<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1997
REGISTRATION NO. 333-25355
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DYNCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4581 36-2408747
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
2000 EDMUND HALLEY DRIVE
RESTON, VIRGINIA 20191-3436
(703) 264-0330
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT's PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID L. REICHARDT
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
DYNCORP
2000 EDMUND HALLEY DRIVE
RESTON, VIRGINIA 20191-3436
(703) 264-9106
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
ROBERT B. OTT, ESQ.
ARNOLD & PORTER
555 TWELFTH STREET, N.W.
WASHINGTON, D.C. 20004
(202) 942-5008
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE , 1997
PROSPECTUS
OFFER TO EXCHANGE 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 OF
[DYNCORP LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1997 UNLESS EXTENDED.
DynCorp, a Delaware corporation (the "Company" or "DynCorp"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 9 1/2% Senior
Subordinated Notes due 2007 (the "Exchange Notes'), which exchange has been
registered under the Securities Act of 1933, as amended (the 'securities Act"),
pursuant to a registration statement of which this Prospectus is a part (the
"Registration Statement"), for each $1,000 principal amount of its outstanding 9
1/2% Senior Subordinated Notes due 2007 (the "Original Notes'), of which $100.0
million in aggregate principal amount are outstanding as of the date hereof. The
form and terms of the Exchange Notes are the same as the form and terms of the
Original Notes except that (i) the exchange will have been registered under the
Securities Act, and hence the Exchange Notes will not bear legends restricting
the transfer thereof, and (ii) holders of the Exchange Notes will not be
entitled to certain rights of holders of the Original Notes under the
Registration Rights Agreement (as defined herein), which rights will terminate
upon the consummation of the Exchange Offer. The Exchange Notes will evidence
the same debt as the Original Notes (which they replace) and will be entitled to
the benefits of an indenture dated as of March 17, 1997 by and between the
Company and United States Trust Company of New York, as Trustee (the "Trustee"),
governing the Original Notes and the Exchange Notes (the "Indenture"). The
Original Notes and the Exchange Notes are sometimes referred to herein
collectively as the 'senior Subordinated Notes' or the "Notes." See "The
Exchange Offer" and "Description of Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Original Notes. Consequently, the Exchange Notes will bear interest at
the rate of 9 1/2% per annum and the interest will be payable semi-annually on
March 1 and September 1 of each year commencing on September 1, 1997. The
Exchange Notes will bear interest from and including the date of issuance of the
Original Notes (March 17, 1997) (the "Issue Date"). Holders whose Original Notes
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Original Notes.
The Notes are redeemable, in whole or in part, at the option of the Company,
on or after March 1, 2002 at the redemption prices set forth herein, plus
accrued interest to the date of redemption. In addition, on or prior to March 1,
2000 the Company, at its option, may redeem up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Public Equity Offerings (as defined) at the redemption price set forth herein,
plus accrued interest to the date of redemption; provided that at least 65% of
the original aggregate principal amount of the Notes remains outstanding after
any such redemption.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. At March 27, 1997 on a pro forma basis after giving
effect to the New Securitization Facility (as defined), the aggregate
outstanding amount of Senior Debt of the Company would have been approximately
$58.4 million (including issued but undrawn letters of credit of $4.8 million
and excluding unused commitments expected to be available for borrowing of $70.2
million). The Notes will be effectively subordinated to all secured indebtedness
of the Company as well as existing and future obligations of the Company's
subsidiaries.
Upon a Change of Control (as defined), each holder of the Notes will have
the right to require the Company to repurchase such holder's Notes at a price
equal to 101% of their principal amount, plus accrued interest to the date of
repurchase. In addition, the Company will be obligated to offer to repurchase
the Notes at 100% of their principal amount, plus accrued interest to the date
of repurchase in the event of certain asset sales. See "Description of Notes."
------------------------------
SEE "RISK FACTORs' COMMENCING ON PAGE 13 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS WHICH HOLDERS OF ORIGINAL NOTES SHOULD CONSIDER IN
CONNECTION WITH THIS EXCHANGE OFFER.
The Company will accept for exchange any and all validly tendered Original
Notes not withdrawn prior to 5:00 p.m., New York City time, on 1997 unless
extended by the Company, in its sole discretion (the "Expiration Date"). Tenders
of Original Notes may be withdrawn at any time prior to the Expiration Date. The
Exchange Offer is subject to certain customary conditions. See "The Exchange
Offer--Certain Conditions to the Exchange Offer." Original Notes may be tendered
only in integral multiples of $1,000.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to this
Exchange Offer in exchange for Original Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Original
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met.
Each broker-dealer that receives the Exchange Notes for its own account in
exchange for the Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Original Notes where such Original Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has indicated its intention to make this Prospectus (as
it may be amended or supplemented) available to any broker-dealer for use in
connection with any such resale for a period of 90 days after the Expiration
Date. See "Plan of Distribution." The Company believes that none of the
registered holders of the Original Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Company.
Although the Original Notes are eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market,
prior to this Exchange Offer, there has been no public market for the Original
Notes. The Company does not intend to list the Notes on any securities exchange
or to seek approval for quotations through any automated quotation system. There
can be no assurance that an active market for the Notes will develop. To the
extent that a market for the Notes does develop, the market value of the Notes
will depend on market conditions (such as yields on alternative investments),
general economic conditions, the Company's financial condition and other
conditions. Such conditions might cause the Senior Subordinated Notes, to the
extent that they are actively traded, to trade at a significant discount from
face value. See "Risk Factors-- Absence of Public Market."
The Company will not receive any proceeds from this Exchange Offer. The
Company has agreed to bear the expenses of this Exchange Offer. No underwriter
is being used in connection with this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus
or the accompanying Letter of Transmittal, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. Neither the delivery of this Prospectus or the accompanying
Letter of Transmittal, nor any exchange made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof.
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports and other information filed by the Company may be examined without
charge at, or copies obtained upon payment of prescribed fees from, the Public
Reference Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and are also available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Electronic filings filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
system (EDGAR) are publicly available through the Commission's home page on the
Internet at http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will file with the Commission and furnish to the holders
of the Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K,
including for each, a "Management's Discussion and Analysis of Financial
Condition and Results of Operations' and, with respect to the annual information
only, a report thereof by the Company's independent public accountants and (ii)
all reports filed on Form 8-K. In addition, for so long as any of the Notes
remain outstanding, the Company has agreed to make available to any prospective
purchaser of the Notes or beneficial owner of the Notes in connection with any
sale thereof, the information required by Rule 144A(d)(4) under the Securities
Act.
CERTAIN INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company pursuant
to the Exchange Act are incorporated by reference into this Prospectus:
1. Annual Report of the Company on Form 10-K for the year ended
December 31, 1996.
2. Quarterly Report of the Company on Form 10-Q for the quarter ended
March 27, 1997.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY UNDERTAKES TO PROVIDE A COPY OF EACH
SUCH DOCUMENT, WITHOUT CHARGE, TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER,
TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO H. MONTGOMERY
HOUGEN, VICE PRESIDENT AND SECRETARY, DYNCORP, 2000 EDMUND HALLEY DRIVE, RESTON,
VIRGINIA 20191-3436, (703) 264-9108. IN ORDER TO ENSURE EARLY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [INSERT DATE].
This Prospectus includes or incorporates by reference "forward-looking
statements' within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such statements are identified by the use of
forward-looking words or phrases including, but not limited to, "intended,"
"will be positioned," "expects," "expected," "anticipates," and "anticipated."
These forward-looking statements are based on the Company's current
expectations. All statements other than statements of historical facts included
in this Prospectus or incorporated by reference therein, including those
regarding the Company's financial position, business strategy, projected costs,
and plans and objectives of management for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. Because
forward-
iii
<PAGE>
looking statements involve risks and uncertainties, the Company's actual results
could differ materially. Important factors that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements') are
disclosed under "Risk Factors," and elsewhere in this Prospectus or incorporated
by reference therein including, without limitation, in conjunction with the
forward-looking statements included in this Prospectus. These forward-looking
statements represent the Company's judgment as of the date of this Prospectus.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Statements. The Company disclaims, however, any
intent or obligation to update its forward-looking statements.
This Prospectus is accompanied by a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, without exhibits ("Annual
Report"), and the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 27, 1997, without exhibits ("Quarterly Report").
The Company was incorporated in Delaware in 1946. The address of the
Company's principal executive offices is 2000 Edmund Halley Drive, Reston,
Virginia 20191-3436, telephone (703) 264-0330.
iv
<PAGE>
TABLE OF CONTENTS
PAGE
----
Available Information................................. iii
Certain Information Incorporated by Reference......... iii
Summary............................................... 1
Risk Factors.......................................... 13
The Transactions...................................... 18
Use of Proceeds....................................... 20
Capitalization........................................ 20
Unaudited Pro Forma Financial Data.................... 21
Selected Historical Financial Data.................... 25
Employee Stock Ownership Plan......................... 27
Description of Certain Financing Arrangements......... 28
Legal Proceedings..................................... 28
The Exchange Offer.................................... 33
Description of Notes.................................. 42
Book-Entry; Delivery and Form......................... 65
Certain Federal Income Tax Considerations............. 67
Plan of Distribution.................................. 69
Independent Public Accountants........................ 70
Legal Matters......................................... 70
v
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere or incorporated
by reference in this Prospectus. As used in this Prospectus, all references to
the Company include, unless the context indicates otherwise, DynCorp and its
subsidiaries.
THE COMPANY
DynCorp is a leading provider of diversified management, technical, and
professional services to a wide range of government customers. The Company's
principal markets are information management services, software development, and
system integration and analysis; facilities management; and aviation maintenance
and specialized support services. With current customers including the
Department of Defense ("DoD"), the Department of Energy ("DoE"), the National
Aeronautics and Space Administration ("NASA"), the Department of State, the
Department of Justice ("DoJ"), and various other U.S. Government agencies, the
Company is one of the foremost providers of services to the U.S. Government. The
Company has over 250 contracts that employ approximately 14,250 employees
throughout the United States and in numerous other countries. The Company is
strategically positioned to benefit from the growth trends in government and
commercial markets for information technology and outsourcing of technical,
professional and support services. For the year ended December 31, 1996, the
Company's total revenues and adjusted EBITDA (as defined) were $1,021.5 million
and $39.0 million, respectively.
The Company has a substantial base of long-term contracts with U.S.
Government customers that has provided a stable, recurring stream of revenues.
DynCorp's strong reputation and historical relationship with these customers is
a result of a high level of customer satisfaction and strong performance on
existing contracts. For the year ended December 31, 1996, approximately
one-third of DynCorp's revenues were generated from contracts where the Company
has served for eight years or more. These established customer relationships not
only improve the Company's knowledge of customer requirements, but also enhance
its position to bid on and win new business opportunities with these customers.
The Company's base of existing business resulted in total backlog of $3.0
billion at December 31, 1996 (including the estimated value of option years),
which represents a 4.0% increase from the December 31, 1995 level. The Company
anticipates that approximately $987.0 million of this backlog will be recognized
as revenues during fiscal year 1997.
The Company has achieved 56.0% revenue growth from December 31, 1991
through the year ended December 31, 1996 by winning business with new customers,
expanding business with existing customers, and through strategic acquisitions.
The Company has a strong track record of winning business with new customers,
where no previous relationship existed, particularly in the rapidly growing
information technology sector. Business with information technology customers
has grown substantially and, for the year ended December 31, 1996, accounted for
26.6% of total revenues. Because much of the Company's growth has come from new
non-DoD customers, DoD customer prime contracts accounted for 50.0% of revenues
for the year ended December 31, 1996 compared to 79.8% of revenues for the year
ended December 31, 1991.
A key component of the Company's business strategy has been the use of
strategic acquisitions and a focused marketing and business development effort
to exploit new business opportunities. DynCorp is organized into three principal
businesses: Information and Engineering Technology ("I&ET"), Enterprise
Management ("EM"), and Aerospace Technology ("AT").
The following table shows revenues for the twelve months ended December 31,
1996 for, and describes services provided by, the three principal business
divisions of the Company:
1
<PAGE>
[A chart showing total revenues of 1,021.5 million for DynCorp. The
chart also also shows (a) revenues of 271.5 million for I&ET (with
services provided of Systems Services, Consulting Services, Engineering
Solutions, Network Management, and National Security Programs); (b)
revenues of $366.7 million for EM (with services provided of Facilities
Management, Administrative and Security Support Services, and Marine
Services); and (c) revenues for AT of $383.3 million (with services
provided of Field Service Operations, Test and Evaluation, Engineering
Technology, and Aviation Services.)]
Information and Engineering Technology. The Company designs, develops,
supports and integrates software and systems to provide customers with
comprehensive solutions for information management and engineering needs. The
specific operations of this division include software development and
maintenance, computer center operations, data processing and analysis, database
administration, telecommunications support and operations, maintenance and
operation of integrated electronic systems, and integration of electronic
systems in local and wide area networks. This division's contracts include the
design and development of a personnel records management system, including
imaging, database and client server technology, for the entire U.S. Navy, and
the provision of basic computer, software, and networking support to all of the
DoE's operations. One of the Company's key business strategies is to continue to
expand this division's presence in the rapidly growing information technology
market. This division also provides services in support of nuclear safeguards
and security research and development. As a result of internal growth and
numerous strategic acquisitions, this division has experienced a 262% growth in
revenues from December 31, 1991 through the year ended December 31, 1996. For
the year ended December 31, 1996, this division accounted for 26.6% of total
revenues.
Enterprise Management. The Company provides full service, "turn-key"
solutions for the management, operation and maintenance of federal and
commercial facilities. The Company manages large-scale facilities, using
sophisticated computerized work management and scheduled maintenance systems to
perform roads and grounds maintenance, civil engineering and custodial services,
landfill recycling, disposal operations, and vehicle and heavy equipment
maintenance. Other activities of this division include testing and evaluation of
military hardware systems at government test ranges, collection and processing
of data, maintenance of targets, ranges and laboratory facilities, health
services, developmental testing of complex weapons systems, security systems
work, and technology transfer into commercial applications. Services under this
division's contracts include facilities and equipment maintenance and management
provided to the DoE complexes at Rocky Flats, Colorado, and Hanford, Washington
and the Strategic Petroleum Reserve. In addition, this division's contracts
include the support of the DoJ's and the Drug Enforcement Agency's ("DEA")
drug-related asset seizure program. The division expects to benefit from
continued government outsourcing for both maintenance of government facilities
and performance of various activities. This division's operations typically
require minimal investments in working capital and fixed assets on the part of
the Company. For the year ended December 31, 1996, this division accounted for
35.9% of total revenues.
2
<PAGE>
Aerospace Technology. The Company has been a leading provider of global
aerospace and engineering services. This division has the unique capability to
mobilize a work force quickly anywhere in the world to provide technology based
solutions to its customers. The Company is the largest DoD maintenance
contractor supporting multi-mission and training programs for weapon systems.
Specific activities of this division include technical and evaluation services
at test and training ranges; engineering, manufacturing and installation of
aircraft system upgrades; corrosive repairs and structural modifications that
extend airframe life for the aging fleet of military aircraft; ground based
logistics support and staff augmentation; and engineering and technical services
for high-technology space and missile systems programs. In addition, under a
five-year contract awarded in January 1997, the Company will provide contingency
planning, operations, logistical and other services for the Army Materiel
Command in support of U.S. Army contingency operations worldwide. This division
is expected to benefit from strong demand in several markets, including support
of aging aircraft, contractor logistics support, and global peacekeeping. Like
Enterprise Management, this division's operations typically require minimal
investments in working capital and fixed assets. For the year ended December 31,
1996, this division accounted for 37.5% of total revenues.
3
<PAGE>
BUSINESS STRENGTHS
DynCorp's revenues have increased 56.0%, from $654.7 million in 1991 to
$1,021.5 million for the year ended December 31, 1996. The Company's revenue
growth and market leadership are attributable to a number of factors, including
the following:
o Substantial Contracts and Backlog. The Company's services are generally
performed through large, long-term contracts with the U.S. Government.
Under most of these contracts, the Company is entitled to reimbursement
for all allowable costs incurred in providing its services, as well as a
fee. The Company's services also typically require minimal investments in
working capital, fixed assets, and other fixed costs. The Company's
substantial backlog of such contracts can be counted on to generate
strong and dependable cash flows with relatively low levels of operating
and credit risk.
o Proven Track Record and Established Reputation. The Company believes it
has achieved its position as a leading provider of diversified
management, technical and professional services to the U.S. Government by
developing the ability to integrate services and Company-wide
technologies to deliver total system solutions for clients. In addition,
DynCorp has well established relationships with its customers in both
civilian and military agencies. The Company has been supporting military
aviation programs worldwide since 1951. In addition, the Company has
performed services at the White Sands Missile Range since 1949 and at the
U.S. Navy Warfare Assessment Division in Norco, California since 1964.
o Technological Expertise. The Company's technological expertise provides
it with a competitive advantage in its primary markets. An example of
this expertise is DynCorp's development of an emerging technology
solution using its Enterprize(Registered) product, which is a key imaging
technology-based component of document handling and database management
systems. Other core information technology competencies include network
engineering, technology outsourcing, and database management.
o Unique Network of Highly Skilled Personnel Worldwide. DynCorp has the
ability to respond to clients' needs quickly. Over the years, DynCorp has
developed methods to plan, recruit, staff, and then efficiently manage
projects from central locations, allowing the Company to meet unique
client requests and to manage a large number of contracts at multiple
sites around the world. The Company currently manages over 250 contracts
with approximately 14,250 employees throughout the United States and in
numerous other countries.
o Successful Acquisition Record. Acquisitions have been an integral part of
the Company's strategic growth plans. Since 1990, the Company has
acquired 13 businesses, the majority of which have been primarily engaged
in the delivery of information technology services and solutions. These
businesses were acquired either to expand existing business into new
markets or to take newly acquired technologies into existing markets. The
Company has a proven capability to integrate acquired companies quickly
and to realize marketing and operating efficiencies.
o Strong Management Team. The Company has a highly experienced management
team that has successfully grown the Company's businesses. The Company's
operations are decentralized, with the senior business unit managers
responsible for strategic operating decisions, excluding financing and
top level corporate strategy. The senior managers have substantial
breadth of experience in the industry and have been responsible for the
expansion and diversification of the Company into new markets.
o Employee Ownership. The Employee Stock Ownership Plan ("ESOP") and
management employees own approximately 85% of the Company's capital stock
on a fully diluted basis, following the Company's and the ESOP's recent
purchases of securities formerly owned by Capricorn Investors L.P.
("Capricorn"). The Company believes its substantial employee ownership
encourages both managers and other employees to act as stakeholders, and
has been a significant factor in providing an incentive for its
employees.
4
<PAGE>
BUSINESS STRATEGY
The Company's business strategy consists of the following five key
elements:
o Maintain and Augment Core Businesses. The Company's core businesses in
enterprise management and aerospace technology have large, stable and
long-term contracts with the U.S. Government. These contracts typically
require minimal investment by the Company and represent a strong and
reliable source of revenues. The Company intends to retain and enhance
these valuable businesses by its intensive focus on customer satisfaction
and cost competitiveness.
o Leverage Customer Relationships. The Company works closely with its
customers to develop and design new services jointly and to improve the
performance and lower the cost of existing services. Management believes
this strategy, together with solid performance under existing contracts,
has led to additional long-term business from key customers as well as
with new customers.
o Expand Presence in Growing Information Technology Market. The Company has
developed core information technology competencies, including network
imaging and engineering, software development, and database management.
The Company believes demand for information technology services is
growing rapidly in both government and commercial markets. DynCorp
intends to leverage its existing information technology expertise to
expand business opportunities in this growing market.
o Continue to Pursue Strategic Acquisitions. The Company intends to
continue to acquire complementary businesses that provide opportunities
to enhance the Company's core services, diversify into new markets, and
create operating efficiencies. In implementing this strategy, management
intends to build upon its successful experience in integrating nine
acquired companies from 1990 to 1996 into the Company's Information and
Engineering Technology division.
o Expand and Diversify into New Markets. The Company continually seeks new
business opportunities that are complementary to its current operations.
For example, the Company intends to expand into the growing state and
local government outsourcing market, as the federal government moves
block grants down to the state level. The Company has also increased its
marketing to commercial customers and believes its proven track record
and technological expertise make it well positioned to increase
penetration in this market.
5
<PAGE>
THE TRANSACTIONS
In addition to the proceeds provided by the sale of the Original Notes (the
"Offering"), the Company replaced its former $100.0 million accounts receivable
securitization facility ("Former Securitization Facility") with a new $140.0
million securitization facility ("New Securitization Facility") on April 18,
1997. The Former Securitization Facility was, and the New Securitization
Facility is, non-recourse to the Company. The Company and its ESOP have recently
purchased a substantial portion of the Company's equity securities formerly held
by Capricorn in exchange for cash and notes ("Capricorn Transaction").
Capricorn, an investment fund, provided substantial capital in connection with
the Company's leveraged buyout in 1988. See "The Transactions' and "Description
of Certain Financing Arrangements."
The sources and uses of funds to replace the Former Securitization Facility
and to pay the notes issued in connection with the Capricorn Transaction are set
forth in the following table (dollars in millions):
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- ------------------------------------------ ------------------------------------------
<S> <C> <C> <C>
Issuance of Notes......................... $ 99.5 Replace Existing Securitization
Facility................................ $100.0
New Securitization Facility............... 50.0(1) Repay notes issued in connection with the
Capricorn Transaction................... 28.2
General Corporate Purposes................ 16.3
Estimated Fees and Expenses............... 5.0
------ ------
Total Sources................... $149.5 Total Uses................................ $149.5
====== ======
</TABLE>
- ------------------
(1) At the closing of the New Securitization Facility, the Company borrowed
$50.0 million of $110.0 million available for borrowing based upon current
levels of eligible collateral.
Upon the closing of the New Securitization Facility, the line of credit
with Citicorp North America, Inc. (the "Revolving Credit Facility") was
voluntarily reduced to $15.0 million. See "Description of Certain Financing
Arrangements."
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................ The Company is offering to exchange $1,000 principal amount of
Exchange Notes for each $1,000 principal amount of Original Notes
that are properly tendered and accepted. The Company will issue
Exchange Notes on or promptly after the Expiration Date. There is
$100.0 million aggregate principal amount of Original Notes
outstanding. See "The Exchange Offer."
Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, the Company believes
that the Exchange Notes issued pursuant to this Exchange Offer in
exchange for Original Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than (i) a broker-
dealer who purchases such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemptions under
the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is
acquiring the Exchange Notes in the ordinary course of its business
and is not participating, and had no arrangement or understanding
with any person to participate, in the distribution of the Exchange
Notes. Each broker-dealer that receives the Exchange Notes for its
own account in exchange for the Original Notes, where such Notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Notes.
Registration Rights Agreement............. The Original Notes were sold by the Company on March 17, 1997 to BT
Securities Corporation and Citicorp Securities, Inc. (the "Initial
Purchasers') pursuant to a Purchase Agreement dated as of March 11,
1997 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"). Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers entered into a Registration Rights
Agreement dated as of March 17, 1997 (the "Registration Rights
Agreement") which grants the holders of the Original Notes certain
exchange and registration rights. See "The Exchange
Offer--Termination of Certain Rights." This Exchange Offer is
intended to satisfy such rights, which terminate upon the
consummation of the Exchange Offer. The holders of the Exchange Notes
are not entitled to any exchange or registration rights with respect
to the Exchange Notes.
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997, unless the Exchange Offer is extended by the Company
in its sole discretion, in which
case the term "Expiration Date"
shall mean the latest date and time
to which the Exchange Offer is
extended.
Accrued Interest on the Exchange Notes and
Original Notes.......................... The Exchange Notes will bear interest from and including the Issue
Date. Holders whose Original Notes are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on
the Original Notes.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Conditions to the Exchange Offer.......... The Exchange Offer is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange Offer--Certain
Conditions to the Exchange Offer." The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Original
Notes being tendered for exchange.
Procedures for Tendering Notes............ Each holder of Original Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Original Notes and
any other required documentation to United States Trust Company of
New York, as Exchange Agent, at the address set forth herein. By
executing the Letter of Transmittal, each holder will represent to
the Company that, among other things, (i) the Exchange Notes to be
acquired by the holder of the Original Note in connection with the
Exchange Offer are being acquired by the holder in the ordinary
course of business of the holder, (ii) the holder has no arrangement
or understanding with any person to participate in the distribution
of Exchange Notes, (iii) the holder acknowledges and agrees that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing
the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the Commission
set forth in no-action letters (see "The Exchange Offer--Resale of
the Exchange Notes'), (iv) the holder understands that a secondary
resale transaction described in clause (iii) above and any resales of
Exchange Notes obtained by such holder in exchange for Original Notes
acquired by such holder directly from the Company should be covered
by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission, and (v) the holder
is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original
Notes that were acquired as a result of market-making activities or
other trading activities, the holder is required to acknowledge in
the Letter of Transmittal that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the holder will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--Procedures for Tendering."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Special Procedures for Beneficial
Owners.................................. Any beneficial owner whose Original Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender such Original Notes in the Exchange Offer
should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"The Exchange Offer--Procedures for Tendering." If such beneficial
owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and
delivering such owner's Original Notes, either make appropriate
arrangements to register ownership of the Original Notes in such
owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery Procedures............ Holders of Original Notes who wish to tender their Original Notes and
whose Original Notes are not immediately available or who cannot
deliver their Original Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to United States
Trust Company of New York, as Exchange Agent, prior to the Expiration
Date, must tender their Original Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer-- Guaranteed
Delivery Procedures."
Acceptance of the Original Notes and
Delivery of the Exchange Notes.......... Subject to the satisfaction or waiver of the conditions to the
Exchange Offer, the Company will accept for exchange any and all
Original Notes that are properly tendered in the Exchange Offer prior
to the Expiration Date. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the earliest practicable date
following the Expiration Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Withdrawal Rights......................... Tenders of Original Notes may be withdrawn at any time prior to the
Expiration Date. See "The Exchange Offer--Withdrawal of Tenders."
Certain Federal Income Tax
Considerations.......................... For a discussion of certain federal income tax considerations
relating to the exchange of the Original Notes for the Exchange
Notes, see "Certain Federal Income Tax Considerations."
Exchange Agent............................ United States Trust Company of New York is serving as the exchange
agent (the "Exchange Agent") in connection with the Exchange Offer.
United States Trust Company of New York also serves as Trustee under
the Indenture.
Consequences of Failure to Exchange....... The Original Notes that are not exchanged pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Notes may
be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule
144 under the Securities Act or pursuant to some other exemption
under the Securities Act, (iii) outside the United States to a
foreign person pursuant to the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act. See "The Exchange
Offer--Consequences of Failure to Exchange."
</TABLE>
9
<PAGE>
THE NOTES
<TABLE>
<S> <C>
The Exchange Notes........................ The Exchange Offer applies to $100.0 million aggregate principal
amount of the Original Notes. The form and terms of the Exchange
Notes are the same as the form and terms of the Original Notes except
that (i) the exchange will have been registered under the Securities
Act and, therefore, the Exchange Notes will not bear legends
restricting their transfer pursuant to the Securities Act, and (ii)
holders of the Exchange Notes will not be entitled to certain rights
of holders of the Original Notes under the Registration Rights
Agreement, which rights will terminate upon consummation of the
Exchange Offer. The Exchange Notes will evidence the same debt as the
Original Notes (which they replace) and will be issued under, and be
entitled to the benefits of, the Indenture. See "Description of
Notes' for further information and for definitions of certain
capitalized terms used below.
Maturity Date............................. March 1, 2007.
Interest Rate and Payment Dates........... The Exchange Notes will bear interest at a rate of 9 1/2% per annum.
Interest on the Exchange Notes will accrue from the Issue Date and
will be payable semi-annually on March 1 and September 1 of each
year, commencing on September 1, 1997.
Subordination............................. The Exchange Notes will be general unsecured obligations of the
Company and will be subordinated in right of payment to all existing
and future Senior Debt (as defined) of the Company. The Exchange
Notes will rank pari passu with the Original Notes. At March 27, 1997
on a pro forma basis after giving effect to the New Securitization
Facility (as defined), the aggregate outstanding amount of Senior
Debt of the Company would have been approximately $58.4 million
(including issued but undrawn letters of credit of $4.8 million and
excluding unused commitments expected to be available for borrowing
of $70.2 million). The Notes will be effectively subordinated to all
secured indebtedness of the Company as well as existing and future
obligations of the Company's subsidiaries. See "Description of
Notes--Subordination."
Optional Redemption....................... Except as described below, the Company may not redeem the Exchange
Notes prior to March 1, 2002. On or after such date, the Company may
redeem the Notes, in whole or in part, at the redemption prices set
forth herein, plus accrued interest to the date of redemption. In
addition, at any time on or prior to March 1, 2000, the Company may
redeem up to 35% of the aggregate principal amount of the Notes
originally issued in the Offering with the net cash proceeds of one
or more Public Equity Offerings (as defined) at a redemption price
equal to 109.50% of the principal amount to be redeemed, plus accrued
interest to the date of redemption; provided that at least 65% of the
original aggregate principal amount of the Notes remains outstanding
after any such redemption. See "Description of Notes--Optional
Redemption."
Change of Control......................... Upon a Change of Control (as defined), each holder of the Notes will
have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of their principal amount, plus
accrued interest to the date of repurchase. See "Description of
Notes--Change of Control."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Certain Covenants......................... The Indenture governing the Notes (the "Indenture") contains certain
covenants that limit the ability of the Company and certain of its
subsidiaries to, among other things, incur additional indebtedness,
pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates,
incur indebtedness that is subordinate in right of payment to any
Senior Debt and senior in right of payment to the Notes, incur liens,
impose restrictions on the ability of a subsidiary to pay dividends
or make certain payments to the Company and certain of its
subsidiaries, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. See "Description of
Notes--Certain Covenants."
</TABLE>
For additional information regarding the Notes, see "Description of Notes."
RISK FACTORS
See "Risk Factors," which begins on page 13, for a discussion of certain
factors that should be considered in evaluating an investment in the Exchange
Notes.
11
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical and unaudited pro forma
consolidated financial information of the Company. The summary historical
consolidated financial information of the Company for the three years ended
December 31, 1996 has been derived from the Company's audited financial
statements. The pro forma and other data for the year ended December 31, 1996
and the three months ended March 27, 1997 and March 28, 1996, give effect to the
Offering, the New Securitization Facility, and the Capricorn Transaction
(collectively, the "Transactions'), as if such Transactions had occurred on
January 1, 1996, and the pro forma balance sheet data gives effect to the
Transactions as if the Transactions had occurred on March 27, 1997. The
following information should be read in conjunction with the "Unaudited Pro
Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the financial statements of the Company
and the notes thereto included elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
---------------------------------------------------
THREE MONTHS ENDED
------------------------ YEAR ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
MARCH 27, MARCH 28, ----------------------- ----------------------------------
1997 1996 1996 1996 1995 1994
---------- ---------- ----------------------- ---------- -------- --------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................... $ 271,137 $ 241,726 $ 1,021,453 $1,021,453 $908,725 $818,683
Cost of services................. 259,794 230,997 970,163 970,163 871,317 783,121
---------- ---------- ----------- ---------- -------- --------
Gross profit..................... 11,343 10,729 51,290 51,290 37,408 35,562
Corporate selling and
administrative expense......... 4,439 4,460 18,241 18,241 18,705 16,887
---------- ---------- ----------- ---------- -------- --------
Operating income................. 6,904 6,269 33,049 33,049 18,703 18,675
Interest expense................. 3,828 3,636 14,609 10,220 14,856 14,903
Interest income.................. (361) (614) (1,752) (1,752) (3,804) (2,398)
Other expenses................... 277 566 5,474 5,474 10,212 7,628
Income tax provision (benefit)... 948 778 4,137 5,893 (9,090) (2,236)
Minority interest................ 408 296 1,265 1,265 1,255 1,130
---------- ---------- ----------- ---------- -------- --------
Earnings (loss) from continuing
operations before extraordinary
item........................... $ 1,804 $ 1,607 $ 9,316 $ 11,949 $ 5,274 $ (352)
---------- ---------- ----------- ---------- -------- --------
---------- ---------- ----------- ---------- -------- --------
OTHER DATA:
Adjusted EBITDA(1)............... $ 8,682 $ 7,295 $ 38,997 $ 38,997 $ 29,722 $ 29,177
Total debt to Adjusted EBITDA.... 3.9x
Adjusted EBITDA to interest
expense........................ 2.7x
Ratio of earnings to fixed
charges........................ 1.6x
Depreciation and
amortization(2)................ $ 2,463 $ 1,888 $ 8,638 $ 8,638 $ 10,424 $ 15,669
Capital expenditures............. $ 1,360 $ 1,502 $ 5,310 $ 5,310 $ 4,789 $ 3,742
<CAPTION>
UNAUDITED
PRO FORMA
AT
MARCH 27,
BALANCE SHEET DATA: 1997
----------
<S> <C> <C> <C> <C> <C> <C>
Total assets..................... $ 364,412
Total debt....................... $ 153,074(3)
</TABLE>
- ------------------
(1) EBITDA represents the sum of earnings (loss) from continuing operations
before extraordinary items, income taxes, interest expense, interest income,
depreciation and amortization. EBITDA data is presented because such data is
used by certain investors to determine the Company's ability to meet debt
service requirements. The Company considers EBITDA to be an indicative
measure of the Company's operating performance. However, such information
should not be considered as an alternative to net income, operating profit,
cash flows from operations or any other operating or liquidity performance
measure prescribed by generally accepted accounting principles (GAAP).
Adjusted EBITDA is defined as EBITDA adjusted to eliminate (w) $3,299
accrual for supplemental pension and other fees payable to retiring officers
and a member of the Board of Directors in the year ended December 31, 1996
and pro forma year ended December 31, 1996; (x) loss related to the
Company's Mexican operations of $4,362 in the year ended December 31, 1995,
$926 in the year ended December 31, 1994 and $11 in the year ended December
31, 1993; (y) legal fees related to the defense of a lawsuit by a
subcontractor of a former electrical contracting subsidiary of $750 in the
year ended December 31, 1996, pro forma year ended December 31, 1996, $2,400
in the year ended December 31, 1995, and $2,665 in the year ended December
31, 1994, and (z) accruals for uninsured costs related to an inactive
subsidiary's alleged use of asbestos products of $5,300 in the year ended
December 31, 1995. The determination of the amounts referred to in clauses
(y) and (z) above are subject to numerous uncertainties and judgments which
are described in Note 21(a) and (b) to the Consolidated Financial Statements
dated December 31, 1996 included in the Annual Report and it is possible
that additional amounts will be required to be recorded in the future. See
"Risk Factors--Potential for Adverse Judgments in Legal Proceedings' and
Note 21 to the Consolidated Financial Statements dated December 31, 1996
included in the Annual Report.
(2) Excludes amortizaton of deferred debt expense and discount on the Notes that
are included in interest expense.
(3) Shown net of discount of $516.
12
<PAGE>
RISK FACTORS
Investors should carefully consider the following factors in addition to
the other information set forth or incorporated by reference in this Prospectus
before making an investment in the Exchange Notes offered hereby.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE AND REFINANCE DEBT
The Company is highly leveraged. As of March 27, 1997, after giving pro
forma effect to the Transactions, the Company's indebtedness would have been
approximately $157.9 million, net of discount of $0.5 million, (including issued
but undrawn letters of credit of $4.8 million and excluding unused commitments
available for borrowing of $70.2 million) and its Stockholders' Equity was
negative $8.3 million. For the Company's deficiency of earnings to fixed charges
for the five years ended December 31, 1996, see 'selected Historical Financial
Data." Subject to the restrictions in the New Securitization Facility and the
Indenture which require a Consolidated Debt Coverage Ratio, as hereafter
defined, of at least 2.0:1.0, the Company may incur additional indebtedness from
time to time to finance acquisitions, working capital, or capital expenditures
or for other purposes. See "Description of Certain Financing Arrangements' and
"Description of Notes--Certain Covenants and--Certain Definitions."
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures or
acquisitions may be limited and, if additional borrowings can be made, they may
not be on terms favorable to the Company; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in the industry
and economic conditions generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. The Company anticipates that
its operating cash flow together with the proceeds from the Offering and
borrowings under the New Securitization Facility and Revolving Credit Facility
will be sufficient to meet its operating expenses and to service its debt
obligations as they become due. If the Company is unable to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness, or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. If the Company is unable to repay its
debt as it becomes due, the purchasers of the Notes could lose some or all of
their investment.
SUBORDINATION OF THE NOTES
The payment of principal, premium (if any) and interest on, and any other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Debt. At March 27, 1997, on a pro
forma basis after giving effect to the Transactions (and certain related
assumptions), the aggregate outstanding amount of Senior Debt of the Company
would have been approximately $58.4 million (including issued but undrawn
letters of credit of $4.8 million and excluding unused commitments available for
borrowing of $70.2 million). In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding up of the Company, the assets of
the Company will be available to pay obligations on the Notes only after all
Senior Debt has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes. See "Description of
Notes--Subordination."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY's INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to incur
additional indebtedness (unless the Consolidated Debt Coverage Ratio, after
giving effect to such additional indebtedness, remains at least 2.0:1.0), incur
liens, pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. See "Description of Notes." In addition, the
Revolving Credit Facility contains substantially similar restrictive covenants.
See
13
<PAGE>
"Description of Certain Financing Arrangements." A breach of any of these
covenants could result in a default under the Revolving Credit Facility and the
New Securitization Facility. Upon the occurrence of an event of default under
the New Securitization Facility or the Revolving Credit Facility, the lenders
could elect to declare all amounts outstanding, together with accrued interest,
to be immediately due and payable. If the Company were unable to repay those
amounts, such lenders could proceed against the collateral granted to them to
secure that indebtedness, which indebtedness currently is secured by
substantially all of the assets of the Company. If the lenders under the New
Securitization Facility or the Revolving Credit Facility accelerate the payment
of such indebtedness, there can be no assurance that the assets of the Company
would be sufficient to repay in full such indebtedness and the other
indebtedness of the Company, including the Notes.
Under the terms of the New Securitization Facility, if the interest
coverage ratio (as defined) falls below 1.1:1.0 or if scheduled principal
payments on the Company's other indebtedness exceed $40.0 million during the
24-month period, or $20.0 million during the 12-month period, preceding the
scheduled maturity of the Facility, the Company's ability to obtain funding
through the Facility will be suspended. Further, if the collateral value of the
receivables and cash held by Dyn Funding Corporation ("DFC") falls below the
amount of outstanding borrowings under the Facility, and the Company fails to
provide sufficient receivables or cash to increase the collateral value to such
amount, the Company's ability to obtain funding through the Facility will be
suspended or terminated and collections on receivables will be used to repay all
or part of amounts outstanding under the Facility. The suspension or termination
of the Company's ability to obtain funding through the Facility and the use of
collections to repay borrowings under the Facility would result in additional
demands on the Company's cash resources. See "The Transactions' and "Description
of Certain Financing Arrangements."
PAST NET LOSSES
The Company reported net earnings of $2.3 million for the three months
ending March 27, 1997 and $14.6 million and $2.4 million for the years ended
December 31, 1996 and 1995, respectively, and net losses for the years ended
December 31, 1994, 1993, and 1992, of $12.8 million, $13.4 million, and $23.3
million, respectively. In the future, there can be no assurance that profitable
operations will be sustained.
The Company had federal and state deferred tax assets of $8.0 million at
December 31, 1996 that have not been recognized because of the uncertainty of
achieving the future earnings in either the time frame or in the particular
state jurisdictions needed to realize the tax benefit.
DEPENDENCE ON AND RISKS INHERENT IN U.S. GOVERNMENT CONTRACTS
The Company derived 97.1% and 94.6% of its revenues for the years ended
December 31, 1996 and 1995, respectively, from contracts and sub-contracts with
the U.S. Government ("Government Contracts'). Contracts with the DoD represented
52.0% and 53.3% of the Company's revenues for the years ended December 31, 1996
and 1995, respectively. Continuation and renewal of the Company's existing
Government Contracts and the acquisition by the Company of additional Government
Contracts is contingent upon, among other things, the availability of adequate
funding for various U.S. Government agencies. A further significant decline in
U.S. military expenditures, particularly in the operations and maintenance
portion of the defense budget, or a reapportioning of such expenditures reducing
the operations and maintenance segment, might materially and adversely affect
the Company's revenues and earnings. The loss or significant curtailment of the
Company's material U.S. military contracts would materially and adversely affect
the Company's future revenues and earnings.
Typically, a Government Contract has an initial term of one year combined
with two, three, or four one-year renewal periods, exercisable at the discretion
of the Government. The Government is not obligated to exercise its option to
renew a Government Contract. At the time of completion of a Government Contract,
the contract in its entirety is "recompeted" against all eligible third-party
providers. Contracts between the U.S. Government and its prime contractors
usually contain standard provisions for termination at the convenience of the
Government or such prime contractors. There can be no assurance that
terminations will not occur, and such terminations could adversely affect the
Company's business and prospects.
The Company's Government Contract services are provided through three types
of contracts--fixed-price, time-and-materials, and cost-reimbursement. The
Company assumes financial risk on fixed-price contracts and
14
<PAGE>
time-and-materials contracts, because the Company assumes the risk of performing
those contracts at the stipulated prices or negotiated hourly rates. The failure
to accurately estimate ultimate costs or to control costs during performance of
the work could result in losses or smaller than anticipated profits. With regard
to cost-reimbursement contracts, to the extent that the actual costs incurred
are within the contract ceiling and allowable under the terms of the contract
and applicable regulations, the Company is entitled to reimbursement of its
costs plus a stipulated profit.
Government Contract payments received by the Company for allowable direct
and indirect costs are subject to adjustment and repayment after audit by
Government auditors if the payments exceed allowable costs as defined in such
Government Contracts. Audits have been completed on the Company's incurred
contract costs through 1986 and are continuing for subsequent periods. The
Company has included an allowance for excess billings and contract losses in its
financial statements that it believes is adequate based on its interpretation of
contracting regulations and past experience. There can be no assurance, however,
that this allowance will be adequate.
The Company is aware of various costs questioned by the government,
including issues related to the recoverability of certain of its ESOP
contributions, but cannot determine the outcome of the audit findings at this
time. In addition, the Company is occasionally the subject of investigations by
the Department of Justice and other investigative organizations, resulting from
employee and other allegations regarding business practices. In management's
opinion, there are no outstanding issues of this nature at March 27, 1997 that
will have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.
As a U.S. Government contractor, the Company is subject to federal
regulations under which its right to receive future awards of new Government
Contracts, or extensions of existing Government Contracts, may be unilaterally
suspended or barred should the Company be convicted of a crime or be indicted
based on allegations of a violation of certain specific federal statutes or
other activities. The initiation of suspension or debarment hearings against the
Company or any of its affiliated entities could have a material adverse impact
upon the Company's business and prospects.
POTENTIAL FOR ADVERSE JUDGMENTS IN LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various claims and
lawsuits, including contract disputes and claims based on allegations of
negligence and other tortious conduct. The Company and its subsidiaries are also
potentially liable for certain environmental, personal injury, tax and other
issues related to prior operations of divested businesses. In addition, an
inactive subsidiary of the Company has been named as one of many defendants in
many civil lawsuits in certain state courts (primarily Texas); the alleged
claims arise out of the subsidiary's installation and distribution of industrial
insulation products that allegedly contained asbestos. Management has estimated
the Company's exposure to these lawsuits on a consolidated basis, including
estimated future filings, in view of possible recoveries and contributions from
insurance, and has established reserves therefore. It is possible that the level
of filings will increase more than management has anticipated, thereby
increasing such exposure, and no upper limit of exposure can be reasonably
estimated. See "Legal Proceedings."
COMPETITION
The markets which the Company services are highly competitive. In each of
its businesses, the Company's competition is quite fragmented, with no single
competitor holding a significant market position. The Company experiences
vigorous competition from industrial firms, university laboratories, nonprofit
institutions and U.S. Government agencies. Some of the Company's competitors are
large, diversified firms with substantially greater financial resources and
larger technical staffs than the Company has available to it. Government
agencies also compete with and are potential competitors of the Company because
they can utilize their internal resources to perform certain types of services
that might otherwise be performed by the Company. A majority of the Company's
revenues are derived from contracts with the U.S. Government and its prime
contractors, and such contracts are awarded on the basis of negotiations or
competitive bids where price is a significant factor.
15
<PAGE>
COMPANY MAY BE OBLIGATED TO REPURCHASE SHARES OF CERTAIN ESOP PARTICIPANTS
In the event that an employee participating in the ESOP is terminated,
retires, dies or becomes disabled while employed by the Company, the ESOP, or
the Company under certain circumstances, is obligated to repurchase shares of
common stock distributed to such former employee under the ESOP, until such time
as the common stock becomes readily tradable stock. In addition, after ten years
of participation in the ESOP, a participant who is 55 years of age may receive a
distribution of up to 25% of shares from his or her account, increasing to 50%
after age 60, for diversification purposes. These shares are also subject to the
repurchase obligation. To the extent that the Company repurchases shares as
described above, its availability of cash will be adversely affected. DynCorp
has the right under both the ESOP and applicable law to defer indefinitely the
repurchase of any shares if payment to the shareholders would impair the capital
of the Company. See "Employee Stock Ownership Plan." The Company's future
obligations with respect to the ESOP are not restricted under the Indenture. See
"Description of Notes--Certain Covenants."
ABSENCE OF PUBLIC MARKET
The Exchange Notes are being offered to Holders of the Original Notes. The
Original Notes were sold by the Company to a limited number of institutional
investors and are eligible for trading in the PORTAL Market. To the extent that
Original Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Original Notes could be adversely affected.
The Original Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in the
Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Exchange
Notes on any national securities exchange or to seek approval for quotation
through any automated quotation system. Accordingly, no assurance can be given
that an active public or other market will develop for the Exchange Notes or as
to the liquidity of the trading market for the Exchange Notes. If a trading
market does not develop or is not maintained, holders of the Exchange Notes may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. If a market for the Exchange Notes develops, any such market may be
discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from their
principal amount.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Notes as set forth in the legend thereon and in
the Offering Memorandum, dated March 11, 1997, because the Notes were issued
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom, or in a transaction not subject to the Securities Act and
applicable state securities laws. The Company does not intend to register the
Original Notes under the Securities Act and, after consummation of the Exchange
Offer, will not be obligated to do so except under limited circumstances. See
"The Exchange Offer--Purpose of the Exchange Offer." Based on an interpretation
by the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Original Notes may be offered for resale, resold
or otherwise transferred by holders thereof (other than any such holder which is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business, such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes and neither such holders nor any such other person is engaging in or
intends to engage in a distribution of such Exchange Notes. Any holder of
Original Notes who
16
<PAGE>
tenders in the Exchange Offer for the purpose of participating in a distribution
of the Exchange Notes may be deemed to have received restricted securities and,
if so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that received Exchange Notes for its own account in exchange
for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent the Original Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Original Notes could
be adversely affected. See "The Exchange Offer."
EXCHANGE OFFER PROCEDURES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders of
Original Notes for exchange. Original Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Original Notes,
where such Original Notes were acquired by such broker-dealer as a result of
market-making activities or any other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Original Notes could be adversely affected. See "The
Exchange Offer."
PURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control (as defined in the Indenture), each holder of the
Notes will have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase. The source of funds for any such purchase
would be the Company's available cash or cash generated from other sources.
However, there can be no assurance that sufficient funds would be available at
the time of any Change of Control to make any required repurchases of Notes
tendered.
The Company could, in the future, enter into certain transactions,
including acquisitions, refinancing or other recapitalizations or highly
leveraged transactions, which would not constitute a Change of Control under the
Indenture but could increase the amount of indebtedness outstanding at such time
or otherwise affect the Company's capital structure or credit ratings or
otherwise adversely affect holders of the Exchange Notes.
17
<PAGE>
THE TRANSACTIONS
The Company has retired the funding provided by the Former Securitization
Facility and replaced it with the New Securitization Facility. Additionally, the
Company and its ESOP have recently purchased equity securities in the Capricorn
Transaction.
THE NEW SECURITIZATION FACILITY
The Company primarily funds its working capital requirements through an
accounts receivable securitization program that is managed by DFC. In 1992, DFC
issued $100.0 million aggregate principal amount of notes under the Former
Securitization Facility to fund the accounts receivable securitization program.
See "Description of Certain Financing Arrangements." The Company entered into
agreements with certain investors to fund the New Securitization Facility with a
borrowing capacity of up to $140.0 million on April 18, 1997. At the time of the
closing $110.0 million of the Facility was available for borrowing, based on
current levels of eligible collateral, and the Company borrowed $50.0 million.
The Former Securitization Facility was, and the New Securitization Facility is,
non-recourse to the Company.
THE CAPRICORN TRANSACTION
The Company and its ESOP recently entered into agreements with certain of
the investors in Capricorn, a limited partnership in which a company controlled
by H.S. Winokur, Jr., the Company's former Chairman and current director, serves
as general partner. Under the terms of the agreements, the ESOP purchased all of
the Company's Class C Preferred Stock, and the Company purchased a substantial
portion of Common Stock and certain Common Stock Warrants that were previously
held by Capricorn. The total purchase price for all of these securities was
$56.4 million. The price per share of equivalent Common Stock was based upon the
most recent price paid by the ESOP for shares of Common Stock, adjusted for a
liquidity discount and the warrant exercise price, and was conditioned upon
fairness opinions by the ESOP's and the Board of Directors' financial advisors.
The ESOP paid $18.6 million for its securities, of which approximately $9.3
million was paid in cash and $9.3 million was paid in notes ("ESOP Capricorn
Notes'). The Company paid $37.8 million for its securities, of which
approximately $18.9 million was paid in cash and $18.9 million was paid in notes
(the "Company Capricorn Notes'). The Company used a portion of the proceeds from
the Offering and borrowings under the New Securitization Facility to repay the
Company Capricorn Notes and to make a loan to the ESOP for the purpose of
permitting it to repay the ESOP Capricorn Notes. Concurrently with the Capricorn
Transaction, the ESOP converted the Class C Preferred Stock and exercised the
Common Stock Warrants issuable upon such conversion, and the Company issued
949,692 shares of Common Stock to the ESOP. Following the Company's and the
ESOP's recent purchases of securities from Capricorn, the ESOP and management
own approximately 85% of the Company's capital stock on a fully diluted basis.
The Company engaged in the Capricorn Transaction in order to: eliminate the
potential effect of certain preferential voting rights given the Class C
Preferred Stock in the Company's certificate of incorporation; reduce the equity
holdings and voting capacity, and related potential for control of the Company,
of a large outside stockholder; reduce the outstanding and fully diluted equity
of the Company; provide treasury shares for future issuance to employees under
the Company's various compensation and benefit plans without the need for
issuance of new shares; and provide additional shares for the ESOP, which can
only acquire shares by purchase from the Company or other stockholders. The
ESOP's purpose for engaging therein was to acquire shares for allocation to
participants' accounts in 1997 and 1998. In addition to converting a portion of
the Company's total capitalization from equity capitalization to debt
capitalization, the Capricorn Transaction reduced the Company's fully diluted
equity, will increase the Company's debt expense and will have an impact on the
Company's earnings per share.
18
<PAGE>
The following table sets forth the sources and uses of funds to consummate
the Transactions (dollars in millions). The actual amounts of sources and uses
of funds on the date the Transactions are consummated may vary.
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- -------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Issuance of Notes........................... $ 99.5 Replace Existing Securitization $100.0
Facility..................................
New Securitization Facility................. 50.0(1) Repay notes issued in connection with the 28.2
Capricorn Transaction.....................
General Corporate Purposes.................. 16.3
Estimated Fees and Expenses................. 5.0
------ ------
Total Sources...................... $149.5 Total Uses.................................. $149.5
====== ======
</TABLE>
- ------------------
(1) At the closing of the New Securitization Facility, the Company borrowed
$50.0 million of $110.0 million available for borrowing based upon current
levels of eligible collateral.
Upon the closing of the New Securitization Facility, the Revolving Credit
Facility was voluntarily reduced to $15.0 million. See "Description of Certain
Financing Arrangements."
19
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Original Notes in like principal amount, the terms of which are identical to the
Exchange Notes. The Original Notes surrendered in exchange for Exchange Notes
will be retired and cancelled and cannot be reissued. Accordingly, issuance of
the Exchange Notes will not result in any increase in the indebtedness of the
Company.
CAPITALIZATION
The following table sets forth the capitalization of the Company on a pro
forma basis giving effect to the Transactions as if they had occurred on March
27, 1997. This table should be read in conjunction with the 'selected Historical
Financial Data" and "Unaudited Pro Forma Financial Data" included elsewhere in
this Offering Memorandum.
<TABLE>
<CAPTION>
MARCH 27, 1997
ACTUAL AS ADJUSTED
------ -----------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C>
Revolving Credit Facility.............................................. $ -- $ --(1)
Existing Securitization Facility....................................... 100.0 --
New Securitization Facility............................................ -- 50.0(2)
Notes(4)............................................................... 99.5 99.5
Other Debt............................................................. 3.6 3.6
------ ---------
Total Debt........................................................ $203.1 $ 153.1
Stockholders' Deficit(3)............................................... (8.3) (8.3)
------ ---------
Total Capitalization................................................... $194.8 $ 144.8
====== =========
</TABLE>
- ------------------
(1) Upon consummation of the Offering and the New Securitization Facility, $15.0
million was committed under the Revolving Credit Facility, of which $4.8
million is currently utilized to support stand-by letters of credit.
(2) At the closing of the New Securitization Facility, the Company borrowed
$50.0 million of approximately $110.0 million available for borrowing based
upon current levels of eligible collateral.
(3) Includes temporary and permanent stockholders' equity of $149.4 million and
negative $157.7 million, respectively.
(4) Shown net of discount of $0.5 million.
20
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial information of the
Company is based on the historical consolidated financial statements of the
Company and have been prepared to illustrate the effects of the Transactions.
See "The Transactions."
The unaudited pro forma consolidated condensed statements of operations for
the year ended December 31, 1996 and the three months ended March 27, 1997 and
March 28, 1996 have been prepared as if the Transactions had occurred on January
1, 1996, and the unaudited consolidated condensed balance sheet as of March 27,
1997 has been prepared to give effect to the Transactions as if the Transactions
had occurred on March 27, 1997.
The unaudited pro forma consolidated condensed financial data is not
necessarily indicative of how the Company's balance sheet and results of
operations would have been presented had the Transactions actually been
consummated on March 27, 1997 and January 1, 1996, respectively. Moreover, the
pro forma financial data is not intended to be indicative of future results of
operations or presentation of the balance sheet. The unaudited pro forma
financial data should be read in conjunction with the historical consolidated
financial statements and related notes thereto included in the Annual Report
that accompanies this Prospectus.
21
<PAGE>
DYNCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 27, 1997 AND MARCH 28, 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 27, 1997 THREE MONTHS ENDED MARCH 28, 1996
-------------------------------------- --------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 271,137 $ $271,137 $ 241,726 $ $241,726
Cost of services..................... 259,794 259,794 230,997 230,997
---------- --------- ---------- ---------
Gross profit......................... 11,343 11,343 10,729 10,729
Corporate selling and administrative
expense............................ 4,439 4,439 4,460 4,460
---------- --------- ---------- ---------
Operating income..................... 6,904 6,904 6,269 6,269
Interest expense..................... 2,983 845(1) 3,828 2,580 1,056(1) 3,636
Interest income...................... (361) (361) (614) (614 )
Other expenses....................... 277 277 566 566
Income tax provision (benefit)....... 1,286 (338)(2) 948 1,200 (422)(2) 778
Minority interest.................... 408 408 296 296
---------- ----------- --------- ---------- ----------- ---------
Earnings from continuing operations
before extraordinary item.......... 2,311 (507) 1,804 2,241 (634) 1,607
Preferred Class C dividends not
declared or recorded............... -- -- -- (534) 534 --
---------- ----------- --------- ---------- ----------- ---------
Common stockholders' share of
earnings from continuing operations
before extraordinary item.......... $ 2,311 $ (507) $ 1,804 $ 1,707 $ (100) $ 1,607
========== ========== ========= ========== =========== ========
</TABLE>
- ------------------
Notes to Unaudited Pro Forma Consolidated Condensed Statements of Operations.
<TABLE>
<CAPTION>
(1)
<S> <C> <C> <C>
THREE MONTHS ENDED
----------------------
MARCH 27, MARCH 28,
1997 1996
--------- ---------
3,450 3,450 Interest expense and amortization of
deferred debt expense related to the assumed
interest rates for the Notes (9 1/2%) and New
Securitization Facility (7 1/3%).
(2,605) (2,394) Eliminate interest expense and amortization of deferred debt expense related to the
retirement of the Existing Securitization Facility and Revolving Credit Facility and
the interest and deferred debt amortization on
the Notes for the period March 17, 1997 to March
27, 1997.
--------- ---------
$ 845 $ 1,056
========= =========
</TABLE>
(2) Estimated effective income tax of pro forma adjustments.
(3) Elimination of Class C Preferred Stock dividends since the ESOP purchased
the Class C Preferred Stock and converted it to Common Stock.
22
<PAGE>
DYNCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Revenues................................................................ $1,021,453 $ $1,021,453
Cost of services........................................................ 970,163 970,163
---------- ----------
Gross profit............................................................ 51,290 51,290
Corporate selling and administrative expense............................ 18,241 18,241
---------- ----------
Operating income........................................................ 33,049 33,049
Interest expense........................................................ 10,220 4,389(1) 14,609
Interest income......................................................... (1,752) (1,752)
Other expenses.......................................................... 5,474 5,474
Income tax provision (benefit).......................................... 5,893 (1,756)(2) 4,137
Minority interest....................................................... 1,265 1,265
---------- ----------- ----------
Earnings from continuing operations..................................... 11,949 (2,633) 9,316
Preferred Class C dividends not declared or recorded.................... (2,284) 2,284 --
---------- ----------- ----------
Common stockholders' share of earnings from continuing operations....... $ 9,665 $ (349) $ 9,316
========== =========== ==========
Earnings per share from continuing operations(4)
Basic................................................................. $ 1.14 $ 1.06
========== ==========
Diluted............................................................... $ 0.82 $ 0.91
========== ==========
</TABLE>
- ------------------
Notes to Unaudited Pro Forma Consolidated Condensed Statements of Operations.
<TABLE>
<CAPTION>
(1)
<S> <C> <C>
YEAR ENDED
DECEMBER 31,
1996
------------
$ 13,758 Interest expense and amortization of deferred debt
expense related to the assumed interest rates for the
Notes (9 1/2%) and New Securitization Facility (7 1/3%).
$ (9,369) Eliminate interest expense and amortization of deferred debt expense related to the retirement
of the Existing Securitization Facility and Revolving Credit Facility.
------------
$ 4,389
============
</TABLE>
(2) Estimated effective income tax of pro forma adjustments.
(3) Elimination of Class C Preferred Stock dividends since the ESOP purchased
the Class C Preferred Stock and converted it to Common Stock.
(4) Restated as required by SFAS 128, "Earnings per Share."
23
<PAGE>
DYNCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 27, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................. $ 64,138 $ (50,000) $ 14,138
Accounts receivable and contracts in process.......................... 186,893 186,893
Inventories and other current assets.................................. 16,506 16,506
---------- -------------- ---------
Total current assets............................................... 267,537 (50,000) 217,537
Property and equipment, at cost less accumulated depreciation........... 19,294 19,294
Intangible assets....................................................... 48,379 48,379
Other assets............................................................ 79,202 79,202
---------- -------------- ---------
Total assets....................................................... $ 414,412 $ (50,000)
========== ============== =========
LIABILITIES AND STOCKHOLDERs' EQUITY
Current liabilities
Notes payable and current position of long-term debt.................. $ 523 $ $ 523
Accounts payable and other current liabilities........................ 140,003 140,003
---------- -------------- ---------
Total current liabilities........................................ 140,526 140,526
Long-term debt
Notes payable......................................................... 103,067 (100,000) 3,067
New securitization notes payable due 2002............................. -- 50,000 50,000
Senior subordinated notes payable due 2007, net of discount........... 99,484 99,484
Other liabilities and deferred credits.................................. 79,621 79,621
Temporary equity, redeemable common stock............................... 149,412 149,412
Permanent stockholders' equity
Preferred stock, Class C.............................................. --
Common stock.......................................................... 386 386
Paid-in surplus....................................................... 122,766 122,766
Deficit............................................................... (98,948) (98,948)
Common stock warrants................................................. 3,925 3,925
Other common stock equity accounts.................................... (185,827) (185,827)
---------- -------------- ---------
Total liabilities and stockholders' equity......................... $ 414,412 $ (50,000) $364,412
========== ============== =========
</TABLE>
(1) Reflects the use of the proceeds from the issuance of the Notes and
borrowings under the New Securitization Facility to retire the Existing
Securitization Facility.
24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents summary selected historical financial data for
the Company. The selected historical financial data for the five years ended
December 31, 1996 were derived from the Consolidated Financial Statements of the
Company, which have been audited by Arthur Andersen LLP. The selected financial
data for the three months ended March 27, 1997 and March 28, 1996 were derived
from the unaudited Consolidated Financial Statements of the Company which, in
the opinion of management, reflect all adjustments necessary for a fair
presentation. During the periods presented, the Company paid no cash dividends
on its Common Stock. The following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the Consolidated Financial Statements and related notes thereto,
included in the Company's Annual Report that accompanies this Prospectus and is
incorporated by reference herein.
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENED YEARS ENDED DECEMBER 31,
------------------- ---------------------------------------------------------------
March March
27, 28,
1997 1996 1996(2) 1995(3) 1994(1)(5) 1993(1)(6) 1992(1)(7)
-------- -------- ---------- -------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................... $271,137 $241,726 $1,021,453 $908,725 $ 818,683 $ 777,216 $ 728,244
Cost of services....................... 259,794 230,997 970,163 871,317 783,121 742,460 707,803
-------- -------- ---------- -------- ----------- ----------- -----------
Gross profit........................... 11,343 10,729 51,290 37,408 35,562 34,756 20,441
Corporate selling and administrative
expense.............................. 4,439 4,460 18,241 18,705 16,887 17,547 18,503
-------- -------- ---------- -------- ----------- ----------- -----------
Operating income....................... 6,904 6,269 33,049 18,703 18,675 17,209 1,938
Interest expense....................... 2,983 2,580 10,220 14,856 14,903 14,777 14,629
Other expenses and income.............. (84) (48) 3,722 6,408 5,230 4,676 (1,059)
Income tax provision (benefit)......... 1,286 1,200 5,893 (9,090) (2,236) 1,289 2,480
Minority interest...................... 408 296 1,265 1,255 1,130 952 --
-------- -------- ---------- -------- ----------- ----------- -----------
Earnings (loss) from continuing
operations before extraordinary
item(4).............................. $ 2,311 $ 2,241 $ 11,949 $ 5,274 $ (352) $ (4,485) $ (14,112)
== ======== ======== ========== ======== ========= ========= =========
Net earnings (loss).................... $ 2,311 $ 2,241 $ 14,629 $ 2,368 $ (12,831) $ (13,414) $ (23,342)
======== ======== ========== ======== ========= ========= =========
BALANCE SHEET DATA AT PERIOD END:
Total assets........................... $414,412 $348,881 $ 368,752 $375,490 $ 396,000 $ 360,103 $ 338,135
Long-term debt excluding current
maturities........................... $202,551 $149,412 $ 103,555 $104,112 $ 230,444 $ 215,939 $ 198,770
Redeemable common stock................ $149,412 $138,083 $ 139,322 $135,894 $ 130,828 $ 100,630 $ 95,391
Earnings (loss) per share from continuing
operations before extraordinary item for
common stockholders(8)
Basic.................................. $ 0.27 $ 0.21 $ 1.14 $ 0.40 $ (0.29) $ (1.13) $ (3.18)
Diluted................................ $ 0.21 $ 0.14 $ 0.82 $ 0.29 $ (0.29) $ (1.13) $ (3.18)
Ratio of earnings to fixed charges(9)...... 1.7x 1.7x 2.0x -- -- -- --
</TABLE>
- ------------------
(1) Restated for the discontinuance of the Commercial Aviation Business.
(2) 1996 includes $3,299 accrual for supplemental pension and other fees payable
to retiring officers and a member of the Board of Directors (See Note 13 to
the Consolidated Financial Statements dated December 31, 1996), $1,286
write-off of cost in excess of net assets acquired of an unconsolidated
subsidiary (See Note 13 to the Consolidated Financial Statements dated
December 31, 1996), $1,250 credit for a revised estimate of the ESOP Put
Premium (See Notes 7 and 13 to the Consolidated Financial Statements dated
December 31, 1996), and $4,067 reversal of income tax valuation allowance
(See Note 14 to the Consolidated Financial Statements dated December 31,
1996).
(3) 1995 includes $7,707 reversal of income tax valuation allowance (see Note 14
to the Consolidated Financial Statements dated December 31, 1996), $4,362
accrued for losses and reserves related to the Company's Mexican operation,
$2,400 accrual of legal fees related to the defense of a lawsuit filed by a
subcontractor of a former electrical contracting subsidiary (see Notes 13
and 21 to the Consolidated Financial Statements dated December 31, 1996) and
$5,300 accrued for uninsured costs related to claims against a former
subsidiary for alleged use of asbestos products (see Notes 13 and 21 to the
Consolidated Financial Statements dated December 31, 1996).
(4) The extraordinary loss in 1995 of $2,886 and in 1992 of $2,526 result from
the early extinguishment of debt.
(5) 1994 includes $3,250 write-off of investment in unconsolidated subsidiary
(see Note 13 to the Consolidated Financial Statements dated December 31,
1996), $2,665 accrual of legal fees related to the defense of a lawsuit
filed by a subcontractor of a former electrical contracting subsidiary (see
Notes 13 and 21 to the Consolidated Financial Statements dated December 31,
1996), $1,830 credit for
(Footnotes continued on next page)
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<PAGE>
(Footnotes continued from previous page)
reversal of legal costs associated with an acquired business (see Note 13 to
the Consolidated Financial Statements dated December 31, 1996) and $4,069
reversal of income tax reserves (see Note 14 to the Consolidated Financial
Statements dated December 31, 1996).
(6) 1993 includes $2,000 of legal and other expenses associated with an acquired
business and $988 accelerated amortization of costs in excess of net assets
of an acquired business, for assets that were subsequently determined to
have been overvalued at the time of acquisition).
(7) 1992 Cost of Services includes approximately $6,000 for settlement of claims
against the Company related to prior years.
(8) Prior years' data has been restated to conform with current presentation
under SFAS 128, "Earnings per Share."
(9) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) from continuing operations before income taxes,
extraordinary item and fixed charges. Fixed charges consist of the total (i)
interest expense; (ii) amortization of debt expense and discount relating to
any indebtedness; and (iii) that portion of rental expense considered to
represent interest cost (assumed to be one-third). Earnings for years ended
December 31, 1995, 1994, 1993 and 1992 were insufficient to cover fixed
charges by $4,462, $3,118, $3,662 and $13,944, respectively.
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<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
Since 1988, the Company has sponsored the ESOP as the Company's principal
retirement plan. The ESOP is a defined contribution employee stock ownership
plan, designed to be invested in the Company's common stock and intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
("Code"), in which a majority of the Company's employees, other than those
covered exclusively by collective bargaining agreements, participate.
The Company makes quarterly cash contributions to the ESOP as a percentage
of total compensation (as defined in applicable ERISA and Code provisions).
These contributions are included in Cost of Services in the Company's financial
statements. The ESOP then purchases shares of the Company's common stock either
from former participants, investors, the Company or on the Company's Internal
Stock Market. At March 27, 1997, the ESOP Trust held approximately 7,159,290
shares, representing approximately 62% of the Company's fully diluted equity, on
behalf of approximately 30,000 participants.
Upon retirement, disability, death or termination, participants receive
their vested shares over a period of from one to ten years. In accordance with
the plan documents and ERISA regulations, the ESOP Trust or the Company is
obligated to repurchase shares from those inactive participants at the share
value price determined by the ESOP's trustees, based upon the advice of their
independent financial advisor, following its appraisal of the Company's shares,
until such time as the shares are "readily tradable" on an established
securities market. The plan documents require that those shares that were
initially purchased by the ESOP in 1988 be valued at a control-share premium
while they continue to be owned by the ESOP, while later-purchased shares are
valued at a market, or minority-share, value. In addition, after ten years of
participation in the plan, a participant who is 55 years of age may receive a
distribution of up to 25% of shares from his account, increasing to 50% after
age 60, for diversification purposes. These shares are also subject to the
repurchase obligation. Historically, the amount of contributions has exceeded
the repurchase obligation.
DynCorp's conditional obligation to honor the puts is subject to several
significant limitations. First, DynCorp has the right under both the ESOP Plan
and applicable law to defer indefinitely the repurchase of any shares if payment
to the shareholder would impair the capital of the Company. Second, DynCorp may
elect to list its shares for sale publicly on a national exchange at any time,
which would make them readily tradable on an established market. Under ERISA,
this would extinguish the put option as to ESOP shares which have not been
distributed by the Trust.
27
<PAGE>
DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS
THE NEW SECURITIZATION FACILITY
Under the New Securitization Facility DFC issued, under a Master Indenture,
four contract accounts receivable collateralized notes: two term notes for an
aggregate amount of $50.0 million ("Term Notes') and two grid notes for an
aggregate amount of $90.0 million ("Grid Notes'). The Company did not borrow any
amounts against the Grid Note at the closing of the New Securitization Facility.
The Term Notes, which will mature on October 31, 2002 and bear interest at
7.486%, are collateralized by the right to receive proceeds from certain U.S.
Government contracts and certain eligible accounts receivable of commercial
customers ("Receivables') of the Company and its subsidiaries, which are
purchased by DFC from time to time from the Company and its subsidiaries, at a
slight discount. The Grid Notes, which will also mature on October 31, 2002 but
bear interest at a floating rate, are collateralized by the same pool of
Receivables; however, the Grid Notes would only be drawn upon to the extent that
DFC requires cash to purchase new Receivables and increases the collateral
thereby and must be reduced when DFC has more cash available than it needs for
purchase of new Receivables. As DFC receives payments on the Receivables it has
acquired, such funds are used to make required payments on the Notes, to pay its
expenses of operation, and to purchase new Receivables. If the Receivables
available for collateral were to decrease below the amount of the Term Note, DFC
would be required to maintain excess cash in collateral account as security for
the holders of the Term Notes. The Company retains an interest in the excess
balance of Receivables over amounts due on the Notes through its ownership of
the common stock of DFC. DFC declares dividends to the Company from time to
time, from its retained earnings and surplus. Additional credit and liquidity
support is provided through a reserve fund. The Notes will begin to amortize on
April 30, 2002, when DFC's available cash must be used for payment of principal
rather than the purchase of new Receivables.
THE REVOLVING CREDIT FACILITY
The Company has available up to $15.0 million in financing under the
Revolving Credit Facility to provide funds for working capital and letters of
credit. The Company currently has approximately $4.8 million utilized at March
27, 1997, to support stand-by letters of credit under the Revolving Credit
Facility.
LEGAL PROCEEDINGS
GENERAL
The Company and its subsidiaries and affiliates are involved in various
claims and lawsuits, including contract disputes and claims based on allegations
of negligence and other tortious conduct. The Company is also potentially liable
for certain personal injury, tax, environmental and contract dispute issues
related to the prior operations of divested businesses. In addition, certain
subsidiary companies are potentially liable for environmental, personal injury
and contract and dispute claims. In most cases, the Company and its subsidiaries
have denied, or believe they have a basis to deny, liability, and in some cases
have offsetting claims against the plaintiffs, third parties or insurance
carriers. As of March 27, 1997, the total amount of damages currently claimed by
the plaintiffs in these cases is estimated to be approximately $127.0 million
(including compensatory punitive damages and penalties). This amount includes
estimates for claims that have been filed without specified dollar amounts or
for amounts that are in excess of recoveries customarily associated with the
stated causes of action; such amount does not include estimates for claims that
may have been incurred but have not yet been asserted. The Company believes that
the amount that will actually be recovered in these cases will be substantially
less than the amount claimed. After taking into account available insurance, the
Company believes it is adequately reserved with respect to the potential
liability for such claims. The Company has recorded such damages and penalties
that are considered to be probable recoveries against the Company or its
subsidiaries. The Company's accounting policy is to accrue an estimate of the
future legal costs that will be incurred to complete litigation of claims and
disputed issues. This policy has been applied consistently for all significant
legal issues for each period presented. See "Risk Factors--Potential for Adverse
Judgments in Legal Proceedings."
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The Company estimates that the aggregate potential liability for claims
asserted as of March 27, 1997 ranges from $8.5 million to $127.0 million,
excluding amounts for claims that may have been incurred but have not yet been
asserted, and has accrued aggregate reserves of $29.3 million for such claims,
excluding approximately $2.0 million in additional reserves. Such estimates
reflect management's best estimate of the aggregate liability that will result
from these matters. While it is not possible to predict with certainty the
outcome of litigation and other matters discussed herein, Company's management
believes, based in part upon opinions of counsel, insurance in force and the
facts currently known, that liabilities in excess of those recorded, if any,
arising from such matters would not have a material adverse effect on the
results of operations, consolidated financial position or liquidity of the
Company over the long-term. As of March 27, 1997, the Company estimates that it
had primary and excess insurance coverage, excluding approximately $92.0 million
in excess coverage underwritten by insolvent carriers, of more than $507
million. It is possible, however, that the timing of the resolution of
individual issues could result in a significant impact on the operating results
and/or liquidity for one or more future reporting periods.
FULLER-AUSTIN ASBESTOS CLAIMS
An acquired and now inactive subsidiary, Fuller-Austin Insulation Company
("Fuller-Austin"), which discontinued its business activities in 1986, has been
named as one of many defendants in civil lawsuits which have been filed in
certain state courts beginning in 1986 (principally Texas) against
manufacturers, distributors and installers of products allegedly containing
asbestos. Fuller-Austin was a non-manufacturer that installed and occasionally
distributed industrial insulation products. Fuller-Austin had discontinued the
use of asbestos-containing products prior to being acquired by the Company in
1974. These claims are not part of a class action.
The claimants generally allege injuries to their health caused by
inhalation of asbestos fibers. Many of the claimants seek punitive damages as
well as compensatory damages. The amount of damages sought is impacted by a
multitude of factors. These include the type and severity of the disease
sustained by the claimant (i.e., mesothelioma, lung cancer, other types of
cancer, asbestosis or pleural changes); the occupation of the claimant; the
duration of the claimant's exposure to asbestos-containing products; the number
and financial resources of the defendants; the jurisdiction in which the claim
is filed; the presence or absence of other possible causes of the claimant's
illness; the availability of legal defenses, such as the statute of limitations;
and whether the claim was made on an individual basis or as part of a group
claim.
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<PAGE>
CLAIMS EXPOSURE
As of May 2, 1997, 14,111 plaintiffs have filed claims against
Fuller-Austin and various other defendants. Of these claims, 3,203 have been
dismissed, 3,690 have been resolved without an admission of liability at an
average cost of $3,590 per claim (excluding legal defense costs) and an
additional 618 claims have been settled in principle (subject to future
processing and funding) at a average cost of $2,019 per claim.
The following is a summary of claims filed against Fuller-Austin:
<TABLE>
<CAPTION>
YEARS
------------------------------------------------------
1993 AND PRIOR 1994 1995 1996 1997(1) TOTAL
-------------- ----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Claims Filed........................................ 2,921 1,136 4,522 4,122 1,410 14,111
Claims Dismissed.................................... (79) (21) (1,035) (1,459) (609) (3,203)
Claims Resolved..................................... (1,224) (394) (182) (1,828) (62) (3,690)
Settlements in process.............................. (618)
Claims Outstanding at May 2, 1997................... 6,600
======
- -------
(1) As of May 2, 1997
</TABLE>
In connection with these claims, Fuller-Austin's primary insurance carriers
have incurred approximately $21.4 million (including $9.4 million of legal
defense costs, but excluding $1.3 million for settlements in process) to defend
and settle the claims and, in addition, judgments have been entered against
Fuller-Austin for jury verdicts of $6.5 million which have not been paid and
which are under appeal by Fuller-Austin. Through March 27,1997, the Company and
Fuller-Austin have charged to expense approximately $12.5 million consisting of
$6.2 million of charges under retrospectively rated insurance policies and $6.3
million of reserves for potential uninsured legal and settlement costs related
to these claims. These charges substantially eliminate any further exposure for
retrospectively determined premium payments under the retrospectively rated
insurance policies.
Fuller-Austin has continued its strategy to require direct proof that
claimants had exposure to asbestos-containing products as the result of
Fuller-Austin's operations. This has resulted in an increase in claim
settlements and a decrease in litigation defense activities. However, perceived
changes in the nature of new claims filed have caused Fuller-Austin and its
insurers to reevaluate Fuller-Austin's approach to claims settlement.
Consequently, there is a potential for an increased level of trial activity
which Fuller-Austin believes will reduce the overall cost of asbestos personal
injury claims in the long run by requiring claimants to present and prove clear
evidence of substantial asbestos-related impairment and exposure to Fuller-
Austin's operations, and by denying recovery to claimants who are unimpaired or
who did not have significant exposure to Fuller-Austin's operations.
Further, the level of filed claims has become significant only since 1992,
and therefore, Fuller-Austin has a relatively brief history (compared to
manufacturers and suppliers) of claims volume and a limited data file upon which
to estimate the number or costs of claims that may be received in the future.
Also, effective September 1, 1995, the State of Texas (where most of these
claims have been filed) enacted tort reform legislation which Fuller-Austin
believes will ultimately curtail the number of unsubstantiated asbestos claims
filed against the subsidiary in Texas.
The Company and its defense counsel have analyzed the 14,111 claim filings
incurred through May 2, 1997. With respect to the 6,600 claims outstanding as of
March 27, 1997, the Company estimates that the amount of such claims is
approximately $18.6 million and believes that potential liability ranges from
$8.5 million to $18.6 million. As of March 27, 1997, based on analysis and
consultation with its professional advisors, Fuller-Austin has estimated its
cost, including legal defense costs, to be approximately $16.0 million for
claims filed and unresolved, and the Company has established reserves equal to
such amount. With respect to possible future claims, Fuller-Austin has estimated
its minimum future exposure to be approximately $38.5 million. No upper limit of
exposure can be reasonably estimated at present with respect to such incurred,
but unasserted claims. The Company cautions that these estimates are subject to
significant uncertainties, including the future effect of tort reform
legislation enacted in Texas and other states, the success of Fuller-Austin's
litigation strategy, the size of jury verdicts, success of appeals in process,
the number and financial resources of future plaintiffs, and the actions of
other defendants. During 1996, approximately 40 claims, with approximately 700
more being prepared for filing, were filed in another state where Fuller-Austin
had performed a significant amount of its business. Although the claims filed
against Fuller-Austin in states other than Texas have been included in the
claims summary table set forth above, exposure for these claims has not been
included in the Company's estimates and neither the Company nor its defense
counsel are able to reasonably predict the outcome of these cases or the
incidence of the 700 or other future claims that may be filed. Therefore, actual
claim experience may vary significantly from such estimates, especially if
certain Texas appeals
30
<PAGE>
are decided unfavorably to Fuller-Austin and/or the level of claims filed in
other states increases. At March 27, 1997 and December 31, 1996, Fuller-Austin
recorded an estimated liability for future indemnity payments and defense costs
related to currently unsettled claims and minimum estimated future claims of
$55.0 million (recorded as long-term liability). The reduction in total
liability compared to prior periods resulted from settlements and expenses
incurred in the reporting period which were charged against the accrued
liability.
INSURANCE COVERAGE
Defense has been tendered to and accepted by Fuller-Austin's primary
insurance carriers, and by certain of the Company's primary insurance carriers
that issued policies under which Fuller-Austin is named as an additional
insured; however, only one such primary carrier has partially accepted defense
without a reservation of rights. The Company believes that Fuller-Austin has at
least $7.7 million in unexhausted primary coverage (net of deductibles and
self-insured retentions, but including disputed coverage) under its liability
insurance policies to cover the unsettled claims, verdicts and future unasserted
claims and defense costs. The primary carriers also have unlimited liability for
defense costs (presently running at the annual rate of approximately $1.5
million) until such time as the primary limits under these policies are
exhausted. When the primary limits are exhausted, liability for both indemnity
and legal defense will be tendered to the excess coverage carriers, all of which
have been notified of the pendency of the asbestos claims. The Company and
Fuller-Austin have approximately $490.0 million of additional excess and
umbrella insurance that is generally responsive to asbestos claims. This amount
excludes approximately $92.0 million of coverage issued by insolvent carriers.
After the $7.7 million of unexhausted primary coverage, the Company has $35.7
million of excess coverage in place before entering a $35.0 million layer of
insolvent coverage for policy years 1979 through 1984 (the "Insolvent Layer").
All of the Company's and Fuller-Austin's liability insurance policies cover
indemnity payments and defense fees and expenses subject to applicable policy
terms and conditions.
The Company and Fuller-Austin have instituted litigation in Los Angeles
Superior Court, California, against their primary and excess insurance carriers,
to obtain declaratory judgments from the court regarding the obligations of the
various carriers to defend and pay asbestos claims. The issues in this
litigation include the aggregate liability of the carriers, the triggering and
drop-down of excess coverage to cover the Insolvent Layer and allocation of
losses among multiple carriers including insolvent carriers and various other
issues related to the interpretation of the policy contracts. All of the carrier
defendants have filed general denial answers.
Although there can be no assurances as to the outcome of this litigation,
management believes that it is probable that the Company and Fuller-Austin will
prevail in obtaining judicial rulings confirming the availability of a
substantial portion of the coverage. Based on a review of the independent
ratings of these carriers and opinions of legal counsel, the Company believes
that a substantial portion of this coverage will continue to be available to
meet the claims. Fuller-Austin recorded in Other Assets $55.0 million (not
including reserves of $6.2 million and $6.4 million, respectively) at March 27,
1997 and December 31, 1996, representing the amount that it expects to recover
from its insurance carriers for the payment of currently unsettled and estimated
future claims.
The Company cautions, however, that even though the existence and aggregate
dollar amounts of insurance are not generally being disputed, such insurance
coverage is subject to interpretation by the court and the timing of the
availability of insurance payments could, depending upon the outcome of the
litigation and/or negotiation, delay the receipt of insurance company payments
and require Fuller-Austin to assume responsibility for making interim payment of
asbestos defense and indemnity costs.
While the Company and Fuller-Austin believe that they have recorded
sufficient liability to satisfy Fuller-Austin's reasonably anticipated costs of
present and future plaintiffs' suits, it is not possible to predict the amount
or timing of future suits or the future solvency of its insurers. In the event
that currently unsettled and future claims exceed the recorded liability of
$55.0 million, the Company believes that the judicially determined and/or
negotiated amounts of excess and umbrella insurance coverage that will be
available to cover additional claims
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<PAGE>
will be significant; however, it is unable to predict whether or not such
amounts will be adequate to cover all additional claims without further
contribution by Fuller-Austin.
GENERAL LITIGATION
DYNALECTRIC SUBCONTRACT DISPUTE
The Company has retained certain liability in connection with its 1989
divestiture of its major electrical contracting business, Dynalectric Company
("Dynalectric"). The Company and Dynalectric were sued in 1988 in Bergen County
Superior Court, New Jersey, by a former Dynalectric joint venture
partner/subcontractor ("subcontractor"). The subcontractor has alleged that its
subcontract to furnish certain software and services in connection with a major
municipal traffic signalization project was improperly terminated by Dynalectric
and that Dynalectric fraudulently diverted funds due, misappropriated its trade
secrets and proprietary information, fraudulently induced it to enter the joint
venture, and conspired with other defendants to commit acts in violation of the
New Jersey Racketeering Influenced and Corrupt Organization Act. Although the
aggregate dollar amount of these claims has not been formally recited in the
subcontractor's complaint, the Company estimates such claims to be approximately
$7.5 million. Dynalectric has also filed certain counterclaims against the
former subcontractor. The Company and Dynalectric believe that they have valid
defenses, and/or that any liability would be offset by recoveries under the
counterclaims. The Company and Dynalectric have filed motions with the Court to
enforce the arbitration provisions included in the subcontract. Discovery is
ongoing. The Company believes that it has established adequate reserves ($2.2
million at March 27, 1997) for the contemplated defense costs and for the cost
of obtaining enforcement of arbitration provisions contained in the contract.
CONTRACT INDEMNIFICATION
In November, 1994, the Company acquired an information technology business
which was involved in various disputes with federal and state agencies,
including two contract default actions. The Company has contractual rights to
indemnification from the former owner of the acquired subsidiary with respect to
the defense of all such claims and litigation, as well as all liability for
damages when and if proven. In October, 1995, one of the federal agencies
asserted a claim against the subsidiary and gave the Company notice that it
intended to withhold payments against the contract under which the claim arose.
To date, the agency has withheld approximately $3.3 million allegedly due the
agency under one of the aforementioned disputes. This subsidiary has submitted a
demand for indemnification to the former owner of the subsidiary which has been
denied. The subsidiary recently received an arbitration award confirming that it
is entitled to indemnification.
ENVIRONMENTAL ISSUES
Neither the Company nor any of its subsidiaries is named a Potentially
Responsible Party (as defined in the Comprehensive Environmental Response,
Compensation and Liability Act at any site). The Company, however, did
undertake, as part of the 1988 divestiture of a petrochemical engineering
subsidiary, an obligation to install and operate a soil and water remediation
system at a subsidiary research facility site in New Jersey. The Company is
required to pay the costs of continued operation of the remediation system which
are estimated to be $0.1 million. In addition, the Company, pursuant to the sale
of the Commercial Aviation Business, is responsible for the costs of clean-up of
environmental conditions at certain designated sites. Potential costs may
include the removal and subsequent replacement of contaminated soil, concrete,
tanks, etc., that existed prior to the sale of the Commercial Aviation Business.
The Company has established a reserve of approximately $1.0 million with respect
to such potential costs.
<PAGE>
OTHER LITIGATION
The Company is a party to other civil and contractual lawsuits which have
arisen in the normal course of business for which potential liability, including
costs of defense, which constitute the remainder of the $127.0 million discussed
above. The estimated probable liability for these issues is approximately $10.0
million and is substantially covered by insurance. All of the insured claims are
within policy limits and have been tendered to and accepted by the applicable
carriers.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on the Issue Date to the
Initial Purchasers pursuant to the Purchase Agreement. As a condition to the
sale of the Original Notes, the Company and the Initial Purchasers entered into
the Registration Rights Agreement on the Issue Date. Pursuant to the
Registration Rights Agreement, the Company agreed that, unless the Exchange
Offer is not permitted by applicable law or Commission policy, it would (i) file
with the Commission a Registration Statement under the Securities Act with
respect to the Exchange Notes within 60 days after the Issue Date, (ii) use its
best efforts to cause such Registration Statement to become effective under the
Securities Act within 150 days after the Issue Date and (iii) upon effectiveness
of the Registration Statement, commence the Exchange Offer, use its best efforts
to maintain the effectiveness of the Registration Statement for at least 30 days
(or a longer period if required by law) and deliver to the Exchange Agent
Exchange Notes in the same aggregate principal amount at maturity as the
Original Notes that were rendered by holders thereof pursuant to the Exchange
Offer. Under existing Commission interpretations, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act must
be delivered as required. The Company has agreed to make available a prospectus
meeting the requirements of the Securities Act to any broker-dealer for use in
connection with any resale of any such Exchange Notes acquired as described
below for such period as such broker-dealers must comply with such requirements.
A broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act, and will be bound by the Registration Rights Agreement
(including certain indemnification rights and obligations). A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement of
which this Prospectus is a part is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement and the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who exchanges the Original Notes for the Exchange
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement with any person to participate, in
the distribution of the Exchange Notes, will be allowed to resell the Exchange
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Exchange Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires the Exchange Notes in the Exchange Offer for the purposes of
distributing or participating in the distribution of the Exchange Notes or is a
broker-dealer, such holder cannot rely on the position of the staff of the
Commission enumerated in certain no-action letters issued to third parties and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Original Notes where
such Original Notes were acquired by such broker-dealer as a result of
market-making or other trading activities. Pursuant to the Registration Rights
Agreement, the Company has agreed to make this Prospectus, as it may be amended
or supplemented from time to time, available to all persons subject to the
prospectus delivery requirements of the Securities Act for use in connection
with any resale for a period of 90 days after the Expiration Date. See "Plan of
Distribution."
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<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Original
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Original Notes surrendered pursuant
to the Exchange Offer. Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the exchange will be registered under the
Securities Act and hence the Exchange Notes will not bear legends restricting
their transfer and (ii) holders of the Exchange Notes will not be entitled to
the certain rights of holders of Original Notes under the Registration Rights
Agreement, which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Original Notes
(which they replace) and will be issued under, and be entitled to the benefits
of, the Indenture, which also authorized the issuance of the Original Notes,
such that all outstanding Notes will be treated as a single class of debt
securities under the Indenture.
As of the date of this Prospectus, $100.0 million aggregate principal
amount of the Original Notes are outstanding and registered in the name of Cede
& Co., as nominee for the Depository Trust Company ("DTC"). Only a registered
holder of the Original Notes (or such holder's legal representative or
attorney-in-fact) as reflected on the records of the Trustee under the Indenture
may participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Original Notes entitled to participate in
the Exchange Offer.
Holders of the Original Notes do not have any appraisal or dissenter's
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Original Notes for the purposes of receiving the Exchange Notes from
the Company.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on ,
1997 unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) will mail to the
registered holders of Original Notes an announcement thereof, (iii) will issue a
press release or other public announcement which shall include disclosure of the
approximate number of Original Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company may choose to
make a public announcement of any delay, extension, amendment or termination of
the Exchange Offer, the Company shall have no obligation to publish, advertise
or otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, or (iii) if any
conditions set forth below under "--Certain Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer by giving oral or
written notice of such delay, extension or termination to the Exchange Agent.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
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<PAGE>
registered holders. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders of Original Notes, and the Company will extend the
Exchange Offer for a period of five to 10 business days, depending upon the
significance of the amendment and the manner of disclosure to such registered
holders, if the Exchange Offer would otherwise expire during such five to 10
business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes bear interest at a rate equal to 9 1/2% per annum.
Interest on the Exchange Notes is payable semiannually on each March 1 and
September 1, commencing on the first such date following their date of issuance.
Holders of Exchange Notes will receive interest on September 1, 1997 from the
date of initial issuance of the Original Notes. Holders of Original Notes that
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Original Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes
in the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal or facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Notes, if such procedure is available, into
the Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner(s) of the Original Notes whose Original Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Original Notes, either make appropriate
arrangements to register ownership of the Notes in such owner's name (to the
extent permitted by the Indenture) or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders'), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Original Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box entitled 'special Delivery Instructions' or the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities
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<PAGE>
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in the Depositary's system may utilize the Depositary's
Automated Tender Offer Program to tender Original Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Original Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Original Notes, neither the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Original Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived.
While the Company has no present plan to acquire any Original Notes which
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Original Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Certain
Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Original Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the Exchange Notes to be acquired by the holder of the Original
Notes in connection with the Exchange Offer are being acquired by the holder in
the ordinary course of business of the holder, (ii) the holder has no
arrangement or understanding with any person to participate in the distribution
of Exchange Notes, (iii) the holder acknowledges and agrees that any person who
is a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the holder understands that a
secondary resale transaction described in clause (iii) above and any resales of
Exchange Notes obtained by such holder in exchange for Original Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission, and (v) the holder is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, the holder is required to acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the holder
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
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<PAGE>
RETURN OF NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Original Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Original Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described below,
such Original Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in the Depositary's systems may make book-entry delivery
of Original Notes by causing the Depositary to transfer such Original Notes into
the Exchange Agent's account at the Depositary in accordance with the
Depositary's procedures for transfer. However, although delivery of Original
Notes may be effected through book-entry transfer at DTC, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and any
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date or pursuant to the guaranteed delivery procedures
described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Original Notes and
the principal amount of Original Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof) together with the certificate(s) representing the
Original Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Original
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having deposited the
Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Original Notes), and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Original Notes were tendered (including any
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<PAGE>
required signature guarantees). All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Original Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Original Notes so withdrawn
are validly retendered. Properly withdrawn Notes may be retendered by following
one of the procedures described above under "--Procedures for Tendering" at any
time prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Original Notes not theretofore accepted for exchange, and may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Original
Notes, if any of the following conditions exist:
(a) the Exchange Offer violates applicable law or any applicable
interpretation of the staff of the SEC, (b) an action or proceeding shall
have been instituted or threatened in any court or by any governmental
agency which might materially impair the ability of the Company to proceed
with the Exchange Offer and any material adverse development shall have
occurred in any existing action or proceeding with respect to the Company
and (c) all governmental approvals have not been obtained, which approvals
the Company deems necessary for the consummation of the Exchange Offer.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Original Notes (see "--Withdrawal of Tenders'), or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Original Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Original Notes, and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to 10 business day period.
Holders may have certain rights and remedies against the Company under the
Registration Rights Agreement should the Company fail to consummate the Exchange
Offer, notwithstanding a failure of the conditions stated above. Such conditions
are not intended to modify those rights or remedies in any respect.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in the Company's sole discretion. The failure by the Company
at any time to exercise the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Original Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Original Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Original Notes pursuant to Rule 144A,
(iii) to use its best efforts to keep the Registration Statement effective to
the extent necessary to ensure that it is available for resales of
transfer-restricted Notes by broker-dealers for a period of 90 days from the
date on which the Registration Statement is declared effective, and (iv) to
provide copies of the latest version of the Prospectus to all persons subject to
the prospectus delivery requirements of the Securities Act upon their request
for a period of 90 days from the date on which the Registration Statement is
declared effective.
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<PAGE>
LIQUIDATED DAMAGES
The following description of Section 4 of the Registration Rights Agreement
is qualified in its entirety by the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement of
which the Prospectus is a part. In the event of a failure to file, or to become
effective, one or more registration statements as provided by the Registration
Rights Agreement, the Company has agreed to pay, as liquidated damages,
additional interest on Original Notes ("Additional Interest") under the
circumstances and to the extent set forth below (each of which is given
independent effect):
(i) if (A) neither the Registration Statement of which this Prospectus
is a part (the "Exchange Offer Registration Statement") nor Shelf
Registration Statement, as defined in the Registration Rights Agreement, is
filed with the Commission on or prior to the Filing Date or (B)
notwithstanding that the Company has consummated or will consummate an
Exchange Offer, the Company is required to file a Shelf Registration
Statement and such Shelf Registration Statement is not filed on or prior to
the date required by the Registration Rights Agreement, then commencing on
the day after either such required filing date, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.50% per annum
for the first 90 days immediately following each such filing date, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to 150 days after the applicable filing date or (B) notwithstanding
that the Company has consummated or will consummate an Exchange Offer, the
Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the 60th day following the date such Shelf Registration Statement
was filed, then, commencing on the day after the 60th day following the
applicable filing date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first 90 days
immediately following such date, such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all
Original Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 45th day after the date on which the
Exchange Offer Registration Statement was declared effective or (B) if
applicable, the Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
prior to the second anniversary of its effective date (other than after
such time as all Original Notes have been disposed of thereunder), then
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days commencing on (x) the 46th
day after such effective date, in the case of (A) above, or (y) the day
such Shelf Registration Statement ceases to be effective in the case of (B)
above, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period; provided, however,
that the Additional Interest rate on the Notes may not exceed in the
aggregate 1.0% per annum; provided, further, however, that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of
the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of clause (ii) above), or (3) upon the exchange of Exchange
Notes for all Notes tendered (in the case of clause (iii) (A) above), or
upon the effectiveness of the Shelf Registration Statement which had ceased
to remain effective (in the case of clause (iii)(B) above), Additional
Interest on the Notes as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in accordance with the terms of the Registration
Rights Agreement.
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<PAGE>
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent of the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY UP TO 4:30P.M.:
United States Trust Company United States Trust Company
of New York of New York
Box 843 111 Broadway
Peter Cooper Station Lower Level
New York, NY 10276 New York, NY 10005
Attn: Corporate Trust Attn: Corporate Trust
BY OVERNIGHT COURIER OR BY FACSIMILE TRANSMISSION
BY HAND DELIVERY AFTER 4:30P.M.: (FOR ELIGIBLE INSTITUTIONS ONLY):
United States Trust Company United States Trust Company of New York
of New York (212) 420-6152
770 Broadway Confirm: (800) 548-6565
13th Floor For Information:
New York, NY 10003 (800) 548-6565
Attn: Corporate Trust
Service Window
FEES AND EXPENSES
All fees and expenses incident to compliance with the Registration Rights
Agreement regarding this Exchange Offer shall be borne by the Company whether or
not the Exchange Offer or a Shelf Registration becomes effective.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$77,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Original
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Original Notes which are not exchanged for the Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such Notes
may be resold only (i) to a person whom the seller reasonably believes is a
qualified institutional buyer (as defined in Rule 144A under the Securities Act)
in a transaction meeting the requirements of Rule 144A, (ii) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (iii) outside the
United States to a foreign person in a transaction meeting the requirements of
Rule 904 under the Securities Act, (iv) in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests), (v) to the Company, or (vi)
pursuant to an effective registration statement and, in each case, in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction.
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<PAGE>
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
The Original Notes were issued, and the Exchange Notes are issuable, under
the Indenture, a copy of the form of which has been filed as an exhibit to the
Registration Statement. The form and terms of the Exchange Notes will be
identical in all material respects to the form and terms of the Original Notes,
except that the Exchange Notes will have been registered under the Securities
Act and, therefore, will not bear legends restricting transfer thereof. The
Exchange Notes and the Original Notes are deemed the same class of notes under
the Indenture and are both entitled to the benefits thereof. The following
summary of certain provisions of the Indenture is subject to, and is qualified
in its entirety by reference to, all the provisions of the Indenture, including
the definitions of certain terms therein and those terms made a part thereof by
the Trust Indenture Act of 1939, as amended. Whenever particular Sections or
defined terms of the Indenture not otherwise defined herein are referred to,
such Sections or defined terms are incorporated herein by reference.
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<PAGE>
DESCRIPTION OF NOTES
The Original Notes have been, and the Exchange Notes will be, issued under
the Indenture. The following summary of the material provisions of the Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Trust Indenture Act of 1939, as amended (the
"TIA"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the TIA as in effect on the date of the Indenture. A copy of the
Indenture may be obtained from the Company or the Initial Purchasers. The
definitions of certain capitalized terms used in the following summary are set
forth below under "-- Certain Definitions." For purposes of this section,
references to the "Company" include only the Company and not its Subsidiaries.
The Original Notes are, and the Exchange Notes will be, unsecured
obligations of the Company, ranking subordinate in right of payment to all
Senior Debt of the Company. The Notes will rank pari pasu with any future senior
subordinated indebtedness of the Company and will rank senior to all other
indebtedness of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any Paying Agent and Registrar without notice to holders of the Notes (the
"Holders'). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders. Any Notes that remain outstanding after
the completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150.0 million, of
which $100.0 million is outstanding and will mature on March 1, 2007. Additional
amounts may be issued in one or more series from time to time, subject to the
limitations set forth under "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness." Interest on the Notes will accrue at the rate of 9
1/2% per annum and will be payable semiannually in cash on each March 1 and
September 1 commencing on September 1, 1997, to the persons who are registered
Holders at the close of business on the February 15 and August 15 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after March 1, 2002, upon not less than 30
nor more than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on March 1 of the year set forth below, plus, in each case,
accrued interest to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION PRICE
-----------------
<S> <C>
2002.................................................... 104.750%
2003.................................................... 103.167%
2004.................................................... 101.583%
2005 and thereafter..................................... 100.0%
</TABLE>
At any time, or from time to time, on or prior to March 1, 2000, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined below) to redeem up to 35% of the aggregate
principal amount of Notes originally issued at a redemption price equal to
109.50% of the principal amount thereof, plus accrued interest to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption. In
order to effect the
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<PAGE>
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 120 days after the consummation
of any such Public Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of DTC) unless such method is
otherwise prohibited. Notice of redemption shall be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption as long as the Company has deposited with the Paying Agent
funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 180 days from the
date the payment on the Notes was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of
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commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
At March 27, 1997, on a pro forma basis after giving effect to the New
Securitization Facility, the aggregate outstanding amount of Senior Debt of the
Company would have been approximately $58.4 million (including issued but
undrawn letters of credit of $4.8 million and excluding unused commitments
available for borrowing of $70.2 million).
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof, plus accrued interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full all Indebtedness and terminate all
commitments under the Revolving Credit Facility and all other Senior Debt the
terms of which require repayment upon a Change of Control or offer to repay in
full and terminate all commitments under all Indebtedness under the Revolving
Credit Facility and all other such Senior Debt and to repay the Indebtedness
owed to each lender which has accepted such offer or (ii) obtain the requisite
consents under the Revolving Credit Facility and all other Senior Debt to permit
the repurchase of the Notes as provided below. The Company shall first comply
with the covenant in the immediately preceding sentence before it shall be
required to repurchase Notes pursuant to the provisions described below. The
Company's failure to comply with the immediately preceding sentence shall
constitute an Event of Default described in clause (iii) and not in clause (ii)
under "Events of Default" below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
its property, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require redemption or repurchase of the Notes, and
there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries
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by the management of the Company. While such restrictions cover a wide variety
of arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses (a),
(b), (c) and (d) being referred to as a "Restricted Payment"), if at the time of
such Restricted Payment or immediately after giving effect thereto, (i) a
Default or an Event of Default shall have occurred and be continuing or (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness' covenant or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (x) 50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to the Issue Date and on or prior to the date the Restricted Payment
occurs (the "Reference Date") (treating such period as a single accounting
period); plus (y) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company; plus (z) without duplication of
any amounts included in clause (iii)(y) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(y) and (z), (i)
any net cash proceeds from a Public Equity Offering to the extent used to redeem
the Notes and (ii) cash proceeds from the issuance of Qualified Capital Stock
by, or any equity contribution from any Person, financed directly or indirectly
using funds borrowed from the Company or any Subsidiary of the Company until and
to the extent such borrowing is repaid).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the
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dividend would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or (ii) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) the repurchase by the Company of shares of its
Common Stock in connection with the repurchase provisions of the ESOP as in
effect on the Issue Date (subject to changes in the ESOP to reflect requirements
of ERISA or other applicable laws); and (5) payments by the Company in respect
of (A) the repurchase by the Company of Common Stock from former employees,
officers and directors of the Company, (B) the payment by the Company of up to
$2.5 million in withholding and or payroll taxes upon the lapse of deferrals of
deferred stock and stock equivalent accounts and (C) the Company's obligation to
repurchase 125,714 shares of Common Stock issued in connection with the
Company's acquisition of Technology Applications, Inc., in an aggregate amount
not to exceed $3.0 million in any calendar year (provided that if less than $3.0
million is used for payments pursuant to (A), (B) and (C) in any calendar year,
the difference may be carried forward and used in subsequent calendar years) and
(6) the repurchase by the Company within 30 days of the Issue Date of up to
389,724 shares of Common Stock and Common Stock Warrants which are beneficially
owned by Guaranty National Insurance Company and Security Insurance Company in
an aggregate amount not to exceed $7.9 million. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in accordance
with clause (iii) of the immediately preceding paragraph, amounts expended
pursuant to clauses (1), (2), (4), and (5) shall be included in such
calculation; provided that amounts received by the Company from the sale by the
Company of Common Stock to the ESOP that constitute Disqualified Capital Stock
shall be credited against the amounts calculated pursuant to clause (4) above
for the purpose of such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 80% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition; and (iii) upon the consummation of an Asset
Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof
either (A) to prepay any Senior Debt and, in the case of any Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets'), or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 366th day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis, that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued interest thereon to the
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date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
thereof shall be applied in accordance with this covenant. The Company may defer
the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required pursuant
to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except (i) with respect to Restricted Subsidiaries which are Permitted
Joint Ventures for such restrictions described in clause (b) or (c) above which
require such Restricted Subsidiary to effect such payment, loan, advance or
transfer on terms that are no less favorable than those that might reasonably
have been obtained in a comparable transaction at such time on an arm's length
basis from a Person that is not an Affiliate of such Restricted Subsidiary and
(ii) except for such encumbrances or restrictions existing under or by reason
of: (1) applicable law; (2) the Indenture; (3) the New Securitization Facility
and the Revolving Credit Facility; (4) customary nonassignment provisions of any
contract or any lease governing a leasehold interest of any Restricted
Subsidiary of the Company; (5) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the properties or
assets of the Person so acquired; (6) agreements existing on the Issue Date to
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the extent and in the manner such agreements are in effect on the Issue Date;
(7) any instrument governing Indebtedness incurred by a Permitted Joint Venture
or any instrument or agreement governing a Permitted Joint Venture (but only to
the extent such instrument or agreement does not restrict payments of dividends
or other distributions made pursuant to clause (b) above out of earnings and
profits of such Permitted Joint Venture); or (8) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (3), (5) or (6) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (3), (5) or (6).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Liens of any kind against or upon any property or assets of
the Company or any of its Restricted Subsidiaries whether owned on the Issue
Date or acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless (i) in
the case of Liens securing Indebtedness that is expressly subordinate or junior
in right of payment to the Notes, the Notes are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes are equally and ratably secured, except for (A)
Liens existing as of the Issue Date to the extent and in the manner such Liens
are in effect on the Issue Date; (B) Liens securing Senior Debt; (C) Liens
securing the Notes; (D) Liens of the Company or a Wholly Owned Restricted
Subsidiary of the Company on assets of any Subsidiary of the Company; (E) Liens
securing Refinancing Indebtedness which is incurred to Refinance Indebtedness
which has been secured by a Lien permitted under the Indenture and which has
been incurred in accordance with the provisions of the Indenture; provided,
however, that such Liens (A) are no less favorable to the Holders and are not
more favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (B) do not extend to or cover
any property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will not
incur or suffer to exist Indebtedness that is senior in right of payment to the
Notes and subordinate in right of payment to any other Indebtedness of the
Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the surviving
or continuing corporation or (2) the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the 'surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, the Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction and (2) shall be able to incur at least $1.00 of
additional
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Indebtedness (other than Permitted Indebtedness) pursuant to the "-- Limitation
on Incurrence of Additional Indebtedness" covenant; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Limitations on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary. All Affiliate Transactions (and each series
of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market
value in excess of $250,000 shall be approved by the Board of Directors of
the Company or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company
enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair
market value or payments to an Affiliate, as the case may be, of more than
$2.5 million, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to
the Company or the relevant Restricted Subsidiary, as the case may be, from
a financial point of view, from an Independent Financial Advisor and file
the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions
exclusively between or among the Company and any of its Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by the Indenture;
(iii) transactions exclusively between or among the Company and any of its
Restricted Subsidiaries on the one hand and any Permitted Joint Venture on
the other hand, so long as no portion of the remaining interest in the
Permitted Joint Venture is owned by a Person who is an Affiliate of the
Company (other than another Restricted Subsidiary of the Company); (iv) any
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment
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or replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue
Date; (v) Restricted Payments permitted by the Indenture; and (vi)
transactions pursuant to the New Securitization Facility. In addition,
transactions between the Company and the ESOP or any other of the Company's
benefit plans shall not be considered Affiliate Transactions for purposes
of the Indenture.
Limitation of Guarantees by Restricted Subsidiaries. The Company will not
permit any of its Restricted Subsidiaries, directly or indirectly, by way of the
pledge of any intercompany note or otherwise, to assume, guarantee or in any
other manner become liable with respect to any Indebtedness of the Company or
any other Restricted Subsidiary (other than (A) Indebtedness and other
obligations under the Revolving Credit Facility, (B) Permitted Indebtedness of a
Restricted Subsidiary, (C) Indebtedness under Currency Agreements in reliance on
clause (vi) of the definition of Permitted Indebtedness, or (D) Interest Swap
Obligations incurred in reliance on clause (v) of the definition of Permitted
Indebtedness), unless, in any such case (a) such Restricted Subsidiary executes
and delivers a supplemental indenture to the Indenture, providing a guarantee of
payment of the Notes by such Restricted Subsidiary (the "Guarantee") and (b) (x)
if any such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Senior Debt, the guarantee or other
instrument provided by such Restricted Subsidiary in respect of such Senior Debt
may be superior to the Guarantee pursuant to subordination provisions no less
favorable to the Holders of the Notes than those contained in the Indenture and
(y) if such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Indebtedness that is expressly subordinated
to the Notes, the guarantee or other instrument provided by such Restricted
Subsidiary in respect of such subordinated Indebtedness shall be subordinated to
the Guarantee pursuant to subordination provisions no less favorable to the
Holders of the Notes than those contained in the Indenture. Further, the Company
will cause any Restricted Subsidiary that incurs in excess of $1.0 million of
Restricted Subsidiary Indebtedness (a "Borrowing Restricted Subsidiary") to
become a Subsidiary Guarantor, unless at the time such Restricted Subsidiary
becomes a Borrowing Restricted Subsidiary the total investment of the Company
and the Restricted Subsidiaries in such Borrowing Restricted Subsidiary and in
all other Borrowing Restricted Subsidiaries that are not Subsidiary Guarantors,
computed in accordance with GAAP, is less than 10% of the Total Tangible Assets
of the Company. A Borrowing Restricted Subsidiary shall be released as a
Subsidiary Guarantor (i) at such time as it ceases to be a Borrowing Restricted
Subsidiary or (ii) upon the election of the Company, if after giving effect to
such election, the total investment of the Company and the Restricted
Subsidiaries in all Borrowing Restricted Subsidiaries that are not Subsidiary
Guarantors, computed in accordance with GAAP, is less than 10% of the Total
Tangible Assets of the Company.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; provided that
(a) such sale or disposition of such Capital Stock or assets is otherwise in
compliance with the terms of the Indenture and (b) such assumption, guarantee or
other liability of such Restricted Subsidiary has been released by the holders
of the other Indebtedness so guaranteed.
Reports to Holders. The Indenture provides that the Company will deliver to
the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of TIA Section 314(a).
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the Default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets' covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(iv) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final stated maturity or which has
been accelerated, aggregates $2.5 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $2.5
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable; or
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries.
If an Event of Default (other than an Event of Default specified in clause (vi)
above with respect to the Company) shall occur and be continuing, the Trustee or
the Holders of at least 25% in principal amount of outstanding Notes may declare
the principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Revolving Credit Facility, shall
become immediately due and payable upon the first to occur of an acceleration
under the Revolving Credit Facility or 5 business days after receipt by the
Company and the Representative under the Revolving Credit Facility of such
Acceleration Notice. If an Event of Default specified in clause (vi) above
occurs and is continuing with respect to the Company, then all unpaid principal
of, and premium, if any, and accrued and unpaid interest on all of the
outstanding Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
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The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Under the terms of the Indenture, a holder of the Notes may not pursue any
remedy with respect to the Indenture or Notes unless (i) the holder gives to the
Trustee written notice of a continuing Event of Default (as defined); (ii) the
holders of at least 25% in principal amount of the outstanding Notes make a
written request to the Trustee to pursue the remedy; (iii) such holders offer to
the Trustee indemnity; (iv) the Trustee does not comply with the request within
45 days of receipt of the request and offer of indemnity; and (v) during the
45-day period the holders of a majority in principal amount of the outstanding
Notes do not give the Trustee a direction which, in the opinion of the Trustee,
is inconsistent with the request. Such limitations do not apply, however, to a
suit instituted by a holder of a Note for the enforcement of the payment of the
principal of, premium, if any, or accrued interest on, such Note on or after the
respective due dates expressed in such Note.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders to receive payments in respect of
the principal of and interest on the Notes when such payments are due, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance and Covenant Defeasance (as
defined below) provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the
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case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
officers' certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; (vii) the Company shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior Debt,
including, without limitation, those arising under the Indenture and (B) after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not,
in the opinion of the Trustee, adversely affect the rights of any of the Holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other modifications and
amendments of the Indenture may be made with the consent of the Holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture, except that, without the consent of each Holder affected thereby, no
amendment may: (i) reduce the amount of Notes whose Holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any Notes, or change the date on which any Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price therefor;
(iv) make any Notes payable in money other than that stated in the Notes; (v)
make any change in provisions of the Indenture protecting the right of each
Holder to receive payment of principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment, or permitting
Holders of a majority in principal amount of Notes to waive Defaults or Events
of
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Default; (vi) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto; (vii) modify or change any provision of the
Indenture or the related definitions affecting the subordination or ranking of
the Notes in a manner which adversely affects the Holders; or (viii) amend,
modify, change or waive any of the above provisions.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction,
excluding any such transaction consummated within 180 days after the purchase of
assets sold if the proceeds of the transaction are used to pay
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all or a portion of such transaction) to any Person other than the Company, a
Wholly Owned Restricted Subsidiary of the Company or any Permitted Joint Venture
of (a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any
other property or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business; provided, however, that
Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $250,000, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under the "Merger, Consolidation and Sale of Assets'
covenant, or (iii) the sale, conveyance or other transfer of accounts receivable
in connection with the New Securitization Facility.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
domestic and Eurodollar certificates of deposit and time deposits, bankers'
acceptances and floating rate certificates of deposit maturing within one year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States of America or any state thereof, the District of Columbia,
any foreign bank or their branches and agencies (fully protected against
currency fluctuations), having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase obligations
with a term of not more than 180 days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than the Permitted Holder) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 40% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the Board
of Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either
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were members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges less Consolidated Non-cash Income
for such period, all as determined on a consolidated basis for such Person and
its Restricted Subsidiaries in accordance with GAAP. When calculating
"Consolidated EBITDA" with respect to the Company, for purposes of this
definition only, the Securitization Entity shall be treated as a Restricted
Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income") attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
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"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries and Permitted Joint
Ventures for such period determined on a consolidated basis in accordance with
GAAP, including without limitation, (a) any amortization of debt discount and
amortization or write-off of deferred financing costs, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries and Permitted Joint
Ventures during such period as determined on a consolidated basis in accordance
with GAAP; provided that amounts to be included in clauses (i) and (ii) above
with respect to Permitted Joint Ventures not constituting Restricted
Subsidiaries shall be the product of the amounts computed in accordance with
GAAP and the percentage of the total outstanding shares of Capital Stock of such
Permitted Joint Venture held by the Company or any Restricted Subsidiary of the
Company. When calculating "Consolidated Interest Expense" with respect to the
Company, for purposes of this definition only the Securitization Entity shall be
treated as a Restricted Subsidiary.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any other
Person, other than a Restricted Subsidiary of the referent Person, (except in
the case of (d) and (e) to the extent of cash dividends or distributions paid to
the referent Person or to a Wholly Owned Restricted Subsidiary of the referent
Person by such Person), (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, (g) income
or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), and (h) in the case of a successor to the referent
Person by consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets. When calculating "Consolidated Net Income" with
respect to the Company, for purposes of this definition only the Securitization
Entity shall be treated as a Restricted Subsidiary.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charge
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period). When
calculating "Consolidated Non-cash Charges' with respect to the Company, for
purposes of this definition only, the Securitization Entity shall be treated as
a Restricted Subsidiary.
"Consolidated Non-cash Income" means, with respect to any Person, for any
Period, the aggregate amount of revenue of such Person and its Restricted
Subsidiaries increasing the Consolidated Net Income of such Person and its
Restricted Subsidiaries that will not result in the future receipt of cash by
such Person and its Restricted
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Subsidiaries, determined on a consolidated basis in accordance with GAAP
(excluding any such revenue constituting an extraordinary item). When
calculating "Consolidated Non-cash Income" with respect to the Company, for
purposes of this definition only, the Securitization Entity shall be treated as
a Restricted Subsidiary.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Revolving Credit Facility and (ii) any other Indebtedness constituting Senior
Debt which, at the time of determination, has an aggregate principal amount of
at least $25.0 million and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes. So long as the Company's obligation to repurchase
common stock pursuant to the ESOP exists, common stock issued to the ESOP shall
be Disqualified Capital Stock.
"ESOP" means the Company's Employee Stock Ownership Plan effective as of
January 1, 1988, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under Currency Agreements and Interest Swap
Agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person (other than Disqualified Capital Stock owned by the ESOP or any other
benefit plan) with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but
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excluding accrued dividends, if any. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of. Investments shall
not include travel advances in the ordinary course of business.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax
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liability due to available tax credits or deductions and any tax sharing
arrangements, (c) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale and (d) appropriate amounts to be provided by
the Company or any Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"New Securitization Facility" means the securitization facility which the
Company and the Securitization Entity intend to enter into and anticipates will
be in place by April 30, 1997, as described in this Offering Memorandum, and any
replacement thereof.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holder" means (i) the ESOP and other benefit plans of the
Company, including, without limitation, the Company's 401(k) Plan and (ii) the
group composed of the parties to the New Stockholders Agreement dated as of
March 11, 1994.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes and the Indenture in an aggregate
principal amount of $100 million;
(ii) Indebtedness incurred pursuant to the Revolving Credit Facility
in an aggregate principal amount at any time outstanding not to exceed $50
million until the closing of the New Securitization Facility, and
thereafter $15 million, in each case, reduced by any permanent repayments
(which are accompanied by a corresponding permanent commitment reduction)
thereunder;
(iii) Indebtedness to be incurred pursuant to the New Securitization
Facility in an aggregate principal amount at any time outstanding not to
exceed 85% of the total accounts receivable of the Company and its
Subsidiaries on a consolidated basis plus, without duplication, accounts
receivable transferred in connection with the New Securitization Facility;
(iv) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(v) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that the
extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vii) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided that if as of any date any Person other
than the Company or a Wholly Owned Restricted Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien; provided that (a) any Indebtedness of the Company to any Wholly
Owned Restricted
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Subsidiary of the Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Indenture and the
Notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such Indebtedness or
any Person holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument that
constitutes a daylight overdraft or is inadvertently drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within two business days of
incurrence;
(x) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business,
and payment bonds, performance bonds or bid bonds obtained in the ordinary
course of business, or letters of credit obtained in order to provide
security therefor;
(xi) Refinancing Indebtedness; and
(xii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10 million at
any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Notes and the Indenture; (iii)
Investments in Permitted Joint Ventures; (iv) Investments in cash and Cash
Equivalents; (v) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $1.5 million at any one time outstanding;
(vi) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with the Indenture; (vii) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (viii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant; (ix) Investments in
the Securitization Entity; and (x) additional Investments not to exceed $15.0
million at any one time outstanding.
"Permitted Joint Venture" means any joint venture arrangement (which may be
structured as a corporation, partnership, trust, limited liability company or
any other Person) if (a) no Affiliate of the Company or a Restricted Subsidiary
(other than another Restricted Subsidiary of the Company) has an investment in
such Person, (b) such Person is engaged in the same or a similar line of
business as the Company and its Subsidiaries were engaged in on the date of the
Indenture (or any reasonable extensions or expansions thereof or any business
ancillary thereto or supportive thereof), (c) the Company and/or any of its
Restricted Subsidiaries at all times owns at least 25% of the total outstanding
shares of Capital Stock of such Person entitled to participate in distributions
in respect of the earnings, sale or liquidation of such Person, (d) immediately
after giving effect to such Investment on a pro forma basis (to give effect to
the contribution of any property or assets to such Person or Indebtedness
incurred to fund such Investment or otherwise), the Company could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the "Limitation on Incurrence of Additional Indebtedness" covenant, and (e) no
default with respect to any Indebtedness of such Person or any Subsidiary of
such Person (including any right which the holders thereof may have to take
enforcement action against such Person) would permit (upon notice, lapse of time
or both) any holder of any Indebtedness of the Company or its Restricted
Subsidiaries to declare a default on such Indebtedness or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity. If,
at any time, a Permitted Joint Venture fails to comply with clauses (a) through
(e) above, such Permitted Joint Venture shall constitute an Investment and must
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comply with the "Limitation on Restricted Payments" covenants (but only with
respect to the Company's percentage ownership in such Permitted Joint Venture).
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, and Liens securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and assets
so acquired and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of
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such Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company and (B) such Liens do not extend to or cover any property or assets
of the Company or of any of its Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the time
such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company;
(xiv) Liens pursuant to the New Securitization Facility; and
(xv) Liens to secure Indebtedness incurred by Restricted Subsidiaries
of the Company and Permitted Joint Ventures (in each case, to the extent
such Indebtedness is permitted to be incurred by the Indenture).
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iii), (v), (vi), (vii), (viii), (ix) or (xi) of the
definition of Permitted Indebtedness), in each case that does not (1) result in
an increase in the aggregate principal amount of Indebtedness of such Person as
of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness incurred by a
Restricted Subsidiary (other than a Subsidiary Guarantor) that is neither (a)
Acquired Indebtedness nor (b) Permitted Indebtedness as defined in clauses (i)
through (xi) of such defined term.
"Revolving Credit Facility" means the revolving credit facility dated as of
March 14, 1996, between the Company, the lenders party thereto in their
capacities as lenders thereunder and Citicorp North America, Inc., as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available
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borrowings thereunder (provided that such increase in borrowings is permitted by
the "Limitation on Incurrence of Additional Indebtedness" covenant) or adding
Restricted Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property, excluding
any such transaction consummated within 180 days after the purchase of assets
sold if the proceeds of the transaction are used to pay all or a portion of such
transaction.
"Securitization Entity" means Dyn Funding Corporation, or any successor or
replacement entity which is the borrower under the New Securitization Facility
or any replacement thereof.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations (including guarantees thereof) of every nature of the Company under
the Revolving Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt"
shall not include (i) any Indebtedness of the Company to a Subsidiary of the
Company, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of
the Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Significant Subsidiary" has the meaning set forth in Rule 1.02 (w) of
Regulation S-X under the Securities Act but excluding in any case Fuller-Austin
Insulation Company.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means each of the Company's Subsidiaries that
becomes a guarantor of the Notes by executing a supplemental indenture in which
such Subsidiary agrees to be bound by the terms of the Indenture; provided that
any person constituting a Subsidiary Guarantor as described above shall cease to
constitute a Subsidiary Guarantor when its respective Subsidiary Guaranty is
released in accordance with the terms thereof.
"Total Tangible Assets" means the Company's total consolidated assets minus
(i) all intangible assets and (ii) all accruals relating to amounts expected to
be recovered from insurance carriers for the payment of currently
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unsettled and estimated future claims relating to the use of asbestos products
by Fuller-Austin Insulation Company.
"Unrestricted Subsidiary" of any Person means (i) the Securitization
Entity, (ii) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the Board of
Directors of such Person in the manner provided below and (iii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other Subsidiary
of the Company that is not a Subsidiary of the Subsidiary to be so designated;
provided that (x) the Company certifies to the Trustee that such designation
complies with the "Limitation on Restricted Payments" covenant and (y) each
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries (provided that this clause (y)
shall not prevent the Company from guaranteeing Indebtedness of any Unrestricted
Subsidiary, to the extent the Company is permitted to undertake such guarantee
by the terms of the Indenture). The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the ExchangeNotes initially will
be represented by a single permanent global certificate in definitive, fully
registered form (the "Global Note"). The Global Note will be deposited promptly
after the Expiration Date with, or on behalf of, DTC, New York, New York and
registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to "foreign purchasers" or
accredited investors (as defined in Rule 501(a)(1), (2), (3), or (7) under the
Securities Act ("Accredited Investors")) who are not qualified institutional
investors (as defined in Rule 144A under the Securities Act ("QIBs")) or (ii)
held by QIBs who elect to take physical delivery of their certificates instead
of holding their interests through the Global Note (and which are thus
ineligible to trade through DTC) (collectively referred to herein as the
"Non-Global Purchasers") will be issued in registered form (the "Certificated
Security"). Upon the transfer to a QIB of any Certificated Security initially
issued to a Non-Global Purchaser, such Certificated Security will, unless the
transferee requests otherwise or the Global Note has previously been exchanged
in whole for Certificated Securities, be exchanged for an interest in the Global
Note.
The Global Note. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Note to the
respective accounts of persons
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who have accounts with such depository and (ii) ownership of beneficial
interests in the Global Note will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of Participants (as defined herein)) and the
records of Participants (with respect to interests of persons other than
Participants). Such accounts initially will be designated by or on behalf of the
Initial Purchasers and ownership of beneficial interests in the Global Notes
will be limited to persons who have accounts with DTC ("Participants") or
persons who hold interests through Participants. QIBs may hold their interests
in the Global Note directly through DTC, if they are participants in such
system, or indirectly through organizations which are Participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture. No beneficial owner of an interest in the Global Note will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any), and interest (including
Additional Interest) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on the
Global Note, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Note as shown on the records of DTC or its nominee. The Company
also expects that payments by Participants to owners of beneficial interests in
the Global Note held through such Participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Securities, which it will distribute to its Participants and
which will be legended as set forth under the heading "Transfer Restrictions."
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility
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for the performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Note.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the principal material United States federal
income tax consequences of the Exchange Offer and of the ownership and
disposition of Exchange Notes is based on the advice of Arnold & Porter, special
tax counsel to the Company. Except as specifically noted otherwise, this summary
only addresses the tax consequences to a person that acquired Original Notes on
their original issue at their original offering price and that is, except as
noted below, (i) an individual citizen or resident of the United States, (ii) a
corporation, partnership, or other entity organized under the laws of the United
States or any state thereof or the District of Columbia, (iii) an estate the
income of which is subject to United States federal income tax regardless of
source, or (iv) a trust if (a) a United States court of law is able to exercise
primary supervision over the trust's administration and (b) one or more United
States fiduciaries have the authority to control all of the trust's substantial
decisions (a "United States Holder"). This summary does not address all tax
consequences that may be applicable to a United States Holder that is a
beneficial owner of Notes, nor does it address, except as noted below, the tax
consequences to (i) persons that are not United States Holders, (ii) persons
that may be subject to special treatment under United States federal income tax
law, such as banks, insurance companies, thrift institutions, regulated
investment companies, real estate investment trusts, tax-exempt investors and
dealers in securities or currencies, (iii) persons that will hold Notes as part
of a position in a "straddle" or as part of a "hedging," "conversion" or other
integrated transaction for United States federal income tax purposes, (iv)
persons whose functional currency is not the United States dollar, or (v)
persons that do not hold the Notes as capital assets. In addition, this summary
does not include any description of alternative minimum tax consequences or the
tax laws of any state, local or foreign government that may be applicable to a
holder of the Notes.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied retroactively in a manner that
could cause the tax consequences to vary substantially from the consequences
described below, possibly adversely affecting a beneficial owner of the Notes.
The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the United States federal
income tax treatment of the Exchange Offer or of the ownership and disposition
of Notes may differ from the treatment described below.
HOLDERS AND PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF THE
EXCHANGE OFFER AND OF ACQUIRING, OWNING AND DISPOSING OF THE NOTES AS WELL AS
THE APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
THE EXCHANGE
The exchange of the Original Notes for the Exchange Notes pursuant to the
Exchange Offer should not be a taxable event to the holder and thus the holder
should not recognize any taxable gain or loss as a result of the exchange. A
holder's adjusted tax basis in the Exchange Notes will be the same as his
adjusted tax basis in the Original Notes exchanged therefor, and his holding
period for the Original Notes will be included in his holding period for the
Exchange Notes.
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UNITED STATES HOLDERS
Generally, interest paid on an Exchange Note will be taxable to a United
States Holder as ordinary interest income in accordance with such holder's
method of accounting for United States federal income tax purposes. Upon the
sale, exchange, redemption, retirement or other disposition of an Exchange Note,
a holder generally will recognize gain or loss equal to the difference between
the amount realized on the disposition and the holder's adjusted tax basis in
the Exchange Note. Subject to the market discount rules discussed below, gain or
loss recognized by a holder on the disposition of an Exchange Note will be
long-term capital gain or loss provided that the Exchange Note was a capital
asset in the hands of the holder and had been held for more than one year.
ORIGINAL ISSUE DISCOUNT
The Company has determined that the Original Notes were issued with an
amount of "original issue discount" and that such amount is less than a de
minimis amount as determined under the Code. Accordingly, for federal income tax
purposes, such original issue discount amount is treated as being equal to zero.
Consequently, United States Holders will not be required to include any original
issue discount as taxable income while holding the Exchange Notes.
BOND PREMIUM
If a holder purchases an Exchange Note at a cost that results in
amortizable bond premium (as determined under the Code and applicable Treasury
Regulations), the holder may elect to deduct such amortizable bond premium (with
a corresponding reduction in the holder's tax basis) over the remaining term of
the Exchange Note or a shorter period to the first call date, if a smaller
deduction would result. The election would apply to all taxable debt instruments
held by the holder at any time during the first taxable year to which the
election applies and to any such debt instruments which are later acquired by
the holder. The election may not be revoked without the consent of the IRS.
MARKET DISCOUNT
If a holder purchases an Exchange Note for an amount that is less than the
principal amount of such Exchange Note, the amount of the difference will be
treated as market discount for U.S. federal income tax purposes, unless such
difference is less than a specified de minimis amount. Under the market discount
rules, a holder will be required to treat any principal payment on, or any
amount received on the sale, exchange, retirement or other disposition of, an
Exchange Note as ordinary income to the extent of any market discount which has
not previously been included in income and is treated as having accrued on such
Exchange Note by the time of such payment or disposition. If a holder makes a
gift of an Exchange Note, accrued market discount, if any, will be recognized as
if such holder had sold such Exchange Note for a price equal to its fair market
value. In addition, the holder may be required to defer, until the maturity of
the Exchange Note or its earlier disposition in a taxable transaction, the
deduction of a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Exchange Note.
A holder of an Exchange Note acquired at a market discount may elect to
include market discount in income as interest as it accrues, in which case the
foregoing rules would not apply. This election would apply to all bonds with
market discount acquired by the electing holder on or after the first day of the
first taxable year to which the election applies. The election may be revoked
only with the consent of the IRS.
FOREIGN HOLDERS
The following discussion applies to a holder who is not a United States
Holder (a "Foreign Holder").
Interest payments to a Foreign Holder of Exchange Notes will generally not
be subject to withholding of income tax, provided that (a) the beneficial owner
of the Exchange Notes does not (directly or indirectly, actually or
constructively) own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) the beneficial owner of
the Exchange Notes is not a controlled foreign corporation that is related to
the Company through stock ownership, and (c) either (i) the beneficial owner of
the Exchange Notes certifies to the Company or its paying agent, under penalties
of perjury, that it is a Foreign Holder and provides
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its name and address, or (ii) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the Exchange Notes
in such capacity, certifies to the Company or its paying agent, under penalties
of perjury, that such a statement has been received from the beneficial owner by
it or by another Financial Institution between it and the beneficial owner in
the chain of ownership, and furnishes the Company or its paying agent with a
copy thereof.
A Foreign Holder of Exchange Notes will generally not be subject to
withholding of income tax on any gain realized upon the sale or other
disposition of Exchange Notes.
A Foreign Holder that holds Exchange Notes in connection with the active
conduct of a United States trade or business generally will be subject to income
tax on all income and gains recognized with respect to the Exchange Notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, the Notes held by a noncorporate United
States Holder within the United States. In addition, payments made on, and
payments of the proceeds from the sale of, the Notes to or through the United
States office of a broker are subject to information reporting unless the holder
thereof certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding. Taxable income on
the Notes for a calendar year should be reported to United States Holders on
Forms 1099 by the following January 31st.
Payments made on, and proceeds from the sale of, the Notes may be subject
to a "backup" withholding tax of 31% unless the holder complies with certain
identification or exemption requirements. Any amounts so withheld will be
allowed as a credit against the holder's income tax liability, or refunded,
provided certain required information is provided to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Original
Notes for its own account as a result of market-making activities or other
trading activities and it will deliver a prospectus in connection with any
resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Original Notes where
such Original Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of 90 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
The Company will not receive any proceeds from any sales of the Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any person subject to the prospectus delivery
requirements of the Securities Act that requests such documents in the Letter of
Transmittal. The Company has
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agreed to pay all expenses incident to the Exchange Offer, other than
commissions and concessions of any brokers or dealers, and will indemnify the
holders of the Original Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and schedules of the Company, as of
and for the year ended December 31, 1996, incorporated by reference in this
Prospectus and elsewhere in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
LEGAL MATTERS
The validity of the issuance of securities offered hereby will be passed
upon for the Company by Arnold & Porter, Washington, D.C.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NOTES
TO ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................. iii
Certain Information Incorporated by Reference..... iii
Summary........................................... 1
Risk Factors...................................... 13
The Transactions.................................. 18
Use of Proceeds................................... 20
Capitalization.................................... 20
Unaudited Pro Forma Financial Data................ 21
Selected Historical Financial Data................ 25
Employee Stock Ownership Plan..................... 27
Description of Certain Financing
Arrangements.................................... 28
Legal Proceedings................................. 28
The Exchange Offer................................ 33
Description of Notes.............................. 42
Book-Entry; Delivery and Form..................... 65
Certain Federal Income Tax Considerations......... 67
Plan of Distribution.............................. 69
Independent Public Accountants.................... 70
Legal Matters..................................... 70
</TABLE>
$100,000,000
-------------------
PROSPECTUS
-------------------
OFFER TO EXCHANGE ITS
9 1/2% SENIOR SUBORDINATED NOTES
DUE 2007
FOR ANY AND ALL OF ITS 9 1/2%
SENIOR SUBORDINATED NOTES
DUE 2007
JUNE , 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the General Corporation Law of the State of Delaware ("GCL")
allows a corporation to eliminate the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except in cases where the director breached his duty of
loyalty, failed to act in good faith, engaged in intentional misconduct or a
knowing violation of law, authorized the unlawful payment of a dividend or
approved an unlawful stock redemption or repurchase or obtained an improper
personal benefit. The Registrant's Amended and Restated Certificate of
Incorporation, a copy of which is filed as an exhibit to this Registration
Statement, contains a provision which eliminates directors' personal liability
as set forth above.
The Amended and Restated Certificate of Incorporation of the Registrant and
the Bylaws of the Registrant provide in effect that the Registrant shall
indemnify its directors, officers and employees to the extent permitted by
Section 145 of the GCL. Section 145 of the GCL provides that a Delaware
corporation has the power to indemnify its officers and directors in certain
circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or its threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no cause to believe his or her
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses actually and reasonably incurred in connection with the
defense or settlement of such action or suit provided that such director or
officer acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such director
or officer shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action was brought
shall determine that despite the adjudication of liability such director or
officer is fairly and reasonably entitled to indemnify for such expenses which
the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him or her or incurred by him or her in any such capacity or arising out of his
or her status as such whether or not the corporation would have the power to
indemnify him or her against such liabilities under Section 145.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
An index of exhibits appears at pages II-5 through II-6, which is
incorporated herein by reference.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs 1(a) and 1(b) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to section 13 or
section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE COUNTY OF FAIRFAX,
COMMONWEALTH OF VIRGINIA, ON JUNE 3, 1997.
DYNCORP
By: /s/ P.V. LOMBARDI
--------------------------------
P.V. Lombardi
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE TO THIS
AMENDMENT TO REGISTRATION STATEMENT APPEARS BELOW HEREBY APPOINTS DAVID L.
REICHARDT, H. MONTGOMERY HOUGEN AND ROBERT B. OTT, AND EACH OF THEM, ANY ONE OF
WHOM MAY ACT WITHOUT THE JOINER OF THE OTHERS, AS HIS OR HER ATTORNEY IN FACT
WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION TO SIGN ON HIS OR HER BEHALF
INDIVIDUALLY AND IN THE CAPACITY STATED BELOW, AND TO SIGN AND FILE ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS AMENDMENT TO ITS REGISTRATION
STATEMENT AND ANY AND ALL OTHER DOCUMENTS THAT MAY BE REQUIRED IN CONNECTION
WITH THE FILING OF THIS AMENDMENT TO REGISTRATION STATEMENT, WHICH AMENDMENTS
MAY MAKE SUCH CHANGES AND ADDITIONS TO THIS AMENDMENT TO REGISTRATION STATEMENT
AS SUCH ATTORNEY IN FACT MAY DEEM NECESSARY OR APPROPRIATE.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
- ------------------------------------------
P.V. Lombardi President and Director (Principal Executive June 3, 1997
Officer)
*
- ------------------------------------------
P.C. FitzPatrick Senior Vice President--Chief Financial June 3, 1997
Officer (Principal Financial Officer)
*
- ------------------------------------------
D.L. Reichardt Senior Vice President--General Counsel and June 3, 1997
Director
/s/ J.J. Fitzgerald
- ------------------------------------------
J.J. Fitzgerald Vice President and Controller (Principal June 3, 1997
Accounting Officer)
*
- ------------------------------------------
D.R. Bannister Director June 3, 1997
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
*
- ------------------------------------------
T.E. Blanchard Director June 3, 1997
*
- ------------------------------------------
H.S. Winokur, Jr. Director June 3, 1997
*
- ------------------------------------------
D.C Mecum II Director June 3, 1997
*
- ------------------------------------------
R.E. Dougherty Director June 3, 1997
*By: /s/ H. MONTGOMERY HOUGEN
-----------------------------------
H. Montgomery Hougen
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
<C> <C> <S> <C>
3.1 -- Certificate of Incorporation, as currently in effect, consisting of Restated Certification
of Incorporation (incorporated by reference to Registrant's Form 10-K/A for 1995, File No.
1-3879)
3.2 -- Registrant's By-laws as amended to date (incorporated by reference to Registrant's Form
10-K/A for 1995, File No. 1-3879)
4.1 -- Indenture and supplement, dated April 18, 1997 between Dyn Funding Corporation (a wholly
owned subsidiary of the Registrant) and Bankers Trust Company relating to Contract
Receivable Collateralized Notes (incorporated by reference to Registrant's Form S-2, File
No. 33-59279).
4.2 -- Specimen Common Stock Certificate (incorporated by reference to Registrant's Form 10-K for
1988, File No. 1-3879)
4.3 -- Statement Respecting Warrants and Lapse of Certain Restrictions (incorporated by reference
to Registrant's Form 10-K for 1988, File No. 1-3879)
4.4 -- Amendment (effective March 26, 1991) to Statement Respecting
Warrants and Lapse of Certain Restrictions (incorporated by
reference to Registrant's Form 10-K for 1990, File No.
1-3879)
4.5 -- Article Fourth of the Amended and Restated Certificate of Incorporation (incorporated by
reference to Registrant's Form 10-K/A for 1995, File No. 1-3879)
4.6 -- Stockholders Agreement (incorporated by reference to Registrant's Form S-1 for 1995, File
No. 33-59279)
4.7 -- Second Amended and Restated Credit Agreement by and among Citicorp North America, Inc. and
DynCorp dated May 15, 1997.
4.8 -- Registration Rights Agreement, dated as of March 17, 1997, among the Company, and BT
Securities Corporation and Citicorp Securities, Inc.*
4.9 -- Indenture, dated March 17, 1997, among the Company and United States Trust Company of New
York relating to the 9 1/2% Senior Subordinated Notes due 2007*
4.10 -- Form of Exchange Notes (included in Exhibit 4.9)
5.1 -- Opinion of Arnold & Porter as to the legality of the Exchange Notes
8.1 -- Opinion of Arnold & Porter as to certain federal income tax matters
10.1 -- Deferred Compensation Plan (incorporated by reference to Registrant's Form 10-K for 1987,
File No. 1-3879)
10.2 -- Management Incentive Plan (MIP) (incorporated by reference to Registrant's Form 10-K for
1996, File No. 1-3879)
10.3 -- DynCorp Executive Incentive Plan (EIP) (incorporated by reference to Registrant's Form 10-K
for 1996, File No. 1-3879)
10.4 -- Management Severance Agreements (incorporated by reference to Exhibits (c)(4) through
(c)(12) to Schedule 14D-9 filed by Registrant January 25, 1988)
10.5 -- Employment Agreement of Paul V. Lombardi, Vice President, Government Services Group
(incorporated by reference to Registrant's Form 10-K for 1993, File No. 1-3879)
10.6 -- Restricted Stock Plan (incorporated by reference to Registrant's Form 10-K/A for 1995, File
No. 1-3879)
10.7 -- 1995 Stock Option Plan (incorporated by reference to Registrant's Form 10-K/A for 1995,
File No. 1-3879)
10.8 -- Employment Agreement of Patrick C. FitzPatrick, Senior Vice President and Chief Financial
Officer (incorporated by reference to Registrant's Form 10-K for 1996, File No. 1-3879)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
<C> <C> <S> <C>
11.1 -- Computations of Earnings Per Common Share for the Years Ended December 31, 1996, 1995 and 1994 (incorporated by
reference to Registrant's Form 10-K for 1996, File No. 1-3879) and for the three months ended March 27, 1997 and
March 28, 1996 (incorporated by reference to Registrant's Form 10-Q for the period ended March 27, 1997).
12.1 -- Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of the Registrant (incorporated by reference to Registrant's Form 10-K for
1996, File No. 1-3879)
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Arnold & Porter (included as part of Exhibit 5.1 and Exhibit 8.1)
24.1 -- Powers of Attorney (included as part of the signature page)
25.1 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
of United States Trust Company of New York (revised cover page only)
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------
* Previously filed.
II-6
====================================================
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of May 15, 1997
among
DYNCORP,
a Delaware corporation
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
and
CITICORP NORTH AMERICA, INC.
as Agent
====================================================
<PAGE>
ARTICLE I DEFINITIONS
1.01. Certain Defined Terms. 2
1.02. Special Purpose Defined Terms. 33
1.03. Computation of Time Periods. 40
1.04. Accounting Terms. 40
1.05. Other Terms. 40
ARTICLE II AMOUNTS AND TERMS OF LOANS AND LETTERS OF CREDIT
2.01. Revolving Credit Facility. 42
2.02. Authorized Officers and Agents. 44
2.03. Use of Proceeds of Loans. 45
2.04. Letters of Credit. 45
ARTICLE III PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in Commitments. 54
3.02. Payments. 56
3.03. Promise to Repay; Evidence of Indebtedness. 61
3.04. Collections and Collection Account Arrangements. 61
3.05. Post-Default Withdrawals from the Citibank Collection Account. 63
ARTICLE IV INTEREST AND FEES
4.01. Interest on the Loans and other Obligations. 65
4.02. Special Provisions Governing Eurodollar Rate Loans. 67
4.03. Fees. 69
ARTICLE V CONDITIONS TO LOANS AND LETTERS OF CREDIT
5.01. Conditions Precedent to the Initial Loans and Letters of Credit. 72
5.02. Conditions Precedent to All Subsequent Loans and Letters of
Credit. 74
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.01. Representations and Warranties of the Borrower. 75
ARTICLE VII REPORTING COVENANTS
7.01. Financial Statements. 90
7.02. Events of Default. 93
7.03. Lawsuits. 93
7.04. ERISA Notices. 94
7.05. Environmental Notices. 95
7.06. Labor Matters. 97
7.07. Receivables Purchase Documents. 97
<PAGE>
7.08. Fiscal Year. 97
7.09. Other Reports. 97
7.10. Other Information. 98
7.11. Government Contracts. 98
7.12. Formation of Subsidiaries; Investments in Other Persons. 98
ARTICLE VIII AFFIRMATIVE COVENANTS
8.01. Corporate Existence, Etc. 100
8.02. Corporate Powers; Conduct of Business. 100
8.03. Compliance with Laws, Etc. 100
8.04. Payment of Taxes and Claims; Tax Consolidation. 100
8.05. Insurance. 101
8.06. Inspection of Property; Books and Records; Discussions. 102
8.07. ERISA Compliance. 102
8.08. Deposit Accounts. 103
8.09. Maintenance of Property. 103
8.10. Security Clearances. 103
8.11. Future Assurances. 103
ARTICLE IX NEGATIVE COVENANTS
9.01. Indebtedness. 104
9.02. Sales of Assets. 106
9.03. Liens. 108
9.04. Investments. 108
9.05. Intentionally omitted. 110
9.06. Restricted Junior Payments. 111
9.07. Conduct of Business. 113
9.08. Transactions with Shareholders and Affiliates. 113
9.09. Restriction on Fundamental Changes. 113
9.10. Sales and Leasebacks. 114
9.11. Margin Regulations; Securities Laws. 114
9.12. ERISA. 114
9.13. Organizational Documents; ESOP. 115
ARTICLE X FINANCIAL COVENANTS
10.01. Fixed Charge Coverage Ratio. 116
10.02. Funded Debt/EBITDA. 116
ARTICLE XI EVENTS OF DEFAULT; RIGHTS AND REMEDIES
11.01. Events of Default. 117
11.02. Rights and Remedies. 121
<PAGE>
ARTICLE XII THE AGENT
12.01. Appointment. 122
12.02. Nature of Duties. 123
12.03. Rights, Exculpation, Etc. 123
12.04. Reliance. 124
12.05. Indemnification. 125
12.06. Citicorp Individually. 125
12.07. Successor Agents. 125
12.08. Relations Among Lenders. 126
12.09. Concerning the Collateral and the Loan Documents. 126
ARTICLE XIII YIELD PROTECTION
13.01. Taxes. 128
13.02. Increased Capital. 131
13.03. Changes; Legal Restrictions. 131
13.04. Illegality. 132
13.05. Compensation. 133
13.06. Limitation on Additional Amounts Payable by the Borrower. 134
13.07. Change in Lending Office. 134
ARTICLE XIV MISCELLANEOUS
14.01. Assignments and Participations. 134
14.02. Expenses. 136
14.03. Indemnity. 138
14.04. Change in Accounting Principles. 139
14.05. Setoff. 139
14.06. Ratable Sharing. 140
14.07. Amendments and Waivers. 141
14.08. Notices. 143
14.09. Survival of Warranties and Agreements. 143
14.10. Failure or Indulgence Not Waiver; Remedies Cumulative. 143
14.11. Marshalling; Payments Set Aside. 143
14.12. Severability. 144
14.13. Headings. 144
14.14. Governing Law. 144
14.15. Limitation of Liability. 144
14.16. Successors and Assigns. 144
14.17. Certain Consents and Waivers of the Borrower. 145
14.18. Counterparts; Effectiveness; Inconsistencies. 146
14.19. Limitation on Agreements. 146
14.20. Confidentiality. 146
14.21. Entire Agreement. 147
14.22. Advice of Counsel. 148
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Second Amended and Restated Credit Agreement dated as of May 15,
1997 (as amended, supplemented or modified from time to time, the "Agreement")
is entered into among DynCorp, a Delaware corporation (the "Borrower"), the
institutions from time to time a party hereto as Lenders, whether by execution
of this Agreement or an Assignment and Acceptance, and Citicorp North America,
Inc., a Delaware corporation ("Citicorp"), in its capacity as agent for the
Lenders hereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, Borrower entered into the "1996 Credit Agreement" (as
hereinafter defined) pursuant to which Citicorp made certain revolving loans to
Borrower;
WHEREAS, Borrower has requested a decrease in the revolving credit
commitments under the 1996 Credit Agreement, an extension of the term of the
1996 Credit Agreement, and certain other amendments and modifications of the
1996 Credit Agreement;
WHEREAS, Bankers Trust Company is desirous of becoming a Lender and
assuming fifty percent (50%) of the Revolving Credit Commitments under this
Agreement; and
WHEREAS, the parties hereto have agreed to amend and restate the 1996
Credit Agreement to facilitate the aforesaid and set forth the terms and
conditions under which loans, letters of credit and other financial
accommodations will be made available to the Borrower for the benefit of the
Borrower and its subsidiaries from and after the "Closing Date" (as hereinafter
defined);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree that the 1996 Credit Agreement is amended and restated in
its entirety by this Agreement.
<PAGE>
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"Affiliate", as applied to any Person, means any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to vote five percent (5.0%) or more of the Securities
having voting power for the election of directors of such Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting Securities or by contract or otherwise.
"Agent" means Citicorp and each successor agent appointed pursuant to
the terms of Article XII of this Agreement.
"Agreement" is defined in the preamble hereto.
"Applicable Lending Office" means, with respect to a particular
Lender, its Eurodollar Lending Office in respect of provisions relating to
Eurodollar Rate Loans and its Domestic Lending Office in respect of provisions
relating to Base Rate Loans.
"Assignment and Acceptance" means an Assignment and Acceptance in
substantially the form of Exhibit A attached hereto and made a part hereof (with
blanks appropriately completed) delivered to the Agent in connection with an
assignment of a Lender's interest under this Agreement in accordance with the
provisions of Section 14.01.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
ss.ss. 101 et seq.), as amended from time to time, and any successor statute.
<PAGE>
"Base Eurodollar Rate" means, with respect to any Eurodollar Interest
Period applicable to a Borrowing of Eurodollar Rate Loans, an interest rate per
annum determined by the Agent to be the average (rounded upward to the nearest
whole multiple of one-sixteenth of one percent (0.0625%) per annum if such
average is not such a multiple) of the rates per annum specified by notice to
the Agent by Citibank as the rate per annum at which deposits in Dollars are
offered by the principal office of Citibank in London, England to major banks in
the London interbank market at approximately 11:00 a.m. (London time) on the
Eurodollar Interest Rate Determination Date for such Eurodollar Interest Period
for a period equal to such Eurodollar Interest Period and in an amount
substantially equal to the amount of the Eurodollar Rate Loan to be outstanding
to Citicorp for such Eurodollar Interest Period.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as Citibank's base rate; and
(b) the sum (adjusted to the nearest 1/4 of one percent or, if there
is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of
(i) 1/2 of one percent per annum, plus (ii) the rate per annum obtained by
dividing (A) the latest three-week moving average of secondary market
morning offering rates in the United States for three-month certificates of
deposit of major United States money market banks, such three-week moving
average being determined weekly on each Monday (or, if any such date is not
a Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of recognized standing
selected by Citibank, by (B) a
<PAGE>
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Federal Reserve Board for
determining the maximum reserve requirement (including, but not limited to,
any emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among other
liabilities) three-month U.S. dollar nonpersonal time deposits in the
United States, plus (iii) the average during such three-week period of the
annual assessment rates estimated by Citibank for determining the then
current annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank in the United States.
"Base Rate Loans" means all Loans which bear interest at a rate
determined by reference to the Base Rate as provided in Section 4.01(a).
"Base Rate Margin" means a rate equal to (i) one and one-quarter
percent (1.25%) per annum during the period commencing on the Closing Date and
ending on March 31, 1998 and (ii) from and after April 1, 1998, (a) one percent
(1.00%) per annum provided that the ratio of the Borrower's Funded Debt as of
the last day of each Fiscal Month in the Fiscal Quarter then ended to
Consolidated EBITDA for the four consecutive Fiscal Quarters then ended is less
than or equal to 3.5 : 1; (b) one and one-quarter percent (1.25%) per annum
provided that the ratio of the Borrower's Funded Debt as of the last day of each
Fiscal Month in the Fiscal Quarter then ended to Consolidated EBITDA for the
four consecutive Fiscal Quarters then ended is greater than 3.5 : 1 and less
than or equal to 4.0 : 1; and (c) one and one-half percent (1.50%) per annum
provided that the ratio of the Borrower's Funded Debt as of the last day of each
Fiscal Month in the Fiscal Quarter then ended to Consolidated EBITDA for the
four consecutive Fiscal Quarters then ended is greater than 4.0 : 1. The
applicable Base Rate Margin shall be determined on the date the Financial
Statements for the last month of each Fiscal Quarter are due pursuant to Section
7.01(a) as of the end of such Fiscal Quarter and be effective during the period
commencing on the first day of the calendar month next succeeding the calendar
month in which such due date falls and ending on the last day of the calendar
month in which Financial Statements are next due.
<PAGE>
"Benefit Plan" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan or Foreign Employee Benefit
Plan) in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Borrower" is defined in the preamble of this Agreement.
"Borrower Pledge Agreement" means that certain Pledge Agreement dated
as of July 25, 1995 executed by the Borrower in favor of the Agent for the
benefit of the Holders pursuant to which the issued and outstanding Capital
Stock of certain of Borrower's Subsidiaries is pledged as part of the Collateral
securing the payment and performance of the Obligations.
"Borrower Security Agreement" means that certain Amended and Restated
Security Agreement dated as of March 14, 1996 executed by the Borrower in favor
of the Agent for the benefit of the Holders pursuant to which the personal
Property 5 and interests in property of the Borrower more specifically described
therein are pledged as part of the Collateral securing the payment and
performance of the Obligations.
"Borrowing" means a borrowing consisting of Loans of the same type
made, continued or converted on the same day.
"Business Activity Report" means (A) a Notice of Business Activities
Report from the State of New Jersey Division of Taxation or (B) a Minnesota
Business Activity Report from the Minnesota Department of Revenue.
"Business Day" means a day, in the applicable local time, which is not
a Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other governmental action to close (i) in New York, New York
and (ii) in the case of Eurodollar Rate Loans, in London, England.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether payable in cash or
<PAGE>
other property or accrued as a liability (but without duplication)) during such
period that, in conformity with GAAP, are required to be included in or
reflected by the Borrower's or any of its Subsidiaries' fixed asset accounts as
reflected in any of their respective balance sheets; provided, however, Capital
Expenditures shall include that portion of Capital Leases which is capitalized
on the consolidated balance sheet of the Borrower and its Subsidiaries.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) by a Person as lessee which, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of that Person.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"Capricorn Repurchase Transaction" means the purchase of 128,343
shares of common stock, 1,806,147 common stock warrants and 123,711 shares of
Class C Preferred Stock from investors in Capricorn Investors, L.P. during the
period February-April, 1997.
"Cash Collateral" means cash or Cash Equivalents held by the Agent or
any of the Lenders as security for the Obligations.
"Cash Collateral Account" means an interest bearing account at
Citibank's office in New York, New York designated by the Agent into which Cash
Collateral shall be deposited, which account shall be under the sole dominion
and control of the Agent.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; and (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies
<PAGE>
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. or P-1 (or better) by Moody's Investors Services,
Inc.; provided, that (x) the maturities of such Cash Equivalents shall not
exceed one year and (y) such Cash Equivalents shall be maintained in investment
and other accounts of the Agent at Citibank.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., any amendments
thereto, any successor statutes, and any regulations promulgated thereunder.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Borrower to any Person or group of related Persons for
purposes of Section 13(d) of the Securities Exchange Act (a "Group"), together
with any Affiliates thereof (whether or not otherwise in compliance with the
provisions of this Agreement); (ii) the approval by the holders of Capital Stock
of the Borrower of any plan or proposal for the liquidation or dissolution of
the Borrower (whether or not otherwise in compliance with the provisions of this
Agreement); (iii) any Person or Group (other than the ESOP and other benefit
plans of the Borrower, including, without limitation the Borrower's 401(k) Plan
and the Group composed of the parties to the New Stockholders Agreement) becomes
the owner, directly or indirectly, beneficially or of record, of shares
representing more than forty percent (40%) of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the Borrower;
or (iv) the replacement of a majority of the members of the Board of Directors
of the Borrower over a two-year period from the members who constituted the
Board of Directors of the Borrower at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority of the
Board of Directors of the Borrower then still in office who either were members
of the Board of Directors of the Borrower at the beginning of such period or
whose election as such was previously so approved.
"Citibank" means Citibank, N.A., a national banking association.
<PAGE>
"Citibank Collection Account" is defined in Section 3.04.
"Citicorp" is defined in the preamble of this Agreement.
"Claim" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"Closing Date" means May 15, 1996.
"Collateral" means all property and interests in property now owned or
hereafter acquired by the Borrower and the Guarantors upon which a Lien is
granted under the Borrower Pledge Agreement, the Borrower Security Agreement,
the Guarantor Pledge Agreements and the Guarantor Security Agreements.
"Commercial Letter of Credit" means any documentary letter of credit
for the account of the Borrower or any of the Borrower's Subsidiaries which is
payable upon presentation of documents evidencing the sale or shipment of goods
purchased by the Borrower or such Subsidiary in the ordinary course of its
business.
"Commission" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"Commitment" means, with respect to any Lender at the time of
determination thereof, the aggregate amount of such Lender's Revolving Credit
Commitment and "Commitments" means the aggregate amount of all Revolving Credit
Commitments.
"Compliance Certificate" is defined in Section 7.01(c).
"Consolidated EBITDA" means, without duplication, for any period, (i)
the sum of the amounts for such period of (a) Consolidated Net Income (as
defined in Section 1.01), plus (b) provision for taxes based on income, plus (c)
<PAGE>
Consolidated Interest Expense (as defined in Section 1.01), plus (d)
depreciation expense, plus (e) amortization expense, plus (f) Net ESOP
Contributions, plus (g) non-cash 401(k) matching contributions and other
compensation expense payable in Capital Stock of the Borrower which is common
stock, minus (ii) the amount for such period of interest income, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Borrower and its Subsidiaries on a consolidated basis
for such period as determined in accordance with GAAP.
"Consolidated Net Cash Interest Expense" means, for any period
(without duplication), (i) Consolidated Interest Expense (as defined in Section
1.01) for such period, but excluding interest expense not payable in cash and
amortization of debt discount and deferred financing costs to the extent
included in (i) above, plus/minus (ii) to the extent not included in (i) above,
net cash flows resulting from Interest Swap Obligations received or paid during
such period, minus (iii) consolidated cash interest income for such period.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period, excluding the sum of (i) extraordinary items for such period, net of
taxes based on income, plus (ii) dividends for such period on Capital Stock
which is preferred stock, all as determined in accordance with GAAP.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, radioactive materials, asbestos-containing material,
polychlorinated biphenyls (PCBs), or any constituent of any such substance or
waste, and includes, but is not limited to, these terms as defined in federal,
state or local laws or regulations.
"Contractual Obligation", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
<PAGE>
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"Cure Loans" is defined in Section 3.02(b)(v)(C).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Borrower or any Material Subsidiary against fluctuations in currency values.
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and Liens in favor of the
PBGC) with respect to the payment of taxes, assessments or governmental
charges in all cases which are not yet due or which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance
with GAAP;
(ii) Liens of landlords and Liens of suppliers, mechanics, carriers,
materialmen, warehousemen or workmen and other Liens imposed by law created
in the ordinary course of business for amounts not yet due or which are
being contested in good faith by appropriate proceedings and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(iii) Liens (other than any Lien in favor of the PBGC) incurred or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other types of social
security benefits or to secure the performance of bids, tenders, sales,
contracts (other than for the repayment of borrowed money), surety, appeal
and performance bonds; provided that (A) all such Liens do not in the
aggregate materially detract from the value of the Borrower's or any of its
Subsidiaries' assets or property or materially impair the use thereof in
the operation of their respective businesses, and (B) all Liens of
attachment or judgment and
<PAGE>
Liens securing bonds to stay judgments or in connection with appeals do not
secure at any time an aggregate amount exceeding $2,500,000; and
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of Real Property which do not interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries.
"Designated Prepayment" means each mandatory prepayment required by
Section 3.01(b)(i) through (iii).
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the United States.
"Domestic Lending Office" means, with respect to any Lender, such
Lender's office, located in the United States, specified as the "Domestic
Lending Office" under its name on the signature pages hereof or on the
Assignment and Acceptance by which it became a Lender or such other United
States office of such Lender as it may from time to time specify by written
notice to the Borrower and the Agent.
"Dyn Funding" means Dyn Funding Corporation, a Delaware corporation
and Wholly-Owned Subsidiary of the Borrower.
"Eligible Assignee" means (i) a Lender or any Affiliate thereof; (ii)
a commercial bank having total assets in excess of $2,500,000,000; (iii) the
central bank of any country which is a member of the Organization for Economic
Cooperation and Development; or (iv) a finance company, insurance company, other
financial institution or fund, acceptable to the Agent, which is regularly
engaged in making, purchasing or investing in loans and having total assets in
excess of $300,000,000.
"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law derived from or relating
<PAGE>
to any federal, state or local law, ordinance, rule, regulation, Permit, license
or other binding determination of any Governmental Authority relating to,
imposing liability or standards concerning, or otherwise addressing, the
environment, health and/or safety, including, but not limited to the Clean Air
Act, the Clean Water Act, CERCLA, RCRA, any so-called "Superfund" or "Superlien"
law, the Toxic Substances Control Act, OSHA, and public health codes, each as
from time to time in effect.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirement of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Environmental Property Transfer Acts" means any applicable
Requirement of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the transfer, sale, lease or closure of
any Property or deed or title for any Property for environmental reasons,
including, but not limited to, any so-called "Industrial Site Recovery Acts" or
"Responsible Property Transfer Acts".
"Equipment" means, with respect to any Person, all of such Person's
present and future (i) equipment, including, without limitation, machinery,
manufacturing, distribution, selling, data processing and office equipment,
assembly systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, vessels, aircraft, aircraft engines, and trade fixtures,
(ii) other tangible personal property (other than such Person's Inventory), and
(iii) any and all accessions, parts and appurtenances attached to any of the
foregoing or used in connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ss.ss. 1000 et seq., any amendments thereto, any successor statutes, and
any regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations
<PAGE>
(within the meaning of Section 414(b) of the Internal Revenue Code) as the
Borrower; (ii) a partnership or other trade or business (whether or not
incorporated) which is under common control (within the meaning of Section
414(c) of the Internal Revenue Code) with the Borrower; and (iii) a member of
the same affiliated service group (within the meaning of Section 414(m) of the
Internal Revenue Code) as the Borrower, any corporation described in clause (i)
above or any partnership or trade or business described in clause (ii) above.
"ESOP" means the DynCorp Employee Stock Ownership Plan dated as of
January 1, 1988.
"ESOP Documents" means, collectively, that certain Subscription
Agreement dated as of September 9, 1988 between Borrower and Manufacturers
Hanover Trust Company, as trustee of the DynCorp Employee Stock Ownership Trust
established pursuant to the DynCorp Employee Stock Ownership Trust Agreement
("Trust Agreement") adopted as part of the ESOP, the Trust Agreement, the Plan,
and that certain 1995 Stock Issuance Agreement dated March 30, 1995 between
Borrower and the DynCorp Employee Stock Ownership Trust, in each instance, as
amended, supplemented or otherwise modified from time to time as permitted under
the terms of this Agreement.
"Eurodollar Affiliate" means, with respect to each Lender, the
Affiliate of such Lender (if any) set forth below such Lender's name under the
heading "Eurodollar Affiliate" on the signature pages hereof or on the
Assignment and Acceptance by which it became a Lender or such Affiliate of a
Lender as it may from time to time specify by written notice to the Borrower and
the Agent.
"Eurodollar Interest Payment Date" means (i) with respect to any
Eurodollar Rate Loan, the last day of each Eurodollar Interest Period applicable
to such Loan and (ii) with respect to any Eurodollar Rate Loan having a
Eurodollar Interest Period in excess of three (3) calendar months, the last day
of each three (3) calendar month interval during such Eurodollar Interest
Period.
"Eurodollar Interest Period" is defined in Section 4.02(b).
<PAGE>
"Eurodollar Interest Rate Determination Date" is defined in Section
4.02(c).
"Eurodollar Lending Office" means, with respect to any Lender, the
office or offices of such Lender (if any) set forth below such Lender's name
under the heading "Eurodollar Lending Office" on the signature pages hereof or
on the Assignment and Acceptance by which it became a Lender or such office or
offices of such Lender as it may from time to time specify by written notice to
the Borrower and the Agent.
"Eurodollar Rate" means, with respect to any Eurodollar Interest
Period applicable to a Eurodollar Rate Loan, an interest rate per annum obtained
by dividing (i) the Base Eurodollar Rate applicable to that Eurodollar Interest
Period by (ii) a percentage equal to 100% minus the Eurodollar Reserve
Percentage in effect on the relevant Eurodollar Interest Rate Determination
Date.
"Eurodollar Rate Loans" means those Loans outstanding which bear
interest at a rate determined by reference to the Eurodollar Rate and the
Eurodollar Rate Margin as provided in Section 4.01(a).
"Eurodollar Rate Margin" means a rate equal to (i) two and one-half
percent (2.50%) per annum during the period commencing on the Closing Date and
ending on March 31, 1998 and (ii) from and after April 1, 1998, (a) two and
one-quarter percent (2.25%) per annum provided that the ratio of the Borrower's
Funded Debt as of the last day of each Fiscal Month in the Fiscal Quarter then
ended to Consolidated EBITDA for the four consecutive Fiscal Quarters then ended
is less than or equal to 3.5 : 1; (b) two and one-half percent (2.50%) per annum
provided that the ratio of the Borrower's Funded Debt as of the last day of each
Fiscal Month in the Fiscal Quarter then ended to Consolidated EBITDA for the
four consecutive Fiscal Quarters then ended is greater than 3.5 : 1 and less
than or equal to 4.0 : 1; and (c) two and three-quarters percent (2.75%) per
annum provided that the ratio of the Borrower's Funded Debt as of the last day
of each Fiscal Month in the Fiscal Quarter then ended to Consolidated EBITDA for
the four consecutive Fiscal Quarters then ended is greater than 4.0 : 1. The
applicable Eurodollar Rate Margin shall be determined on the date the Financial
Statements for the last month of each Fiscal
<PAGE>
Quarter are due pursuant to Section 7.01(a) as of the end of such Fiscal Quarter
and be effective during the period commencing on the first day of the calendar
month next succeeding the calendar month in which such due date falls and ending
on the last day of the calendar month in which Financial Statements are next
due.
"Eurodollar Reserve Percentage" means, for any day, that percentage
which is in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York, New York with deposits exceeding Five
Billion Dollars ($5,000,000,000) in respect of "Eurocurrency Liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Rate Loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States office of any bank to United States residents).
"Event of Default" means any of the occurrences set forth in Section
11.01 after the expiration of any applicable grace period, as expressly provided
in Section 11.01.
"Fair Market Value" means, with respect to any asset, the value of the
consideration obtainable in a sale of such asset in the open market, assuming a
sale by a willing seller to a willing purchaser dealing at arm's length and
arranged in an orderly manner over a reasonable period of time, each having
reasonable knowledge of the nature and characteristics of such asset, neither
being under any compulsion to act, and, if in excess of $5,000,000, as
determined in good faith by the Board of Directors of the Borrower.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day in New York, New York, for the next preceding
Business Day) in New York, New York by the Federal Reserve Bank of
<PAGE>
New York, or if such rate is not so published for any day which is a Business
Day in New York, New York, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
"Financial Officer" means any of the Borrower's senior vice president
and chief financial officer; vice president and controller; treasurer; and
assistant treasurer.
"Financial Statements" means statements of income and retained
earnings, statements of cash flow, and balance sheets.
"Fiscal Month" means each period commencing on the date immediately
succeeding the "Effective Close Date" for the prior fiscal month and ending on
the "Effective Close Date" for the applicable fiscal month as set forth on
Schedule 1.01.1 attached hereto, respectively, for the Borrower.
"Fiscal Quarter" means each period commencing on the date immediately
succeeding the "Effective Close Date" for the prior fiscal quarter and ending on
the "Effective Close Date" for the applicable fiscal quarter as set forth on
Schedule 1.01.1 attached hereto, respectively, for the Borrower.
"Fiscal Year" means the fiscal year of the Borrower for accounting and
tax purposes, which shall be the 12-month period ending on December 31 of each
calendar year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
the amount calculated as (i) Consolidated EBITDA minus (ii) all federal income
taxes paid in cash during such period attributable to the income of continuing
operations for that period minus (iii) the aggregate amount of Capital
Expenditures made in cash during such period minus (iv) repurchases by the
Borrower of Capital Stock of the Borrower during such period paid for in cash
(other than (A) as permitted under Section 9.06 and (B)
<PAGE>
with respect to the Capricorn Repurchase Transaction) to (b) Fixed Charges.
"Fixed Charges" means, for any period without duplication,
Consolidated Net Cash Interest Expense plus the aggregate amount of scheduled
payments of principal of Funded Debt (other than the repayment of Indebtedness
incurred as part of the Capricorn Repurchase Transaction, the repayment of the
Contract Receivable Collateralized Notes, Series 1992-1, repayments of Loans and
repayments of any Indebtedness arising under any revolving funded or grid notes
issued under the Securitization Program) during such period, plus the aggregate
amount of stock repurchases under the ESOP Documents paid for in cash by the
Borrower during such period, plus repurchases by the Borrower of Capital Stock
of the Borrower during such period paid for in cash as permitted under Section
9.06(e)(ii).
"Foreign Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of the Borrower, any of its Subsidiaries or any of its
ERISA Affiliates and is not covered by ERISA pursuant to ERISA Section 4(b)(4).
"Foreign Pension Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit
of employees of the Borrower, any of its Subsidiaries or any of its ERISA
Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA,
and (iii) under applicable local law, is required to be funded through a trust
or other funding vehicle.
"Foreign Subsidiary" means a Subsidiary domiciled outside of the
United States of America and its states, districts and possessions.
"Fronting Fee" is defined in Section 4.03(a).
"Funded Debt" means Indebtedness of the Borrower and its Subsidiaries
for borrowed money (determined in accordance with GAAP), including, without
limitation, Indebtedness under Capital Leases, and Indebtedness arising under
the Securitization Program.
<PAGE>
"Funding Date" means, with respect to any Loan, the date of funding of
such Loan.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the American Institute of Certified Public
Accountants' Accounting Principles Board and Financial Accounting Standards
Board or in such other statements by such other entity as may be in general use
by significant segments of the accounting profession as in effect on the date
hereof (unless otherwise specified herein as in effect on another date or
dates).
"General Intangibles" means, with respect to any Person, all of such
Person's present and future (i) general intangibles, (ii) rights, interests,
choses in action, causes of action, claims and other intangible property of
every kind and nature (other than Receivables), (iii) corporate and other
business records, (iv) loans, royalties, and other obligations receivable, (v)
trademarks, registered trademarks, trademark applications, service marks,
registered service marks, service mark applications, patents, registered
patents, patent applications, trade names, rights of use of any name, labels,
fictitious names, inventions, designs, trade secrets, computer programs,
software, printouts and other computer materials, goodwill, registrations,
copyrights, copyright applications, permits, licenses, franchises, customer
lists, credit files, correspondence, and advertising materials, (vi) customer
and supplier contracts, firm sale orders, rights under license and franchise
agreements, rights under tax sharing agreements, and other contracts and
contract rights, in each instance other than contracts and such agreements which
by their respective terms are non-assignable, (vii) interests in partnerships
and joint ventures, in each instance other than interests which by the terms of
the partnership or joint venture documents are non-assignable, (viii) tax
refunds and tax refund claims, (ix) right, title and interest under leases,
subleases, licenses and concessions and other agreements relating to property,
in each instance other than leases, subleases, licenses, concession and such
other agreements which by their respective terms are non-assignable, (x) deposit
accounts (general or special) with any bank or other financial institution, (xi)
credits with and other claims against third parties (including carriers and
shippers), (xii) rights to indemnification and with
<PAGE>
respect to support and keep-well agreements, (xiii) reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts, (xiv) proceeds of insurance of which such Person is
beneficiary, (xv) letters of credit and proceeds thereof, guarantees, Liens,
security interests and other security held by or granted to such Person, (xvi)
rights in and under instruments, securities (certificated and uncertificated),
documents of title and investment property, and (xvii) all rights in any goods,
merchandise or Inventory which any of the foregoing may represent.
"Government Contract" means any contract, agreement, work
authorization, lease, commitment for sale or purchase order of Borrower or its
Subsidiaries that is with the United States Government, or any state, local or
foreign government, including, without limitation, all contracts and work
authorizations to supply goods and services to the United States Government, or
any state, local or foreign government.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor Pledge Agreements" means those certain Pledge Agreements
executed by Guarantors in favor of the Agent for the benefit of the Holders
pursuant to which the issued and outstanding Capital Stock of Subsidiaries of
the Guarantors executing and delivering the same is pledged as part of the
Collateral securing the payment and performance of the Obligations.
"Guarantor Security Agreements" means those certain Security
Agreements executed by Guarantors in favor of the Agent for the benefit of the
Holders pursuant to which the personal property and interests in property of the
Guarantors executing and delivering the same, as more specifically described
therein, are pledged as part of the Collateral securing the payment and
performance of the Obligations.
"Guarantors" means those Persons identified on Schedule 1.01.2
attached hereto, each Material Subsidiary
<PAGE>
formed or acquired after the date hereof which is a Wholly-Owned Subsidiary, and
any other Subsidiary of the Borrower executing and delivering a guaranty of
payment and performance of all or any portion of the Obligations; provided,
however, that no Foreign Subsidiary of the Borrower shall be required to become
a Guarantor.
"Hedge Agreement" means any agreement, including, without limitation,
any Currency Agreement, agreement governing Interest Swap Obligations, other
interest rate exchange, swap, collar or cap agreement, interest rate future or
option contract, currency swap agreement, currency future or option contract,
and other similar agreement, evidencing an agreement or arrangement intended to
protect against fluctuation in interest rates and/or foreign exchange rates or
conversion rates for conversion of foreign currencies to Dollars.
"Holder" means any Person entitled to enforce any of the Obligations,
whether or not such Person holds any evidence of Indebtedness, including,
without limitation, the Agent, each Lender, the Issuing Bank, the Affiliate of
the Agent at which the Citibank Collection Account is established, and each
Indemnified Party.
"Indebtedness", as applied to any Person, means, at any time, without
duplication, (a) all indebtedness, obligations or other liabilities of such
Person (i) for borrowed money or evidenced by debt Securities, debentures,
acceptances, notes or other similar instruments, and any accrued interest, fees
and charges relating thereto, (ii) under agreements in respect of obligations to
redeem, repurchase or exchange any Securities of such Person or to pay dividends
in respect of any Capital Stock (other than obligations with respect to puts
arising under the ESOP Documents), (iii) with respect to letters of credit
issued for such Person's account, (iv) to pay the deferred purchase price of
property or services, except accounts payable, accrued expenses and other
current liabilities arising in the ordinary course of business, (v) in respect
of Capital Leases, or (vi) under warranties and indemnities; (b) all
indebtedness, obligations or other liabilities of others secured by a Lien on
any property of such Person, whether or not such indebtedness, obligations or
liabilities are assumed by such Person, all as of such time; (c) all
indebtedness, obligations or other liabilities of such
<PAGE>
Person in respect of Currency Agreements and Interest Swap Obligations, net of
liabilities owed to such Person by the counterparties thereon; (d) all preferred
stock subject (upon the occurrence of any contingency or otherwise) to mandatory
redemption; (e) all indebtedness, obligations or other liabilities of such
Person under the Securitization Program; and (f) all guarantees and other
contingent liabilities accrued in accordance with GAAP with respect to any of
the foregoing.
"Indemnified Matters" is defined in Section 14.03.
"Indemnitees" is defined in Section 14.03.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floor, collars and similar agreements.
"Internal Market" means a stock trading market maintained by the
Borrower or DynEx, Inc. (a Subsidiary of the Borrower) whereon existing
stockholders and other employees of the Borrower are able to buy and sell shares
of the Borrower's common stock at prices established by the Borrower's board of
directors on trading dates intended to be held once per calendar quarter.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidance promulgated thereunder.
"Inventory" means, with respect to any Person, all of such Person's
present and future (i) inventory, (ii) goods, merchandise and other personal
property furnished or to be furnished under any contract of service or intended
for sale or lease, and all consigned goods and all other items which have
previously constituted Equipment of such Person but are then currently being
held for sale or lease
<PAGE>
in the ordinary course of such Person's business, (iii) raw materials,
work-in-process and finished goods, (iv) materials and supplies of any kind,
nature or description used or consumed in such Person's business or in
connection with the manufacture, production, packing, shipping, advertising,
finishing or sale of any of the property described in clauses (i) through (iii)
above, (v) goods in which such Person has a joint or other interest or right of
any kind (including, without limitation, goods in which such Person has an
interest or right as consignee), and (vi) goods which are returned to or
repossessed by such Person; in each case whether in the possession of such
Person, a bailee, a consignee, or any other Person for sale, storage, transit,
processing, use or otherwise, and any and all documents for or relating to any
of the foregoing.
"Investment" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business. The amount of any
Investment shall be the original cost of such Investment, plus the cost of all
additions thereto less the amount of any return of capital or principal or
adjustments for decreases in value, write-downs or write-offs with respect to
such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"Issuing Bank" means Citibank.
"Lender" means, as of the Closing Date, each financial institution
which is a signatory hereto as a Lender and, at any other given time, each
financial institution which is a party hereto as a Lender, whether as a
signatory hereto or pursuant to an Assignment and Acceptance.
<PAGE>
"Letter of Credit" means any Commercial Letter of Credit or Standby
Letter of Credit.
"Letter of Credit Fee" is defined in Section 4.03(a).
"Letter of Credit Obligations" means, at any particular time, the sum
of (i) all outstanding Reimbursement Obligations at such time plus (ii) the
aggregate undrawn face amount of all outstanding Letters of Credit, plus (iii)
the aggregate face amount of all Letters of Credit requested by the Borrower but
not yet issued (unless the request for an unissued Letter of Credit has been
denied by the Issuing Bank as referenced in Section 2.04(c)(i) or has been
withdrawn by the Borrower in writing prior to the issuance thereof).
"Letter of Credit Reimbursement Agreement" means, with respect to a
Letter of Credit, such form of application therefor and form of reimbursement
agreement therefor (whether in a single or several documents, taken together) as
the Issuing Bank from which the Letter of Credit is requested may employ in the
ordinary course of business for its own account, with such modifications thereto
as may be agreed upon by the Issuing Bank and the Borrower and as are not
materially adverse (in the judgment of the Issuing Bank and the Agent) to the
interests of the Lenders; provided, however, in the event of any conflict
between the terms of any Letter of Credit Reimbursement Agreement and this
Agreement, the terms of this Agreement shall control, and the terms of this
Agreement, the Borrower Pledge Agreement, the Borrower Security Agreement, the
Guarantor Pledge Agreements and the Guarantor Security Agreements shall control
with respect to matters pertaining to the Collateral.
"Liabilities and Costs" means all liabilities, obligations,
responsibilities, losses, damages, punitive damages, economic damages,
consequential damages, treble damages, and damages arising from injury or damage
or threat of damage to the environment, natural resources or public health or
welfare, costs and expenses (including, without limitation, attorney, expert and
consulting fees and costs and fees and costs associated with any investigation,
feasibility or Remedial Action studies), fines, penalties
<PAGE>
and monetary sanctions, interest, direct or indirect, known or unknown, absolute
or contingent, past, present or future.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other and including, without limitation, any
Environmental Lien), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever in respect of any
property of a Person, whether granted voluntarily or imposed by law, and
includes the interest of a lessor under a Capital Lease or under any financing
lease having substantially the same economic effect as any of the foregoing and
the filing of any financing statement or similar notice (other than a financing
statement filed by a "true" lessor pursuant to ss. 9-408 of the Uniform
Commercial Code), naming the owner of such property as debtor, under the Uniform
Commercial Code or other comparable law of any jurisdiction.
"Loan" is defined in Section 2.01(a).
"Loan Account" is defined in Section 3.03(b).
"Loan Documents" means this Agreement, the Notes, and all other
instruments, agreements and written Contractual Obligations between the Borrower
or any Guarantor and the Agent or any Lender delivered to either the Agent or
such Lender pursuant to or in connection with the transactions contemplated
hereby.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U and Regulation G.
"Material Adverse Effect" means a material adverse effect upon (i) the
financial condition, operations, assets or business of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Borrower or any of its
Subsidiaries to perform their respective obligations under the Loan Documents,
or (iii) the ability of the Lenders or the Agent to enforce any of the Loan
Documents against the Borrower or the Guarantors.
"Material Government Contract" means any Government Contract (or group
of present or future related Government Contracts such as (i) orders placed
under a Basic
<PAGE>
Ordering Agreement and (ii) indefinite-delivery-contracts of any type), other
than Government Contracts for which the period of performance has been
completed, with respect to which the estimated revenues generated or to be
generated pursuant thereto equals or exceeds $10,000,000 per annum.
"Material Subsidiary" means, individually, Dyn Funding, each
Subsidiary of the Borrower formed or acquired after the date hereof which
receives an initial contract to perform work for a customer, and each Guarantor;
"Material Subsidiaries" means, collectively, Dyn Funding, all such Subsidiaries
of the Borrower, and all Guarantors.
"MIS" means computerized management information system for recording
and maintenance of information regarding purchases, sales, aging,
categorization, and locations of Inventory, creation and aging of Receivables,
and accounts payable (including agings thereof).
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA (other than a Foreign Employee Benefit Plan) which
(i) is, or within the immediately preceding six (6) years was, contributed to by
either the Borrower or any ERISA Affiliate or in respect of which the Borrower
or any ERISA Affiliate has assumed any liability and (ii) is not a Foreign
Employee Benefit Plan.
"Net Cash Proceeds of Issuance of Equity Securities" means net cash
proceeds (including, cash equivalents readily convertible into cash, and such
proceeds of any notes received as consideration or any other non-cash
consideration) received by the Borrower or any Subsidiary of the Borrower on
account of the issuance of equity Securities of Borrower or any such Subsidiary
(other than (i) equity Securities of a Subsidiary issued to the Borrower, a
Subsidiary of the Borrower, the holder of a minority equity interest in such
Subsidiary or the holder of a fifty percent (50%) equity interest in such
Subsidiary if the Borrower or a Subsidiary of the Borrower holds the remaining
fifty percent (50%) equity interest in such Subsidiary, and (ii) Capital Stock
issued pursuant to Permitted Equity Securities Options) net of all transaction
costs and underwriters' discounts with respect thereto; provided, however, that
(a) cash proceeds, in an amount not to exceed $1,000,000 in the aggregate in any
Fiscal Year, of (1) Capital Stock issued upon conversion of existing outstanding
warrants, (2)
<PAGE>
Capital Stock issued upon exercise of options, and (3) Capital Stock sold by the
Borrower under the Internal Market for Borrower's Capital Stock, and (b) Capital
Stock contributions to the ESOP which are made in the form of Capital Stock
purchased with matching contributions of the purchase price therefor, will be
deemed not to be cash proceeds on account of the issuance of equity Securities
for purposes of this definition and the requirements of Section 3.01(b)(iii);
and provided further that, in the event the amount of cash proceeds described in
the foregoing proviso which is received in any Fiscal Year is less than
$1,000,000, the amount of the difference between $1,000,000 and the actual
amount of cash proceeds received in such Fiscal Year shall be permitted to
carry-over to succeeding Fiscal Years, until received, for purposes of
determining the amount of Net Cash Proceeds of Issuance of Equity Securities
required to be remitted to the Agent under Section 3.01(b)(iii).
"Net Cash Proceeds of Sale" means proceeds received by the Borrower or
any of its Subsidiaries in cash (including cash, equivalents readily convertible
into cash, and such proceeds of any notes received in consideration of any other
non-cash consideration) from the sale, assignment, transfer or other disposition
of property (other than (i) proceeds received by or from Dyn Funding under the
Securitization Program and (ii) proceeds from the sale, assignment, transfer or
other disposition of property permitted under Sections 9.02(a) through (h))
which are not used, within 364 days after receipt thereof to make an investment
in properties and assets that replace the properties and assets that were the
subject of such sale, assignment, transfer or other disposition or in properties
and assets that will be used in the business of the Borrower and its
Subsidiaries as existing on the Closing Date or in businesses reasonably related
thereto, in each instance, net of the costs of, and taxes incurred in respect
of, such sale, assignment, transfer or other disposition and amounts reimbursed
to a Governmental Authority under Government Contracts as a result of such sale,
assignment, transfer or other disposition; provided, however, that such proceeds
received by a Subsidiary which is not a Wholly-Owned Subsidiary of the Borrower
included in Net Cash Proceeds of Sale shall be limited to the amount thereof
which is transferred to the Borrower or a Wholly-Owned Subsidiary and provided
further that in the event proceeds from the sale, assignment, transfer or other
disposition of property
<PAGE>
described herein would be required to be paid to reduce the Indebtedness
evidenced by the Senior Notes, the same shall not be excluded from "Net Cash
Proceeds of Sale" as hereinabove provided.
"Net ESOP Contributions" means, for any period, (i) cash contributions
made to the ESOP, but only to the extent that such contributions are repaid (in
the four-Fiscal Quarter period commencing with the Fiscal Quarter in which such
cash contributions are made) by the ESOP to the Borrower in the form of either
(a) cash payments made under loan agreements between the Borrower and the ESOP
or (b) cash proceeds received from the sale of the Borrower's Capital Stock
which is common stock to the ESOP, plus (ii) to the extent expensed, the fair
market value of the Borrower's Capital Stock which is common stock contributed
to the ESOP, minus (iii) the amount of principal payments made pursuant to third
party ESOP-related financing agreements, all determined on a consolidated basis
in accordance with GAAP.
"New Stockholders Agreement" means that certain New Stockholders
Agreement dated as of March 11, 1994 among the Borrower, the "Management
Stockholders" (as defined therein) and the "Investors" (as defined therein), as
in effect on the Closing Date.
"1996 Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of March 14, 1996 entered into by and among Borrower,
Citicorp as agent thereunder, and Citicorp as lender thereunder.
"Non Pro Rata Loan" is defined in Section 3.02(b)(v).
"Note" means a promissory note in the form attached hereto as Exhibit
B payable to a Lender, evidencing the Loans made by such Lender and executed by
the Borrower as required by Section 3.03(a), as the same may be amended,
supplemented, modified or restated from time to time, and any promissory note
issued in substitution therefor; "Notes" means, collectively, all of such Notes
outstanding at any given time.
<PAGE>
"Notice of Borrowing" means a notice substantially in the form of
Exhibit C attached hereto and made a part hereof.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit D attached hereto and made a part hereof with respect to a
proposed conversion or continuation of a Loan pursuant to Section 4.01(c).
"Obligations" means all Loans, advances (including, without
limitation, Protective Advances), debts, liabilities, obligations, covenants and
duties owing by the Borrower to the Agent, any Lender, any Affiliate of the
Agent or any Lender, or any Person entitled to indemnification pursuant to
Section 14.03 of this Agreement, of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under any Hedge Agreement, this Agreement, the Notes or any other Loan Document,
whether or not for the payment of money, whether arising by reason of an
extension of credit, loan, guaranty, indemnification, or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements and any other sum chargeable
to the Borrower under any Hedge Agreement, this Agreement or any other Loan
Document.
"Officer's Certificate" means, as to a corporation, a certificate
executed on behalf of such corporation by the chairman or vice-chairman of its
board of directors or its president, any of its vice-presidents, its chief
financial officer, its treasurer, or its assistant treasurer.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease.
"Organizational Documents" means, with respect to any corporation,
limited liability company, or partnership (i) the articles/certificate of
incorporation (or the equivalent organizational documents) of such corporation
or limited liability company, (ii) the partnership agreement executed by the
partners in the partnership, (iii) the
<PAGE>
by-laws (or the equivalent governing documents) of the corporation, limited
liability company or partnership, and (iv) any document setting forth the
designation, amount and/or relative rights, limitations and preferences of any
class or series of such corporation's Capital Stock or such limited liability
company's or partnership's equity or ownership interests.
"OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C.
ss.ss. 651 et seq., any amendments thereto, any successor statutes and any
regulations or guidance promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Permits" means any permit, approval, authorization license, variance,
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Equity Securities Options" means the subscriptions,
options, warrants, rights, convertible securities and other agreements or
commitments relating to the issuance of equity Securities of the Borrower or any
Subsidiary of the Borrower identified as such on Schedule 1.01.3.
"Permitted Existing Indebtedness" means the Indebtedness of the
Borrower and its Subsidiaries identified as such on Schedule 1.01.4.
"Permitted Existing Investments" means those Investments identified as
such on Schedule 1.01.5 and those Investments in Subsidiaries of the Borrower
identified on Schedule 6.01-C.
"Permitted Existing Liens" means the Liens on assets of the Borrower
or any of its Subsidiaries identified as such on Schedule 1.01.6.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land
<PAGE>
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Foreign Employee Benefit Plan) (i) in respect of which the
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA or the Borrower or
any ERISA Affiliate has assumed any liability and (ii) which is not a Foreign
Employee Benefit Plan.
"Potential Event of Default" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"Principals" has the meaning set forth in paragraph (a)(2) of Section
52.209-5 of the Federal Acquisition Regulation.
"Process Agent" is defined in Section 14.17(a)(i).
"Projections" means the financial projections (including, without
limitation, capital expenditure budget) and assumptions prepared by the Borrower
dated as of the Closing Date and attached hereto as Exhibit E.
"Property" means any Real Property or personal property, underground
storage tank or unit, Equipment, Inventory, General Intangible, Receivable, or
other asset owned, leased or operated by the Borrower or any Subsidiary of the
Borrower, as applicable, (including any surface water thereon, and soil and
groundwater thereunder).
"Pro Rata Share" means, with respect to any Lender, the percentage
obtained by dividing (i) the amount of such Lender's Revolving Credit Commitment
(as adjusted from time to time in accordance with the provisions of this
Agreement or any Assignment and Acceptance to which such Lender is a party) by
(ii) the aggregate amount of all of the Revolving Credit Commitments
(notwithstanding the termination of any such Commitments).
"Protective Advance" is defined in Section 12.09(a).
<PAGE>
"RCRA" means the Resource Conservation and Recovery Act of
1976, 42 U.S.C. ss.ss. 6901 et seq., any amendments thereto, any successor
statutes, and any regulations promulgated thereunder.
"Real Property" means, with respect to any Person, all of such
Person's present and future right, title and interest (including, without
limitation, any leasehold estate) in (i) any plots, pieces or parcels of land,
(ii) any improvements, buildings, structures and fixtures now or hereafter
located or erected thereon or attached thereto of every nature whatsoever (the
rights and interests described in clauses (i) and (ii) above being the
"Premises"), (iii) all easements, rights of way, gores of land or any lands
occupied by streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and (v) all other rights and privileges thereunto
belonging or appertaining and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to or of any of the rights
and interests described in clauses (iii) and (iv) above.
"Receivables" means, with respect to any Person, all of such Person's
present and future (i) accounts, (ii) contract rights, chattel paper,
instruments, documents, deposit accounts, and other rights to payment of any
kind, whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services, and whether or not earned by performance,
(iii) any of the foregoing which are not evidenced by instruments or chattel
paper, (iv) intercompany receivables, and any security documents executed in
connection therewith, (v) proceeds of any letters of credit or insurance
policies on which such Person is named as beneficiary, (vi) claims against third
parties for advances and other financial accommodations and any other
obligations whatsoever owing to such Person, (vii) rights in and to all security
agreements, leases, guarantees, instruments, securities, documents of title and
other contracts securing, evidencing, supporting or otherwise relating to any of
the foregoing, together with
<PAGE>
all rights in any goods, merchandise or Inventory which any of the foregoing may
represent, and (viii) rights in returned and repossessed goods, merchandise and
Inventory which any of the same may represent, including, without limitation,
any right of stoppage in transit. Notwithstanding anything herein to the
contrary, "Receivables" as defined herein shall not include any "Receivable" as
defined in the Receivables Purchase Agreement or any "Transferor Receivable" as
defined in the Servicing Agreement or any item described in clauses (i) through
(viii) above transferred to Dyn Funding pursuant to the Receivables Purchase
Agreement or transferred by Dyn Funding to the Trustee pursuant to the Servicing
Agreement.
"Receivables Purchase Agreement" means, collectively, those certain
Sale and Purchase Agreements dated as of April 18, 1997 between Dyn Funding and
the sellers identified on Schedule 1.01.7 attached hereto pursuant to which such
sellers have sold and, from time to time hereafter will sell, certain of their
accounts to Dyn Funding.
"Receivables Purchase Documents" means the Receivables Purchase
Agreement, the Servicing Agreement, the Securitization Indenture and the
instruments and documents executed and delivered in
connection therewith.
"Register" is defined in Section 14.01(c).
"Regulation A" means Regulation A of the Federal Reserve Board as in
effect from time to time.
"Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board as in
effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.
"Reimbursement Date" is defined in Section 2.04(d)(i)(A).
<PAGE>
"Reimbursement Obligations" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrower with respect to amounts
drawn under Letters of Credit.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, injection, deposit, disposal, abandonment, or discarding of
barrels, containers or other receptacles, discharge, emptying, escape,
dispersal, leaching or migration into the indoor or outdoor environment or into
or out of any Property, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or Property.
"Remedial Action" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"Reportable Event" means any of the events described in Section
4043(b) of ERISA and the regulations promulgated thereunder as in effect from
time to time other than an event for which the thirty (30) day notice
requirement has been waived by the PBGC.
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act, the Securities Exchange Act,
Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or Permit or and Environmental, Health or
Safety Requirement of Law.
<PAGE>
"Requisite Lenders" means all Lenders; provided, however, that, in the
event one of the Lenders shall have failed to fund its Pro Rata Share of any
Loan requested by the Borrower which such Lender is obligated to fund under the
terms of this Agreement and any such failure has not been cured, then for so
long as such failure continues, "Requisite Lenders" means the Lender which has
not failed to fund its respective Pro Rata Share of such Loans or such Lenders
whose failure to fund has/have been cured.
"Responsible Officer" means any of the president and chief executive
officer, executive vice presidents, senior vice presidents, general counsel, and
Financial Officers of the Borrower.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of equity
Securities of the Borrower or any of its Subsidiaries now or hereafter
outstanding, and (iii) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of Capital Stock of the Borrower or
any of its Subsidiaries now or hereafter outstanding.
"Restricted Stock Plan" means that certain DynCorp Restricted Stock
Plan dated May 26, 1989 relating to the award of up to 1,025,037 restricted
stock units and vesting thereof based upon certain performance criteria.
"Revolving Credit Availability" means, at any particular time, the
amount by which the Revolving Credit Commitments at such time exceeds the
Revolving Credit Obligations at such time.
"Revolving Credit Commitment" means, with respect to any Lender, the
obligation of such Lender to make Loans pursuant to the terms and conditions of
this Agreement, in an aggregate amount at any time outstanding which shall not
exceed the principal amount set forth opposite such Lender's
<PAGE>
name under the heading "Revolving Credit Commitment" on the signature pages
hereof or the signature page of the Assignment and Acceptance by which it became
a Lender, as modified from time to time pursuant to the terms of this Agreement
or to give effect to any applicable Assignment and Acceptance, and "Revolving
Credit Commitments" means the aggregate principal amount of the Revolving Credit
Commitments of all the Lenders, the maximum amount of which shall be
$15,000,000, as reduced from time to time pursuant to Section 3.01.
"Revolving Credit Obligations" means, at any particular time, the sum
of (i) the aggregate amount of the outstanding principal amount of the Loans at
such time plus (ii) the Letter of Credit Obligations at such time.
"Revolving Credit Termination Date" means the earliest to occur of (i)
May 14, 2002 (or, if not a Business Day, the next preceding Business Day), (ii)
the date of termination of the Revolving Credit Commitments pursuant to the
terms of this Agreement, and (iii) the date of acceleration of the Obligations
pursuant to Section 11.02.
"SARP" means the DynCorp Savings and Retirement Plan amended and
restated as of January 1, 1989.
"SARP Documents" means the SARP and related trust agreement dated July
1, 1993 between the Borrower and Merrill Lynch Trust Company.
"Securities" means any Capital Stock, shares, voting trust
certificates, limited partnership certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, and investment property commonly known as "securities", including,
without limitation, any "security" as such term is defined in Section 8-102 of
the Uniform Commercial Code, or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include the Notes or any other evidence of the
Obligations.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
<PAGE>
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.
"Securitization Indenture" means, collectively, the DynCorp Trade
Receivables Master Indenture dated April 18, 1997 between Dyn Funding, as
issuer, and Bankers Trust Company, as trustee, relating to the Securitization
Program and Series Supplements thereto, including, without limitation, the
Series 1997-1 Supplement dated April 18, 1997 to DynCorp Trade Receivables
Master Indenture dated April 18, 1997 between Dyn Funding, as issuer, and
Bankers Trust Company, as trustee.
"Securitization Program" means the financing transactions set forth in
the Receivables Purchase Documents.
"Senior Notes" means the senior subordinated notes issued by the
Borrower under the Senior Notes Indenture.
"Senior Notes Indenture" means the Indenture dated as of March 17,
1997 between the Borrower, as issuer, and United States Trust Company of New
York, as trustee, relating to the 9.5% Senior Subordinated Notes due 2007 and
Series B 9.5% Senior Subordinated Notes due 2007, in the original aggregate face
amount of up to $150,000,000, of which amount $100,000,000 was issued on March
17, 1997.
"Servicing Agreement" means that certain Servicing Agreement dated as
of April 18, 1997 among the Borrower, as servicer, Dyn Funding, as issuer, and
Bankers Trust Company, as trustee.
"Solvent", when used with respect to any Person, means that at the
time of determination:
(i) the Fair Market Value of its assets is in excess of the total
amount of its liabilities (including, without limitation, contingent
liabilities); and
(ii) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
<PAGE>
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
"Standby Letter of Credit" means any letter of credit issued for the
account of the Borrower or any of the Borrower's Subsidiaries which is not a
Commercial Letter of Credit.
"Subsidiary" of a Person means any corporation, limited liability
company, general or limited partnership, or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions with
respect to such entity are at the time directly or indirectly owned or
controlled by such Person, one or more of the other subsidiaries of such Person
or any combination thereof.
"Taxes" is defined in Section 13.01(a).
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Borrower or such ERISA Affiliate
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or the
cessation of operations which results in the termination of employment of 20% of
Benefit Plan participants who are employees of the Borrower or any ERISA
Affiliate; (iii) the imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written notice
of intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; or (v) any event or condition which could reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan.
<PAGE>
"Transaction Costs" means the fees, costs and expenses payable by the
Borrower in connection with the execution, delivery and performance of the Loan
Documents.
"Transaction Documents" means the Loan Documents and the Receivables
Purchase Documents.
"Trustee" means Bankers Trust Company, as Trustee under the
Securitization Indenture.
"Uniform Commercial Code" means the Uniform Commercial Code as enacted
in the State of New York, as it may be amended from time to time.
"Unused Commitment Fee" is defined in Section 4.03(b).
"Wholly-Owned Subsidiary" means a corporation (i) one hundred percent
(100%) of the Capital Stock of which is owned by the Borrower and/or any
Subsidiary of the Borrower or (ii) greater than ninety-eight percent (98%) of
the Capital Stock of which is owned by the Borrower or a Subsidiary of the
Borrower and the remainder of which Capital Stock is owned by a nominee of the
Borrower or such Subsidiary solely to comply with the Requirements of Law of the
jurisdiction governing such corporation's organization and existence.
1.02. Special Purpose Defined Terms. (a) Certain Senior Note
Definitions. (i) Notwithstanding the definitions of the following terms
set forth in Section 1.01, such terms shall have the following meanings
solely for the purposes stated in this Agreement by reference to this
Section 1.02:
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
<PAGE>
"Consolidated EBITDA" means, for any period, the sum (without
duplication) of (i) Consolidated Net Income (as defined in Section 1.02) and
(ii) to the extent Consolidated Net Income (as defined in Section 1.02) has been
reduced thereby, (a) all income taxes of the Borrower and the Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions outside the ordinary
course of business), (b) Consolidated Interest Expense (as defined in Section
1.02) and (c) Consolidated Non-cash Charges less any Consolidated Non-cash
Income increasing Consolidated Net Income (as defined in Section 1.02) for such
period, all as determined on a consolidated basis for the Borrower and the
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the sum of,
without duplication, (i) the aggregate of the interest expense of the Borrower
and Restricted Subsidiaries and Permitted Joint Ventures for such period
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and amortization or write-off
deferred financing costs, (b) the net costs under Interest Swap Obligations, (c)
all capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Borrower, Restricted
Subsidiaries and Permitted Joint Ventures during such period as determined on a
consolidated basis in accordance with GAAP, provided that amounts to be included
in clauses (i) and (ii) above with respect to Permitted Joint Ventures not
constituting Restricted Subsidiaries shall be the product of the amounts
computed in accordance with GAAP and the percentage of the total outstanding
shares of Capital Stock of such Permitted Joint Venture held by the Borrower or
any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Borrower and Restricted Subsidiaries for such period on
a consolidated basis determined in accordance with GAAP, provided that there
shall be excluded therefrom (a) after-tax gains from Asset Sales or abandonments
or reserves relating thereto, (b) after-tax items classified as extraordinary or
<PAGE>
nonrecurring gains, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary or is merged or consolidated with the Borrower or any Restricted
Subsidiary, (d) the net income (but not loss) of any Restricted Subsidiary to
the extent that the declaration of dividends or similar distributions by the
Restricted Subsidiary of that income is restricted by a contract, operation of
law or otherwise, (e) the net income of any other Person, other than a
Restricted Subsidiary, (except in the case of (d) and (e) to the extent of cash
dividends or distributions paid to the Borrower or to a Wholly-Owned Restricted
Subsidiary by the Borrower), (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income (as defined in Section 1.02) accrued at any time
following the Issue Date, (g) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued), and (h)
in the case of a successor to the Borrower by consolidation or merger or as a
transferee of the Borrower's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets. Nothing contained in
this definition shall be deemed to permit any consolidation, merger or transfer
of assets of the Borrower other than as permitted in Article IX.
(ii) The following terms shall have the following meanings when used
in this Agreement:
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Borrower or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
or such acquisition, merger or consolidation. Nothing contained in this
definition shall be deemed to permit any merger or consolidation other than as
permitted in Article IX.
<PAGE>
"Asset Acquisition" means (i) an Investment by the Borrower or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with or into the Borrower or
any Restricted Subsidiary or (ii) the acquisition by the Borrower or any
Restricted Subsidiary of the assets of any other Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business. Nothing contained in this definition shall be deemed to permit any
Investment other than as permitted in Article IX.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Borrower or any of
its Restricted Subsidiaries (including any sale and leaseback transaction but
excluding any such transaction consummated within 180 days after the purchase of
assets sold, if the proceeds of the sale are used to pay all or a portion of the
costs of the transaction) to any Person other than the Borrower, a wholly-owned
Restricted Subsidiary or any Permitted Joint Venture of (a) any Capital Stock of
any Restricted Subsidiary or (b) any other property of the Borrower or any
Restricted Subsidiary other than in the ordinary course of business, in either
case, other than pursuant to a transaction or series of transactions for which
the Borrower or the Restricted Subsidiaries receive aggregate consideration of
less than $250,000; the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the property of the Borrower as permitted under
the "Merger, Consolidation and Sale of Assets" covenant of the Senior Notes
Indenture; or the sale, conveyance or other transfer of accounts receivable in
connection with the Securitization Program. Nothing contained in this definition
shall be deemed to permit any sale, assignment, transfer, lease, conveyance or
other disposition of property other than as permitted in Article IX.
"Capitalized Lease Obligations" means the obligations of the Borrower
and its Subsidiaries under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of
<PAGE>
this definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of
Consolidated EBITDA during the four (4) full Fiscal Quarters (the "Four Quarter
Period") ending on or prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction
Date") to Consolidated Fixed Charges for the Four Quarter Period. For purposes
of this definition, "Consolidated EBITDA" shall have the meaning set forth in
Section 1.02. For purposes of calculating the Consolidated Fixed Charge Coverage
Ratio, refer to Section 1.02(b).
"Consolidated Fixed Charges" for any period means the sum, without
duplication, of (i) "Consolidated Interest Expense" (as defined in Section
1.02), plus (ii) the product of (x) the amount of all dividend payments on any
senior of preferred stock of the Borrower (other than dividends pain in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during
such period times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of the Borrower, expressed as a decimal.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Borrower and
Restricted Subsidiaries reducing Consolidated Net Income (as defined in Section
1.02) determined on a consolidated basis in accordance with GAAP (excluding any
such charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Consolidated Non-cash Income" means, with resepct to any Person, for
any period, the aggregate amount of revenue of such Person and its Restricted
Subsidiaries increasing the Consolidated Net Income (as defined in Section 1.02)
of such Person and its Restricted Subsidiaries that will not result in the
future receipt of cash by such Person and its Restricted Subsidiaries,
determined on a
<PAGE>
consolidated basis in accordance with GAAP (excluding any such revenue
constituting an extraordinary item).
"Issue Date" means the date of the original issuance of the Senior
Notes.
"Permitted Joint Ventures" means any joint venture arrangement (which
may be structured as a corporation, partnership, trust, limited liability
company or any other Person) if (i) no Affiliate (as defined in Section 1.02) of
the Borrower or a Restricted Subsidiary (other than another Restricted
Subsidiary) has an investment in such Person, (ii) such Person is engaged in the
same or a similar line of business as the Borrower and its Subsidiaries were
engaged in on the date of the Senior Notes Indenture (or any reasonable
extensions or expansions thereof or any business ancillary thereto or supportive
thereof), (iii) the Borrower and/or any Restricted Subsidiaries at all times
owns at least 25% of the total outstanding shares of Capital Stock of such
Person entitled to participate in distributions in respect of the earnings, sale
or liquidation of such Person, (iv) immediately after giving effect to such
Investment on a pro forma basis (to give effect to the contribution of any
property or assets to such Person or Indebtedness incurred to fund such
Investment or otherwise) the Borrower could incur at least $1.00 of additional
Indebtedness in accordance with the provisions of Section 9.01 (other than
clauses (a) through (l) thereof), and (v) no default with respect to any
Indebtedness of such Person or any Subsidiary of such Person (including any
right which the holders thereof may have to take enforcement action against such
Person) would permit (upon notice, lapse of time or both) any holder of any
Indebtedness of the Borrower or Restricted Subsidiaries to declare a default on
such Indebtedness or cause the payment thereof to be accelerated or payable
prior to its final scheduled maturity.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Borrower pursuant to a registration statement
filed with the Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock which is not, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures
<PAGE>
or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof on or prior
to the final maturity date of the Obligations.
"Restricted Subsidiary" means any Subsidiary of the Borrower which is
not (i) Dyn Funding or a Subsidiary of the Borrower that at the time of
determination shall be or continue to be designated an "Unrestricted Subsidiary"
of the Borrower by the Board of Directors of the Borrower in the manner provided
hereinbelow or (ii) a Subsidiary of an "Unrestricted Subsidiary. The Board of
Directors of the Borrower may designate any Subsidiary of the Borrower to be an
"Unrestricted Subsidiary" unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Borrower or any other Subsidiary
of the Borrower that is not a Subsidiary of the Subsidiary to be so designated;
provided that (a) the Borrower certifies to the Agent that such designation
complies with the "Limitation on Restricted Payments" covenant of the Senior
Notes Indenture and (b) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Borrower or any Restricted Subsidiary.
The Board of Directors may designate any "Unrestricted Subsidiary" to be a
Restricted Subsidiary only if (x) immediately after giving effect to such
designation, the Borrower is able to incur at least $1.00 of additional
Indebtedness in accordance with Section 9.01 (other than clauses (a) through (l)
thereof) and (y) immediately before and immediately after giving effect to such
designation, no Potential Event of Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Agent by promptly filing with the Agent a copy of the Board
of Directors' Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
provisions. All Restricted Subsidiaries as of the Closing Date are identified on
Schedule 1.02 attached hereto and made a part hereof.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
of the Borrower of which all
<PAGE>
outstanding voting securities (other than in the case of a foreign Restricted
Subsidiary, directors' qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable law) are owned by
the Borrower or any Wholly Owned Restricted Subsidiary.
(b) Calculation Explanations. (i) For purposes of calculation of the
Consolidated Fixed Charge Coverage Ratio, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect, on a pro
forma basis for the period of such calculation, to (i) the incurrence or
repayment of any Indebtedness of the Borrower or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Borrower or a Restricted Subsidiary (including any Person that becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (as defined in Section 1.02) (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income" (as defined in Section 1.02))
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period and on or prior to the Transaction
Date, as if such Asset Sale or Asset Acquisition (including the incurrence,
assumption or liability for any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If the Borrower or any Restricted
Subsidiary directly or indirectly guarantees Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed
<PAGE>
Indebtedness. Furthermore, in calculating Consolidated Fixed Charges for
purposes of determining the denominator (but not the numerator) of the
Consolidated Fixed Charge Coverage Ratio, (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
(ii) When calculating Consolidated Interest Expense (as defined in
Section 1.02), Dyn Funding shall be treated as a Restricted Subsidiary.
(iii) When calculating Consolidated Net Income (as defined in Section
1.02), Dyn Funding shall be treated as a Restricted Subsidiary.
(iv) When calculating Consolidated Non-cash Income, Dyn Funding shall
be treated as a Restricted Subsidiary.
1.03. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first
<PAGE>
day of such period; provided that if such period commences on the last day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month during which such period is to end), such period shall,
unless otherwise expressly required by the other provisions of this Agreement,
end on the last day of the calendar month and further provided that Fiscal
Months and Fiscal Quarters for the Borrower and its Subsidiaries, respectively,
shall end on the dates set forth in Schedule 1.01.1 for such Persons.
1.04. Accounting Terms. Subject to Section 14.04, for purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
1.05. Other Terms. All other terms contained in this Agreement shall,
unless the context indicates otherwise, have the meanings assigned to such terms
by the Uniform Commercial Code to the extent the same are defined therein.
<PAGE>
ARTICLE II
AMOUNTS AND TERMS OF LOANS
AND LETTERS OF CREDIT
2.01. Revolving Credit Facility. (a) Availability. Subject to the
terms and conditions set forth in this Agreement, each Lender hereby severally
and not jointly agrees to make revolving loans, in Dollars (each individually, a
"Loan" and, collectively, the "Loans") to the Borrower from time to time during
the period from the Closing Date to the Business Day next preceding the
Revolving Credit Termination Date, in an amount not to exceed such Lender's Pro
Rata Share of the Revolving Credit Availability at such time. All Loans
comprising the same Borrowing under this Agreement shall be made by the Lenders
simultaneously and proportionately to their then respective Pro Rata Shares, it
being understood that no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make a Loan hereunder nor shall the
Revolving Credit Commitment of any Lender be increased or decreased as a result
of any such failure. Subject to the provisions of this Agreement, the Borrower
may repay any outstanding Loan on any day which is a Business Day and any
amounts so repaid may be reborrowed, up to the amount available under this
Section 2.01(a) at the time of such Borrowing, until the Business Day next
preceding the Revolving Credit Termination Date; provided, however, the Borrower
shall, without notice or demand of any kind, immediately make such repayments of
the Loans to the extent necessary to reduce the aggregate outstanding principal
amount of the Revolving Credit Obligations to an amount less than or equal to
the Revolving Credit Commitments as in effect from time to time.
(b) Notice of Borrowing. When the Borrower desires to borrow under
this Section 2.01, it shall deliver to the Agent a Notice of Borrowing, signed
by it, (i) on the Closing Date, in the case of a Borrowing of Loans on the
Closing Date and (ii) no later than 11:00 a.m. (New York time) (A) on the
Funding Date therefor, in the case of a Borrowing of Base Rate Loans after the
Closing Date and (B) at least three (3) Business Days in advance of the proposed
Funding Date therefor, in the case of a Borrowing of Eurodollar Rate Loans after
the Closing Date. Such Notice of Borrowing shall specify (i) the proposed
Funding Date (which shall be a Business Day), (ii) the amount of the
<PAGE>
proposed Borrowing, (iii) the Revolving Credit Availability as of the date of
such Notice of Borrowing, (iv) whether the proposed Borrowing will be of Base
Rate Loans or Eurodollar Rate Loans, (v) in the case of Eurodollar Rate Loans,
the requested Eurodollar Interest Period, and (vi) instructions for the
disbursement of the proceeds of the proposed Borrowing. The Loans made on the
Closing Date shall initially be Base Rate Loans and thereafter may be continued
as Base Rate Loans or converted into Eurodollar Rate Loans, in the manner
provided in Section 4.01(c) and subject to the conditions therein set forth and
in Section 4.02. In lieu of delivering such a Notice of Borrowing (except with
respect to a Borrowing of Loans on the Closing Date), the Borrower may give the
Agent telephonic notice of any proposed Borrowing by the time required under
this Section 2.01(b), if the Borrower confirms such notice by delivery of the
required Notice of Borrowing to the Agent by facsimile transmission promptly,
but in no event later than 2:00 p.m. (New York time) on the same day, the
original of which facsimile copy shall be delivered to the Agent within three
(3) days after the date of such transmission. Any Notice of Borrowing (or
telephonic notice in lieu thereof) given pursuant to this Section 2.01(b) shall
be irrevocable.
(c) Making of Loans. (i) Promptly after receipt of a Notice of
Borrowing under Section 2.01(b) (or telephonic notice in lieu thereof), the
Agent shall notify each Lender by telecopy, or other similar form of
transmission, of the proposed Borrowing. Each Lender shall deposit an amount
equal to its Pro Rata Share of the amount requested by the Borrower to be made
as Loans with the Agent at its office in New York, New York, in immediately
available funds, (A) on the Closing Date with respect to the Borrowing of Loans
on such date specified in the initial Notice of Borrowing and (B) not later than
12:00 noon (New York time) on any other Funding Date for Loans. Subject to the
fulfillment of the conditions precedent set forth in Section 5.01 or Section
5.02, as applicable, the Agent shall promptly make the proceeds of such amounts
received by it available to the Borrower at the Agent's office in New York, New
York on such Funding Date (or on the date received if later than such Funding
Date) and shall promptly deposit such proceeds to the Borrower's disbursement
Account No. 4067-7374 at Citibank. The failure of any Lender to deposit the
amount described above with the Agent on the applicable Funding Date shall not
relieve any other Lender of its
<PAGE>
obligations hereunder to make its Loan on such Funding Date. In the event the
conditions precedent set forth in Section 5.01 or 5.02, as applicable, are not
fulfilled as of the proposed Funding Date for any Borrowing, the Agent shall
promptly return, by wire transfer of immediately available funds, the amount
deposited by each Lender to such Lender.
(ii) Unless the Agent shall have been notified by any Lender on the
Business Day immediately preceding the applicable Funding Date in respect of any
Borrowing of Loans that such Lender does not intend to fund its Loan requested
to be made on such Funding Date, the Agent may assume that such Lender has
funded its Loan and is depositing the proceeds thereof with the Agent on the
Funding Date therefor, and the Agent in its sole discretion may, but shall not
be obligated to, disburse a corresponding amount to the Borrower on the
applicable Funding Date. If the Loan proceeds corresponding to that amount are
advanced to the Borrower by the Agent but are not in fact deposited with the
Agent by such Lender on or prior to the applicable Funding Date, such Lender
agrees to pay, and in addition the Borrower agrees to repay, to the Agent
forthwith on demand such corresponding amount, together with interest thereon,
for each day from the date such amount is disbursed to or for the benefit of the
Borrower until the date such amount is paid or repaid to the Agent, (A) in the
case of the Borrower, at the interest rate applicable to such Borrowing and (B)
in the case of such Lender, at the Federal Funds Rate for the first three (3)
Business Days, and thereafter at the interest rate applicable to such Borrowing.
If such Lender shall pay to the Agent the corresponding amount, the amount so
paid shall constitute such Lender's Loan, and if both such Lender and the
Borrower shall pay and repay such corresponding amount, the Agent shall promptly
pay to the Borrower such corresponding amount. This Section 2.01(c)(ii) does not
relieve any Lender of its obligation to make its Loan on any applicable Funding
Date or prejudice any rights the Borrower may have against such defaulting
Lender.
(d) Revolving Credit Termination Date. The Revolving Credit
Commitments shall terminate on the Revolving Credit Termination Date. All
outstanding Revolving Credit Obligations shall be paid in full on the Revolving
Credit Termination Date.
<PAGE>
(e) Maximum Revolving Credit Facility. Notwithstanding anything in
this Agreement to the contrary, in no event shall the aggregate principal
Revolving Credit Obligations exceed the amount of the Revolving Credit
Commitments in effect from time to time, as reduced by the amount of each
permanent reduction of the Revolving Credit Commitments made pursuant to Section
3.01.
2.02. Authorized Officers and Agents. On the Closing Date the Borrower
shall deliver, and from time to time thereafter the Borrower may deliver, to the
Agent an Officer's Certificate setting forth the names of the officers,
employees and agents authorized to request Loans and Letters of Credit, and to
request a conversion/continuation of any Loan, in each instance containing a
specimen signature of each such officer, employee or agent. The officers,
employees and agents so authorized shall also be authorized to act for the
Borrower in respect of all other matters relating to the Loan Documents. The
Agent and Lenders shall be entitled to rely conclusively on such officer's,
employee's, or agent's authority to request such Loan or such
conversion/continuation until the Agent and Lenders receive written notice to
the contrary. None of the Agent or the Lenders shall have any duty to verify the
authenticity of the signature appearing on any such Officer's Certificate,
written Notice of Borrowing or Notice of Conversion/Continuation, or any other
document, and, with respect to an oral request for such a Loan or such
conversion/continuation, the Agent shall have no duty to verify the identity of
any person representing himself or herself as one of the officers, employees or
agents authorized to make such request or otherwise to act on behalf of the
Borrower. Neither the Agent nor any Lender shall incur any liability to the
Borrower or any other Person in acting upon any telephonic or facsimile notice
referred to above which the Agent or such Lender believes to have been given by
a duly authorized officer or other person authorized to borrow on behalf of the
Borrower.
2.03. Use of Proceeds of Loans. The proceeds of the Loans shall be
used for working capital and capital expenditures in the ordinary course of the
respective businesses of the Borrower and its Subsidiaries or for other lawful
general corporate purposes of the Borrower and its Subsidiaries not prohibited
hereunder and related fees and expenses.
<PAGE>
2.04. Letters of Credit. Subject to the terms and conditions set forth
in this Agreement, the Issuing Bank hereby agrees to issue for the account of
the Borrower, or for the account of any of the Borrower's Subsidiaries if the
Borrower is jointly and severally liable for reimbursement of amounts drawn
under such Letter of Credit, one or more Letters of Credit, subject to the
following provisions:
(a) Types and Amounts. The Issuing Bank shall not have any obligation
to issue, amend or extend, and shall not issue, amend or extend, any Letter of
Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect to the
Issuing Bank, after giving effect to the issuance, amendment or extension
of the Letter of Credit requested hereunder, shall exceed any limit imposed
by law or regulation upon the Issuing Bank;
(ii) if the Issuing Bank receives written notice from the Agent at or
before 11:00 a.m. (New York time) on the date of the proposed issuance,
amendment or extension of such Letter of Credit that (A) immediately after
giving effect to the issuance, amendment or extension of such Letter of
Credit, the Revolving Credit Obligations at such time would exceed the
Revolving Credit Commitments at such time, or (B) one or more of the
conditions precedent contained in Sections 5.01 or 5.02, as applicable,
would not on such date be satisfied, unless such conditions are thereafter
satisfied and written notice of such satisfaction is given to the Issuing
Bank by the Agent (and the Issuing Bank shall not otherwise be required to
determine that, or take notice whether, the conditions precedent set forth
in Sections 5.01 or 5.02, as applicable, have been satisfied);
(iii) which has an expiration date later than the date one (1) year
after the date of issuance (without regard to any automatic renewal
provisions thereof); or
<PAGE>
(iv) which is in a currency other than Dollars unless otherwise agreed
by the Issuing Bank and Agent and provision satisfactory to the Issuing
Bank and Lenders is made for the Borrower to bear the risk of currency
fluctuations.
(b) Conditions. In addition to being subject to the satisfaction of
the conditions precedent contained in Sections 5.01 and 5.02, as applicable, the
obligation of the Issuing Bank to issue, amend or extend any Letter of Credit is
subject to the satisfaction in full of the following conditions:
(i) if the Issuing Bank so requests, the Borrower or, in the case of
Letters of Credit issued for the account of any of the Borrower's
Subsidiaries, the Borrower and such Subsidiary shall have executed and
delivered to the Issuing Bank and the Agent a Letter of Credit
Reimbursement Agreement and such other documents and materials as may be
required pursuant to the terms thereof; and
(ii) the terms of the proposed Letter of Credit shall be satisfactory
to the Issuing Bank in its sole discretion.
(c) Issuance of Letters of Credit. (i) The Borrower shall give the
Issuing Bank and the Agent written notice that it requests the Issuing Bank to
issue a Letter of Credit not later than 11:00 a.m. (New York time) on the third
(3rd) Business Day preceding the requested date for issuance thereof under this
Agreement, or such shorter notice as may be acceptable to the Issuing Bank and
the Agent. Such notice shall be irrevocable unless and until such request is
denied by the Issuing Bank or the Issuing Bank receives written notice from the
Borrower to hold, cancel or amend the proposed Letter of Credit prior to the
issuance thereof and shall specify (A) that the requested Letter of Credit is
either a Commercial Letter of Credit or a Standby Letter of Credit, (B) that
such Letter of Credit is solely for the account of the Borrower or the name of
the Subsidiary of the Borrower which is jointly and severally applying for such
Letter of Credit, (C) the stated amount of the Letter of Credit requested, (D)
the effective date (which shall be a Business Day) of issuance of such Letter
<PAGE>
of Credit, (E) the date on which such Letter of Credit is to expire (which,
except to the extent otherwise provided in Section 2.04(a)(iii), shall be a
Business Day), (F) the Person for whose benefit such Letter of Credit is to be
issued, (G) other relevant terms of such Letter of Credit, (H) the Revolving
Credit Commitments at such time, and (I) the amount of the then outstanding
Letter of Credit Obligations. The Issuing Bank shall notify the Agent
immediately upon receipt of a written notice from the Borrower requesting that a
Letter of Credit be issued, or that an existing Letter of Credit be extended or
amended and, upon the Agent's request therefor, send a copy of such notice to
the Agent.
(ii) The Issuing Bank shall give (A) the Lenders written notice, or
telephonic notice confirmed promptly thereafter in writing, of the issuance,
amendment or extension of a Letter of Credit and (B) promptly after issuance
thereof, provide the Agent and the Borrower with a copy of each Letter of Credit
issued and each amendment thereto.
(d) Reimbursement Obligations; Duties of the Issuing Bank. (i)
Notwithstanding any provisions to the contrary in any Letter of Credit
Reimbursement Agreement:
(A) the Borrower shall reimburse, or cause its Subsidiary for whose
account a Letter of Credit is issued to reimburse, the Issuing Bank for
amounts drawn under such Letter of Credit, in Dollars, no later than the
date (the "Reimbursement Date") which is one (1) Business Day after the
Borrower receives written notice from the Issuing Bank that payment has
been made under such Letter of Credit by the Issuing Bank;
(B) all Reimbursement Obligations with respect to any Letter of Credit
shall bear interest at the rate applicable to Base Rate Loans in accordance
with Section 4.01(a) from the date of the relevant payment under such
Letter of Credit until the Reimbursement Date and thereafter at the rate
applicable to Base Rate Loans in accordance with Section 4.01(d); and
<PAGE>
(C) the Issuing Bank may, at its option, honor a drawing under any
Letter of Credit by paying the amount of such drawing to the beneficiary
thereunder in cash.
(ii) The Issuing Bank shall give the Agent written notice, or
telephonic notice confirmed promptly thereafter in writing, of all drawings
under a Letter of Credit and the payment (or the failure to pay when due) by the
Borrower or its applicable Subsidiary on account of a Reimbursement Obligation
(which notice the Agent shall promptly transmit by telegram, telex, telecopy or
similar transmission to each Lender).
(iii) No action taken or omitted in good faith by the Issuing Bank
under or in connection with any Letter of Credit shall put the Issuing Bank
under any resulting liability to any Lender, the Borrower or any of its
Subsidiaries except for actions taken or omitted resulting from gross negligence
or willful misconduct of the Issuing Bank as determined by a court of competent
jurisdiction, or, so long as it is not issued in violation of Section 2.04(a),
relieve any Lender of its obligations hereunder to the Issuing Bank. Solely as
between the Issuing Bank and the Lenders, in determining whether to pay under
any Letter of Credit, the Issuing Bank shall have no obligation to the Lenders
other than to confirm that any documents required to be delivered under a
respective Letter of Credit appear to have been delivered and that they appear
on their face to comply with the requirements of such Letter of Credit.
(e) Participations. (i) Immediately upon issuance by the Issuing Bank
of any Letter of Credit in accordance with the procedures set forth in this
Section 2.04, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation in such Letter of Credit to
the extent of such Lender's Pro Rata Share, including, without limitation, all
obligations of the Borrower with respect thereto (other than amounts owing to
the Issuing Bank under Section 2.04(g)) and any security therefor and guaranty
pertaining thereto.
(ii) If the Issuing Bank makes any payment under any Letter of Credit
and the Borrower or the Subsidiary of the Borrower for whose account the Letter
of Credit was
<PAGE>
issued does not repay such amount to the Issuing Bank on the Reimbursement Date,
the Issuing Bank shall promptly notify the Agent, which shall promptly notify
each Lender, and each Lender shall promptly and unconditionally pay to the Agent
for the account of the Issuing Bank, in immediately available funds, the amount
of such Lender's Pro Rata Share of such payment, and the Agent shall promptly
pay to the Issuing Bank such amounts received by it, and any other amounts
received by the Agent for the Issuing Bank's account, pursuant to this Section
2.04(e). All amounts so paid to the Issuing Bank shall be deemed to constitute
Loans. If a Lender does not make its Pro Rata Share of the amount of such
payment available to the Agent, such Lender agrees to pay to the Agent for the
account of the Issuing Bank, forthwith on demand, such amount together with
interest thereon, for the first three (3) Business Days after the date such
payment was first due at the Federal Funds Rate, and thereafter at the interest
rate then applicable to Base Rate Loans in accordance with Section 4.01(a). The
failure of any Lender to make available to the Agent for the account of the
Issuing Bank its Pro Rata Share of any such payment shall neither relieve any
other Lender of its obligation hereunder to make available to the Agent for the
account of the Issuing Bank such other Lender's Pro Rata Share of any payment on
the date such payment is to be made nor increase the obligation of any other
Lender to make such payment to the Agent.
(iii) Whenever the Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which the Agent
has previously received payments from any Lender for the account of Issuing Bank
pursuant to this Section 2.04(e), the Issuing Bank shall promptly pay to the
Agent and the Agent shall promptly pay to such Lender an amount equal to such
Lender's Pro Rata Share thereof. Each such payment shall be made by the Issuing
Bank or the Agent, as the case may be, on the Business Day on which such Person
receives the funds paid to such Person pursuant to the preceding sentence, if
received prior to 11:00 a.m. (New York time) on such Business Day, and otherwise
on the next succeeding Business Day.
(iv) Upon the request of any Lender, the Issuing Bank shall furnish
such Lender copies of any Letter of Credit or Letter of Credit Reimbursement
Agreement to which
<PAGE>
the Issuing Bank is party and such other documentation as reasonably may be
requested by such Lender.
(v) The obligations of a Lender to make payments to the Agent for the
account of the Issuing Bank with respect to a Letter of Credit shall be
irrevocable, shall not be subject to any qualification or exception whatsoever
except willful misconduct or gross negligence of the Issuing Bank, and shall be
honored in accordance with this Article II (irrespective of the satisfaction of
the conditions described in Sections 5.01 and 5.02, as applicable) under all
circumstances, including, without limitation, any of the following
circumstances:
(A) any lack of validity or enforceability of this Agreement or any of
the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time against a beneficiary named in a Letter
of Credit or any transferee of a beneficiary named in a Letter of Credit
(or any Person for whom any such transferee may be acting), the Agent, the
Issuing Bank, any Lender, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions
between the account party and beneficiary named in any Letter of Credit);
(C) any draft, certificate or any other document presented under the
Letter of Credit having been determined to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
(E) any failure by the Issuing Bank to make any reports required
pursuant to Section 2.04(h) or the inaccuracy of any such report; or
<PAGE>
(F) the occurrence of any Event of Default or Potential Event of
Default.
(f) Payment of Reimbursement Obligations; Provision of Cash
Collateral. (i) The Borrower unconditionally agrees to pay, or cause its
Subsidiary for whose account a Letter of Credit is issued to pay, to the Issuing
Bank, in Dollars, the amount of all Reimbursement Obligations, interest and
other amounts payable to the Issuing Bank under or in connection with the
Letters of Credit when such amounts are due and payable, irrespective of any
claim, setoff, defense or other right which the Borrower may have at any time
against the Issuing Bank or any other Person.
(ii) In the event any payment by the Borrower or such Subsidiary
received by the Issuing Bank with respect to a Letter of Credit and distributed
by the Agent to the Lenders on account of their participations is thereafter set
aside, avoided or recovered from the Issuing Bank in connection with any
receivership, liquidation or bankruptcy proceeding, each Lender which received
such distribution shall, upon demand by the Issuing Bank, contribute such
Lender's Pro Rata Share of the amount set aside, avoided or recovered together
with interest at the rate required to be paid by the Issuing Bank upon the
amount required to be repaid by it.
(iii) The Borrower unconditionally agrees to deliver to the Agent, on
the Revolving Credit Termination Date, for the benefit of the Issuing Bank and
Lenders, Cash Collateral in an amount equal to the sum of (A) one hundred three
percent (103%) of the sum of the undrawn face amount of all Letters of Credit
(1) outstanding (whether presented for payment or not) on the Revolving Credit
Termination Date plus (2) which expired, undrawn, within the thirty (30) days
immediately preceding the Revolving Credit Termination Date, plus (B) fees
payable over the unexpired terms of such Letters of Credit, which cash
Collateral with respect to a respective Letter of Credit shall be retained by
the Agent until such Letter of Credit has expired or been paid and returned to
the Issuing Bank. All Cash Collateral held by the Agent pursuant to this Section
2.04(f) shall be held by the Agent in a Cash Collateral Account and all interest
earned on such Cash Collateral shall be the property of the
<PAGE>
Borrower and shall be paid to the Borrower quarterly and on the date such Cash
Collateral is no longer required hereunder.
(g) Issuing Bank Charges. The Borrower shall pay, or cause its
Subsidiary for whose account a Letter of Credit is issued to pay, to the Issuing
Bank, solely for its own account, the standard charges assessed by the Issuing
Bank in connection with the issuance, administration, amendment and payment or
cancellation of Letters of Credit and such compensation in respect of such
Letters of Credit for the Borrower's or such Subsidiary's account, as
applicable, as may be agreed upon prior to issuance of such Letters of Credit by
the Borrower and the Issuing Bank. In no event shall the Issuing Bank be
relieved of its obligation to issue Letters of Credit in accordance with the
terms of this Agreement based upon the Borrower's not agreeing to any such other
compensation in addition to the aforesaid standard charges.
(h) Issuing Bank Reporting Requirements. The Issuing Bank shall, (i)
no later than 11:00 a.m. on the first Business Day following the last day of
each calendar month, provide to the Agent, and (ii) promptly after receipt of a
request therefor from the Borrower or any Lender, provide to such requesting
Person, separate schedules for Commercial Letters of Credit and Standby Letters
of Credit issued as Letters of Credit, in form and substance reasonably
satisfactory to the Agent, setting forth the aggregate Letter of Credit
Obligations outstanding to it at the end of each day in such calendar month and,
to the extent not otherwise provided in accordance with the provisions of
Section 2.04(c)(ii), any information requested by the Agent or the Borrower
relating to the date of issue, account party, amount, expiration date and
reference number of each Letter of Credit issued by it.
(i) Indemnification; Exoneration. (i) In addition to all other amounts
payable to the Issuing Bank, the Borrower hereby agrees to defend, indemnify,
and save the Agent, the Issuing Bank and each Lender harmless from and against
any and all claims, demands, liabilities, penalties, damages, losses (other than
loss of profits), costs, charges and expenses (including reasonable attorneys'
fees but excluding taxes) which the Agent, the Issuing Bank or such Lender may
incur or be subject to as a consequence,
<PAGE>
direct or indirect, of (A) the issuance of any Letter of Credit other than as a
result of the gross negligence or willful misconduct of the Issuing Bank, as
determined by a court of competent jurisdiction, or (B) the failure of the
Issuing Bank to honor a drawing under such Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or future de jure
or de facto government or Governmental Authority. In no event shall the Issuing
Bank be liable to the Borrower or any Lender for consequential or special
damages.
(ii) As between the Borrower and any of its Subsidiaries for whose
account a Letter of Credit is issued on the one hand and the Agent, the Lenders
and the Issuing Bank on the other hand, the Borrower assumes all risks of the
acts and omissions of, or misuse of Letters of Credit by, the respective
beneficiaries of the Letters of Credit. In furtherance and not in limitation of
the foregoing, subject to the provisions of the Letter of Credit Reimbursement
Agreements, the Issuing Bank and the Lenders shall not be responsible for: (A)
the form, validity, legality, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for
and issuance of the Letters of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B)
the validity, legality or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (C) failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in interpretation of
technical terms; (F) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (G) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit; and (H) any
consequences arising from causes beyond the control of the Agent, the Issuing
Bank or the Lenders.
<PAGE>
(j) Obligations Several. The obligations of the Issuing Bank and each
Lender under this Section 2.04 are several and not joint, and no Lender shall be
responsible for the obligation of the Issuing Bank to issue Letters of Credit or
for the obligation of any other Lender to participate in Letters of Credit
hereunder.
<PAGE>
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in Commitments.
(a) Voluntary Prepayments/Reductions. (i) Notice. The Borrower may
repay Loans, without prior written notice to the Agent or any Lender, at any
time and from time to time; provided, however, Eurodollar Rate Loans may only be
prepaid (A) in whole or in part on the expiration date of the then applicable
Eurodollar Interest Period, upon at least three (3) Business Days' prior written
notice to the Agent (which the Agent shall promptly transmit to each Lender), or
(B) otherwise upon payment of the amounts described in Section 13.05. Any notice
of prepayment given to the Agent under this Section 3.01(a)(i) shall specify the
Loans to be prepaid, the date (which shall be a Business Day) of prepayment, and
the aggregate principal amount of the prepayment. When notice of prepayment is
delivered as provided herein, the principal amount of the Loans specified in the
notice shall become due and payable on the prepayment date specified in such
notice.
(ii) Voluntary Revolving Credit Commitment Reductions. The Borrower,
upon at least three (3) Business Days' prior written notice to the Agent (which
the Agent shall promptly transmit to each Lender), shall have the right, at any
time and from time to time, to terminate in whole or permanently reduce in part
the Revolving Credit Commitments; provided that the Borrower shall have made
whatever payment may be required to reduce the Revolving Credit Obligations to
an amount less than or equal to the Revolving Credit Commitments as reduced or
terminated. Any partial reduction of the Revolving Credit Commitments shall be
in an aggregate minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount, and shall reduce the Revolving Credit
Commitment of each Lender proportionately in accordance with its Pro Rata Share.
Any notice of termination or reduction given to the Agent under this Section
3.01(a)(ii) shall specify the date (which shall be a Business Day) of such
termination or reduction and, with respect to a partial reduction, the aggregate
principal amount thereof. When notice of termination or reduction is delivered
as provided herein, the principal amount of the Loans specified in the notice
shall become due and payable on the date specified in such notice.
<PAGE>
(b) Mandatory Prepayments. (i) No later than the Business Day next
succeeding any day when the Revolving Credit Obligations exceed the Revolving
Credit Commitments then in effect, the Borrower shall make or cause to be made a
mandatory prepayment of the Revolving Credit Obligations in an amount equal to
the amount of such excess as required pursuant to Section 2.01(a).
(ii) On the 365th day after the Borrower's or any Subsidiary of
Borrower's receipt of Net Cash Proceeds of Sale from the sale, transfer or other
disposition of property in a single transaction or series of related
transactions in any Fiscal Year, the Borrower shall make or cause to be made a
mandatory prepayment of the Revolving Credit Obligations in an amount equal to
such Net Cash Proceeds of Sale.
(iii) On the 366th day after the Borrower's or any Subsidiary of the
Borrower's receipt of any Net Cash Proceeds of Issuance of Equity Securities,
the Borrower shall make or cause to be made a mandatory prepayment of the
Revolving Credit Obligations in an amount equal to that portion of such Net Cash
Proceeds of Issuance of Equity Securities which is not used, within 365 days
after the Borrower's or such Subsidiary's receipt thereof, to repay Funded Debt
or to make an investment in, or acquire assets or properties that will be used
in the business of the Borrower and its Subsidiaries or in a business reasonably
related thereto.
(c) No Prepayment Fee. The prepayments and payments described in
Section 3.01(a) may be made without premium or penalty (except as provided in
Section 13.05). Designated Prepayments shall be made without premium or penalty
(except as provided in Section 13.05); provided, however, that, in the event a
Designated Prepayment which is to be applied to a Eurodollar Rate Loan becomes
due and payable at a time when no Event of Default exists but on a date which is
other than the last day of the Eurodollar Interest Period applicable thereto,
the Lenders (i) hereby authorize the Agent to retain the amount of such
Designated Prepayment delivered to it for application on such Eurodollar Rate
Loan as Cash Collateral therefor until the last day of the Eurodollar Interest
Period applicable thereto and to apply such amount to such Eurodollar Rate
<PAGE>
Loan only on such last day of such Eurodollar Interest Period and (ii) agree
that Borrower's delivery of the amount of such Designated Prepayment to the
Agent as aforesaid shall be deemed to have complied with the requirements of
Section 3.01(b). All Cash Collateral held by the Agent pursuant to this Section
3.01(c) shall be held by the Agent in a Cash Collateral Account and all interest
earned on such Cash Collateral shall be the property of the Borrower and shall
be paid to the Borrower quarterly.
(d) No Waiver or Consent. Nothing in Section 3.01(b) shall be
construed to constitute the Lenders' consent to any transaction referenced in
clauses (ii) or (iii) above which is not expressly permitted by Article IX.
(e) Notice. The Borrower shall give the Agent prior written notice or
telephonic notice promptly confirmed in writing (each of which the Agent shall
promptly transmit to each Lender) when a Designated Prepayment will be made
(which date of prepayment shall be no later than the date on which such
Designated Prepayment becomes due and payable pursuant to Section 3.01(b)).
(f) Application of Designated Prepayments. Designated
Prepayments shall be allocated and applied as follows:
(i) to the principal amount of, and accrued and unpaid interest on,
the Loans outstanding on the date of such Designated Prepayment until paid
in full (or collateralized by Cash Collateral as provided in Section
3.01(c)) and then
(ii) to the Reimbursement Obligations until paid in full.
In the event the amount of a Designated Prepayment exceeds the amount required
to comply with clauses (i) and (ii) above, the amount by which the Designated
Prepayment exceeds the required amount, shall be retained by the Borrower.
(g) Commitment Reduction. On the date each Designated Prepayment
described in clause (b)(ii) above is due and payable, the Revolving Credit
Commitments shall be automatically and permanently reduced by the aggregate
amount of such Designated Prepayment applied to principal of the Loans and
Letter of Credit Obligations and held as Cash
<PAGE>
Collateral as described in clause (c) above in respect of Eurodollar Rate Loans.
3.02. Payments. (a) Manner and Time of Payment. All payments of
principal of and interest on the Loans and other Obligations (including, without
limitation, fees and expenses) which are payable to the Agent or any Lender
shall be made without condition or reservation of right, and, with respect to
payments made other than from application of deposits in the Citibank Collection
Account, in immediately available funds, delivered to the Agent not later than
1:00 p.m. (New York time) on the date and at the place due, to such account of
the Agent as it may designate, for the account of the Agent or the Lenders, as
the case may be; and funds received by the Agent, including, without limitation,
funds in respect of any Loans to be made on that date, not later than 1:00 p.m.
(New York time) on any given Business Day shall be credited against payment to
be made that day and funds received by the Agent after that time shall be deemed
to have been paid on the next succeeding Business Day. Payments actually
received by the Agent for the account of the Lenders, or any of them, shall be
paid to them by the Agent promptly after receipt thereof.
(b) Apportionment of Payments. (i) Subject to the provisions of
Section 3.01 and Section 3.02(b)(v), all payments of principal and interest in
respect of outstanding Loans, all payments of fees and all other payments in
respect of any other Obligations, shall be allocated among such of the Lenders
as are entitled thereto, in proportion to their respective Pro Rata Shares or
otherwise as provided herein. Except as provided in Section 3.02(b)(ii) with
respect to payments and proceeds of Collateral received after the occurrence of
an Event of Default, all such payments and any other amounts received by the
Agent from or for the benefit of the Borrower shall be applied:
(A) first, to pay principal of and interest on any portion of the Loans
which the Agent may have advanced on behalf of any Lender other than Citicorp
for which the Agent has not then been reimbursed by such Lender or the Borrower,
(B) second, to pay principal of and interest on any Protective Advance for
which the Agent has not then been paid by the Borrower or reimbursed by the
Lenders,
<PAGE>
(C) third, to pay (1) the principal of the Loans and Obligations under
Hedge Agreements then due and payable and (2) interest on the Loans and, if
applicable, Obligations under Hedge Agreements, then due and payable; such
payments of principal and interest to be applied, ratably, based on the then
outstanding balances of the Loans and Obligations under Hedge Agreements and,
with respect to Loans, in the order described hereinbelow,
(D) fourth, to pay all other Obligations then due and payable, ratably, and
(E) fifth, as the Borrower so designates.
All such principal and interest payments in respect of Loans shall be applied
first, to repay outstanding Base Rate Loans and then to repay outstanding
Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier
expiring Eurodollar Interest Periods being repaid prior to those which have
later expiring Eurodollar Interest Periods.
(ii) After the occurrence of an Event of Default and while the same is
continuing, the Agent shall apply all payments in respect of any Obligations and
all proceeds of Collateral in the following order:
(A) first, to pay principal of and interest on any portion of the Loans
which the Agent may have advanced on behalf of any Lender other than Citicorp
for which the Agent has not then been reimbursed by such Lender or the Borrower;
(B) second, to pay principal of and interest on any Protective Advance for
which the Agent has not then been paid by the Borrower or reimbursed by the
Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lenders;
(E) fifth, to pay interest due in respect of the Loans, ratably, in
accordance with the Lenders' respective Pro Rata Shares;
<PAGE>
(F) sixth, to the ratable payment or prepayment of principal outstanding on
all Loans and Obligations under Hedge Agreements;
(G) seventh, to the ratable payment of all other Obligations; and
(H) eighth, as the Borrower so designates.
Notwithstanding the foregoing, (i) in the event the Agent is holding Cash
Collateral for Reimbursement Obligations, such Cash Collateral shall be applied
to such Reimbursement Obligations immediately upon the occurrence of an Event of
Default and (ii) in the event the Agent is holding Cash Collateral for Letter of
Credit Obligations other than Reimbursement Obligations, such Cash Collateral
shall be retained by the Agent until all Letters of Credit have expired (or
otherwise been cancelled and returned to the Issuing Bank) undrawn or been drawn
upon and the Reimbursement Obligations with respect thereto have been paid in
full in cash. All Cash Collateral held by the Agent shall be held in a Cash
Collateral Account and all interest thereon shall be the property of the
Borrower and shall be paid to the Borrower quarterly. The order of priority set
forth in this Section 3.02(b) and the related provisions of this Agreement are
set forth solely to determine the rights and priorities of the Agent, the
Lenders, and other Holders as among themselves.
(iii) Upon the occurrence and during the continuance of an Event of
Default under Section 11.01(a), the Agent, in its sole discretion subject only
to the terms of this Section 3.02(b)(iii), may pay from the proceeds of Loans
made to the Borrower hereunder, following a deemed request by the Borrower as
provided in this Section 3.02(b)(iii), all amounts when due and payable by the
Borrower hereunder, including, without limitation, amounts due and payable with
respect to payments of principal, interest, and fees and all reimbursements for
expenses pursuant to Section 14.02. The Borrower hereby irrevocably authorizes
the Lenders to make Loans, which Loans shall be Base Rate Loans, in each case,
upon notice from the Agent as described in the following sentence for the
purpose of paying principal, interest, and fees due from the Borrower,
reimbursing expenses pursuant to Section 14.02 and paying any and all other
amounts due and payable by the
<PAGE>
Borrower hereunder or under the Notes, and the Borrower agrees that all such
Loans so made shall be deemed to have been requested by it pursuant to Section
2.01 as of the date of the aforementioned notice. The Agent shall request Loans
on behalf of the Borrower as described in the preceding sentence by notifying
the Lenders by telecopy, telegram or other similar form of transmission (which
notice the Agent shall thereafter promptly transmit to the Borrower), of the
amount and Funding Date of the proposed Borrowing and that such Borrowing is
being requested on the Borrower's behalf pursuant to this Section 3.02(b)(iii).
On the proposed Funding Date for such Loan, the Lenders shall make the requested
Loans in accordance with the procedures and subject to the conditions specified
in Section 2.01.
(iv) Subject to Section 3.02(b)(v), the Agent shall promptly
distribute to each Lender at its primary address set forth on the appropriate
signature page hereof or the signature page to the Assignment and Acceptance by
which it became a Lender, or at such other address as a Lender or other Holder
may request in writing, such funds as such Person may be entitled to receive;
provided that the Agent shall under no circumstances be bound to inquire into or
determine the validity, scope or priority of any interest or entitlement of any
Holder and may suspend all payments or seek appropriate relief (including,
without limitation, instructions from the Requisite Lenders or an action in the
nature of interpleader) in the event of any doubt or dispute as to any
apportionment or distribution contemplated hereby.
(v) In the event that any Lender fails to fund its Pro Rata Share of
any Loan requested by the Borrower which such Lender is obligated to fund under
the terms of this Agreement (the funded portion of such Loan being hereinafter
referred to as a "Non Pro Rata Loan"), until the earlier of such Lender's cure
of such failure and the termination of the Revolving Credit Commitments, the
proceeds of all amounts thereafter repaid to the Agent by the Borrower and
otherwise required to be applied to such Lender's share of all other Obligations
pursuant to the terms of this Agreement shall be advanced to the Borrower by the
Agent on behalf of such Lender to cure, in full or in part, such failure by such
Lender, but shall nevertheless be deemed to have been paid to such Lender in
satisfaction of such other Obligations. Notwithstanding anything in this
Agreement to the contrary:
<PAGE>
(A) the foregoing provisions of this Section 3.02(b)(v) shall apply
only with respect to the proceeds of payments of Obligations and shall not
affect the conversion or continuation of Loans pursuant to Section 4.01(c);
(B) a Lender shall be deemed to have cured its failure to fund its Pro
Rata Share of any Loan at such time as an amount equal to such Lender's
original Pro Rata Share of the requested principal portion of such Loan is
fully funded to the Borrower, whether made by such Lender itself or by
operation of the terms of this Section 3.02(b)(v), and whether or not the
Non Pro Rata Loan with respect thereto has been repaid, converted or
continued;
(C) amounts advanced to the Borrower to cure, in full or in part, any
such Lender's failure to fund its Pro Rata Share of any Loan ("Cure Loans")
shall bear interest at the rate applicable to the other Loans comprising
such Borrowing and shall be treated as Loans comprising such Borrowing for
all other purposes in this Agreement; and
(D) regardless of whether or not an Event of Default has occurred or
is continuing, and notwithstanding the instructions of the Borrower as to
its desired application, all repayments of principal which, in accordance
with the other terms of this Section 3.02, would be applied to the
outstanding Loans which are Base Rate Loans shall be applied first, ratably
to all such Base Rate Loans constituting Non Pro Rata Loans, second,
ratably to such Base Rate Loans other than those constituting Non Pro Rata
Loans or Cure Loans and, third, ratably to such Base Rate Loans
constituting Cure Loans.
(c) Payments on Non-Business Days. Whenever any payment to be made by
the Borrower hereunder or under the Notes is stated to be due on a day which is
not a Business Day, the payment shall instead be due on the next succeeding
Business Day (except as set forth in Section 4.02(b)(iii)
<PAGE>
with respect to payments due on the next preceding Business Day), and any such
extension of time shall be included in the computation of the payment of
interest and fees hereunder.
3.03. Promise to Repay; Evidence of Indebtedness.
(a) Promise to Repay. The Borrower hereby agrees to pay when due the
principal amount of each Loan which is made to it, and further agrees to pay all
unpaid interest accrued thereon, in accordance with the terms of this Agreement
and the Notes. The Borrower shall execute and deliver to each Lender on the
Closing Date, which is not then the holder of a Note, a Note evidencing the
Loans made by such Lender hereunder and thereafter shall execute and deliver
such other Notes as are necessary to evidence Loans owing to the Lenders after
giving effect to any assignment thereof pursuant to Section 14.01.
(b) Loan Account. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to such Lender resulting from each Loan owing to
such Lender from time to time, including the amount of principal and interest
payable and paid to such Lender from time to time hereunder and under its
respective Note.
(c) Control Account. The Register maintained by the Agent pursuant to
Section 14.01(c) shall include a control account, and a subsidiary account for
each Lender, in which accounts (taken together) shall be recorded (i) the date
and amount of each Borrowing made hereunder, the type of Loan comprising such
Borrowing and any Eurodollar Interest Period applicable thereto, (ii) the
effective date and amount of each Assignment and Acceptance delivered to and
accepted by it and the parties thereto, (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder or under the Notes, and (iv) the amount of any sum received by
the Agent from the Borrower hereunder and each Lender's share thereof.
(d) Entries Binding. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error.
<PAGE>
3.04. Collections and Collection Account Arrangements. (a)
Establishment. From and after such time as the Fixed Charge Coverage Ratio is
less than or equal to 1.35 to 1.00, as determined as of the last day of any
Fiscal Quarter, the Borrower shall maintain a deposit account at Citibank, N.A.
(the "Citibank Collection Account"), into which all proceeds of Collateral shall
be deposited by transfer, as and when set forth hereinbelow, from the depository
accounts described in Section 8.08 maintained by the Borrower and the
Guarantors. The Agent hereby agrees on behalf of itself, the Lenders and the
Issuing Bank, that unless and until the Fixed Charge Coverage Ratio is less than
or equal to 1.35 to 1.00, the Agent shall not deliver any notice described in
Exhibit I to any depository bank. Borrower shall cause all proceeds of
Collateral to be deposited in the aforesaid depository accounts for subsequent
transfer, subject to the aforesaid Fixed Charge Coverage Ratio test, to the
Citibank Collection Account and such proceeds shall be deemed received by the
Borrower or applicable Guarantor and to have been received by the Borrower or
such Guarantor as the Agent's trustee. All amounts received by the Agent,
whether through payment, deposit in the Citibank Collection Account as described
above, or otherwise, will be the sole property of the Agent for the benefit of
the Holders and will be (i) deemed received by the Agent for application to the
Obligations then due and payable pursuant to Section 3.02 and (ii) thereafter
held by the Agent, for the benefit of the Holders, as Cash Collateral for the
Obligations, subject to the rights of the Borrower set forth in Section 3.04(b)
and the rights of the Agent set forth in Section 3.05.
(b) Pre-Default Withdrawals from Citibank Collection Account. The
Borrower shall have the right to direct disbursements from the Citibank
Collection Account, so long as no Event of Default shall have occurred and be
continuing or unwaived. Amounts on deposit in the Citibank Collection Account
shall be invested in such Cash Equivalents as the Borrower may select as more
particularly described in Section 3.04(d).
(c) Reasonable Care. The Agent shall exercise reasonable care in the
custody and preservation of any funds held in the Citibank Collection Account
and shall be deemed to have exercised such care if such funds are accorded
<PAGE>
treatment substantially equivalent to that which the Agent accords its own like
property, it being understood that the Agent shall not have any responsibility
for taking any steps necessary to preserve rights against any parties with
respect to any such funds but may do so at its option. In the event the Agent
takes any such steps, it shall provide the Borrower with prompt written notice
thereof. All reasonable expenses incurred in connection therewith shall be for
the sole account of the Borrower and shall constitute Obligations hereunder.
(d) Investments. If requested by the Borrower, the Agent shall, so
long as no Event of Default shall have occurred and be continuing, from time to
time invest funds on deposit in the Citibank Collection Account and accrued
interest thereon, reinvest proceeds of any such investments which may mature or
be sold, and invest interest or other income received from any such Investments,
in each case in such Cash Equivalents as the Borrower may select. Such funds,
interest, proceeds or income which are not so invested or reinvested in Cash
Equivalents shall, except as otherwise provided in Section 3.05, be deposited
and held by the Agent in the Citibank Collection Account. Neither the Agent nor
any Lender shall be liable to the Borrower for, or with respect to, any decline
in value of amounts on deposit in the Citibank Collection Account which shall
have been invested pursuant to this Section 3.04(d) at the direction of the
Borrower. Cash Equivalents from time to time purchased and held pursuant to this
Section 3.04(d) shall constitute Cash Collateral and shall, for purposes of this
Agreement, be deemed to be part of the funds held in the Citibank Collection
Account.
3.05. Post-Default Withdrawals from the Citibank Collection Account.
Notwithstanding any other provision of this Agreement, unless the Borrower shall
have deposited with the Agent Cash Collateral in an amount equal to the
Commitments as of the time of such deposit, from and after the occurrence of an
Event of Default and for so long as the same is continuing unwaived, neither the
Borrower nor any Person or entity claiming on behalf of or through the Borrower
shall have any right to withdraw any of the funds held in the Citibank
Collection Accounts other than funds in excess of the Obligations then due and
payable. The Agent may, at any time after the occurrence and during the
continuance of an Event of Default, (a) apply amounts on
<PAGE>
deposit in the Citibank Collection Account to payment of the outstanding Loans
and other Obligations in accordance with Section 3.02(b)(ii) and (b) sell or
cause to be sold any Cash Equivalents being held by the Agent in the Citibank
Collection Account as Cash Collateral at any broker's board or at public or
private sale, in one or more sales or lots, at such price as the Agent may deem
best, without assumption of any credit risk, and the purchaser of any or all
such Cash Equivalents so sold shall thereafter own the same, absolutely free
from any claim, encumbrance or right of any kind whatsoever. The Agent or any
Holder may, in its own name or in the name of a designee or nominee, buy such
Cash Equivalents at any public sale and, if permitted by applicable law, buy
such Cash Equivalents at any private sale. The Agent shall apply the proceeds of
any such sale, net of any reasonable expenses incurred in connection therewith,
and any other funds deposited in the Citibank Collection Account to the payment
of the Obligations in accordance with Section 3.02(b)(ii). The Borrower agrees
that any sale of Cash Equivalents conducted in conformity with reasonable
commercial practices of banks, commercial finance companies, insurance companies
or other financial institutions disposing of property similar to such Cash
Equivalents shall be deemed to be commercially reasonable and any requirements
of reasonable notice shall be met if such notice is given by the Agent within a
commercially reasonable time prior to such disposition, the time of delivery of
which notice the parties hereto agree shall in no event be required to be
greater than ten (10) Business Days before the date of the intended sale or
disposition. Any other requirement of notice, demand or advertisement for sale
is waived to the extent permitted by law. The Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
<PAGE>
ARTICLE IV
INTEREST AND FEES
4.01. Interest on the Loans and other Obligations. (a) Rate of
Interest. (i) All Loans shall bear interest on the unpaid principal amount
thereof from the date such Loans are made until paid in full, except as
otherwise provided in Section 4.01(d), as follows:
(A) If a Base Rate Loan, at a rate per annum equal to the sum of (1)
the Base Rate, as in effect from time to time as interest accrues plus (2)
the applicable Base Rate Margin; and
(B) If a Eurodollar Rate Loan, at a rate per annum equal to the sum of
(1) the Eurodollar Rate determined for the applicable Eurodollar Interest
Period, plus (2) the applicable Eurodollar Rate Margin.
(ii) The applicable basis for determining the rate of interest on the
Loans shall be selected by the Borrower at the time a Notice of Borrowing or a
Notice of Conversion/Continuation is delivered by the Borrower to the Agent;
provided, however, the Borrower may not select the Eurodollar Rate as the
applicable basis for determining the rate of interest on such a Loan if (A) such
Loan is to be made on the Closing Date or (B) at the time of such selection an
Event of Default or a Potential Event of Default would occur or has occurred and
is continuing. If on any day any Loan is outstanding with respect to which
notice has not been timely delivered to the Agent in accordance with the terms
of this Agreement specifying the basis for determining the rate of interest on
that day, then for that day interest on that Loan shall be determined by
reference to the Base Rate.
(b) Interest Payments. (i) Interest accrued on each Base Rate Loan
shall be payable in arrears (A) on the first day of each calendar quarter for
the immediately preceding calendar quarter, commencing on the first such day
following the making of such Base Rate Loan, (B) upon the payment or prepayment
thereof in full or in part, if a concurrent reduction in the Commitments is
made, and (C) if not theretofore paid in full, on the Revolving Credit
Termination Date.
<PAGE>
(ii) Interest accrued on each Eurodollar Rate Loan shall be payable in
arrears (A) on each Eurodollar Interest Payment Date applicable to such Loan,
(B) upon the payment or prepayment thereof in full or in part, and (C) if not
theretofore paid in full, on the Revolving Credit Termination Date.
(c) Conversion or Continuation. (i) The Borrower shall have the option
(A) to convert at any time all or any part of outstanding Base Rate Loans to
Eurodollar Rate Loans; (B) to convert all or any part of outstanding Eurodollar
Rate Loans having Eurodollar Interest Periods which expire on the same date to
Base Rate Loans on such expiration date; or (C) to continue all or any part of
outstanding Eurodollar Rate Loans having Eurodollar Interest Periods which
expire on the same date as Eurodollar Rate Loans, and the succeeding Eurodollar
Interest Period of such continued Loans shall commence on such expiration date;
provided, however, no such outstanding Loan may be continued as, or be converted
into, a Eurodollar Rate Loan (i) if the continuation of, or the conversion into,
would violate any of the provisions of Section 4.02 or (ii) if an Event of
Default or a Potential Event of Default would occur or has occurred and is
continuing. Any conversion into or continuation of Eurodollar Rate Loans under
this Section 4.01(c) shall be in a minimum amount of $1,000,000 and in integral
multiples of $1,000,000 in excess of that amount except in the case of a
conversion into or a continuation of an entire Borrowing of Non Pro Rata Loans.
(ii) To convert or continue a Loan under Section 4.01(c)(i), the
Borrower shall deliver a Notice of Conversion/Continuation to the Agent no later
than 11:00 a.m. (New York time) at least three (3) Business Days in advance of
the proposed conversion/continuation date. A Notice of Conversion/Continuation
shall specify (A) the proposed conversion/continuation date (which shall be a
Business Day), (B) the principal amount of the Loan to be converted/continued,
(C) whether such Loan shall be converted and/or continued, and (D) in the case
of a conversion to, or continuation of, a Eurodollar Rate Loan, the requested
Eurodollar Interest Period. In lieu of delivering a Notice of
Conversion/Continuation, the Borrower may give the Agent telephonic notice of
any proposed conversion/continuation by the time required under this
<PAGE>
Section 4.01(c)(ii), and such notice shall be confirmed in writing delivered to
the Agent by facsimile transmission promptly (but in no event later than 5:00
p.m. (New York time) on the same day), the original of which facsimile copy
shall be delivered to the Agent within three (3) days after the date of such
transmission. Promptly after receipt of a Notice of Conversion/Continuation
under this Section 4.01(c)(ii) (or telephonic notice in lieu thereof), the Agent
shall notify each Lender by telecopy, or other similar form of transmission, of
the proposed conversion/continuation. Any Notice of Conversion/Continuation for
conversion to, or continuation of, a Loan (or telephonic notice in lieu thereof)
shall be irrevocable, and the Borrower shall be bound to convert or continue in
accordance therewith.
(d) Default Interest. (i) Notwithstanding the rates of interest
specified in Section 4.01(a), effective on the date of the occurrence of an
Event of Default, and for as long thereafter as such Event of Default shall be
continuing, (A) the principal balance of all Loans shall bear interest at a rate
which is equal to the sum of (1) two percent (2.0%) per annum plus (2) the rate
of interest otherwise applicable to such Loans from time to time and (B) to the
extent permitted by applicable law, the principal balance of all other
Obligations shall bear interest at a per annum rate equal to the sum of (1) the
Base Rate, as in effect from time to time as interest accrues plus (2) the then
applicable Base Rate Margin plus (3) two percent (2.00%) per annum; provided
that, except in the case of an Event of Default arising under Section
11.01(a)(i) or Section 11.01(a)(ii), the Agent shall have given the Borrower
written notice of the provisions of this Section 4.01(d) becoming effective.
(ii) Interest accrued on the principal balance of all Obligations
other than the Loans shall be payable in arrears (A) on the first day of each
calendar quarter for the immediately preceding calendar quarter, commencing on
the first such day following the incurrence of such Obligation and (B) upon
payment of such Obligation in full or in part.
(e) Computation of Interest. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period during
which interest
<PAGE>
accrues and a year of 360 days. In computing interest on any Loan, the date of
the making of the Loan or the first day of a Eurodollar Interest Period, as the
case may be, shall be included and the date of payment or the expiration date of
a Eurodollar Interest Period, as the case may be, shall be excluded; provided,
however, if a Loan is repaid on the same day on which it is made, one (1) day's
interest shall be paid on such Loan. In computing interest on any other
Obligation, the date of incurrence thereof shall be included and the date of
payment thereof shall be excluded.
4.02. Special Provisions Governing Eurodollar Rate Loans. With respect
to Eurodollar Rate Loans:
(a) Amount of Eurodollar Rate Loans. Each Eurodollar Rate Loan shall
be for a minimum amount of $1,000,000 and in integral multiples of $1,000,000 in
excess of that amount.
(b) Determination of Eurodollar Interest Period. By giving notice as
set forth in Section 2.01(b) (with respect to a Borrowing of Eurodollar Rate
Loans) or Section 4.01(c) (with respect to a conversion into or continuation of
Eurodollar Rate Loans), the Borrower shall have the option, subject to the other
provisions of this Section 4.02, to select an interest period (each, a
"Eurodollar Interest Period") to apply to the Loans described in such notice,
subject to the following provisions:
(i) The Borrower may only select, as to a particular Borrowing of
Eurodollar Rate Loans, a Eurodollar Interest Period of one or three months
in duration;
(ii) In the case of immediately successive Eurodollar Interest Periods
applicable to a Borrowing of Eurodollar Rate Loans, each successive
Eurodollar Interest Period shall commence on the day on which the next
preceding Eurodollar Interest Period expires;
(iii) If any Eurodollar Interest Period would otherwise expire on a
day which is not a Business Day, such Eurodollar Interest Period shall be
extended to expire on the next succeeding
<PAGE>
Business Day if the next succeeding Business Day occurs in the same
calendar month, and if there will be no succeeding Business Day in such
calendar month, the Eurodollar Interest Period shall expire on the
immediately preceding Business Day;
(iv) The Borrower may not select a Eurodollar Interest Period as to
any Loan if such Eurodollar Interest Period terminates later than the
scheduled Revolving Credit Termination Date; and
(v) There shall be no more than three (3) Eurodollar Interest Periods
in effect at any one time.
(c) Determination of Interest Rate. As soon as practicable on the
second Business Day prior to the first day of each Eurodollar Interest Period
(the "Eurodollar Interest Rate Determination Date"), the Agent shall determine
(pursuant to the procedures set forth in the definition of "Eurodollar Rate")
the interest rate which shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable Eurodollar Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Borrower and to each Lender. The Agent's
determination shall be presumed to be correct, absent manifest error, and shall
be binding upon the Borrower.
(d) Interest Rate Unascertainable, Inadequate or Unfair. In the event
that at least one (1) Business Day before the Eurodollar Interest Rate
Determination Date:
(i) the Agent is advised by Citibank that deposits in Dollars (in the
applicable amounts) are not being offered by Citibank in the London
interbank market for such Eurodollar Interest Period; or
(ii) the Agent determines that adequate and fair means do not exist
for ascertaining the applicable interest rates by reference to which the
Eurodollar Rate then being determined is to be fixed; or
<PAGE>
(iii) the Requisite Lenders advise the Agent that the Eurodollar Rate
for Eurodollar Rate Loans comprising such Borrowing will not adequately
reflect the cost to such Requisite Lenders of obtaining funds in Dollars in
the London interbank market in the amount substantially equal to such
Lenders' Eurodollar Rate Loans in Dollars and for a period equal to such
Eurodollar Interest Period;
then the Agent shall forthwith give notice thereof to the Borrower, whereupon
(until the Agent notifies the Borrower that the circumstances giving rise to
such suspension no longer exist) the right of the Borrower to elect to have
Loans bear interest based upon the Eurodollar Rate shall be suspended and each
outstanding Eurodollar Rate Loan shall be converted into a Base Rate Loan on the
last day of the then current Eurodollar Interest Period therefor,
notwithstanding any prior election by the Borrower to the contrary.
(e) Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of, its Eurodollar
Lending Office or Eurodollar Affiliate or its other offices or Affiliates. No
Lender shall be entitled, however, to receive any greater amount under any
provision of Article XIII as a result of the transfer of any such Eurodollar
Rate Loan to any office (other than such Eurodollar Lending Office) or any
Affiliate (other than such Eurodollar Affiliate) than such Lender would have
been entitled to receive immediately prior thereto, unless (i) the transfer
occurred at a time when circumstances giving rise to the claim for such greater
amount did not exist and (ii) such claim would have arisen even if such transfer
had not occurred.
(f) Affiliates Not Obligated. No Eurodollar Affiliate or other
Affiliate of any Lender shall be deemed a party to this Agreement or shall have
any liability or obligation under this Agreement.
4.03. Fees. (a) Letter of Credit Fees. In addition to any charges paid
pursuant to Section 2.04(g), the Borrower shall pay to the (i) Issuing Bank a
fee (the "Fronting Fee") accruing during the period commencing on the date of
issuance of such Letter of Credit and ending on the expiry date of such Letter
of Credit equal to one-quarter of
<PAGE>
one percent (0.25%) of the undrawn face amount of each Letter of Credit and (ii)
Agent, for the account of the Lenders based on their respective Pro Rata Shares,
a fee (the "Letter of Credit Fee") accruing during the period commencing on the
date of issuance of such Letter of Credit and ending on the expiry date of such
Letter of Credit at a per annum rate equal to the Eurodollar Rate Margin in
effect from time to time minus one-quarter of one percent (0.25%) on the undrawn
face amount of each outstanding Letter of Credit, which Fronting Fee and Letter
of Credit Fee shall be payable quarterly, in arrears, on the first day of each
calendar quarter for the immediately preceding calendar quarter and on the
Revolving Credit Termination Date; provided that upon the occurrence of an Event
of Default and for so long thereafter as such Event of Default shall be
continuing unwaived, the rate at which the Fronting Fee and Letter of Credit Fee
would otherwise accrue and be payable shall be increased by two percent (2.0%)
per annum.
(b) Unused Commitment Fee. (i) The Borrower shall pay to the Agent,
for the account of the Lenders in accordance with their respective Pro Rata
Shares, a fee (the "Unused Commitment Fee"), accruing at the rate of one-half of
one percent (0.50%) per annum on the average daily amount by which the Revolving
Credit Commitments exceed the Revolving Credit Obligations for the period
commencing on the Closing Date and ending on the Revolving Credit Termination
Date, such Unused Commitment Fee being payable (A) quarterly, in arrears, on the
first day of each calendar quarter for the immediately preceding calendar
quarter, commencing on the first day of the calendar quarter next succeeding the
Closing Date, and (B) on the Revolving Credit Termination Date.
(ii) Notwithstanding the foregoing, in the event that any Lender fails
to fund its Pro Rata Share of any Loan requested by the Borrower which such
Lender is obligated to fund under the terms of this Agreement, (A) such Lender
shall not be entitled to any Unused Commitment Fees with respect to its
Revolving Credit Commitment until such failure has been cured in accordance with
Section 3.02(b)(v)(B) and (B) until such time, the Unused Commitment Fee shall
accrue in favor of the Lenders which have funded their respective Pro Rata
Shares of such requested Loan, shall be allocated among such performing Lenders
ratably based upon their relative Revolving Credit Commitments, and
<PAGE>
shall be calculated based upon the average amount by which the aggregate
Revolving Credit Commitments of such performing Lenders exceeds the outstanding
principal amount of the Loans owing to such performing Lenders.
(d) Amendment Fee. On the Closing Date, the Borrower shall pay to the
Agent for the account of the Lenders based on their respective Pro Rata Shares,
in consideration of the execution and delivery of this Agreement, a fee in the
amount of one-quarter of one percent (0.25%) of the Revolving Credit
Commitments.
(e) Calculation and Payment of Fees. The Unused Commitment Fee,
Fronting Fee, and Letter of Credit Fee shall be calculated on the basis of the
actual number of days elapsed in a 360-day year. All of the fees described in
this Section 4.03 shall be payable in addition to, and not in lieu of, interest,
compensation, expense reimbursements, indemnification and other Obligations,
shall be payable to the Agent at its office in New York, New York in immediately
available funds, shall constitute Obligations, and shall be secured by the
Collateral. All such fees shall be fully earned and nonrefundable when paid.
<PAGE>
ARTICLE V
CONDITIONS TO LOANS AND LETTERS OF CREDIT
5.01. Conditions Precedent to the Initial Loans and Letters of Credit.
The obligation of each Lender on the Closing Date to make any Loan requested to
be made by it, and the obligation of the Issuing Bank on the Closing Date to
issue any Letter of Credit requested to be issued by it, shall be subject to the
satisfaction of all of the following conditions precedent:
(a) Documents. The Agent shall have received on or before the Closing
Date all of the following:
(i) this Agreement, the Notes and all other agreements, documents and
instruments relating to the loan and other credit transactions contemplated
by this Agreement and described in the List of Closing Documents attached
hereto as Exhibit F and made a part hereof, each duly executed where
appropriate and in form and substance satisfactory to the Agent; without
limiting the foregoing, the Borrower hereby directs its counsel, Brown &
Wood, to prepare and deliver to the Agent, the Lenders and Sidley & Austin,
the opinion referred to in such List of Closing Documents;
(ii) the Projections, in form and substance satisfactory to the Agent;
(iii) an Officer's Certificate executed and delivered by the president
or vice president of the Borrower certifying that all conditions precedent
have been met and no Potential Event of Default or Event of Default has
occurred or is continuing;
(iv) a Notice of Borrowing dated as of the Closing Date with respect
to Loans requested to be made on the Closing Date; and
(v) such additional documentation as the Agent may reasonably request.
<PAGE>
(b) Perfection of Liens; Lien Search Reports. Evidence that all
financing statements relating to the Collateral have been filed or recorded,
certificates representing Capital Stock included in the Collateral (and not
previously delivered pursuant to the Borrower Pledge Agreement and Guarantor
Pledge Agreements) have been delivered to the Agent (with duly executed stock
powers) and all recording fees and filing taxes have been paid.
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain the making of the requested Loans on the
Closing Date, or (ii) result in a Material Adverse Effect.
(d) No Change in Condition. No change in the business, assets,
management, operations, or financial condition of the Borrower or any of its
Subsidiaries, shall have occurred since February 15, 1997, which change, in the
judgment of the Agent, will, or is reasonably likely to, result in a Material
Adverse Effect. No change in the corporate or capital structure of the Borrower
and its Subsidiaries shall have occurred since February 5, 1997. Except as
otherwise disclosed to the Agent in writing prior to the Closing Date, no change
in the composition of the Boards of Directors or Responsible Officers of the
Borrower or of Borrower's vice presidents acting as heads of its strategic
business units shall have occurred after February 15, 1997.
(e) Financial Statements; Budgets. Borrower shall have delivered to
the Lenders its most recently audited and unaudited Financial Statements and
five-year budgets for the Borrower and the Guarantors, in each case satisfactory
to the Agent and the Lenders.
(f) No Market Changes. Since January 15, 1997, no material adverse
change shall have occurred in the loan syndication, financial or capital markets
conditions generally that, in the judgment of the Agent, would materially impair
syndication of the Revolving Credit Commitments.
(g) No Default. No "Event of Default" or "Potential Event of Default"
(in each case as defined in the
<PAGE>
1996 Credit Agreement) shall have occurred and be continuing unwaived and no
Event of Default or Potential Event of Default hereunder shall have occurred and
be continuing or would result from the making of the Loans.
(h) Representations and Warranties. All of the representations and
warranties contained in Section 6.01 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Closing
Date.
(i) Litigation. No litigation shall be pending or threatened nor shall
any claim have been made with respect to any aspect of the transactions
contemplated by this Agreement and the other Loan Documents.
(j) Fees and Expenses Paid. There shall have been paid to the Agent,
for the accounts of the Lenders and the Agent, as applicable, all fees and
expenses due and payable on or before the Closing Date, including, without
limitation, all fees and expenses due and payable under the 1996 Credit
Agreement.
5.02. Conditions Precedent to All Subsequent Loans and Letters of
Credit. The obligation of each Lender to make any Loan requested to be made by
it on any Funding Date and of the Issuing Bank to issue any Letter of Credit
requested to be issued by it on any day after the Closing Date is subject to the
following conditions precedent as of each such date, both before and after
giving effect to the Loans to be made, or Letters of Credit to be issued, on
such date:
(a) Representations and Warranties. All of the representations and
warranties of the Borrower contained in Section 6.01 and in any other Loan
Document (other than representations and warranties which expressly speak as of
a different date) shall be true and correct in all material respects.
(b) No Defaults. No Event of Default or Potential Event of
Default shall have occurred and be continuing or would result from the
making of the requested Loan.
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority
<PAGE>
shall, and the Agent shall not have received from any Lender notice that, in the
judgment of such Lender, litigation is pending or threatened which is reasonably
likely to, enjoin, prohibit or restrain, or impose or result in the imposition
of any material adverse condition upon, such Lender's making of the requested
Loan.
(d) No Material Adverse Effect. No event shall have occurred since the
date of this Agreement which has resulted, or is reasonably likely to result, in
a Material Adverse Effect.
Each submission by the Borrower to the Agent of a Notice of Borrowing with
respect to any Loan or a Notice of Conversion/Continuation with respect to any
Loan, each acceptance by the Borrower of the proceeds of each Loan made,
converted or continued hereunder, and each submission of an application for a
Letter of Credit and acceptance by the Borrower of delivery of a Letter of
Credit issued shall constitute a representation and warranty by the Borrower as
of the Funding Date in respect of such Loan, the date of conversion or
continuation, the date of such application and the date of issuance of a Letter
of Credit that all the conditions contained in this Section 5.02 have been
satisfied or waived in accordance with Section 14.07.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01. Representations and Warranties of the Borrower. In order to
induce the Lenders to enter into this Agreement and to make the Loans and the
other financial accommodations to the Borrower described herein, the Borrower
hereby represents and warrants to each Lender and the Agent that the following
statements are true, correct and complete:
(a) Organization; Corporate Powers. (i) The Borrower and each Material
Subsidiary (A) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (B) is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which failure to be so qualified and in good
standing will have or is reasonably likely to have a Material Adverse
<PAGE>
Effect, (C) has filed and maintained effective (unless exempt from the
requirements for filing) a current Business Activity Report with the appropriate
Governmental Authority in the states of Minnesota and New Jersey, and (D) has
all requisite corporate power and authority to own, operate and (in the case of
the Borrower) encumber its property and to conduct its business as presently
conducted and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by this Agreement.
(ii) As of the Closing Date, true, correct and complete copies of the
Organizational Documents identified on Schedule 6.01-A attached hereto have been
delivered to the Agent, each of which is in full force and effect, has not been
modified or amended except to the extent indicated therein and, to the best of
the Borrower's knowledge, there are no defaults under such Organizational
Documents and no events which, with the passage of time or giving of notice or
both, would constitute a default under such Organizational Documents.
(b) Authority. (i) The Borrower and each Guarantor has the requisite
corporate power and authority (A) to execute, deliver and perform each of the
Loan Documents which have been executed by it as required by this Agreement on
or prior to the Closing Date and (B) to file or record the Loan Documents which
have been filed or recorded by it as required by this Agreement on or prior to
the Closing Date, with any Governmental Authority.
(ii) The execution, delivery, performance and filing or recording, as
the case may be, of each of the Loan Documents which have been executed, filed
or recorded as required by this Agreement on or prior to the Closing Date and to
which the Borrower or Guarantor is party and the consummation of the
transactions contemplated thereby, have been duly approved by the respective
boards of directors and, if necessary, the shareholders of the Borrower and
Guarantors and such approvals have not been rescinded. No other corporate action
or proceedings on the part of the Borrower or any Guarantor are necessary to
consummate such transactions.
(iii) Each of the Loan Documents to which the Borrower or any
Guarantor is a party (A) has been duly
<PAGE>
executed, delivered, filed or recorded, as the case may be, by it, (B) where
applicable, creates valid Liens in the Collateral covered thereby securing the
payment of all of the Obligations purported to be secured thereby, which Liens
will be perfected upon the Agent's filing appropriate financing statements with
respect thereto or taking possession of the underlying Collateral as may be
required under the applicable Requirements of Law, (C) constitutes the
Borrower's or respective Guarantor's (as applicable) legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally, and (D) is in full
force and effect. To the best of Borrower's knowledge, there are no Liens
against any of the Collateral which would be senior to the Liens granted under
the Borrower Pledge Agreement or the Borrower Security Agreement, other than
Liens permitted by Section 9.03. Each of the Borrower and the Guarantor parties
to the Loan Documents have performed and complied with all the terms,
provisions, agreements and conditions set forth therein and required to be
performed or complied with by such parties on or before the Closing Date (except
to the extent waived by the required party(ies) to this Agreement), all filings
and recordings and other actions on the part of the Borrower which are necessary
or desirable to perfect and protect the Liens granted pursuant to the Loan
Documents and preserve their required priority have been duly taken, and no
Potential Event of Default or Event of Default exists thereunder.
(c) Subsidiaries; Ownership of Equity Securities. Schedule 6.01-C
attached hereto, as amended from time to time as required under Section 7.12,
(i) contains a diagram indicating the corporate structure of the Borrower and
its Subsidiaries and a list of all other Persons in which the Borrower or any of
its Subsidiaries holds a direct or indirect partnership, joint venture or other
equity interest and indicates the nature of such interest with respect to each
Person included on such list; and (ii) accurately sets forth (A) the correct
legal name of such Person, the jurisdiction of its incorporation or organization
and the jurisdictions in which it is qualified to transact business as a foreign
corporation or otherwise and (B) the authorized, issued and outstanding shares
or interests of each class of equity Securities of the Borrower and each of
<PAGE>
its Subsidiaries and the owners of such shares or interests. None of the issued
and outstanding equity Securities of any Material Subsidiary is subject to any
vesting, redemption, or repurchase agreement, and there are no warrants or
options (other than Permitted Equity Securities Options) outstanding with
respect to such equity Securities. The outstanding equity Securities of each
Material Subsidiary are free and clear of any Liens other than those
contemplated by the Loan Documents. The outstanding equity Securities of the
Borrower and each of the Material Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and are not Margin Stock.
(d) No Conflict. The execution, delivery and performance of each of
the Loan Documents to which the Borrower or any Guarantor is a party do not and
will not (i) conflict with the Organizational Documents of the Borrower or any
such Guarantor, (ii) constitute a tortious interference with any Contractual
Obligation of such Person or conflict with, result in a breach of or constitute
(with or without notice or lapse of time or both) a default under any
Requirement of Law or Contractual Obligation of the Borrower or any such
Guarantor, or require termination of any Contractual Obligation, the
consequences of which violation, breach, default or termination, singly or in
the aggregate, will, or is reasonably likely to, result in a Material Adverse
Effect or is reasonably likely to subject the Agent or any of the Lenders to any
liability, (iii) result in or require the creation or imposition of any Lien
whatsoever upon any of the property or assets of the Borrower or any such
Guarantor, other than Liens contemplated by the Loan Documents, or (iv) require
any approval of the Borrower's or any such Guarantor's shareholders, equity
holders or members, as the case may be, which has not been obtained.
(e) Governmental Consents. Except as set forth on Schedule 6.01-E
attached hereto, the execution, delivery and performance of each of the Loan
Documents to which the Borrower or any Guarantor is a party do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by any Governmental Authority, except (i) filings, consents
or notices which have been made, obtained or given and (ii) filings necessary to
create or perfect security interests in the Collateral.
<PAGE>
(f) Governmental Regulation. Neither the Borrower, nor any Guarantor
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, or the Investment Company
Act of 1940, or any other federal or state statute or regulation which limits
its ability to incur indebtedness or its ability to consummate the transactions
contemplated hereby or by the Loan Documents.
(g) Restricted Junior Payments. Since January 1, 1997, neither the
Borrower nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made or set apart any sum or property for any Restricted Junior
Payment or agreed to do so, except as permitted under the 1996 Credit Agreement,
pursuant to Section 9.06 of this Agreement, or as otherwise described on
Schedule 6.01-G.
(h) Financial Position. Complete and accurate copies of the Borrower's
Annual Report on Form 10-K (including audited financial statements) for each of
the Fiscal Years ended December 31, 1995 and December 31, 1996 have been
delivered to the Agent. All Financial Statements included in such materials were
prepared in all material respects in conformity with GAAP, except as otherwise
noted therein, and fairly present in all material respects the respective
consolidated financial positions, and the consolidated results of operations and
cash flows for each of the periods covered thereby of the Borrower and its
Subsidiaries as at the respective dates thereof. Neither the Borrower nor any of
its Subsidiaries has any contingent liability or liability for any taxes,
long-term leases or commitments, not permitted by the terms of Article IX, not
reflected in the audited Financial Statements delivered to the Agent on or prior
to the Closing Date as aforesaid, or not otherwise disclosed to the Agent and
the Lenders in writing, which will have or is reasonably likely to have a
Material Adverse Effect.
(i) Projections. Projections have been delivered to the Agent on or
before the Closing Date which, as of the Closing Date, are reasonable based on
the information available to the Borrower at the time so furnished and which
were prepared based on assumptions reviewed by the Agent.
(j) Indebtedness. Schedule 1.01.7 sets forth, as of the Closing Date,
all Funded Debt in an aggregate amount
<PAGE>
of $1,000,000 or more and there are no defaults in the payment of principal or
interest (after giving effect to any applicable grace periods) on any such
Funded Debt and no payments thereunder have been deferred or extended beyond
their stated maturity (except as disclosed on such Schedule).
(k) Litigation; Adverse Effects. Except as set forth in Schedule
6.01-K attached hereto, there is no action, suit, proceeding, Claim,
investigation or arbitration before or by any Governmental Authority or private
arbitrator pending or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries or any property of the Borrower or any of
its Subsidiaries (i) challenging the validity or the enforceability of any of
the Transaction Documents, (ii) which will, or is reasonably likely to, result
in any Material Adverse Effect, or (iii) under the Racketeering Influenced and
Corrupt Organizations Act or any similar federal or state statute where such
Person is a defendant in a criminal indictment that provides for the forfeiture
of assets to any Governmental Authority as a criminal penalty. There is no
material loss contingency within the meaning of GAAP as of the Closing Date;
nor, from and after the Closing Date, any material loss contingency within the
meaning of GAAP as of the date of the Borrower's annual consolidated Financial
Statements or the date of the Borrower's filings with the Commission which has
not been reflected in such annual audited consolidated Financial Statements of
the Borrower or filings with the Commission. Neither the Borrower nor any of its
Subsidiaries is (A) in violation of any applicable Requirements of Law which
violation will result, or is reasonably likely to result, in a Material Adverse
Effect, or (B) subject to or in default with respect to any final judgment,
writ, injunction, restraining order or order of any nature, decree, rule or
regulation of any court or Governmental Authority which will, or is reasonably
likely to, result in a Material Adverse Effect.
(l) No Material Adverse Effect. Other than as otherwise disclosed in
the Schedules attached hereto and the filings made with the Commission and
referenced in this Agreement, since December 31, 1995, there has occurred no
event which has resulted, or is reasonably likely to result, in a Material
Adverse Effect.
<PAGE>
(m) Tax Examinations. The IRS has examined the Borrower's consolidated
federal income tax returns for all tax periods prior to and including the
taxable year ending December 31, 1993. All deficiencies which have been asserted
against the Borrower or any Material Subsidiary as a result of any federal,
state, local or foreign tax examination for each taxable year in respect of
which an examination has been conducted have been fully paid or finally settled
or are being contested in good faith, and no issue has been raised in any such
examination which, by application of similar principles, reasonably can be
expected to result in assertion of a material deficiency for any other year not
so examined which has not been reserved for in the Borrower's consolidated
Financial Statements to the extent, if any, required by GAAP. Neither the
Borrower nor any of the Material Subsidiaries has taken any reporting positions
for which it does not have a reasonable basis and does not anticipate any
further material tax liability (which has not been reserved for in the
Borrower's consolidated Financial Statements to the extent, if any, required by
GAAP) with respect to the years which have not been closed pursuant to
applicable law.
(n) Payment of Taxes. All material tax returns and reports of each of
the Borrower and the Material Subsidiaries required to be filed have been timely
filed, and all taxes, assessments, fees and other charges of Governmental
Authorities thereupon and upon or relating to their respective property, assets,
income and franchises which are shown in such returns or reports to be due and
payable have been paid, except to the extent (i) such taxes, assessments, fees
and other charges are being contested in good faith by an appropriate proceeding
diligently pursued as permitted by the terms of Section 8.04 or do not exceed
$250,000 and (ii) non-payment of the amounts thereof would not, individually or
in the aggregate, result in a Material Adverse Effect. The Borrower has no
knowledge of any proposed tax assessment against the Borrower or any of the
Material Subsidiaries that will, or is reasonably likely to, result in a
Material Adverse Effect.
(o) Performance. No Responsible Officer has any actual knowledge, that
the Borrower or any of the Material Subsidiaries has received any notice,
citation, or allegation, nor has actual knowledge, that (i) the Borrower or any
Material Subsidiary is in default in the performance,
<PAGE>
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contractual Obligation applicable to it, (ii) any Property of
the Borrower or any Material Subsidiary is in violation of any Requirement of
Law, or (iii) any condition exists which, with the giving of notice or the lapse
of time or both, would constitute a default with respect to any such Contractual
Obligation, in each case, except where such violation, violations, default or
defaults, if any, will not, or will not reasonably be likely to, result in a
Material Adverse Effect.
(p) Disclosure. The representations and warranties of the Borrower and
Guarantors contained in the Loan Documents, and all certificates and other
documents delivered to the Agent pursuant to the terms thereof, do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, taken as a whole, not
misleading. The Borrower has not intentionally withheld any fact from the Agent
or the Lenders in regard to any matter which will, or is reasonably likely to,
result in a Material Adverse Effect.
(q) Requirements of Law. The Borrower and the Material Subsidiaries
are in compliance with all Requirements of Law applicable to them and their
respective businesses, in each case where the failure to so comply individually
or in the aggregate will, or is reasonably likely to, result in a Material
Adverse Effect.
(r) Environmental Matters. (i) Except to the extent that none of the
following will result in a Material Adverse Effect or except as disclosed on
Schedule 6.01-R attached hereto, to the knowledge of the Responsible Officers:
(A) the operations of the Borrower and the Material Subsidiaries
comply in all material respects with all applicable Environmental, Health or
Safety Requirements of Law;
(B) the Borrower and each of the Material Subsidiaries has obtained
all environmental, health and safety Permits necessary for its respective
operations, all
<PAGE>
such Permits are in good standing, and the Borrower and each of the Material
Subsidiaries are currently in material compliance with all terms and conditions
of such Permits;
(C) none of the Borrower or the Material Subsidiaries or any of their
respective present or past Real Property or operations, are subject to or the
subject of any judicial or administrative proceeding, order, judgment, decree,
dispute, negotiations, agreement, or settlement arising out of their respective
ownership of or operations on any past or present Property and respecting (I)
any Environmental, Health or Safety Requirements of Law, (II) any Remedial
Action, (III) any Claims or Liabilities and Costs arising from the Release or
threatened Release of a Contaminant into the environment, or (IV) any violation
of or liability under any Environmental, Health or Safety Requirement of Law
that Borrower or any Material Subsidiary reasonably believes will result in a
material expenditure of money;
(D) neither the Borrower nor any Material Subsidiary has filed any
notice under any applicable Requirement of Law (I) reporting a Release of a
Contaminant where remedial action has not been, or is not being, conducted to
the satisfaction of the appropriate Governmental Authority; (II) under Section
103(c) of CERCLA, indicating past or present treatment, storage or disposal of a
hazardous waste, as that term is defined under 40 C.F.R. Part 261 or any state
equivalent; or (III) reporting a violation of any applicable Environmental,
Health or Safety Requirement of Law where such violation has not been, or is not
being, corrected to the satisfaction of the appropriate Governmental Authority;
(E) none of the Borrower's or the Material Subsidiaries' present or
past Real Property is listed or proposed for listing on the National Priorities
List ("NPL") pursuant to CERCLA or on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS") or any similar state
list of sites requiring Remedial Action;
(F) neither the Borrower nor any of the Material Subsidiaries has sent
or directly arranged for the transport of any waste generated as a result of
their respective
<PAGE>
operations to any current or proposed NPL site, CERCLIS or any similar state
list of sites requiring Remedial Action;
(G) there is not now in connection with or resulting from Borrower's
or any Material Subsidiary's operations, nor, has there ever been on or in any
of the Real Property (I) any treatment, recycling, storage or disposal of any
hazardous waste requiring a permit under 40 C.F.R. Parts 264 and 265 or any
state equivalent, (II) any landfill, waste pile, underground storage tank or
surface impoundment, (III) any asbestos-containing material, or (IV) a Release
of any polychlorinated biphenyls (PCB) used in hydraulic oils, electrical
transformers or other Equipment;
(H) neither the Borrower nor any Material Subsidiary has received any
notice or Claim to the effect that any of such Persons is or may be liable to
any Person as a result of the Release or threatened Release of a Contaminant
into the environment;
(I) there have been no Releases of any Contaminants to the environment
from any Real Property except in compliance with Environmental, Health or Safety
Requirements of Law, or which have not been corrected to the satisfaction of the
appropriate Governmental Authorities;
(J) no Environmental Lien has attached to any Property owned by the
Borrower or any Material Subsidiary;
(K) none of the Real Property owned by the Borrower or a Material
Subsidiary is subject to any Environmental Property Transfer Act, or to the
extent such acts are applicable to any such Property, the Borrower and the
Material Subsidiaries have fully complied with the requirements of such acts.
(ii) Except as otherwise disclosed on Schedule 6.01-R, the Borrower
and each of the Material Subsidiaries are conducting and will continue to
conduct their respective business and operations in material compliance with
Environmental, Health or Safety Requirements of Law, and the Borrower and the
Material Subsidiaries, taken as a whole, have not been, and have no reason to
believe that they will be, subject to Liabilities and Costs arising out of or
relating to environmental, health or safety matters that
<PAGE>
will, or are reasonably likely to, result in a Material Adverse Effect.
(s) ERISA. Neither the Borrower nor any ERISA Affiliate maintains or
contributes to any Benefit Plan or Multiemployer Plan other than those listed on
Schedule 6.01-S attached hereto. Each Plan maintained by the Borrower or an
ERISA Affiliate which is intended to be qualified under Section 401(a) of the
Internal Revenue Code as currently in effect either (i) has received a favorable
determination letter from the IRS that the Plan is so qualified or (ii) an
application for determination of such tax-qualified status will be made to the
IRS prior to the end of the applicable remedial amendment period under Section
401(a) of the Internal Revenue Code as currently in effect, and the Borrower or
an ERISA Affiliate shall diligently seek to obtain a determination letter with
respect to such application. Except as identified on Schedule 6.01-S, neither
the Borrower nor any of its Subsidiaries maintains or contributes to any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides benefits to employees after termination of employment other than as
required by Section 601 of ERISA. To the knowledge of the plan administrator,
the Borrower and each of its Subsidiaries are in compliance in all material
respects with the responsibilities, obligations and duties imposed on them by
ERISA and the Internal Revenue Code with respect to all Plans. Except as
otherwise disclosed on Schedule 6.01-S, no Benefit Plan has incurred any
accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA and
412(a) of the Internal Revenue Code) whether or not waived. Except as otherwise
disclosed on Schedule 6.01-S, neither the Borrower nor any ERISA Affiliate nor
any fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code or (ii) has taken or failed to take any action which
would constitute or result in a Termination Event, which, in either event, will
result in an obligation to pay a material amount of money. Neither the Borrower
nor any ERISA Affiliate has any potential liability under Sections 4063, 4064,
4069, 4204 or 4212(c) of ERISA which, singly or in the aggregate, will result in
an obligation to pay a material amount of money. Neither the Borrower nor any
ERISA Affiliate has incurred any liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premium payments
<PAGE>
which have become due which are unpaid. Schedule B to the most recent annual
report filed with the IRS with respect to each Benefit Plan maintained by the
Borrower or an ERISA Affiliate and furnished to the Agent is complete and
accurate in all material respects. Since the date of each such Schedule B, there
has been no material adverse change in the funding status or financial condition
of the Benefit Plan relating to such Schedule B. Neither the Borrower nor any
ERISA Affiliate has, within the past five (5) years, made a complete or partial
withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer Plan.
Neither the Borrower nor any ERISA Affiliate has failed to make a required
installment or any other required payment under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other payment.
Neither the Borrower nor any ERISA Affiliate is required to provide security to
a Benefit Plan under Section 401(a)(29) of the Internal Revenue Code due to a
Benefit Plan amendment that results in an increase in current liability for the
plan year. Neither the Borrower nor any of its Subsidiaries has, by reason of
the transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement. The Borrower
has made available to the Agent copies of all of the following: each Benefit
Plan and related trust agreement (including all amendments to such Plan and
trust) in existence or committed to as of the Closing Date and in respect of
which the Borrower or any ERISA Affiliate is currently an "employer" as defined
in section 3(5) of ERISA, and the most recent summary plan description,
actuarial report, and determination letter issued by the IRS filed in respect of
each such Benefit Plan in existence; and as to each employee welfare benefit
plan within the meaning of Section 3(1) of ERISA which provides benefits to
employees of the Borrower or any of its Subsidiaries after termination of
employment other than as required by Section 601 of ERISA, the most recent
summary plan description for such plan and the aggregate amount of the most
recent annual payments made to terminated employees under each such plan.
(t) Foreign Employee Benefit Matters. Neither the Borrower nor any of
its Subsidiaries or ERISA Affiliates maintains or contributes to any Foreign
Employee Benefit Plan or Foreign Pension Plan, the maintenance or participation
in which, or the failure to comply with
<PAGE>
Requirements of Law applicable thereto, will or is reasonably likely to result
in a Material Adverse Effect.
(u) Labor Matters. There are no strikes, lockouts or other grievances
relating to any collective bargaining or similar agreement to which the Borrower
or any of its Subsidiaries is a party which are reasonably likely to result in a
Material Adverse Effect.
(v) Securities Activities. Neither the Borrower nor any of
its Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.
(w) Solvency. After giving effect to the Loans to be made and Letters
of Credit to be issued on the Closing Date or such other date as Loans or
Letters of Credit requested hereunder are made or issued, and the disbursement
of the proceeds of such Loans pursuant to the Borrower's instructions, the
Borrower and its Subsidiaries (on a consolidated basis) and each of the Borrower
and Dyn Funding, individually, are Solvent.
(x) Patents, Trademarks, Permits, Etc. (i) The Borrower and each of
the Material Subsidiaries, as applicable, owns, is licensed or otherwise has the
lawful right to use, all patents, trademarks, trade names, registered
copyrights, technology, know-how, and processes used in or necessary for the
conduct of its respective business as currently conducted which are material to
its operations and assets, taken as a whole. No claims are pending or, to the
best of Borrower's knowledge following diligent inquiry, threatened that the
Borrower or any of the Material Subsidiaries is infringing or otherwise
adversely affecting the rights of any Person with respect to such patents,
trademarks, trade names, copyrights, technology, know-how, and processes, except
for such claims and infringements as do not, in the aggregate, give rise to any
liability on the part of the Borrower or any Material Subsidiary which will, or
is reasonably likely to, result in a Material Adverse Effect.
(ii) The consummation of the transactions contemplated by the Loan
Documents will not impair the ownership of or rights under (or the license or
other right to use, as the case may be) any patents, trademarks, trade names,
copyrights, technology, know-how, or processes by the
<PAGE>
Borrower or any Material Subsidiary in any manner which will, or is reasonably
likely to, result in a Material Adverse Effect.
(iii) Except to the extent otherwise provided herein, the Borrower and
each of the Material Subsidiaries has all Permits necessary for the conduct of
its respective business which are material to its operations and assets, except
to the extent the failure to have such Permits would not reasonably be likely to
result in a Material Adverse Effect.
(y) Assets and Properties. The Borrower and each of the Material
Subsidiaries has good and marketable title to substantially all of the assets
and property (tangible and intangible) owned by it (except insofar as
marketability may be limited by any laws or regulations of any Governmental
Authority affecting such assets), and all such assets and property are free and
clear of all Liens except Liens securing the Obligations and Liens permitted
under Section 9.03. Substantially all of the assets and property owned by or
leased to and used by the Borrower and/or each such Material Subsidiary which is
material to the operation of their respective businesses is in adequate
operating condition and repair, ordinary wear and tear excepted, is free and
clear of any known defects except such defects as do not substantially interfere
with the continued use thereof in the conduct of normal operations, and is able
to serve the function for which they are currently being used, except in each
case where the failure of such asset to meet such requirements would not, or is
not reasonably likely to, result in a Material Adverse Effect. Neither this
Agreement nor any other Loan Document, nor any transaction contemplated under
any such agreement, will affect any right, title or interest of the Borrower or
any Material Subsidiary of the Borrower in and to any of such assets in a manner
that would, or is reasonably likely to, result in a Material Adverse Effect.
(z) Insurance. Schedule 6.01-Z attached hereto accurately sets forth
as of the Closing Date all insurance policies and programs currently in effect
with respect to the respective property and assets and business of the Borrower
and its Material Subsidiaries, specifying for each such policy and program, (i)
the amount thereof, (ii) the risks insured against thereby, (iii) the name of
the insurer
<PAGE>
and each insured party thereunder, (iv) the policy or other identification
number thereof, (v) the expiration date thereof, (vi) the annual premium with
respect to property and business interruption insurance included on such
Schedule, and (vii) a list of claims made thereunder during the immediately
preceding three (3) calendar years, under which the amount claimed exceeds,
individually, $500,000. On or before the Closing Date, the Borrower made copies
of all such insurance policies available to the Agent for review at Borrower's
chief executive office. Such insurance policies and programs are currently in
full force and effect, in compliance with the requirements of Section 8.05 and
are in amounts, subject to the limitations of coverage set forth therein,
sufficient to cover the replacement value of the respective property and assets
of the Borrower and the Material Subsidiaries reasonably anticipated to be
subject to a claim thereunder at any given time.
(aa) Pledge of Capital Stock. The granting of the security interest by
(i) the Borrower in the Capital Stock of the those Subsidiaries identified in
the Borrower Pledge Agreement and (ii) certain Guarantors in the Capital Stock
of their Subsidiaries identified in the Guarantor Pledge Agreements, in each
case, constituting a portion of the Collateral for the benefit of the Holders
and the perfection of such security interest, as contemplated by the terms of
the Borrower Pledge Agreement and Guarantor Pledge Agreements, is not made in
violation of the registration provisions of the Securities Act, any applicable
provisions of other federal securities laws, state securities or "Blue Sky" law,
or applicable general corporation law or in violation of any other Requirement
of Law.
(bb) Government Contracts. For purposes of the provisions of this
Agreement relating solely to Government Contracts only, the term "Material
Subsidiary" shall include all Subsidiaries of the Borrower performing Government
Contracts with the United States Government worldwide.
(i) Neither the Borrower nor any of the Borrower's Subsidiaries is
party to any Contractual Obligation or subject to any Requirement of Law
relating to organizational conflicts of interest between or among the Borrower
and its Subsidiaries or otherwise that would result in the termination of any
Material Government Contract or that is reasonably likely to impose any material
limitation on the
<PAGE>
Borrower's or such Material Subsidiary's ability to perform such contract or
which is reasonably likely to result in a material adverse effect on the
Borrower's or such Material Subsidiary to receive similar Government contracts
in the future.
(ii) To the best of Borrower's knowledge after diligent inquiry, no
payment has been made by the Borrower or any of the Material Subsidiaries, or by
any Person authorized to act on their behalf, to any Person within the past
three (3) years in connection with any Government Contract of the Borrower or
any Material Subsidiary, which payment would be a violation of applicable
procurement laws or regulations or of the Foreign Corrupt Practices Act or of
any other Requirement of Law.
(iii) With respect to each Government Contract to which the Borrower
or any of the Material Subsidiaries is a party, to the best of Borrower's
Principals' knowledge, except as set forth on Schedule 6.01-BB, within the last
three (3) years: (A) neither the United States Government nor any prime
contractor, subcontractor or other Person has notified the Borrower or any such
Material Subsidiary, in writing, that the Borrower or any Material Subsidiary
has breached or violated any material Requirement of Law, or any material
certificate or representation, or any material clause which has resulted in a
cure notice; and (B) solely with respect to Material Government Contracts, no
termination for default is currently in effect pertaining to any such Material
Government Contract.
(iv) Except as otherwise disclosed to the Agent in writing, to the
best of Borrower's Principals' knowledge, (A) none of the Borrower or any of the
Material Subsidiaries or any of their respective directors or officers is (or
during the last five (5) years has been) under civil investigation by the United
States Department of Justice or a state attorney general or under criminal
investigation by any Governmental Authority, or is under indictment by any
Governmental Authority with respect to any irregularity, misstatement or
omission arising under or relating to any activities of the Borrower or any
Material Subsidiary of the Borrower under a Government Contract; and (B) during
the last five (5) years, none of the Borrower or any of the Material
Subsidiaries has made a voluntary disclosure to the United States Government
with respect to any irregularity,
<PAGE>
misstatement or omission arising under or relating to a Government Contract, in
each case except (with respect to such matters occurring after the Closing Date)
as disclosed to the Lenders.
(v) Except as otherwise disclosed to the Agent in writing, there exist
(A) no outstanding material claims against the Borrower or any of the Material
Subsidiaries, either by the United States Government or by any prime
contractors, subcontractor, vendor or other third party, arising under or
relating to any Government Contract; and (B) no material disputes between the
Borrower or any of the Material Subsidiaries and the United States Government
under the Contract Disputes Act or any other Federal statute or between the
Borrower or any of the Material Subsidiaries and any prime contractor,
subcontractor or vendor arising under or relating to any such Government
Contract, which is reasonably likely to result in a Material Adverse Effect.
(vi) To the best of Borrower's knowledge, none of the Borrower or any
of the Material Subsidiaries or any of their respective directors, officers or
employees is (or during the last five (5) years has been) suspended or debarred
from doing business with the United States Government or is (or during such
period was) the subject of a finding of nonresponsibility or ineligibility for
United States Government contracting.
(cc) No Challenged Costs. To the best of Borrower's knowledge, no cost
incurred pertaining to any Government Contract of the Borrower or any of the
Material Subsidiaries is the subject of any investigation or has been disallowed
by the United States Government or any of its agencies which is reasonably
likely to result in a Material Adverse Effect.
(dd) No Money Withheld. To the Borrower's knowledge, within the past
year, no more than $1,000,000 has been withheld or set off for payment of
contract debts, as described in Federal Acquisition Regulation Sections 32.611
and 32.612, with respect to any Receivables arising under any Government
Contract of the Borrower or any of the Material Subsidiaries, except for
retainages contracted for under certain such Government Contracts and, with
respect to the year preceding the Closing Date, amounts disclosed to the Agent
prior to the Closing Date.
<PAGE>
(ee) Cost Accounting and Property Systems. The cost accounting and
property systems with respect to Government Contracts of the Borrower and the
Material Subsidiaries are in compliance with all applicable Requirements of Law
and Contractual Obligations, except to the extent non-compliance therewith would
not be reasonably likely to result in a Material Adverse Effect.
(ff) Receivables Purchase Transaction. All conditions precedent to,
and all consents necessary to permit, the continuing consummation of the
transactions contemplated by the Receivables Purchase Documents have been
satisfied or delivered, or waived, and no material breach of any term or
provision of any Receivables Purchase Document has occurred which is continuing
and no action has been taken by any competent authority which restrains,
prevents or imposes material adverse conditions upon, or seeks to restrain,
prevent or impose material adverse conditions upon, the consummation of the
transactions contemplated by the Receivables Purchase documents or the continued
performance of the parties to the Receivables Purchase Documents in accordance
with the terms thereof. The terms of the Receivables Purchase Documents continue
in effect unmodified since April 18, 1997. The Borrower and its Subsidiaries
have complied with all applicable laws and regulatory approval requirements and
all contractual approval and consent requirements with respect to the
transactions contemplated by the Receivables Purchase Documents, and no material
breach of any term or provision of any instrument or document pertaining to the
Receivables Purchase Documents has occurred.
<PAGE>
ARTICLE VII
REPORTING COVENANTS
The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than indemnities not yet due), unless the Requisite Lenders shall
otherwise give their prior written consent thereto:
7.01. Financial Statements. The Borrower shall maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated and consolidating Financial Statements in conformity with GAAP
and each of the Financial Statements described below shall be prepared from such
system and records. The Borrower shall deliver or cause to be delivered to the
Agent and the Lenders:
(a) Quarterly Reports. As soon as practicable, and in any event within
fifty (50) days after the end of each of the first three (3) Fiscal Quarters in
each Fiscal Year of the Borrower, the consolidated balance sheets of the
Borrower and its Subsidiaries as at the end of such period (i) for such Fiscal
Quarter and (ii) for the period beginning on the first day of such Fiscal Year
and ending on the last day of such Fiscal Quarter, together with the related
consolidated statements of income and cash flow of the Borrower and its
Subsidiaries for such periods, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the consolidated financial forecast for
the current Fiscal Year delivered on the Closing Date or pursuant to Section
7.01(e), as applicable, certified by a Financial Officer as fairly presenting
the consolidated financial position of the Borrower and its Subsidiaries as at
the dates indicated and the results of their operations and cash flow for the
Fiscal Quarters of the Borrower indicated, subject to normal year end
adjustments.
(b) Annual Reports. As soon as practicable, and in any event within
one hundred (100) days after the end of each Fiscal Year, (i) the consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as at the
end of such Fiscal Year and the related consolidated and
<PAGE>
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the corresponding figures for the previous Fiscal Year and
the corresponding figures from the consolidated financial forecast for the
current Fiscal Year delivered on the Closing Date or pursuant to Section
7.01(e), as applicable, and (ii) a report with respect to such consolidated
Financial Statements of Arthur Andersen LLP or other independent certified
public accountants acceptable to the Agent, which report shall be unqualified
and shall state that such Financial Statements fairly present the consolidated
financial position of the Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in conformity with GAAP (except for changes with which Arthur Andersen
LLP or any such other independent certified public accountants, if applicable,
shall concur and which shall have been disclosed in the notes to the Financial
Statements) and that the examination by such accountants in connection with such
consolidated Financial Statements has been made in accordance with generally
accepted auditing standards.
(c) Officer's Certificate. Together with each delivery of any
Financial Statement pursuant to paragraph (a) and (b) of this Section 7.01, (i)
an Officer's Certificate of the Borrower substantially in the form of Exhibit G
attached hereto and made a part hereof, stating that the Financial Officer
signatory thereto has reviewed the terms of the Loan Documents, and has made, or
caused to be made under his/her supervision, a review in reasonable detail of
the transactions and consolidated and consolidating financial condition of the
Borrower and its Subsidiaries during the accounting period covered by such
Financial Statements, that such review has not disclosed the existence during or
at the end of such accounting period, and that such Person does not have
knowledge of the existence as at the date of such Officer's Certificate, of any
condition or event which constitutes an Event of Default or Potential Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Borrower or any of
its Subsidiaries has taken, is taking and proposes to take with respect thereto;
and (ii) a certificate (the "Compliance Certificate"), signed by a Financial
Officer setting forth
<PAGE>
calculations (with such specificity as the Agent may reasonably request) for the
period then ended which demonstrate compliance, when applicable, with the
provisions of Article X.
(d) Accountant's Statement and Privity Letter. Together with each
delivery of the Financial Statements referred to in Section 7.01(b), a written
statement of the firm of independent certified public accountants giving the
report thereon (i) stating that their audit examination has included a review of
the terms of this Agreement as it relates to accounting matters, (ii) stating
whether, in connection with their audit examination, any condition or event
which constitutes an Event of Default or Potential Event of Default has come to
their attention, and if such condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain knowledge of
any such condition or event that would not be disclosed in the course of their
audit examination, and (iii) stating that based on their audit examination
nothing has come to their attention which causes them to believe that the
information contained in either or both of the certificates delivered therewith
pursuant to Section 7.01(c) (as the information contained in such certificates
relates to the covenants set forth in Article X) is not correct or that the
matters set forth in the Compliance Certificate delivered therewith pursuant to
Section 7.01(c)(ii) for the applicable Fiscal Year are not stated in accordance
with the terms of this Agreement. The statement referred to above shall be
accompanied by (x) a copy of the draft management letter or any similar report
delivered to the Borrower or to any officer or employee thereof by such
accountants in connection with such Financial Statements and (y) a letter in
substantially the form of Exhibit H attached hereto and made a part hereof from
the Borrower to such accountants informing such accountants that the Lenders are
relying upon the Financial Statements audited by such accountants and delivered
to the Agent and the Lenders pursuant to Section 7.01(b). The Borrower shall
deliver the final executed management letter (a draft of which is referenced in
clause (x) above) delivered by such accountants, promptly after its receipt
thereof. The Agent and each Lender may, with the written consent of the Borrower
(which consent shall not be
<PAGE>
unreasonably withheld or delayed), communicate directly with such accountants.
(e) Budgets; Business Plans; Financial Projections. As soon as
practicable and in any event within forty-five days (45) after the end of each
Fiscal Year of the Borrower, a consolidated plan and financial forecast,
prepared in accordance with the Borrower's normal accounting procedures applied
on a consistent basis, for the five (5) Fiscal Year period of the Borrower
commencing in the Fiscal Year in which delivered, including, without limitation,
(i) forecasted consolidated balance sheets and statements of cash flow and
income statement of the Borrower for such Fiscal Years, (ii) forecasted
consolidated and consolidating statement of cash flow and income statement of
the Borrower and its Subsidiaries for and as of the end of each Fiscal Month of
such Fiscal Years, (iii) the amount of forecasted Capital Expenditures for such
Fiscal Years, and (iv) forecasted compliance with the provisions of Article X,
each of the foregoing prepared for each Fiscal Month in the first Fiscal Year of
such five Fiscal Year period.
(f) Monthly Bank Statements. As soon as available after the Agent's
request therefor, a copy of each monthly statement prepared by the applicable
depositary bank with respect to each of the Borrower's and each Guarantor's
depositary accounts identified by the Agent in such request.
(g) Notices of Indemnities and Warranties. Promptly after entering
into a Contractual Obligation under which the Borrower or any Guarantor incurs
material obligations or liabilities for any indemnities or warranties outside of
the ordinary course of its business, written notice thereof and, to the extent
possible, an estimate of the projected amount of such obligation or liability
and the time period over which the same is likely to be incurred.
7.02. Events of Default. Promptly upon any of the chief executive
officer or any Financial Officer obtaining knowledge (a) of any condition or
event which constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender or the Agent has given any notice with respect to
a claimed Event of Default or Potential Event of Default under this Agreement,
(b) that any Person has given any notice to the Borrower or any Material
Subsidiary or taken any other action with respect to a claimed default or
<PAGE>
event or condition of the type referred to in Section 11.01(e), or (c) of any
condition or event which has resulted, or is reasonably likely to result, in a
Material Adverse Effect or affect the value of, or the Agent's interest in, the
Collateral in any material respect, the Borrower shall deliver to the Agent and
the Lenders an Officer's Certificate specifying (i) the nature and period of
existence of any such claimed default, Event of Default, Potential Event of
Default, condition or event, (ii) the notice given or action taken by such
Person in connection therewith, and (iii) what action the Borrower has taken, is
taking and proposes to take with respect thereto.
7.03. Lawsuits. (a) Institution of Proceedings. Promptly upon a
Responsible Officer's obtaining knowledge of the institution of, or written
threat of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Borrower or any of its Subsidiaries or any
of the Property not previously disclosed pursuant to Section 6.01(k), which
action, suit, proceeding, governmental investigation or arbitration is
reasonably likely to expose, or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out of the same
general allegations or circumstances which are reasonably likely to expose, in
the Borrower's reasonable judgment, the Borrower and/or any of its Subsidiaries
to liability in an amount or of a nature which could result in a Material
Adverse Effect, the Borrower shall give written notice thereof to the Agent and
the Lenders and provide such other information as may be reasonably available,
and not subject to attorney-client privilege which would be abrogated by such
provision thereof, to enable the each Lender and the Agent and its counsel to
evaluate such matters.
(b) Additional Reports. In addition to the requirements set forth in
clause (a) of this Section 7.03, upon the Agent's or Lenders' request therefor,
the Borrower shall promptly give written notice of any change in the status of
any action, suit, proceeding, governmental investigation or arbitration covered
by a report delivered pursuant to clause (a) and provide such other information
as may be reasonably available to it to enable each Lender and the Agent and its
counsel to evaluate such matters.
<PAGE>
7.04. ERISA Notices. The Borrower shall deliver or cause to be
delivered to the Agent and the Lenders, at the Borrower's expense, the following
information and notices as soon as reasonably possible, and in any event:
(a) within ten (10) Business Days after the Borrower knows or has
reason to know that a Termination Event has occurred, a written statement
of a Financial Officer describing such Termination Event and the action, if
any, which the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(b) within ten (10) Business Days after the Borrower knows or has
reason to know that an assessment of a prohibited transaction excise tax
under Section 4975 of the Internal Revenue Code has occurred which could
reasonably be expected to subject the Borrower and/or its Subsidiaries to a
liability in excess of $1,000,000, a statement of a Financial Officer
describing such transaction and the action which the Borrower or any ERISA
Affiliate has taken, is taking or proposes to take with respect thereto;
(c) within ten (10) Business Days after a request therefor from the
Agent, copies of each annual report (form 5500 series), including Schedule
B thereto, filed with respect to each Benefit Plan;
(d) within ten (10) Business Days after a request therefor from the
Agent, copies of the most recent actuarial report received by the Borrower
for any Benefit Plan;
(e) within ten (10) Business Days after the filing of the same with
the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by the Borrower or any ERISA
Affiliate with respect to such request;
<PAGE>
(f) within ten (10) Business Days after the occurrence any increase in
the benefits of any existing Benefit Plan or the establishment of any new
Benefit Plan or the commencement of contributions to any Benefit Plan to
which the Borrower or any ERISA Affiliate was not previously contributing
which could reasonably be expected to subject the Borrower and/or its
Subsidiaries to a liability in excess of $1,000,000, notification of such
increase, establishment or commencement;
(g) within ten (10) Business Days after the Borrower or any ERISA
Affiliate receives notice of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of
each such notice;
(h) within ten (10) Business Days after the Borrower receives notice
of any unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Internal Revenue Code
which could reasonably be expected to subject the Borrower and/or its
Subsidiaries to a liability in excess of $1,000,000, copies of each such
notice and letter; and
(i) within three (3) Business Days after a Responsible Officer obtains
knowledge that Borrower or any ERISA Affiliate has failed, to make a
required installment or any other required payment under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
payment where such failure could give rise to a Lien under Section 302(f)
of ERISA, a notification of such failure.
For purposes of this Section 7.04, the Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the Administrator of any Plan of which the
Borrower or any ERISA Affiliate is the plan sponsor.
7.05. Environmental Notices. (a) The Borrower shall notify
the Agent and the Lenders in writing, promptly upon any Responsible
Officer's learning thereof, of any:
<PAGE>
(i) notice or claim to the effect that the Borrower or any Material
Subsidiary is or is reasonably likely to be liable to any Person as a
result of the Release or threatened Release of any Contaminant into the
environment which could reasonably result in the occurrence of a Material
Adverse Effect;
(ii) notice that the Borrower or any Material Subsidiary is subject to
investigation by any Governmental Authority evaluating whether any Remedial
Action is needed to respond to the Release or threatened Release of any
Contaminant into the environment which could reasonably result in the
occurrence of a Material Adverse Effect;
(iii) notice that any owned Property is subject to an Environmental
Lien which is reasonably likely to result in a Material Adverse Effect;
(iv) notice to the Borrower or any Material Subsidiary of any material
violation of any Environmental, Health or Safety Requirement of Law which
is reasonably likely to result in a Material Adverse Effect;
(v) condition which might reasonably result in a material violation of
any Environmental, Health or Safety Requirement of Law which is reasonably
likely to result in a Material Adverse Effect;
(vi) commencement or threat of any judicial or administrative
proceeding alleging a material violation by the Borrower or any Material
Subsidiary of any Environmental, Health or Safety Requirement of Law which
is reasonably likely to result in a Material Adverse Effect;
(vii) any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by the Borrower or any Material
Subsidiary that could subject the Borrower or any Material Subsidiary to
environmental, health or
<PAGE>
safety Liabilities and Costs which are likely to result in a Material
Adverse Effect; or
(viii) any filing or report made by the Borrower or any Material
Subsidiary with any Governmental Authority with respect to any unpermitted
Release or threatened Release of a Contaminant which could reasonably
result in an expenditure of $1,000,000 or more.
(b) Within forty-five (45) days after the end of each Fiscal Year, the
Borrower shall submit to the Agent and the Lenders a report summarizing any
material adverse change in the status of environmental, health or safety
compliance, hazard or liability issues not otherwise identified in notices
required pursuant to Section 7.05(a) or disclosed on Schedule 6.01-R which is
reasonably likely to result in a Material Adverse Effect.
7.06. Labor Matters. The Borrower shall notify the Agent and the
Lenders in writing, promptly upon the Borrower's learning thereof, of any
material labor dispute to which the Borrower or any Material Subsidiary may
become a party, including, without limitation, any strikes, lockouts or other
grievances relating to such Persons' plants and other facilities, which is
reasonably likely to result in a Material Adverse Effect.
7.07. Receivables Purchase Documents. From and after Agent's request
therefor, the Borrower shall deliver a copy of the following, promptly upon its
receipt thereof (where applicable), and concurrently with its delivery thereof
(where applicable), to the Agent and the Lenders: (a) each notice or other
communication (other than routine daily reports) delivered by or on behalf of
the Borrower or Dyn Funding to any Person in connection with any agreement or
other document relating to the transactions contemplated by any of the
Receivables Purchase Documents by the same means as such notice or other
communication is delivered to such Person; (b) each material notice or other
material communication received by the Borrower or Dyn Funding from any Person
in connection with any agreement or other document relating to the transactions
contemplated by any of the Receivables Purchase Documents; (c) each report
(other than routine daily reports, but including, without limitation, monthly
determination date statements) delivered by or on behalf of the Borrower or Dyn
Funding to any Person
<PAGE>
pursuant to the requirements of any of the Receivables Purchase Documents by the
same means as such report is delivered to such Person; (d) each written request
delivered by the "Servicer" (as defined in the Receivables Purchase Documents)
to the Trustee under Section 3.04(a) of the Servicing Agreement; and (e) the
monthly accounting of amounts withdrawn and paid to the "Servicer" pursuant to
such Section 3.04(b) or like provision provided by the Trustee to the
"Servicer".
7.08. Fiscal Year. The Borrower shall provide the Agent with prior
written notice of any change in its Fiscal Year, Fiscal Quarters or Fiscal
Months for accounting or tax purposes.
7.09. Other Reports. The Borrower shall deliver or cause to be
delivered to the Agent and the Lenders copies of all Financial Statements,
material reports and material notices, if any, sent or made available generally
by the Borrower to its Securities holders or filed with the Commission (to the
extent not otherwise delivered by the Borrower hereunder) and all material
notifications received by the Borrower or any Subsidiary of the Borrower
pursuant to the Securities Exchange Act and the rules promulgated thereunder.
The Borrower shall use its best efforts to deliver or cause to be delivered to
the Agent and the Lenders copies of all press releases made available generally
by the Borrower or a Subsidiary to the public concerning material developments
in the business of the Borrower or any such Subsidiary.
7.10. Other Information. Promptly upon receiving a request therefor
from the Agent or the Requisite Lenders, the Borrower shall prepare and deliver
to the Agent and the Lenders such other information with respect to the
Borrower, any of its Subsidiaries, or the Collateral, including, without
limitation, schedules identifying and describing the Collateral and any
dispositions thereof, as from time to time may be reasonably requested by the
Agent or the Requisite Lenders.
7.11. Government Contracts. (i) The Borrower shall notify the Agent in
writing promptly after the Borrower knows thereof, of any loss or threatened
loss of the security clearances referenced in Section 8.10; and (ii) the
Borrower shall notify the Agent in writing promptly
<PAGE>
upon (and, in any event, within five (5) Business Days of) the Borrower
obtaining knowledge of (a) any material adverse change in the status of any
governmental investigation disclosed on Schedule 6.01-BB and (b) any change in
the status of any other matter disclosed on or arising out of the matters
disclosed on Schedule 6.01-BB which might result in the occurrence of a Material
Adverse Effect, including, without limitation, any action, suit, or proceeding
arising out of the matters disclosed on Schedule 6.01-BB, and shall provide such
other information as may be reasonably available to it to enable the Lender and
its counsel to evaluate such matters referenced in (i) and (ii) above.
7.12. Formation of Subsidiaries; Investments in Other Persons. The
Borrower shall (i) notify the Agent in writing of the formation of each new
Subsidiary which is or becomes a Material Subsidiary and Wholly-Owned Subsidiary
promptly upon its becoming a Material Subsidiary which is a Wholly-Owned
Subsidiary and (ii) deliver to the Agent, with a copy to its counsel,
concurrently with delivery of the Financial Statements required pursuant to
Section 7.01(b) or upon the earlier request of the Agent, an amended Schedule
6.01-C reflecting the formation of Subsidiaries and equity Investments made in
Persons which are not Subsidiaries, in each instance after more recently to
occur of the Closing Date and the date of the preceeding amended Schedule
6.01-C.
<PAGE>
ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than indemnities not yet due), unless the Requisite Lenders shall
otherwise give prior written consent:
8.01. Corporate Existence, Etc. The Borrower shall, and shall cause
each of the Material Subsidiaries to, at all times maintain its corporate
existence and preserve and keep, or cause to be preserved and kept, in full
force and effect its rights and franchises material to its businesses, except
where the loss or termination of such rights and franchises is not reasonably
likely to result in a Material Adverse Effect.
8.02. Corporate Powers; Conduct of Business. The Borrower shall, and
shall cause each of the Material Subsidiaries to, qualify and remain qualified
to do business and maintain its good standing in each jurisdiction in which the
nature of its business and the ownership of its property requires it to be so
qualified and in good standing, except where the failure to be so qualified and
in good standing is not reasonably likely to result in a Material Adverse Effect
or impair the ability of the Borrower, the Material Subsidiaries, or the Agent
to enforce Receivables owing by account debtors in such jurisdictions.
8.03. Compliance with Laws, Etc. The Borrower shall, and shall cause
each of the Material Subsidiaries to, (a) comply with all Requirements of Law
and all restrictive covenants affecting it or its business, property, assets or
operations and (b) obtain as needed all Permits necessary for its operations and
maintain such Permits in good standing, except in the case where noncompliance
with either clause (a) or (b) above is not reasonably likely to result in a
Material Adverse Effect.
8.04. Payment of Taxes and Claims; Tax Consolidation. The Borrower
shall, and shall cause each of its Subsidiaries to, pay (a) all taxes,
assessments and other governmental charges imposed upon it or on any of its
property or assets or in respect of any of its franchises, business, income or
property by any U.S. federal, state, or
<PAGE>
local Governmental Authority, which singly or collectively are in a material
amount, before any penalty or interest accrues thereon, and (b) all material
Claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by Section 9.03) upon any of the
Borrower's or such Subsidiary's property or assets, prior to the time when any
penalty or fine shall be assessed with respect thereto; provided, however, that
failure to pay any such taxes, assessments and governmental charges referred to
in clause (a) above or Claims referred to in clause (b) above shall not result
in a Potential Event of Default or Event of Default if being contested in good
faith by appropriate proceedings diligently instituted and conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and further provided that
upon the payment of such taxes, assessments and governmental charges referred to
in clause (a) above and all penalties and interest associated therewith, the
amount of such taxes, assessments and governmental charges shall not be included
in determination of the aforesaid materiality threshold. The Borrower will not,
nor will it permit any of its Subsidiaries to, file or consent to the filing of
any consolidated income tax return with any Person (other than the Borrower and
its Subsidiaries).
8.05. Insurance. The Borrower shall maintain for itself and the
Material Subsidiaries, or shall cause each of the Material Subsidiaries to
maintain in full force and effect, the insurance policies and programs listed on
Schedule 6.01-Z or substantially similar policies and programs. All such
insurance including any self-insurance programs shall be reasonably satisfactory
to the Agent; all such policies and programs otherwise obtained shall be
maintained with responsible and reputable insurance companies or associations,
in such amounts and covering such risks as are usual for companies engaged in
similar businesses and owning similar property in the same general geographic
areas in which the Borrower and/or the Material Subsidiaries operate. Each
policy pertaining to insurance coverage with respect to the Collateral or
business interruption shall, if requested in writing by the Agent, contain an
endorsement naming the Agent as an additional insured, as its interests may
appear, under such policy or
<PAGE>
be subject to a loss payable endorsement in form and substance satisfactory to
the Agent. Such endorsement or an independent instrument furnished to the Agent
shall provide that the insurance companies will give the Agent at least thirty
(30) days' written notice before any such policy or policies of insurance shall
be altered adversely to the interests of the Holders or cancelled and that no
act, whether willful or negligent, or default of the Borrower, any of its
Material Subsidiaries or any other Person shall affect the right of the Agent to
recover under such policy or policies of insurance in case of loss or damage. In
the event the Borrower or any of the Material Subsidiaries, at any time or times
hereafter shall fail to obtain or maintain any of the policies or insurance
required herein with respect to its property or business interruption or to pay
any premium in whole or in part relating thereto, then the Agent, without
waiving or releasing any obligations or resulting Event of Default hereunder,
may at any time or times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto which the Agent deems advisable. All sums
so disbursed by the Agent shall constitute Protective Advances hereunder and be
part of the Obligations, payable as provided in this Agreement.
8.06. Inspection of Property; Books and Records; Discussions. The
Borrower shall, and shall cause each of the Material Subsidiaries to, permit any
authorized representative(s) designated by either the Agent or any Lender to
visit and inspect, whether by access to Borrower's and the Material
Subsidiaries' MIS or otherwise, any office or other location of thereof, to
examine, audit, check and make copies of its respective financial and accounting
records, books, journals, orders, receipts and any correspondence (other than
privileged correspondence with legal counsel, information and materials deemed
proprietary for competitive purposes, and information and materials subject to
Requirements of Law relating to confidentiality) and other data relating to
their respective businesses or the transactions contemplated hereby or
referenced herein (including, without limitation, in connection with
environmental compliance, hazard or liability), and to discuss their affairs,
finances and accounts with their officers, management personnel, and independent
certified public accountants, all upon reasonable written notice and
<PAGE>
at such reasonable times during normal business hours, as often as may be
reasonably requested. Each such visitation and inspection (i) by or on behalf of
any Lender shall be at such Lender's expense and (ii) by or on behalf of the
Agent shall be at the Borrower's expense. The Borrower shall keep and maintain,
and cause each of the Material Subsidiaries to keep and maintain, in all
material respects on its MIS and otherwise proper books of record and account in
which entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its respective businesses and activities, including,
without limitation, transactions and other dealings with respect to the
Collateral. If an Event of Default has occurred and is continuing, the Borrower,
upon the Agent's request, shall turn over any such records to the Agent or its
representatives which the Agent may reasonably request in connection with
enforcement of the Liens granted to it and/or the Contractual Obligations
arising with respect to the Collateral; provided, however, that the Borrower
may, in its discretion, retain copies of such records.
8.07. ERISA Compliance. The Borrower shall, and shall cause each of
the Material Subsidiaries and ERISA Affiliates to, establish, maintain and
operate all Plans to comply in all respects with the provisions of ERISA, the
Internal Revenue Code, all other applicable laws, and the regulations and
interpretations thereunder and the respective requirements of the governing
documents for such Plans, except to the extent such non-compliance would not
reasonably be likely to result in a Material Adverse Effect.
8.08. Deposit Accounts. In connection with the establishment of any
deposit account for the collection of Receivables and other proceeds of
Collateral after the Closing Date and within sixty (60) days after the Closing
Date with respect to the deposit account maintained with Bankers Trust Company
in connection with the Securitization Program, the Borrower shall, and, if such
account is an account of a Guarantor, shall cause each of the Guarantors to,
enter into agreements substantially in the form attached hereto as Exhibit I
with respect to each such account. Borrower shall cause Bankers Trust Company to
transfer funds on deposit in the aforesaid account in accordance with the
Agent's directions upon delivery of the notice set forth on Exhibit A to the
Collection Account Agreement required to be executed by Bankers Trust Company.
<PAGE>
8.09. Maintenance of Property. The Borrower shall, and shall cause
each of the Material Subsidiaries to, maintain, in all material respects, in
good, safe and insurable condition and repair, ordinary wear and tear excepted,
all of its respective owned and leased property which is material to the
continued operations of the owner or lessee thereof.
8.10. Security Clearances. The Borrower shall, and shall cause each of
its Subsidiaries to, apply for and maintain all facility security clearances
required of the Borrower or any of its Subsidiaries under all Requirements of
Law to perform and deliver under any and all Government Contracts and as
otherwise may be necessary to continue to perform the Borrower's business and
such personnel security clearances as are required to assure continuation of the
Borrower's and its Subsidiaries' performance under Government Contracts.
8.11. Future Assurances. Upon the request of the Agent, the Borrower
shall execute and deliver to the Agent, for the benefit of the Holders, such
other agreements, documents, and instruments which the Agent deems necessary or
desirable, in form and substance satisfactory to the Agent, to enable the Agent
to perfect, or maintain perfected, Liens in the Collateral; provided, however,
that the foregoing shall only pertain to requests with respect to vehicle titles
made after the occurrence and during the continuance of an Event of Default.
ARTICLE IX
NEGATIVE COVENANTS
Borrower covenants and agrees that it shall comply with the following
covenants so long as any Commitments are outstanding and thereafter until
payment in full of all of the Obligations (other than indemnities not yet due),
unless the Requisite Lenders shall otherwise give prior written consent:
9.01. Indebtedness. The Borrower shall not and shall not
permit any Restricted Subsidiary or Guarantor to
<PAGE>
directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(a) the Obligations and Indebtedness evidenced by the Senior Notes;
(b) Permitted Existing Indebtedness, reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon, and any extensions, renewals, refundings,
refinancings, or replacements of Permitted Existing Indebtedness as so
reduced; provided that any such extension, renewal, refunding, refinancing
or replacement is in an aggregate principal amount not greater than the
principal amount outstanding with respect to the Permitted Existing
Indebtedness so extended, renewed, refunded, refinanced, or replaced as of
the date of such extension, renewal, refunding, refinancing or replacement
plus any premium required under the terms of the such Permitted Existing
Indebtedness and expenses incurred in connection with the subject
transaction; is on terms no less favorable to the Borrower or such
Restricted Subsidiary or Guarantor than the terms of the Permitted Existing
Indebtedness so extended, renewed, refunded, refinanced or replaced; and
results in a final maturity of the Indebtedness extending, renewing,
refunding, refinancing, or replacing Permitted Existing Indebtedness no
shorter in time than that of the Permitted Existing Indebtedness being
extended, renewed, refunded, refinanced or replaced;
(c) Indebtedness arising from intercompany loans (i) from the Borrower
to any of its Restricted Subsidiaries or any Guarantor for so long as such
Indebtedness is held by the Borrower or (ii) from any such Subsidiary to
the Borrower or any other such Subsidiary for so long as such Indebtedness
is held by such other Subsidiary and provided that such Indebtedness is
subordinated, pursuant to written agreement in form and substance
satisfactory to the Agent, to the Obligations;
<PAGE>
(d) Indebtedness with respect to warranties and indemnities made under
(i) any agreements for asset sales permitted under Section 9.02, (ii)
Contractual Obligations of the Borrower, any Restricted Subsidiary or any
Guarantor entered into in the ordinary course of its business, and (iii)
Contractual Obligations of the Borrower and its Subsidiaries identified on
Schedule 9.01-D attached hereto;
(e) Interest Swap Obligations of the Borrower covering Indebtedness of
the Borrower, any Restricted Subsidiary, or any of the Guarantors and
Interest Swap Obligations of any Restricted Subsidiary or Guarantor
covering Indebtedness of such Restricted Subsidiary or Guarantor,
respectively; provided that the notional principal amount of such Interest
Swap Obligations does not exceed the principal amount of the Indebtedness
to which such Interest Swap Obligations relate;
(f) Indebtedness under the Receivables Purchase Documents;
(g) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Borrower, Restricted
Subsidiaries, and Guarantors outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument that
constitutes a daylight overdraft or is inadvertently drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished withint two (2) Business Days after
incurrence;
(i) Indebtedness for trade payables, wages and other accrued expenses
incurred in the ordinary course of business that are not overdue by ninety
(90) days or more or are being contested in good faith by
<PAGE>
appropriate proceedings promptly instituted and diligently conducted;
(j) Indebtedness of the Borrower arising from the operations and
indemnity obligations relating to the sale of the Borrower's former
Subsidiary, Dynalectric Company, and litigation among Computran Systems
Corporation, Dynalectric Company, and the Borrower;
(k) Indebtedness in respect of taxes, assessments, governmental
charges and Claims for labor, materials or supplies, to the extent that
payment thereof is not required pursuant to Section 8.04;
(l) Indebtedness with respect to contingent liabilities incurred in
the ordinary course of business of the Borrower, the Restricted
Subsidiaries or Guarantors;
(m) Indebtedness in respect of profit sharing plans to the extent
permitted under Section 9.04;
(n) Indebtedness under appeal bonds in connection with judgments which
do not result in an Event of Default or a Potential Event of Default or any
other breach hereunder; provided that the aggregate amount of all such
Indebtedness does not exceed $5,000,000;
(o) in addition to the Indebtedness permitted by clauses (a) through
(n) above, other Indebtedness in an aggregate principal amount not to
exceed $10,000,000 at any time outstanding.
For purposes of this Section 9.01, (i) the amount of Indebtedness of any
Restricted Subsidiary or Guarantor which is not a Wholly-Owned Subsidiary shall
be deemed to be equal to that percentage of the Indebtedness of such Restricted
Subsidiary or Guarantor which equals the equity ownership percentage of the
equity Securities of such Restricted Subsidiary held by the Borrower or by a
Wholly-Owned Subsidiary and (ii) all Interest Swap Obligations and Currency
Agreements shall be subject to terms reasonably acceptable to the Agent.
Notwithstanding anything in this Agreement to the contrary, the Borrower and its
Subsidiaries may incur Indebtedness, if on the date of the incurrence thereof,
after giving effect to such incurrence, no
<PAGE>
Potential Event of Default or Event of Default shall have occurred and be
continuing and the Consolidated Fixed Charge Coverage Ratio is greater than 2.0
to 1.0.
9.02. Sales of Assets. The Borrower shall not and shall not permit any
Restricted Subsidiary or Guarantor to sell, assign, transfer, lease, convey or
otherwise dispose of any property, whether now owned or hereafter acquired, or
any income or profits therefrom, or enter into any agreement to do so, except:
(a) the sales, repurchases and other transfers of accounts receivable
in accordance with the provisions of the Receivables Purchase Documents;
(b) the transfer of property (i) from a Restricted Subsidiary or
Guarantor to the Borrower or (ii) from a Restricted Subsidiary or Guarantor
to a Restricted Subsidiary or Guarantor;
(c) the transfer of property from the Borrower, a Restricted
Subsidiary or a Guarantor to a Permitted Joint Venture;
(d) the sale of Inventory in the ordinary course of Borrower's and its
Subsidiaries' respective businesses and the sale, trade-in or other
disposition of surplus, obsolete, or worn out Equipment in the ordinary
course of Borrower's and its Subsidiaries' respective businesses and
consistent with past practices;
(e) the sale of any Real Property owned by the Borrower or any
Restricted Subsidiary or Guarantor;
(f) the sale of Investments in Cash Equivalents, cash equivalents and
other readily marketable Securities;
(g) the sales permitted pursuant to Section 9.10;
(h) other sales or transfers of property in a single transaction or
series of related transactions having a fair market value of less than
$250,000; and
<PAGE>
(i) other sales or transfers of property having a fair market value of
less than $15,000,000 in the aggregate.
Notwithstanding anything in this Section 9.02 to the contrary, without the prior
written consent of the Lenders, the Borrower shall not and shall not permit any
of its Subsidiaries to sell, assign, transfer, lease, convey or otherwise
dispose of any property not described in clauses (a) through, (e) and (h) above
unless the Borrower or Subsidiary of the Borrower selling, assigning,
transferring, leasing, conveying or otherwise disposing of such property
receives consideration at the time of consummation of such transaction at least
equal to the then fair market value of such property and at least 80% of the
consideration received by the Borrower or such Subsidiary therefrom shall be in
the form of cash or cash equivalents and be received at the time of disposition
of such property.
9.03. Liens. The Borrower shall not and shall not permit any
Subsidiary to directly or indirectly create, incur, assume or permit to
exist any Lien on or with respect to any of their respective property or
assets except:
(a) Liens created pursuant to (i) the Receivables Purchase Documents
and (ii) the Loan Documents;
(b) Permitted Existing Liens;
(c) Customary Permitted Liens;
(d) purchase money Liens to finance property acquired in the ordinary
course of business of such Person; provided that (i) the related purchase
money Indebtedness shall not exceed the cost of such property and shall not
be secured by Liens on any property of such Person other than the property
so acquired and (ii) the Lien securing such Indebtedness shall be created
within ninety (90) days after the date of such acquisition;
(e) Liens in favor of the lessor under Capital Leases permitted under
Section 9.01; provided that such
<PAGE>
Lien shall not extend to property other than that which is the subject of
any such Capital Lease;
(f) extensions, renewals, refundings and replacements of Liens
referred to in clauses (a) and (b) of this Section 9.03; provided that any
such extension, renewal, refunding or replacement of a Lien referred to in
clause (b) shall be limited to the property covered by the Lien extended,
renewed, refunded or replaced and that the obligations secured by any such
extension, renewal, refunding or replacement Lien shall be in an amount not
greater than the amount of the obligations then secured by the Lien
extended, renewed, refunded or replaced; and
(g) Liens to secure Indebtedness of a Restricted Subsidiary which is
not required to be a Guarantor or the Capital Stock of which is not pledged
to secure the Obligations as required by Section 9.04(g).
9.04. Investments. The Borrower shall not and shall not permit any
Restricted Subsidiary or Guarantor to directly or indirectly make or own any
Investment except:
(a) Investments in (i) Cash Equivalents and (ii) other readily
marketable debt Securities having a maturity, where applicable, of no more
than one year after the date of such Investment therein; provided, however
that, from and after such time as the Fixed Charge Coverage Ratio is less
than or equal to 1.35 to 1.00, as determined as of the last day of any
Fiscal Quarter, Investments described in clause (ii) above shall be
permitted only if Investments in Cash Equivalents aggregate an amount at
least equal to the Commitments in effect from time to time, which Cash
Equivalents shall be deemed to be Cash Collateral;
(b) Investments in (i) Dyn Funding and any successor thereto and (ii)
Permitted Joint Ventures;
(c) Permitted Existing Investments;
(d) Investments in the form of (i) advances to employees and officers
of the Borrower, Restricted Subsidiaries, or Guarantors in the ordinary
course of business for business-related
<PAGE>
travel and (ii) other loans and advances to employees and officers of the
Borrower, Restricted Subsidiaries, or Guarantors in the ordinary course of
business for bona fide business purposes not in excess of $1,500,000 in the
aggregate at any time outstanding;
(e) Investments received in connection with the bankruptcy or
reorganization of trade creditors and customers;
(f) Investments which, if they were in the form of intercompany loans,
would be permitted under Section 9.01(c);
(g) Investments in Persons which will become, immediately after such
Investment, a Wholly-Owned Subsidiary or will merge or consolidate into the
Borrower or a Wholly-Owned Subsidiary, and (i) if a Domestic Subsidiary,
all of the Capital Stock thereof is pledged to secure the Obligations or
(ii) if not a Domestic Subsidiary, 65% of the Capital Stock thereof is
pledged to secure the Obligations; provided that (A) such Person is engaged
in a business substantially similar to that of the Borrower and its
Subsidiaries as of the Closing Date and (B) if not merged into the Borrower
or a Guarantor, such Person described in clause (i) becomes a Guarantor;
(h) Investments pursuant to Currency Agreements and with respect to
Interest Swap Obligations which, if in the form of Indebtedness, would be
permitted under Section 9.01;
(i) Investments made by the Borrower and its Subsidiaries as a result
of consideration received in connection with a sale, assignment, transfer,
lease, conveyance or other disposition of any property made in compliance
with the provisions of Section 9.02;
(j) Investments in addition to those described in clauses (a) through
(i) above, not to exceed $10,000,000 in the aggregate at any time
outstanding; and
<PAGE>
(k) any other Investment; provided that at the time thereof or
immediately after giving effect thereto, (i) no Event of Default or
Potential Event of Default shall have occurred and be continuing unwaived
and (ii) the Borrower is able to incur at least $1.00 of additional
Indebtedness in compliance with the provisions of Section 9.01 (other than
clauses (a) through (h) thereof), and (iii) the sum of (A) the aggregate
amount of Restricted Junior Payments made after the Issue Date (the amount
expended for such purposes, if other than in Cash, being the fair market
value of such property as determined reasonably and in good faith by the
Board of Directors of the Borrower) plus (B) the aggregate amount of such
Investments made after the Issue Date, including such proposed Investment,
does not exceed the sum of: (x) fifty percent (50%) of the cumulative
Consolidated Net Income (as defined in Section 1.02) (or if cumulative
Consolidated Net Income (as defined in Section 1.02) shall be a loss, minus
100% of such loss) earned subsequent to the Issue Date and on or prior to
the date such Investment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (y) 100% of the aggregate net
cash proceeds received by the Borrower from any Person (other than a
Subsidiary of the Borrower) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock
of the Borrower; plus (z) without duplication of any amounts included in
clause (iii)(y) above, 100% of the aggregate net cash proceeds of any
equity contribution received by the Borrower from a holder of the
Borrower's Capital Stock (excluding, in the case of clauses (iii)(y) and
(z), any net cash proceeds from a Public Equity Offering used to redeem the
Obligations and cash proceeds from the issuance of Qualified Capital Stock
by, or any equity contribution from any Person, financed directly or
indirectly using funds borrowed from the Borrower or any Subsidiary of the
Borrower until and to the extent such borrowing is repaid).
9.05. Intentionally omitted.
9.06. Restricted Junior Payments. The Borrower shall not and shall not
permit any of its Subsidiaries which
<PAGE>
are Guarantors to declare or make any Restricted Junior Payment, except:
(a) dividends or distributions to the Borrower on the Capital Stock of
any of its Subsidiaries or to any of the Borrower's Subsidiaries from any
other Subsidiary of the Borrower; provided, however, that Subsidiaries of
the Borrower which are not Wholly-Owned Subsidiaries may pay dividends and
make distributions only if the Borrower or Subsidiary of the Borrower which
is a holder of the Capital Stock with respect to which such dividend or
distribution is paid or made receives its pro rata share thereof;
(b) dividends or distributions by the Borrower on its Capital Stock to
holders of such Capital Stock, repurchases, redemptions, retirements or
other acquisitions by the Borrower, for value, of any of its Capital Stock
or warrants, rights or options to purchase or acquire shares of any class
of such capital Stock, principal payments on, purchases, defeasance,
redemptions, and prepayments of, decreases in or other acquisitions or
retirements, for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, of any Indebtedness of the
Borrower that is junior in right of payment to the Obligations, other than
the Senior Notes; provided that at the time thereof or immediately after
giving effect thereto, (i) no Event of Default or Potential Event of
Default shall have occurred and be continuing unwaived and (ii) the
Borrower is able to incur at least $1.00 of additional Indebtedness in
compliance with the provisions of Section 9.01 (other than clauses (a)
through (n) thereof), and (iii) the sum of (A) the aggregate amount of
Restricted Junior Payments, including such proposed Restricted Junior
Payment, made after the Issue Date (the amount expended for such purposes,
if other than in Cash, being the fair market value of such property as
determined reasonably and in good faith by the Board of Directors of the
Borrower) plus (B) the aggregate amount of Investments permitted under
Section 9.04(k) made after the Issue Date does not exceed the sum of: (x)
fifty percent (50%) of the cumulative Consolidated Net Income (as defined
in Section 1.02) (or if cumulative Consolidated Net Income
<PAGE>
(as defined in Section 1.02) shall be a loss, minus 100% of such loss)
earned subsequent to the Issue Date and on or prior to the date such
Restricted Junior Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (y) 100% of the aggregate net
cash proceeds received by the Borrower from any Person (other than a
Subsidiary of the Borrower) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock
of the Borrower; plus (z) without duplication of any amounts included in
clause (iii)(y) above, 100% of the aggregate net cash proceeds of any
equity contribution received by the Borrower from a holder of the
Borrower's Capital Stock (excluding, in the case of clauses (iii)(y) and
(z), any net cash proceeds from a Public Equity Offering used to redeem the
Obligations and cash proceeds from the issuance of Qualified Capital Stock
by, or any equity contribution from any Person, financed directly or
indirectly using funds borrowed from the Borrower or any Subsidiary of the
Borrower until and to the extent such borrowing is repaid);
(c) acquisitions of any shares of Capital Stock of the Borrower,
either (i) solely in exchange for shares of Qualified Capital Stock of the
Borrower or (ii) through the application of net proceeds of a substantially
concurrent sale for Cash (other than to a Subsidiary of the Borrower) of
shares of Qualified Capital Stock of the Borrower; in either case provided
that no Event of Default or Potential Event of Default shall have occurred
and be continuing unwaived;
(d) repurchases by Borrower of shares of its common Capital Stock in
connection with the repurchase provisions of the ESOP as in effect on the
Closing Date (subject to changes in the ESOP to reflect requirements of
ERISA or other Requirements of Law); and
(e) repurchases by Borrower of (i) its common Capital Stock from
former employees, officers and directors of the Borrower and (ii) 125,714
shares of its common Capital Stock issued in connection with the Borrower's
acquisition of Technology Applications, Inc. for an amount which, when
aggregated with payments by the Borrower of up to $2,500,000 in withholding
and/or
<PAGE>
payroll taxes upon the lapse of deferrals of deferred stock and stock
equivalent accounts, does not exceed $3,000,000 in any calendar year;
provided that, if less than $3,000,000 is used for such payments and
repurchases in any calendar year, the amount equal to $3,000,000 minus the
amount of such payments and repurchases made in such year may be used for
such purposes in subsequent calendar years.
For purposes of determining the aggregate amount of Restricted Junior Payments
made after the Issue Date as described in Section 9.06(c)(iii), the amount of
all Restricted Junior Payments and taxes described in Section 9.06(e) made or
paid which are of the type described in this Section 9.06 shall be included in
such calculation and the amounts received by the Borrower from the sale by the
Borrower of common Capital Stock to the ESOP that constitute Disqualified
Capital Stock shall be credited against the amounts calculated pursuant to
Section 9.06(d).
The Borrower shall deliver to the Agent not later than the date of
making any Restricted Junior Payment, an officer's certificate signed by a
Responsible Officer stataing that such Restricted Junior Payment complies with
this Section 9.06 and setting forth in reasonable detail the basis upon which
the required calculations were computed, which calculations may be based upon
the Borrower's latest available internal quarterly Financial Statements.
9.07. Conduct of Business. The Borrower shall not and shall not permit
any of its Subsidiaries to engage in any business other than (a) the businesses
engaged in by the Borrower and its Subsidiaries on the date hereof and (b) any
business or activities which are substantially similar, related or incidental
thereto.
9.08. Transactions with Shareholders and Affiliates. The Borrower
shall not and shall not permit any of its Subsidiaries to directly or indirectly
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder or holders of more than five percent (5%) of any class
of equity Securities of the Borrower (other than the DynCorp Employee Stock
Ownership Trust established pursuant to the Trust Agreement with respect to
transactions contemplated by
<PAGE>
the ESOP Documents or SARP Documents or holders who are trustees or
beneficiaries under any Plan), or with any other Affiliate of the Borrower which
is not its Subsidiary, on terms that are less favorable to the Borrower or such
Subsidiary of the Borrower, as applicable, than those that might be obtained in
an arm's length transaction at the time from Persons who are not such a holder
or Affiliate. Nothing contained in this Section 9.08 shall prohibit (a) any
transaction expressly permitted by Sections 9.06 and 9.12; (b) reasonable fees
and compensation paid to and indemnity provided for officers, directors,
consultants and employees of the Borrower or any of its Subsidiaries as
determined in good faith by the Borrower's Board of Directors or senior
management; or (c) performance of any obligations arising under the Transaction
Documents.
9.09. Restriction on Fundamental Changes. The Borrower shall not and
shall not permit any of its Subsidiaries to enter into any merger or
consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of such Person's
business or property, whether now or hereafter acquired, except (a) in
connection with transactions permitted under Section 9.02, (b) in connection
with the merger of any Guarantor with and into any other Guarantor, (c) in
connection with the merger of any Subsidiary of the Borrower which is not a
Material Subsidiary with and into any other Subsidiary of the Borrower and/or
(d) the dissolution of Subsidiaries of the Borrower identified on Schedule
6.01-C as inactive Subsidiaries of the Borrower or the dissolution of
Subsidiaries of the Borrower which are not Material Subsidiaries.
9.10. Sales and Leasebacks. Except with respect to (a) the property
identified on Schedule 9.10 attached hereto, (b) transactions with respect to
property acquired after the Closing Date, (c) any single transaction or series
of related transactions resulting in a liability of less than $250,000, and (d)
transactions consummated within 180 days after the purchase of the assets sold
and leased back, if the proceeds of such sale are used to pay all or a portion
of the purchase price of such assets, the Borrower shall not or permit any of
its Subsidiaries to become liable, directly, by assumption or otherwise, with
respect
<PAGE>
to any lease, whether an Operating Lease or a Capital Lease, of any property
(whether real or personal or mixed) which it or one of its Subsidiaries (a) sold
or transferred or is to sell or transfer to any other Person, or (b) intends to
use for substantially the same purposes as any other property which has been or
is to be sold or transferred by it or one of its Subsidiaries to any other
Person, in either instance, in connection with such lease.
9.11. Margin Regulations; Securities Laws. The Borrower shall not or
permit any of its Subsidiaries to use all or any portion of the proceeds of any
credit extended under this Agreement to purchase or carry Margin Stock.
9.12. ERISA. The Borrower shall not:
(a) knowingly engage, or permit any of its Subsidiaries to engage, in
any prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained from the
DOL;
(b) permit to exist any accumulated funding deficiency (as defined in
Sections 302 of ERISA and 412 of the Internal Revenue Code), with respect
to any Benefit Plan maintained by the Borrower or any of its Subsidiaries,
whether or not waived;
(c) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any ERISA Affiliate to terminate, any Benefit
Plan which would result in any liability of Borrower or any ERISA Affiliate
under Title IV of ERISA;
(e) fail, or permit any ERISA Affiliate to fail, to pay any required
installment or any other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other
payment; or
<PAGE>
(f) amend, or permit any ERISA Affiliate to amend, a Benefit Plan
resulting in an increase in current liability for the plan year such that
the Borrower or any ERISA Affiliate is required to provide security to such
Plan under Section 401(a)(29) of the Internal Revenue Code
if such event, either singly or in the aggregate, after taking into account all
other such events and any liabilities associated therewith, could reasonably be
expected to subject the Borrower and/or its Subsidiaries to a material liability
for the payment of money or give rise to a Lien under Section 302(f) of ERISA.
9.13. Organizational Documents; ESOP. The Borrower shall not and shall
not permit any Subsidiary the Capital Stock of which is part of the Collateral
to amend, modify or otherwise change any of the terms or provisions in any of
(a) their respective Organizational Documents as in effect on the Closing Date,
except amendments (i) to effect a change of name (A) of the Borrower as
permitted by the Borrower Security Agreement or (B) of a Subsidiary of the
Borrower, written notice of which change of name the Borrower shall have
provided the Agent within sixty (60) days prior to the effective date of any
such name change, (ii) with respect to mergers or dissolutions permitted by
Section 9.09 and (iii) to the Borrower's Organizational Documents that would not
result in a Material Adverse Effect, (b) the Receivables Purchase Documents as
in effect on the Closing Date, or (c) the ESOP Documents or SARP Documents as in
effect on the Closing Date, except with respect to terms and conditions the
amendment of which would not result in any material adverse financial
consequences to the Borrower.
ARTICLE X
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than indemnities not yet due):
<PAGE>
10.01. Fixed Charge Coverage Ratio. The Borrower shall maintain a
Fixed Charge Coverage Ratio of at least 1.25 to 1.00, as determined as of the
last day of each Fiscal Quarter of the Borrower, for the four Fiscal Quarter
period then ending, commencing with the Fiscal Quarter ending June 26, 1997.
10.02. Funded Debt/EBITDA. The Borrower shall maintain a ratio of the
average of Borrower's Funded Debt as of the last day of each Fiscal Month in the
Fiscal-Quarter ending on the respective dates set forth below to EBITDA for the
four-Fiscal-Quarter period then ended of not more than the ratio set forth
opposite such Fiscal Quarter:
Fiscal Quarter Ending Ratio
--------------------- -----
June 26, 1997 6.00 to 1.00
and each Fiscal Quarter
thereafter through the
Fiscal Quarter ending
December 31, 1998
April 1, 1999 5.75 to 1.00
July 1, 1999 5.50 to 1.00
September 30, 1999 5.25 to 1.00
December 31, 1999 5.00 to 1.00
March 30, 2000 4.75 to 1.00
June 29, 2000 4.50 to 1.00
September 28, 2000 4.25 to 1.00
December 31, 2000 4.00 to 1.00
and each Fiscal Quarter
thereafter
<PAGE>
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
11.01. Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrower shall fail to pay
(i) any principal of any Loan or Reimbursement Obligation when due or (ii) any
of the Obligations for fees or interest described in Article IV within three (3)
Business Days after the date such Obligations are due or (iii) any of the other
Obligations within thirty (30) days after the date such Obligations are due.
(b) Breach of Certain Covenants. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under Sections 7.02, 8.01, 8.02, 8.03, 8.04, 8.06, and 8.11,
Article IX or Article X.
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by the Borrower to the Agent or any Lender herein
or by the Borrower or any Guarantor in any of the other Loan Documents or in any
statement or certificate at any time given by any such Person pursuant to any of
the Loan Documents shall be false or misleading in any material respect on the
date as of which made (or deemed made).
(d) Other Defaults. The Borrower shall default in the performance of
or compliance with any term contained in this Agreement (other than as
identified in clauses (a), (b) or (c) of this Section 11.01) or any default or
event of default shall occur under any of the other Loan Documents, and such
default or event of default shall continue for thirty (30) days after the date
on which notice of the occurrence thereof is given to or by the Agent.
(e) Default as to Other Indebtedness; Operating Leases. The Borrower
or Material Subsidiaries shall fail to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise, but
after giving effect to any applicable cure period) with respect to any
Indebtedness (other than an Obligation) of the Borrower and the Material
Subsidiaries aggregating $5,000,000 or more. Any breach, default or event of
default shall occur, or any other condition shall exist under any
<PAGE>
instrument, agreement or indenture pertaining to any Funded Debt of the Borrower
or any Material Subsidiary, if the effect thereof is to cause an acceleration,
mandatory redemption or other required repurchase of such Funded Debt, or permit
the holder(s) of such Funded Debt to accelerate the maturity of any such Funded
Debt or require a redemption or other repurchase of such Funded Debt; or any
such Funded Debt shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the Borrower or Material Subsidiaries (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof. Any breach,
default or event of default on the part of the Borrower or Material Subsidiaries
shall occur under any Operating Lease to which the Borrower or any Material
Subsidiary is a party which breach, default or event of default shall materially
adversely affect the rights of the Borrower or any Material Subsidiary with
respect to the property subject to any Operating Lease on which the remaining
payments exceed $2,000,000.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i) An
involuntary case shall be commenced against the Borrower or any of its
Subsidiaries and the petition shall not be dismissed, stayed, bonded or
discharged within sixty (60) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Borrower or any of its Subsidiaries in an involuntary case, under
any applicable bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over the Borrower or any of its
Subsidiaries or over all or a substantial part of the property of the Borrower
or any of its Subsidiaries shall be entered; or an interim receiver, trustee or
other custodian of the Borrower or any of its Subsidiaries or of all or a
substantial part of the property of the Borrower or any of
<PAGE>
its Subsidiaries shall be appointed or a warrant of attachment, execution or
similar process against any substantial part of the property of the Borrower or
any of its Subsidiaries shall be issued and any such event shall not be stayed,
dismissed, bonded or discharged within sixty (60) days after entry, appointment
or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. The Borrower
or any of its Subsidiaries shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; or the
Borrower or any of its Subsidiaries shall make any assignment for the benefit of
creditors or shall be unable or fail, or admit in writing its inability, to pay
its debts as such debts become due; or the board of directors (or equivalent) of
the Borrower or any of its Subsidiaries (or any committee thereof) adopts any
resolution or otherwise authorizes any action to approve any of the foregoing.
(h) Dissolution. Any order, judgment or decree shall be entered
against the Borrower or any of its Subsidiaries decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of sixty (60) days; or the Borrower or any of its
Subsidiaries shall otherwise dissolve, be dissolved, or cease to exist except as
specifically permitted by this Agreement.
(i) Loan Documents; Failure of Security. At any time, for any reason,
(i) any Loan Document ceases to be in full force and effect or the Borrower or
Guarantor party thereto seeks to repudiate its obligations thereunder and the
Liens intended to be created thereby are, or the Borrower seeks to render such
Liens, invalid or unperfected, or (ii) Liens in favor of the Agent for the
benefit of the Holders contemplated by the Loan Documents shall, at any time,
for any reason, be invalidated or otherwise cease to be in full force and
effect, or such Liens shall be subordinated or shall not have the priority
contemplated by this Agreement or the Loan Documents, other than as a result of
the actions or failure to act on the part of the Agent or any Lender.
<PAGE>
(j) Judgments and Attachments. (i) Any money judgment (other than a
money judgment covered by insurance; provided that no Responsible Officer has
received any written notice from the applicable insurer that it has denied
coverage), writ or warrant of attachment, or similar process against the
Borrower or any of its Subsidiaries or any of their respective assets involving
in any case an amount in excess of $250,000 is entered and shall remain
undischarged, unvacated, unbonded or unstayed for a period of the lesser of (A)
sixty (60) days, (B) such shorter period required by any applicable Requirement
of Law, or (C) five (5) days prior to the date of any proposed sale thereunder;
provided, however, if any such judgment, writ or warrant of attachment or
similar process is in excess of $5,000,000, the entry thereof shall immediately
constitute an Event of Default hereunder.
(ii) A federal tax Lien is filed against the Borrower or any of its
property which is not discharged of record, bonded over or otherwise secured to
the satisfaction of the Agent within forty-five (45) days after the filing
thereof or the date upon which the Agent receives actual knowledge of the filing
thereof for an amount which, either separately or when aggregated with the
amount of any judgments described in clause (i) above and/or the amount of any
Environmental Lien Claims described in clause (iii) below, equals or exceeds
$5,000,000.
(iii) An Environmental Lien is filed against any property of the
Borrower or any Material Subsidiary with respect to Claims in an amount which,
when aggregated with the amount of judgments set forth in clause (i) above
and/or the federal tax Lien Claims described in clause (ii) above, equals or
exceeds $5,000,000.
(k) Termination Event. Any Termination Event occurs which
could reasonably be expected to subject either the Borrower or any ERISA
Affiliate to liability in excess of $1,000,000.
(l) Waiver Application. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and the Agent believes
that the substantial business hardship upon which the application for the waiver
is based could subject either the
<PAGE>
Borrower or any ERISA Affiliate to an obligation to pay more than $1,000,000.
(m) Change in Control. A Change of Control shall occur.
(n) Material Adverse Effect. An event shall occur which results in a
Material Adverse Effect.
(o) Receivables Purchase Defaults. Any "Event of Default" shall occur
under the Receivables Purchase Documents, any mandatory prepayment shall be
required to be made pursuant to the terms of the Receivables Purchase Documents,
or any "Termination Event" shall occur under the Receivables Purchase Documents.
Notwithstanding anything in clauses (f), (g), or (h) above to the contrary, no
Event of Default shall be deemed to have occurred in the event an involuntary
case under any applicable bankruptcy, insolvency or other similar law is
commenced against any of the Subsidiaries of the Borrower identified on Schedule
6.01-C as inactive Subsidiaries of the Borrower (the "Inactive Subsidiaries"),
any Inactive Subsidiary commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law, or any order, judgment or decree
shall be entered against any Inactive Subsidiary decreeing its involuntary
dissolution or split up.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with Section 14.07.
<PAGE>
11.02. Rights and Remedies.
(a) Acceleration and Termination. Upon the occurrence of any Event of
Default described in Sections 11.01(f), (g) or (h) as applied to the Borrower or
any Material Subsidiary, the Lenders' respective obligations to make Loans under
the Revolving Credit Commitments shall automatically and immediately terminate
and the unpaid principal amount of, and any and all accrued interest on, the
Obligations and all accrued fees shall automatically become immediately due and
payable, without presentment, demand, or protest or other requirements of any
kind (including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by the Borrower; and upon the occurrence
and during the continuance of any other Event of Default, the Agent shall at the
request, or may with the consent, of the Requisite Lenders, by written notice to
the Borrower, (i) declare that the Lenders' respective obligations to make Loans
under the Revolving Credit Commitments are terminated, whereupon such obligation
of each Lender to make any Loan hereunder shall immediately terminate, and/or
(ii) declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Obligations to be, and the same shall thereupon be, immediately
due and payable, without (except as specifically set forth herein) presentment,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and of acceleration), all of which are hereby expressly
waived by the Borrower.
(b) Rescission. If at any time after termination of the Lenders'
obligations to make Loans under the Revolving Credit Commitments and/or
acceleration of the maturity of the Loans, the Borrower shall pay all arrears of
interest and all payments on account of principal of the Loans which shall have
become due otherwise than by acceleration (with interest on principal and, to
the extent permitted by law, on overdue interest, at the rates specified in this
Agreement) and all Events of Default and Potential Events of Default (other than
nonpayment of principal of and accrued interest on the Loans due and payable
solely by virtue of acceleration) shall be remedied
<PAGE>
or waived pursuant to Section 14.07, then upon the written consent of the
Requisite Lenders and written notice to the Borrower, the termination of
Lenders' respective obligations to make Loans under the Revolving Credit
Commitments and/or the aforesaid acceleration and its consequences may be
rescinded and annulled; but such action shall not affect any subsequent Event of
Default or Potential Event of Default or impair any right or remedy consequent
thereon. The provisions of the preceding sentence are intended merely to bind
the Lenders to a decision which may be made at the election of the Requisite
Lenders; they are not intended to benefit the Borrower and do not give the
Borrower the right to require the Lenders to rescind or annul any termination of
the aforesaid obligations of the Lenders or any acceleration hereunder, even if
the conditions set forth herein are met.
(c) Enforcement. The Borrower acknowledges that in the event the
Borrower or any Guarantor fails to perform, observe or discharge any of their
respective obligations or liabilities under this Agreement or any other Loan
Document, any remedy of law may prove to be inadequate relief to the Agent and
the Lenders; therefore, the Borrower agrees that the Agent and the Lenders shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
ARTICLE XII
THE AGENT
12.01. Appointment. (a) The Issuing Bank and each Lender hereby
designates and appoints Citicorp as the Agent of the Issuing Bank and such
Lender under this Agreement, and the Issuing Bank and each Lender hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and the Loan Documents and to exercise such powers
as are set forth herein or therein together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this Article XII.
(b) The provisions of this Article XII are solely for the benefit of
the Agent, the Lenders and the Issuing
<PAGE>
Bank, and neither the Borrower nor any Subsidiary of the Borrower shall have any
rights to rely on or enforce any of the provisions hereof (other than as
expressly set forth in Section 12.07). In performing its functions and duties
under this Agreement, the Agent shall act solely as agent of the Lenders and
Issuing Bank and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency, trustee or fiduciary with or for the
Borrower or any Affiliate of the Borrower. The Agent may perform any of its
duties hereunder, or under the other Loan Documents, by or through its agents or
employees.
12.02. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of the Agent shall be mechanical and administrative
in nature. The Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Holder. Nothing in this Agreement or any of the
Loan Documents, expressed or implied, is intended to or shall be construed to
impose upon the Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein. The
Issuing Bank and each Lender shall make its own independent investigation of the
financial condition and affairs of the Borrower and Affiliates in connection
with the making and the continuance of the Loans hereunder and shall make its
own appraisal of the creditworthiness of the Borrower and Guarantor initially
and on a continuing basis, and the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Holder
with any credit or other information with respect thereto (except for reports
required to be delivered by the Agent under the terms of this Agreement). If the
Agent seeks the consent or approval of the Lenders or Issuing Bank to the taking
or refraining from taking of any action hereunder, the Agent shall send notice
thereof to the Issuing Bank and each Lender. The Agent shall promptly notify the
Issuing Bank and each Lender at any time that the Lenders so required hereunder
have instructed the Agent to act or refrain from acting pursuant hereto. As to
any matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes or any amount payable under
any provision of Article IV when due) or the other Loan Documents, the Agent
shall not be required to exercise any discretion or take any action.
Notwithstanding the foregoing, the Agent shall be required to act or refrain
<PAGE>
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Requisite Lenders (unless the instructions
or consent of all of the Lenders is required hereunder or thereunder) and such
instructions shall be binding upon all Lenders, Issuing Bank, and Holders of
Notes; provided, however, the Agent shall not be required to take any action
which (i) the Agent reasonably believes will expose it to personal liability
unless the Agent receives an indemnification satisfactory to it from the Lenders
with respect to such action or (ii) is contrary to this Agreement, the other
Loan Documents or applicable law.
12.03. Rights, Exculpation, Etc. (a) Liabilities; Responsibilities.
None of the Agent, any Affiliate of the Agent, or any of their respective
officers, directors, employees or agents shall be liable to any Holder for any
action taken or omitted by them hereunder or under any of the Loan Documents, or
in connection therewith, except that no Person shall be relieved of any
liability imposed by law for gross negligence or willful misconduct. The Agent
shall not be liable for any apportionment or distribution of payments made by it
in good faith pursuant to Section 3.02(b), and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Holder to whom payment was due, but not made, shall be to
recover from other Holders any payment in excess of the amount to which they are
determined to have been entitled. The Agent shall not be responsible to any
Holder for any recitals, statements, representations or warranties herein or for
the execution, effectiveness, genuineness, validity, legality, enforceability,
collectibility, or sufficiency of this Agreement or any of the other Loan
Documents or the transactions contemplated thereby, or for the financial
condition of the Borrower or any of its Affiliates or the Guarantor. The Agent
shall not be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any of the other Loan Documents, or the financial condition of the Borrower or
any of its Affiliates or the Guarantor, or the existence or possible existence
of any Potential Event of Default or Event of Default.
(b) Right to Request Instructions. The Agent may at any time request
instructions from the Lenders and
<PAGE>
Issuing Bank with respect to any actions or approvals which by the terms of any
of the Loan Documents the Agent is permitted or required to take or to grant,
and the Agent shall be absolutely entitled to refrain from taking any action or
to withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any approval under any of
the Loan Documents until it shall have received such instructions from those
Lenders from whom the Agent is required to obtain such instructions for the
pertinent matter in accordance with the Loan Documents. Without limiting the
generality of the foregoing, no Holder shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
under the Loan Documents in accordance with the instructions of the Requisite
Lenders or, where required by the express terms of this Agreement, a greater
proportion of the Lenders.
12.04. Reliance. The Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it.
12.05. Indemnification. To the extent that the Agent is required to be
reimbursed and indemnified by the Borrower but is not reimbursed and indemnified
by the Borrower, the Lenders will reimburse and indemnify the Agent for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against it
in any way relating to or arising out of the Loan Documents or any action taken
or omitted by the Agent under the Loan Documents, in proportion to each Lender's
Pro Rata Share. The obligations of the Lenders under this Section 12.05 shall
survive the payment in full of the Loans and all other Obligations and the
termination of this Agreement.
12.06. Citicorp Individually. With respect to its Pro Rata Share of
the Commitments hereunder, if any, and the Loans made by it, if any, Citicorp
shall have and may
<PAGE>
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall,
unless the context clearly otherwise indicates, include Citicorp in its
individual capacity as a Lender or one of the Requisite Lenders. Citicorp and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of banking, trust or other business with the Borrower or any of its
Affiliates as if it were not acting as the Agent pursuant hereto.
12.07. Successor Agents. (a) Resignation. The Agent may resign from
the performance of all its functions and duties hereunder at any time by giving
at least thirty (30) Business Days' prior written notice to the Borrower and the
Lenders. Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to this Section 12.07.
(b) Appointment by Requisite Lenders. Upon any such notice of
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent selected from among the Lenders which appointment shall be subject to the
prior written approval of the Borrower (which may not be unreasonably withheld,
and shall not be required upon the occurrence and during the continuance of an
Event of Default).
(c) Appointment by Retiring Agent. If a successor Agent shall not have
been appointed within the thirty (30) Business Day period provided in clause (a)
of this Section 12.07, the retiring Agent, with the consent of the Borrower
(which may not be unreasonably withheld, and shall not be required upon the
occurrence and during the continuance of an Event of Default), shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
the Requisite Lenders appoint a successor Agent as provided above.
(d) Rights of the Successor and Retiring Agents. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and
<PAGE>
obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article XII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Agreement.
12.08. Relations Among Lenders. The Issuing Bank and each Lender
agrees (except as provided in Section 14.05) that it will not take any legal
action, nor institute any actions or proceedings, against the Borrower or any
other obligor hereunder or with respect to any Collateral, without the prior
written consent of the Requisite Lenders. Without limiting the generality of the
foregoing, neither the Issuing Bank nor any Lender may accelerate or otherwise
enforce its portion of the Obligations, or unilaterally terminate its
Commitments except in accordance with Section 11.02(a).
12.09. Concerning the Collateral and the Loan Documents. (a)
Protective Advances. The Agent may from time to time, before or after the
occurrence of an Event of Default, make such disbursements and advances pursuant
to the Loan Documents which the Agent, in its sole discretion, deems necessary
or desirable to preserve or protect the Collateral or any portion thereof or to
enhance the likelihood or maximize the amount of repayment of the Loans and
other Obligations ("Protective Advances"). The Agent shall notify the Borrower
and each Lender in writing of each such Protective Advance, which notice shall
include a description of the purpose of such Protective Advance. The Borrower
agrees to pay the Agent, upon demand, the principal amount of all outstanding
Protective Advances, together with interest thereon at the rate from time to
time applicable to Base Rate Loans from the date of such Protective Advance
until the outstanding principal balance thereof is paid in full. If the Borrower
fails to make payment in respect of any Protective Advance within one (1)
Business Day after the date the Borrower receives written demand therefor from
the Agent, the Agent shall promptly notify each Lender and each Lender agrees
that it shall thereupon make available to the Agent, in Dollars in immediately
available funds, the amount equal to such Lender's Pro Rata Share of such
Protective Advance. If such funds are not made available to the Agent by such
Lender within one (1) Business Day after the Agent's demand therefor, the Agent
will be entitled to recover any such amount from such Lender together with
interest thereon
<PAGE>
at the Federal Funds Rate for each day during the period commencing on the date
of such demand and ending on the date such amount is received. The failure of
any Lender to make available to the Agent its Pro Rata Share of any such
Protective Advance shall neither relieve any other Lender of its obligation
hereunder to make available to the Agent such other Lender's Pro Rata Share of
such Protective Advance on the date such payment is to be made nor increase the
obligation of any other Lender to make such payment to the Agent. All
outstanding principal of, and interest on, Protective Advances shall constitute
Obligations secured by the Collateral until paid in full by the Borrower.
(b) Authority. The Issuing Bank and each Lender authorizes and directs
the Agent to enter into the Loan Documents relating to the Collateral for the
benefit of the Lenders and Issuing Bank. The Issuing Bank and each Lender agrees
that any action taken by the Agent or the Requisite Lenders (or, where required
by the express terms of this Agreement, a greater proportion of the Lenders) in
accordance with the provisions of this Agreement or the other Loan Documents,
and the exercise by the Agent or the Requisite Lenders (or, where so required,
such greater proportion) of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all of the Lenders. Without limiting the generality of the
foregoing, the Agent shall have the sole and exclusive right and authority to
(i) act as the disbursing and collecting agent for the Lenders with respect to
all payments and collections arising in connection with this Agreement and the
Loan Documents relating to the Collateral; (ii) execute and deliver each Loan
Document relating to the Collateral and accept delivery of each such agreement
delivered by the Borrower, any of its Subsidiaries or Guarantor a party thereto;
(iii) act as collateral agent for the Lenders for purposes of the perfection of
all security interests and Liens created by such agreements and all other
purposes stated therein; provided, however, the Agent hereby appoints,
authorizes and directs the Lenders and Issuing Bank to act as collateral
sub-agent for the Agent, the Lenders and the Issuing Bank for purposes of the
perfection of all security interests and Liens with respect to the property of
the Borrower and its Subsidiaries at any time in the possession of such Lender
or the Issuing Bank, including, without limitation, deposit accounts maintained
<PAGE>
with, and cash and Cash Equivalents held by, such Lender or the Issuing Bank;
(iv) manage, supervise and otherwise deal with the Collateral; (v) take such
action as is necessary or desirable to maintain the perfection and priority of
the security interests and liens created or purported to be created by the Loan
Documents; and (vi) except as may be otherwise specifically restricted by the
terms of this Agreement or any other Loan Document, exercise all remedies given
to the Agent, the Lenders or the Issuing Bank with respect to the Collateral
under the Loan Documents relating thereto, applicable law or otherwise.
(c) Release of Collateral; Release of Guarantors. (i) The Issuing Bank
and each Lender hereby directs, in accordance with the terms of this Agreement,
the Agent to release any Lien held by the Agent for the benefit of the Holders:
(A) against all of the Collateral, upon final and indefeasible payment
in full of the Obligations and termination of this Agreement;
(B) against any part of the Collateral sold or disposed of (directly
or indirectly) by the Borrower or any of its Subsidiaries, if such sale or
disposition is permitted by Section 9.02 or is otherwise consented to by
the Requisite Lenders, as certified to the Agent by the Borrower in an
Officer's Certificate; and/or
(C) against any part of the Collateral consisting of a promissory
note, upon final and indefeasible payment in full of the Indebtedness
evidenced thereby.
(ii) The Issuing Bank and each Lender hereby directs the Agent to
execute and deliver or file such termination and partial release statements and
do such other things as are necessary to release Liens to be released pursuant
to this Section 12.09(c) promptly upon the effectiveness of any such release.
<PAGE>
ARTICLE XIII
YIELD PROTECTION
13.01. Taxes. (a) Payment of Taxes. Any and all payments by the
Borrower hereunder or under any Note or other document evidencing any
Obligations shall be made, in accordance with Section 3.02, free and clear of
and without reduction for any and all present or future taxes, levies, imposts,
deductions, charges, withholdings, or levies which arise from the payment or
performance under, or otherwise with respect to, any of the Loan Documents or
the Commitments and all other liabilities with respect thereto excluding, in the
case of each Lender and the Agent, taxes imposed on or measured by net income or
overall gross receipts and capital and franchise taxes imposed on it by (i) the
United States, (ii) the Governmental Authority of the jurisdiction in which such
Lender's Applicable Lending Office is located or any political subdivision
thereof or (iii) the Governmental Authority in which such Person is organized,
managed and controlled or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges and withholdings being
hereinafter referred to as "Taxes"). If the Borrower shall be required by
applicable Requirements of Law to withhold or deduct any Taxes from or in
respect of any sum payable hereunder or under any such Note or document to any
Lender or the Agent, (x) the sum payable to such Lender or the Agent shall be
increased as may be necessary so that after making all required withholding or
deductions (including withholding or deductions applicable to additional sums
payable under this Section 13.01) such Lender or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
withholding or deductions been made, (y) the Borrower shall make such
withholding or deductions, and (z) the Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) Indemnification. The Borrower will indemnify each Lender and the
Agent against, and reimburse each on demand for, the full amount of all Taxes
and all stamp or documentary taxes, excise taxes, ad valorem taxes, charges and
other taxes imposed on the value of property of the Borrower and its
Subsidiaries, (including, without limitation, any additional income or franchise
taxes resulting therefrom) incurred or paid by or on behalf of such Lender or
the Agent (as the case may be) by any of their respective Affiliates in
connection with the execution, delivery or registration of the Loan Documents,
<PAGE>
or from and any liability (including penalties, interest, and out-of-pocket
expenses paid to third parties) arising therefrom or with respect thereto,
whether or not such Taxes were lawfully payable. A certificate in reasonable
detail as to any additional amount payable to any Person under this Section
13.01 submitted by it to the Borrower shall, absent manifest error, be final,
conclusive and binding upon all parties hereto. Each Lender agrees, within a
reasonable time after receiving a written request from the Borrower, to provide
the Borrower and the Agent with such certificates as are reasonably required,
and take such other actions as are reasonably necessary to claim such exemptions
as such Lender may be entitled to claim in respect of all or a portion of any
Taxes which are otherwise required to be paid or deducted or withheld pursuant
to this Section 13.01 in respect of any payments under this Agreement or under
the Notes.
(c) Receipts. Within thirty (30) days after the date of any payment of
Taxes by the Borrower, it will furnish to the Agent, at its address referred to
in Section 14.08, the original or a certified copy of a receipt evidencing
payment thereof.
(d) Foreign Bank Certifications. (i) Each Lender that is not created
or organized under the laws of the United States or a political subdivision
thereof shall deliver to the Borrower and the Agent on the Closing Date or the
date on which such Lender becomes a Lender pursuant to Section 14.01 hereof a
true and accurate certificate executed in duplicate by a duly authorized officer
of such Lender to the effect that such Lender is eligible to receive payments
hereunder and under the Notes without deduction or withholding of United States
federal income tax (I) under the provisions of an applicable tax treaty
concluded by the United States (in which case the certificate shall be
accompanied by two duly completed copies of IRS Form 1001 (or any successor or
substitute form or forms)), (II) under Sections 1442(c)(1) and 1442(a) of the
Internal Revenue Code (in which case the certificate shall be accompanied by two
duly completed copies of IRS Form 4224 (or any successor or substitute form or
forms)), or (III) due to such Lender's not being a "bank" as such term is used
in Section 881(c)(3)(A) of the Internal Revenue Code (in which case, the
certificate shall be accompanied by two accurate and
<PAGE>
complete original signed copies of IRS Form W-8 (or any successor or substitute
form or forms)).
(ii) Each Lender further agrees to deliver to the Borrower and the
Agent from time to time, a true and accurate certificate executed in duplicate
by a duly authorized officer of such Lender before or promptly upon the
occurrence of any event requiring a change in the most recent certificate
previously delivered by it to the Borrower and the Agent pursuant to this
Section 13.01(d). Each certificate required to be delivered pursuant to this
Section 3.01(d)(ii) shall certify as to one of the following:
(A) that such Lender can continue to receive payments hereunder and
under the Notes without deduction or withholding of United States federal
income tax;
(B) that such Lender cannot continue to receive payments hereunder and
under the Notes without deduction or withholding of United States federal
income tax as specified therein but does not require additional payments
pursuant to Section 13.01(a) because it is entitled to recover the full
amount of any such deduction or withholding from a source other than the
Borrower; or
(C) that such Lender is no longer capable of receiving payments
hereunder and under the Notes without deduction or withholding of United
States federal income tax as specified therein and that it is not capable
of recovering the full amount of the same from a source other than the
Borrower.
Each Lender agrees to deliver to the Borrower and the Agent further duly
completed copies of the above-mentioned IRS forms on or before the earlier of
(x) the date that any such form expires or becomes obsolete or otherwise is
required to be resubmitted as a condition to obtaining an exemption from
withholding from United States federal income tax and (y) fifteen (15) days
after the occurrence of any event requiring a change in the most recent form
previously delivered by such Lender to the Borrower and Agent, unless any change
in treaty, law, regulation, or official interpretation thereof which would
render such form
<PAGE>
inapplicable or which would prevent the Lender from duly completing and
delivering such form has occurred prior to the date on which any such delivery
would otherwise be required and the Lender promptly advises the Borrower that it
is not capable of receiving payments hereunder and under the Notes without any
deduction or withholding of United States federal income tax.
13.02. Increased Capital. If after the date hereof any Lender
determines that (i) the adoption or implementation of or any change in or in the
interpretation or administration of any law or regulation or any guideline or
request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over any
Lender or banks or financial institutions generally (whether or not having the
force of law), compliance with which affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and (ii) the amount of such capital is increased by or
based upon the making or maintenance by any Lender of its Loans or other
advances made hereunder or the existence of any Lender's obligation to make
Loans, then, upon written demand by such Lender (with a copy of such demand to
the Agent), the Borrower shall immediately pay to the Agent for the account of
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation therefor. Such demand
shall be accompanied by a statement as to the amount of such compensation and
include a brief summary of the basis for such demand. Such statement shall be
conclusive and binding for all purposes, absent manifest error.
13.03. Changes; Legal Restrictions. If after the date hereof any
Lender determines that the adoption or implementation of or any change in or in
the interpretation or administration of any law or regulation or any guideline
or request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over any
Lender or over banks or financial institutions generally (whether or not having
the force of law), compliance with which:
(a) does or will subject a Lender (or its Applicable Lending Office or
Eurodollar Affiliate) to charges (other than taxes) of any kind which
<PAGE>
such Lender reasonably determines to be applicable to the Commitments of
the Lenders to make Eurodollar Rate Loans or change the basis of taxation
of payments to that Lender of principal, fees, interest, or any other
amount payable hereunder with respect to Eurodollar Rate Loans; or
(b) does or will impose, modify, or hold applicable, in the
determination of a Lender, any reserve (other than reserves taken into
account in calculating the Eurodollar Rate), special deposit, compulsory
loan, FDIC insurance or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans
by, commitments made, or other credit extended by, or any other acquisition
of funds by, a Lender or any Applicable Lending Office or Eurodollar
Affiliate of that Lender;
and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining the Loans or to reduce any amount receivable
thereunder; then, in any such case, upon written demand by such Lender (with a
copy of such demand to the Agent), the Borrower shall immediately pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, such amount or amounts as may be necessary to compensate such Lender or
its Eurodollar Affiliate for any such additional cost incurred or reduced amount
received. Such demand shall be accompanied by a statement as to the amount of
such compensation and include a brief summary of the basis for such demand. Such
statement shall be conclusive and binding for all purposes, absent manifest
error.
13.04. Illegality. (i) If at any time any Lender determines (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties) that the making or continuation of any Eurodollar Rate Loan
has become unlawful or impermissible by compliance by that Lender with any law,
governmental rule, regulation or order of any Governmental Authority (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful or would result in costs or penalties), then, and in any such event,
such Lender may give notice of that determination, in writing, to the
<PAGE>
Borrower and the Agent, and the Agent shall promptly transmit the notice to each
other Lender.
(ii) When notice is given by a Lender under Section 13.04(i), (A) the
Borrower's right to request from such Lender and such Lender's obligation, if
any, to make Eurodollar Rate Loans shall be immediately suspended, and such
Lender shall make a Base Rate Loan as part of any requested Borrowing of
Eurodollar Rate Loans and (B) if the affected Eurodollar Rate Loan or Loans are
then outstanding, the Borrower shall immediately, or if permitted by applicable
law, no later than the date permitted thereby, upon at least one (1) Business
Day's prior written notice to the Agent and the affected Lender, convert each
such Loan into a Base Rate Loan.
(iii) If at any time after a Lender gives notice under Section 13.04(i)
such Lender determines that it may lawfully make Eurodollar Rate Loans, such
Lender shall promptly give notice of that determination, in writing, to the
Borrower and the Agent, and the Agent shall promptly transmit the notice to each
other Lender. The Borrower's right to request, and such Lender's obligation, if
any, to make Eurodollar Rate Loans shall thereupon be restored.
13.05. Compensation. In addition to all amounts required to be paid by
the Borrower pursuant to Section 4.01, the Borrower shall compensate each
Lender, upon demand, for all losses, expenses and liabilities (including,
without limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Lender's Eurodollar Rate Loans to the Borrower but excluding any
loss of Applicable Eurodollar Rate Margin on the relevant Loans) which that
Lender may sustain (i) if for any reason a Borrowing, conversion into or
continuation of Eurodollar Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of Conversion/Continuation given
by the Borrower or in a telephonic request by it for borrowing or
conversion/continuation or a successive Eurodollar Interest Period does not
commence after notice therefor is given pursuant to Section 4.01(c), (ii) if for
any reason any Eurodollar Rate Loan is prepaid (including, without limitation,
mandatorily pursuant to Section 3.01) on a date which is not the last day of the
applicable Eurodollar Interest Period, (iii) as a consequence of a required
conversion of a Eurodollar Rate
<PAGE>
Loan to a Base Rate Loan as a result of any of the events indicated in Section
4.02(d), or (iv) as a consequence of any failure by the Borrower to repay
Eurodollar Rate Loans when required by the terms of this Agreement. The Lender
making demand for such compensation shall deliver to the Borrower concurrently
with such demand a written statement in reasonable detail as to such losses,
expenses and liabilities, and this statement shall be conclusive as to the
amount of compensation due to that Lender, absent manifest error.
13.06. Limitation on Additional Amounts Payable by the Borrower.
Notwithstanding the provisions of Section 13.01(a), the Borrower shall not be
required to pay any additional amounts thereunder to a Lender if (a) the
obligation to pay such additional amounts would not have arisen but for a
failure by the Lender to comply with the requirements described in Section 13.01
or (b) the Lender shall not have furnished the Borrower with such forms or shall
not have taken such other action as reasonably may be available to it under
applicable tax laws and any applicable tax treaty to obtain an exemption from,
or reduction (to the lowest applicable rate) of withholding of such United
States federal income tax; provided, however, the Borrower's obligation to pay
such additional amounts shall be reinstated upon receipt of such forms or
evidence that action with respect to obtaining such exemption or reduction has
been taken.
13.07. Change in Lending Office. Any Lender claiming any additional
amounts payable pursuant to Section 13.01 shall use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
change the Lending Office designated by it for purposes of this Agreement to a
Lending Office in another jurisdiction, if the making of such a change would
avoid the need for, or reduce the amount of, any such additional amounts which
may thereafter accrue and would not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender.
ARTICLE XIV
MISCELLANEOUS
14.01. Assignments and Participations. (a) Assignments. No assignments
or participations of any Lender's rights or obligations under this Agreement
shall be
<PAGE>
made except in accordance with this Section 14.01. Each Lender may assign to one
or more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all of its rights and obligations with respect to the
Loans) in accordance with the provisions of this Section 14.01.
(b) Limitations on Assignments. Each assignment shall be subject to
the following conditions: (i) each such assignment shall be of all of the
assigning Lender's rights and obligations under this Agreement, (ii) each such
assignment shall be to an Eligible Assignee, (iii) the Borrower shall have the
right to approve each such Eligible Assignee and any assignee which is an
Affiliate of a Lender which is not domiciled in the United States, which
approval shall not be unreasonably withheld or delayed and (iv) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance. Upon such
execution, delivery, acceptance and recording in the Register, from and after
the effective date specified in each Assignment and Acceptance and agreed to by
the Agent, (A) the assignee thereunder shall, in addition to any rights and
obligations hereunder held by it immediately prior to such effective date, if
any, have the rights and obligations hereunder that have been assigned to it
pursuant to such Assignment and Acceptance and shall, to the fullest extent
permitted by law, have the same rights and benefits hereunder as if it were an
original Lender hereunder, (B) the assigning Lender shall relinquish its rights
and be released from its obligations under this Agreement and the assigning
Lender shall cease to be a party hereto, and (C) the Borrower shall execute and
deliver to the assignee thereunder one or more Notes, as applicable, evidencing
its obligations to such assignee with respect to the Loans.
(c) The Register. The Agent shall maintain at its address referred to
in Section 14.08 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment under each Loan of, and
principal amount of the Loans under each facility owing to, each Lender from
time to time and whether such Lender is an original Lender or the assignee of
another Lender pursuant to an Assignment and Acceptance. The entries in the
Register shall be conclusive and binding for
<PAGE>
all purposes, absent manifest error, and the Borrower and each of its
Subsidiaries, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Fee. Upon its receipt of an Assignment and Acceptance executed by
the assigning Lender and an Eligible Assignee and a processing and recordation
fee of $2,500 (payable by the assigning Lender or the assignee, as shall be
agreed between them), the Agent shall, if such Assignment and Acceptance has
been completed and is in compliance with this Agreement and in substantially the
form of Exhibit A, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower and the other Lenders.
(e) Participations. Each Lender may sell participations to one or more
other financial institutions in or to all or a portion of its rights and
obligations under and in respect of any and all facilities under this Agreement
(including, without limitation, all or a portion of any or all of its
Commitments hereunder and the Loans owing to it); provided, however, that (i)
such Lender's obligations under this Agreement (including, without limitation,
its Commitments hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the Borrower, the Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and (iv) such participant's rights
to agree or to restrict such Lender's ability to agree to the modification,
waiver or release of any of the terms of the Loan Documents or to the release of
any Collateral covered by the Loan Documents, to consent to any action or
failure to act by any party to any of the Loan Documents or any of their
respective Affiliates, or to exercise or refrain from exercising any powers or
rights which any Lender may have under or in respect of the Loan Documents or
any Collateral, shall be limited to the right to consent to (A) increase in the
Commitment of the Lender from whom such participant purchased a participation,
(B) reduction of the principal of, or rate or amount of interest on the Loans(s)
subject to
<PAGE>
such participation (other than by the payment or prepayment thereof), (C)
postponement of any date fixed for any payment of principal of, or interest on,
the Loan(s) subject to such participation and (D) release of any guarantor of
the Obligations or all or a substantial portion of the Collateral except as
provided in Section 12.09(c).
(f) Information Regarding the Borrower. Any Lender may, in connection
with any assignment or proposed assignment pursuant to this Section 14.01,
disclose to the assignee, or proposed assignee, any information relating to the
Borrower or its Subsidiaries furnished to such Lender by the Agent or by or on
behalf of the Borrower; provided that, prior to any such disclosure, such
assignee or proposed assignee shall agree, in writing, to preserve in accordance
with Section 14.20 the confidentiality of any confidential information described
therein.
(g) Payment to Participants. Intentionally omitted.
(h) Lenders' Creation of Security Interests. Notwithstanding any other
provision set forth in this Agreement, any Lender may at any time create a
security interest in all or any portion of its rights under this Agreement
(including, without limitation, Obligations owing to it and any Notes held by
it) in favor of any Federal Reserve bank in accordance with Regulation A of the
Federal Reserve Board.
14.02. Expenses.
(a) Generally. The Borrower agrees upon demand to pay, or reimburse
the Agent for, all of the Agent's reasonable internal and external audit, legal,
appraisal, valuation, filing, document duplication and reproduction and
investigation expenses and for all reasonable other out-of-pocket costs and
expenses of every type and nature (including, without limitation, the reasonable
fees, expenses and disbursements of Sidley & Austin, local legal counsel,
auditors, accountants, appraisers, printers, insurance and environmental
advisers, and other consultants and agents) incurred by the Agent in connection
with (i) the Agent's review and investigation of the Borrower and its Affiliates
and the Collateral in connection with the preparation, negotiation, and
execution of the Loan
<PAGE>
Documents and the Agent's periodic reviews and audits of the Borrower; (ii) the
preparation, negotiation, execution and interpretation of this Agreement
(including, without limitation, the satisfaction or attempted satisfaction of
any of the conditions set forth in Article V) and the other Loan Documents and
the making of the Loans hereunder; (iii) the creation, perfection or protection
of the Liens under the Loan Documents (including, without limitation, any
reasonable fees and expenses for local counsel in various jurisdictions); (iv)
the ongoing administration of this Agreement, the other Loan Documents and the
Loans, including consultation with attorneys in connection therewith and with
respect to the Agent's rights and responsibilities under this Agreement and the
other Loan Documents; (v) the protection, collection or enforcement of any of
the Obligations or the enforcement of any of the Loan Documents; (vi) the
commencement of any court proceeding having as parties thereto Lenders,
participants, the Agent and/or the Borrower or any Subsidiary of the Borrower
and relating in any way to the Obligations, the Collateral, this Agreement or
any of the other Loan Documents, or the defense or intervention in any court
proceeding relating in any way to the Obligations, property of the Borrower
and/or its Subsidiaries, the Borrower, any of its Subsidiaries, this Agreement
or any of the other Loan Documents; (vii) the response to, and preparation for,
any subpoena or request for document production with which the Agent is served
or deposition or other proceeding in which the Agent is called to testify, in
each case, relating in any way to the Obligations, property of the Borrower
and/or its Subsidiaries, the Borrower, any of its Subsidiaries, this Agreement
or any of the other Loan Documents; and (viii) any amendments, consents,
waivers, assignments, restatements, or supplements to any of the Loan Documents
and the preparation, negotiation, and execution of the same.
(b) After Default. The Borrower further agrees to pay or reimburse the
Agent and the Lenders upon demand for all reasonable out-of-pocket costs and
expenses, including, without limitation, reasonable attorneys' fees (including
allocated costs of internal counsel and costs of settlement) incurred by the
Agent or any Lender after the occurrence, and during the continuance, of an
Event of Default (i) in enforcing any Loan Document or Obligation or any
security therefor or exercising or enforcing any other right or remedy available
by reason of such Event of
<PAGE>
Default; (ii) in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or in
any insolvency or bankruptcy proceeding; (iii) in commencing, defending or
intervening in any litigation or in filing a petition, complaint, answer, motion
or other pleadings in any legal proceeding relating to the Obligations, property
of the Borrower and/or its Subsidiaries, the Borrower or any of its Subsidiaries
and related to or arising out of the transactions contemplated hereby or by any
of the other Loan Documents; and (iv) in taking any other action in or with
respect to any suit or proceeding (bankruptcy or otherwise) described in clauses
(i) through (iii) above.
14.03. Indemnity. The Borrower further agrees to defend, protect,
indemnify, and hold harmless the Agent and each and all of the Lenders and each
of their respective officers, directors, employees, attorneys and agents
(including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
Article V) (collectively, the "Indemnitees") from and against any and all
liabilities, obligations, losses (other than loss of profits), damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (excluding any taxes and including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of (i) this Agreement or the other Loan
Documents, or any act, event or transaction related or attendant thereto, the
making of the Loans, the use or intended use of the proceeds of the Loans, or
any of the other transactions contemplated by any of the Loan Documents, or (ii)
any Liabilities and Costs relating to any violation by the Borrower or any
Material Subsidiary, or their respective predecessors-in-interest of any
Environmental, Health or Safety Requirements of Law, the past, present or future
operations of the Borrower or any Material Subsidiary, or any of their
respective predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective past, present or
future Property of the Borrower or any Material Subsidiary, the presence of
asbestos-containing materials at
<PAGE>
any respective past, present or future Property of the Borrower or any Material
Subsidiary, or the Release or threatened Release of any Contaminant into the
environment by the Borrower or any Material Subsidiary, or their respective
predecessors-in-interest, or the Release or threatened Release of any
Contaminant into the environment from or at any facility to which the Borrower
or any Material Subsidiary, or their respective predecessors-in-interest sent or
directly arranged the transport of any Contaminant (collectively, the
"Indemnified Matters"); provided, however, the Borrower shall have no obligation
to an Indemnitee hereunder with respect to Indemnified Matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnitee, as
determined by a court of competent jurisdiction. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees. The Agent and the Lenders agree
to notify the Borrower of the institution or assertion of any Indemnified
Matter, but the parties hereto hereby agree that the failure to so notify the
Borrower shall not release the Borrower from its obligations hereunder.
14.04. Change in Accounting Principles. If any change in the
accounting principles used in the preparation of the most recent Financial
Statements referred to in Section 7.01 are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by the
Borrower with the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of any of the
covenants, standards or terms found in Article VIII, Article IX, and Article X,
the parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
by the Borrower shall be the same after such changes as if such changes had not
been made; provided, however, no change in GAAP that would affect the method of
<PAGE>
calculation of any of the covenants, standards or terms shall be given effect in
such calculations until such provisions are amended, in a manner satisfactory to
the Requisite Lenders and the Borrower, to so reflect such change in accounting
principles.
14.05. Setoff. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default under Section
11.01(a) or acceleration of, or declaration that Obligations are due and payable
under Section 11.02(a), each Lender and any Affiliate of any Lender is hereby
authorized by the Borrower at any time or from time to time, without notice to
any Person (any such notice being hereby expressly waived) to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured (but not including trust accounts)) and any other
Indebtedness at any time held or owing by such Lender or any of its Affiliates
to or for the credit or the account of the Borrower against and on account of
the Obligations of the Borrower to such Lender or any of its Affiliates,
including, but not limited to, all Loans and all claims of any nature or
description arising out of or in connection with this Agreement, irrespective of
whether or not (i) such Lender shall have made any demand hereunder or (ii) the
Agent, at the request or with the consent of the Requisite Lenders, shall have
declared the principal of and interest on the Loans and other amounts due
hereunder to be due and payable as permitted by Article XI and even though such
Obligations may be contingent or unmatured. Each Lender agrees that it shall
not, without the express consent of the Requisite Lenders, and that it shall, to
the extent it is lawfully entitled to do so, upon the request of the Requisite
Lenders, exercise its setoff rights hereunder against any accounts of the
Borrower or any Guarantor now or hereafter maintained with such Lender or any
Affiliate of such Lender.
14.06. Ratable Sharing. The Lenders agree among themselves that (i)
with respect to all amounts received by them which are applicable to the payment
of the Obligations (excluding the fees described in Section 4.03 and Article
XIII), equitable adjustment will be made so that, in effect, all such amounts
will be shared among them ratably in
<PAGE>
accordance with their Pro Rata Shares, whether received by voluntary payment, by
the exercise of the right of setoff or banker's lien, by counterclaim or
cross-action or by the enforcement of any or all of the Obligations (excluding
the fees described in Sections 4.03 and Article XIII) or the Collateral, (ii) if
any of them shall by voluntary payment or by the exercise of any right of
counterclaim, setoff, banker's lien or otherwise, receive payment of a
proportion of the aggregate amount of the Obligations held by it, which is
greater than the amount which such Lender is entitled to receive hereunder, the
Lender receiving such excess payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it shall be deemed to
have done simultaneously upon the receipt of such payment) in such Obligations
owed to the others so that all such recoveries with respect to such Obligations
shall be applied ratably in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to such party
to the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 14.06 may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
subject to Section 14.05, the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
14.07. Amendments and Waivers. (a) General Provisions. Unless
otherwise provided for or required in this Agreement, no amendment or
modification of any provision of this Agreement or any of the other Loan
Documents shall be effective without the written agreement of the Requisite
Lenders (which the Requisite Lenders shall have the right to grant or
<PAGE>
withhold in their sole discretion) and the Borrower or Guarantor a party
thereto. No termination or waiver of any provision of this Agreement or any of
the other Loan Documents, or consent to any departure by the Borrower therefrom,
shall be effective without the written concurrence of the Requisite Lenders,
which the Requisite Lenders shall have the right to grant or withhold in their
sole discretion. All amendments, modifications, waivers and consents not
specifically reserved to Lenders and the Agent in Section 14.07(b), Section
14.07(c) and in other provisions of this Agreement shall require only the
approval of the Requisite Lenders. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was 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.
(b) Amendments, Consents and Waivers by all Lenders. Any amendment,
modification, termination, waiver or consent with respect to any of the
following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender:
(i) waiver of any of the conditions specified in Sections 5.01 and 5.02
(except with respect to a condition based upon another provision of this
Agreement, the waiver of which requires only the concurrence of the
Requisite Lenders),
(ii) increase in the amount of any of the Commitments of such Lender
(except with respect to an increase in the amount, or other modification to
the terms or components, of the Borrowing Base Certificate, each of which
shall require only the concurrence of the Requisite Lenders),
(iii) reduction of the principal of, rate or amount of interest on the
Loans or any fees or other amounts payable to such Lender (other than by
the payment or prepayment thereof),
(iv) postponement of the Revolving Credit Termination Date any date fixed
for any payment of principal of, or interest on, the Loans or any fees or
other amounts payable to such Lender,
(v) change in the definition of Revolving Credit Commitments,
(vi) release of any guarantor of the Obligations or all or a substantial
portion of the Collateral (except as provided in Section 12.09(c)),
<PAGE>
(vii) change in the (A) definitions of Requisite Lenders or (B) the
aggregate Pro Rata Share of the Lenders which shall be required for the
Lenders or any of them to take action under this Agreement or the other
Loan Documents,
(viii) amendment of Section 14.01, Section 14.06 or this Section 14.07,
(ix) assignment of any right or interest in or under this Agreement or any
of the other Loan Documents by the Borrower, and
(x) waiver of any Event of Default described in Sections 11.01(a), (f),
(g), (h), and (m).
(c) Agent Authority. The Agent may, but shall have no obligation to,
with the written concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of that Lender. Notwithstanding anything to the
contrary contained in this Section 14.07, no amendment, modification, waiver or
consent shall affect the rights or duties of the Agent under this Agreement or
the other Loan Documents, unless made in writing and signed by the Agent in
addition to the Lenders required above to take such action; and the order of
priority set forth in clauses (A) through (C) of Section 3.02(b)(ii) may be
changed only with the prior written consent of the Agent. Notwithstanding
anything herein to the contrary, in the event that the Borrower shall have
requested, in writing, that any Lender agree to an amendment, modification,
waiver or consent with respect to any particular provision or provisions of this
Agreement or the other Loan Documents, and such Lender shall have failed to
state, in writing, that it either agrees or disagrees (in full or in part) with
all such requests (in the case of its statement of agreement, subject to
satisfactory documentation and such other conditions it may specify) within
thirty (30) days after such request, then such Lender shall be deemed to not
have approved such amendment, modification, waiver or consent and the Agent
shall thereupon determine whether the Lenders required above to take the
requested action have approved the same within the required time and communicate
such determination to the Borrower and the Lenders.
<PAGE>
14.08. Notices. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, sent facsimile transmission or courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a facsimile
transmission, or four (4) Business Days after deposit in the United States mail
with postage prepaid and properly addressed. Notices to the Agent pursuant to
Articles II, IV or XIII shall not be effective until received by the Agent. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section 14.08) shall be as set
forth below each party's name on the signature pages hereof or the signature
page of any applicable Assignment and Acceptance, or, as to each party, at such
other address as may be designated by such party in a written notice to all of
the other parties to this Agreement.
14.09. Survival of Warranties and Agreements. All representations and
warranties made herein and all obligations of the Borrower in respect of taxes,
indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the making and
repayment of the Loans, and the termination of this Agreement and shall not be
limited in any way by the passage of time or occurrence of any event.
14.10. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of the Agent or any Lender in the exercise of any
power, right or privilege under any of the Loan Documents shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies existing under the Loan
Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.
14.11. Marshalling; Payments Set Aside. Neither the Agent nor any
Lender shall be under any obligation to marshall any assets in favor of the
Borrower or any other Person or against or in payment of any or all of the
Obligations. To the extent that the Borrower makes a payment or
<PAGE>
payments to the Agent, the Lenders or any of such Persons receives payment from
the proceeds of the Collateral or exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all Liens, right and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
14.12. Severability. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
14.13. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
14.14. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
14.15. Limitation of Liability. No claim may be made by the Borrower,
any Lender, the Agent, any Indemnitee, or any other Person against the Borrower,
the Agent, any Lender, any Indemnitee, or the Affiliates, directors, officers,
employees, attorneys or agents of any of them for any indirect, special,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by or provisions of this Agreement, or any act, omission or event
occurring in connection therewith; and the Borrower, each Lender, and the Agent
hereby waives, releases and agrees not to sue upon any such claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
<PAGE>
14.16. Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lenders. The rights hereunder of the
Borrower, or any interest therein, may not be assigned without the written
consent of all Lenders.
14.17. Certain Consents and Waivers of the Borrower.
(a) Personal Jurisdiction. (i) EACH OF THE AGENT, THE LENDERS, AND THE
BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY,
TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT
SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF
MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE BORROWER IRREVOCABLY DESIGNATES AND
APPOINTS MARKET INTELLIGENCE CORPORATION, 635 MADISON AVENUE, 4 THE FLOOR, NEW
YORK, NEW YORK 10022, AS ITS AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH OF THE
AGENT, THE LENDERS, AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF ANY COURT CONSIDERING THE DISPUTE WHICH IS DESCRIBED IN THE FIRST
SENTENCE OF THIS CLAUSE (a) OR IN CLAUSE (ii) BELOW.
(ii) THE BORROWER AGREES THAT THE AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION HAVING
JURISDICTION OVER THE BORROWER OR ITS PROPERTY TO ENABLE THE AGENT AND THE
LENDERS TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
<PAGE>
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE AGENT OR ANY LENDER. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE AGENT OR ANY
LENDER TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS,
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT OR ANY
LENDER. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH THE AGENT OR ANY LENDER MAY COMMENCE A PROCEEDING DESCRIBED
IN THIS SECTION.
(b) Service of Process. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO THE PROCESS AGENT OR THE
BORROWER'S NOTICE ADDRESS SPECIFIED BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE
(5) BUSINESS DAYS AFTER SUCH MAILING. THE BORROWER IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO BRING PROCEEDINGS
AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
(c) Waiver of Jury Trial. EACH OF THE AGENT, LENDERS, AND THE BORROWER
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. ANY OF THE BORROWER, THE AGENT, OR
THE LENDERS MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
14.18. Counterparts; Effectiveness; Inconsistencies. This Agreement
and any amendments, waivers, consents, or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against the Borrower,
<PAGE>
each Lender, and the Agent on the Closing Date. This Agreement and each of the
other Loan Documents shall be construed to the extent reasonable to be
consistent one with the other, but to the extent that the terms and conditions
of this Agreement are actually inconsistent with the terms and conditions of any
other Loan Document, this Agreement shall govern.
14.19. Limitation on Agreements. All agreements between the
Borrower, the Agent and each Lender in the Loan Documents are hereby
expressly limited so that in no event shall any of the Loans or other
amounts payable by the Borrower under any of the Loan Documents be
directly or indirectly secured (within the meaning of Regulation U) by
Margin Stock.
14.20. Confidentiality. Subject to Section 14.01(f), the Agent and the
Lenders shall hold all nonpublic information identified as such by the Borrower
and obtained pursuant to the requirements of this Agreement and in accordance
with such Lender's customary procedures for handling confidential information of
this nature and in accordance with safe and sound banking practices and in any
event may make disclosure reasonably required by a bona fide offeree, transferee
or participant in connection with the contemplated transfer or participation or
as required or requested by any Governmental Authority or representative thereof
or pursuant to legal process and shall require any such offeree, transferee or
participant to agree (and require any of its offeree, transferees or
participants to agree in writing) to comply with this Section 14.20. In no event
shall any Lender be obligated or required to return any materials furnished by
the Borrower; provided, however, each offeree shall be required to agree that if
it does not become a transferee or participant it shall return all materials
furnished to it by the Borrower in connection with this Agreement. Any and all
confidentiality agreements entered into between any Lender and the Borrower
shall survive the execution of this Agreement. Except as specifically prohibited
by applicable law or any court order, the Agent and each Lender agrees to notify
the Borrower, in writing, of any request of any Governmental Authority or
representative thereof or any legal process pursuant to which any request is
made for such information prior to its disclosure thereof.
14.21. Entire Agreement. This Agreement, taken together with
all of the other Loan Documents, embodies the
<PAGE>
entire agreement and understanding among the parties hereto and supersedes all
prior agreements and understandings, written and oral, relating to the subject
matter hereof.
14.22. Advice of Counsel. The Borrower and each Lender understand that
the Agent's counsel represents only the Agent's and its Affiliates' interests
and that the Borrower and other Lenders are advised to obtain their own counsel.
The Borrower represents and warrants to the Agent and the other Holders that it
has discussed this Agreement with its counsel.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
BORROWER: DYNCORP
By_____________________________
Patrick C. FitzPatrick
Senior Vice President
and Chief Financial Officer
Notice Address:
2000 Edmund Halley Drive
Reston, Virginia 20191-3436
Attn: Senior Vice President and
Chief Financial Officer
Telecopier No. (703) 264-9355
with a copy to Borrower's Senior Vice
President and General Counsel at the same
notice address
<PAGE>
AGENT: CITICORP NORTH AMERICA, INC., as Agent
By_____________________________
Shapleigh B. Smith
Vice President
Notice Address:
Citicorp North America, Inc.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: DeVerille A. Huston
Telecopier No. (312) 853-7036
<PAGE>
ISSUING BANK: CITIBANK, N.A.
By____________________________
Name:
Vice President
Notice Address
and Domestic Lending Office:
Citibank, N.A.
c/o Citicorp North America, Inc.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
<PAGE>
LENDERS: CITICORP NORTH AMERICA, INC.
By_____________________________
Shapleigh B. Smith
Vice President
Notice Address
and Domestic Lending Office:
Citicorp North America, Inc.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
Eurodollar Lending Office or
Eurodollar Affiliate:
Citicorp North America, Inc.
c/o Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
Pro Rata Share: 50%
Revolving Credit Commitment: $7,500,000
<PAGE>
BANKERS TRUST COMPANY
By___________________________
Mary Kay Coyle
Managing Director
Notice Address
and Domestic Lending Office:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attn: Anita Manglani
Telecopier No. (212) 250-7351
Eurodollar Lending Office or
Eurodollar Affiliate:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attn: Anita Manglani
Telecopier No. (212) 250-7351
Pro Rata Share: 50%
Revolving Credit Commitment: $7,500,000
<PAGE>
EXHIBITS
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Note
Exhibit C -- Form of Notice of Borrowing
Exhibit D -- Form of Notice of Conversion/Continuation
Exhibit E -- Projections
Exhibit F -- List of Closing Documents
Exhibit G -- Form of Officer's Certificate to Accompany Reports
Exhibit H -- Form of Letter to Accountants
Exhibit I -- Form of Collection Account Agreement
<PAGE>
SCHEDULES
Schedule 1.01.1 -- Fiscal Months; Fiscal Quarters
Schedule 1.01.2 -- Guarantors
Schedule 1.01.3 -- Permitted Equity Securities Options
Schedule 1.01.4 -- Permitted Existing Indebtedness
Schedule 1.01.5 -- Permitted Existing Investments
Schedule 1.01.6 -- Permitted Existing Liens
Schedule 1.01.7 -- List of Sellers to Dyn Funding
Schedule 1.02 -- Restricted Subsidiaries as of the Closing
Date
Schedule 6.01-A -- Organizational Documents
Schedule 6.01-C -- Organizational Structure
Schedule 6.01-E -- Governmental Consents
Schedule 6.01-K -- Pending Actions
Schedule 6.01-G -- Compensation and Employee Benefit Plans;
Stock Redemptions, Repurchases and
Issuances
Schedule 6.01-R -- Environmental Matters
Schedule 6.01-S -- ERISA Matters
Schedule 6.01-Z -- Insurance Policies
Schedule 6.01-BB -- Government Contract Matters
Schedule 9.01-D -- Existing Indemnities and Warranties
Schedule 9.10 -- Permitted Sale/Leaseback Transactions
[Arnold & Porter Letterhead]
June 3, 1997
DynCorp
2000 Edmund Halley Drive
Reston, VA 20191-3436
Ladies and Gentlemen:
We have acted as special counsel for DynCorp, a Delaware corporation (the
"Company"), in connection with the preparation of the registration statement on
Form S-4, Registration No. 333-25355 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), pursuant to which the Company is registering $100,000,000
aggregate principal amount of 9-1/2% Senior Subordinated Notes due 2007 (the
"Exchange Notes"), under an Indenture dated as of March 17, 1997, between the
Company and United States Trust Company of New York (the "Trustee"), to be
issued in exchange for $100,000,000 aggregate principal amount of the Company's
9-1/2% Senior Subordinated Notes (the "Exchange Offer"). The terms and
conditions of the Exchange Notes and the Exchange Offer are as set forth in the
Registration Statement and the prospectus (the "Prospectus") contained therein.
In rendering the opinion expressed below, we examined the Certificate of
Incorporation of the Company and the Bylaws of the Company and the minutes of
the Board of Directors of the Company with respect to the filing of the
Registration Statement and the issuance of the Exchange Notes. We also have
examined such certificates of public officials, corporate documents and records
and other certificates and instruments, and have made such other investigations,
as we have deemed necessary in connection with the opinion set forth herein.
Furthermore, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, and the conformity to authentic
originals of all documents submitted to us as copies.
<PAGE>
DynCorp
June 3, 1997
Page 2
This opinion is limited to the federal laws of the United States, the
General Corporation Law of the State of Delaware and the laws of the State of
New York, and we do not express any opinion herein concerning the laws of any
other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Notes have been duly authorized by the Company and when the Exchange
Notes have been duly executed by the Company and authenticated by the Trustee in
accordance with the terms of the Indenture and issued in accordance with the
terms of the Exchange Offer, the Exchange Notes will constitute valid and
legally binding obligations of the Company under the laws of the State of New
York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Registration Statement. In giving the foregoing consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.
This opinion is solely for your information and is not to be quoted in
whole or in part, summarized or otherwise referred to without our written
consent. This opinion is as of the date hereof. We disclaim any responsibility
to update or supplement this opinion to reflect any events or state of facts
which may hereafter come to our attention or any changes in statutes or
regulations or any court decisions which may hereafter occur.
Very truly yours,
/s/ Arnold & Porter
ARNOLD & PORTER
[Arnold & Porter Letterhead]
June 3, 1997
DynCorp
2000 Edmund Halley Drive
Reston, Virginia 20191
Ladies and Gentlemen:
We have acted as special tax counsel to DynCorp (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), of a Form
S-4 Registration Statement, Registration No. 333-25355 (the "Registration
Statement"). The Registration Statement relates to the offer (the "Exchange
Offer") by the Company for all outstanding 9-1/2% Senior Subordinated Notes due
March 1, 2007 (the "Original Notes") of the Company in exchange for the
Company's 9-1/2% Senior Subordinated Notes due March 1, 2007 (the "Exchange
Notes").
This opinion letter relates to the principal material federal income tax
consequences of the Exchange Offer and the ownership and disposition of the
Exchange Notes. All capitalized terms used in this opinion letter and not
otherwise defined herein are used as described in the Registration Statement.
The opinion set forth herein is subject to the assumptions and conditions
set forth in the Registration Statement under the heading "Certain Federal
Income Tax Considerations" and is premised on the assumption that all of the
factual information, descriptions, representations and assumptions set forth or
referred to in this letter and in the Registration Statement are accurate and
complete. We have not independently verified any factual matters relating to the
Exchange Notes or the Exchange Offer in connection with or apart from our
preparation of this opinion and, accordingly, our opinion does not take into
account any matters not set forth herein which might have been disclosed by
independent verification. We have examined the
<PAGE>
DynCorp
June 3, 1997
Page 2
Registration Statement and such other documents as we have deemed necessary to
render our opinion expressed below. In our examination of such material, we have
relied upon the current and continued accuracy of the factual matters we have
considered, and we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all copies of documents submitted to us. Should any of the
facts, circumstances, or assumptions on which we have relied subsequently be
determined to be incorrect or inaccurate, our conclusions may vary from those
set forth below and such variance could be material.
Based on and subject to the foregoing, and subject to further
qualifications set forth below, it is our opinion that the statements in the
Registration Statement under the caption "Certain Federal Income Tax
Considerations," to the extent such statements constitute a summary of
applicable United States federal income tax law, accurately describe the
material United States federal income tax consequences of the Exchange Offer and
the ownership and disposition of the Exchange Notes.
This opinion is based upon the Internal Revenue Code of 1986, as amended,
the Treasury regulations promulgated thereunder and other relevant authorities
and law, all as in effect on the date hereof. All of the above are subject to
change or modification by subsequent legislative, regulatory, administrative or
judicial decisions which could adversely affect our opinions. Consequently,
future changes in the law, or administrative or judicial interpretations
thereof, may cause the tax treatment of the transactions referred to herein to
be materially different from that described above.
Other than the specific tax opinion set forth in this letter, no other
opinion has been rendered with respect to the tax treatment of the Exchange
Offer and the ownership and disposition of the Exchange Notes, including, but
not limited to, their tax treatment under other provisions of the Code and the
regulations, the tax treatment of any conditions existing at the time of, or
effects resulting from, the Exchange Offer and the
<PAGE>
DynCorp
June 3, 1997
Page 3
ownership and disposition of the Exchange Notes that are not specifically
covered by the above opinions, or the tax treatment under state, local, foreign
or any other tax laws.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and the use of our name in the Registration Statement
under the caption "Certain Federal Income Tax Considerations." In giving such
consent, we do not concede that this consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
/s/ Arnold & Porter
ARNOLD & PORTER
Exhibit 12
DynCorp and Subsidiaries
Computation of Ratios
(Dollars in Thousands)
(1) Ratio of earnings to fixed charges
<TABLE>
<CAPTION>
Unaudited
--------------------
Three Months Ended For the Years Ended December 31,
-------------------- ---------------------------------------------
Mar. 27, Mar. 28,
1997 1996 1996 1995 1994(a) 1993(a) 1992(a)
---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest on debt $2,796 $2,323 $9,391 $14,113 $14,579 $14,449 $ 14,246
Amortization of debt discount
and expenses 187 257 829 743 324 328 383
Interest element of rentals 1,904 2,213 7,266 8,245 4,762 3,475 3,018
------ ------ ------- ------- ------- ------- --------
$4,887 $4,793 $17,486 $23,101 $19,665 $18,252 $ 17,647
====== ====== ======= ======= ======= ======= ========
Earnings
Earnings (loss) from continuing
operations before income
taxes, minority interest and
extraordinary items $4,005 $3,737 $19,107 $(2,561) $(1,458) $(2,244) $(13,944)
Interest on debt 2,796 2,323 9,391 14,113 14,579 14,449 14,246
Amortization of debt discount
and expense 187 257 829 743 324 328 383
Interest element of rentals 1,904 2,213 7,266 8,245 4,762 3,475 3,018
Minority interest (pre-tax) (604) (456) (1,926) (1,901) (1,660) (1,418) -
------ ------ ------- ------- ------- ------- --------
$8,288 $8,074 $34,667 $18,639 $16,547 $14,590 $ 3,703
====== ====== ======= ======= ======= ======= ========
Ratio of earnings to fixed charges 1.7 1.7 2.0 - - - -
====== ====== ======= ======= ======= ======= ========
Deficiency in earnings available
to cover fixed charges $ - $ - $ - $ 4,462 $ 3,118 $ 3,662 $ 13,944
====== ====== ======= ======= ======= ======= ========
</TABLE>
(a) Restated for the discontinued operations of the Commercial Aviation
businesses.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 21, 1997 included in DynCorp's Form 10-K for the year ended December 31,
1996 and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Washington, D.C.,
June 3, 1997
Exhibit 25.1
FORM T-1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of
trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
------------------
United States Trust Company of New York
114 West 47th St.
New York, NY 10036-1532
(212) 852-1000
Attn: Corporate Trust Division
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
------------------
DynCorp
(Exact name of obligor as specified in its charter)
Delaware 36-2408747
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2000 Edmund Halley Drive
Reston, Virginia 22091-3436
(Address of principal executive offices) (Zip Code)
------------------
9-1/2% Senior Subordinated Notes Due 2007
(Title of the indenture securities)
================================================================================
LETTER OF TRANSMITTAL
DYNCORP
Offer to Exchange 9 1/2% Senior Subordinated Notes Due 2007,
for all Outstanding 9 1/2% Senior Subordinated Notes Due 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
Deliver to United States Trust Company of New York
(the "Exchange Agent")
<TABLE>
<CAPTION>
<S> <C> <C>
BY OVERNIGHT COURIER AND
BY HAND DELIVERY UP TO 4:30P.M.: BY HAND DELIVERY AFTER 4:30P.M.: BY REGISTERED OR CERTIFIED MAIL:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
111 Broadway 770 Broadway Box 843
Lower Level 13th Floor Peter Cooper Station
New York, NY 10005 New York, NY 10003 New York, NY 10276
Attn: Corporate Trust Attn: Corporate Trust Service Attn: Corporate Trust
Window
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
United States Trust Company of New York
(212) 420-6152
Confirm: (800) 548-6565
For Information:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1997 (the "Prospectus") of DynCorp (the "Company") and this Letter of
Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of $100,000,000 of its 9 1/2%
Senior Subordinated Notes Due 2007 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for an
equal principal amount of its outstanding 9 1/2% Senior Subordinated Notes Due
2007 (the "Original Notes"), in integral multiples of $1,000. The term
"Expiration Date" means 5:00P.M., New York City time, on , 1997, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term shall mean the latest date and time to which the Exchange Offer is
extended. Capitalized terms used but not defined herein have the respective
meanings given to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS RELATING TO THE PROCEDURE FOR TENDERING AND REQUESTS FOR ADDITIONAL
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT. QUESTIONS RELATING TO THE EXCHANGE OFFER AND REQUESTS FOR
ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF
TRANSMITTAL MAY BE DIRECTED TO THE COMPANY.
<PAGE>
List below the Original Notes to which this Letter of Transmittal
relates. If the space indicated below is inadequate, additional information
should be listed on a separately signed schedule affixed hereto.
<TABLE>
<CAPTION>
====================================================================================================================================
DESCRIPTION OF ORIGINAL NOTES TENDERED HEREBY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Holder(s) Aggegate Principal Principal Amount
Exactly as Name(s) Appear(s) on Note(s) Note Amount Represented Tendered** (if less
(Please fill in) Numbers* by Outstanding Notes than all)
- ------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the
full aggregate principal amount represented by such Outstanding Notes. All
tenders must be in integral multiples of $1,000.
====================================================================================================================================
</TABLE>
This Letter of Transmittal is to be used (i) if certificates of
Original Notes are to be tendered herewith, (ii) if delivery of Original Notes
is to be made by book-entry transfer to an account maintained by the Exchange
Agent at The Depository Trust Company ("DTC"), pursuant to the procedures set
forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus or
(iii) tender of the Original Notes is to be made according to the guaranteed
delivery procedures described in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures". See Instruction 2. Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent. It is understood that participants in DTC's book-entry system (the
"Book-Entry Transfer Facility") will, in accordance with DTC's Automated Tender
Offer Program procedures and in lieu of physical delivery to the Exchange Agent
of a Letter of Transmittal, electronically acknowledge receipt of, and agree to
be bound by, the terms of this Letter of Transmittal.
The term "Holder" with respect to the Exchange Offer means any person
in whose name Original Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Original
Notes must complete this letter in its entirety.
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution___________________________________________________
|_| The Depository Trust Company
Account Number__________________________________________________________________
Transaction Code Number_________________________________________________________
Holders whose Original Notes are not immediately available or who
cannot deliver their Original Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date must tender their Original
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures". See
Instruction 2.
<PAGE>
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)_________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Eligible Institution that Guaranteed Delivery___________________________
If delivered by book-entry transfer:
Account Number________________________________________________________________
Transaction Code Number_______________________________________________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name____________________________________________________________________________
Address_________________________________________________________________________
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Original
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of such Original Notes tendered hereby, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Original Notes as are being tendered
hereby, including all rights to accrual of interest thereon on and after the
date of issuance of the Exchange Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent
acts as the agent of the Company in connection with the Exchange Offer) to cause
the Original Notes to be assigned, transferred and exchanged. The undersigned
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Original Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Original Notes, and that when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Original Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of the Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes, it represents that the Original Notes to be
exchanged for the Exchange Notes were acquired as a result of market-making
activities or other trading activities. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is receiving
the Exchange Notes for its own account in exchange for Original Notes that were
acquired as a result of market-making activities or other trading activities,
the undersigned acknowledges that it or such other person will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned and any such other person acknowledge that, if they are
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes, (i) they cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991) or
similar no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with the resale transaction and (ii) failure to
comply with such requirements in such instance could result in the undersigned
or any such other person incurring liability under the Securities Act for which
such persons are not indemnified by the Company. If the undersigned or the
person receiving the Exchange Notes covered by this letter is an affiliate (as
defined under Rule 405 of the Securities Act) of the Company, the undersigned
represents to the Company that (i) the undersigned understands and acknowledges
that such Exchange Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom and (ii) the undersigned or such
other person will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes or transfer ownership of such Original Notes on the
account books maintained by the Book-Entry Transfer Facility. The undersigned
further agrees that acceptance of any tendered Original Notes by the Company and
the issuance of Exchange Notes in exchange therefor shall constitute performance
in full by the Company of its obligations under that certain Registration Rights
Agreement and that the Company shall have no further obligations or liabilities
thereunder for the registration of the Original Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer--Conditions". The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Original Notes tendered
hereby and, in such event, the Original Notes not exchanged will be returned to
the undersigned at the address shown below the signature of the undersigned.
<PAGE>
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Original Notes may be
withdrawn at any time prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Original Notes, and any Original Notes delivered herewith but not
exchanged, will be registered in the name of the undersigned and shall be
delivered to the undersigned at the address shown below the signature of the
undersigned. If an Exchange Note is to be issued to a person other than the
person(s) signing this Letter of Transmittal, or if the Exchange Note is to be
mailed to someone other than the person(s) signing this Letter of Transmittal or
to the person(s) signing this Letter of Transmittal at an address different than
the address shown on this Letter of Transmittal, the appropriate boxes of this
Letter of Transmittal should be completed. IF ORIGINAL NOTES ARE SURRENDERED BY
HOLDER(S) THAT HAVE COMPLETED EITHER THE BOX ENTITLED "SPECIAL REGISTRATION
INSTRUCTIONS" OR THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" IN THIS LETTER
OF TRANSMITTAL, SIGNATURE(S) ON THIS LETTER OF TRANSMITTAL MUST BE GUARANTEED BY
AN ELIGIBLE INSTITUTION (SEE INSTRUCTION 4).
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 5) (SEE INSTRUCTION 5)
To be completed ONLY if the Exchange Notes are to To be completed ONLY if the Exchange Notes are to
be issued in the name of someone other than the be sent to someone other than the undersigned, or
undersigned. to the undersigned at an address other than that
shown under "Description of Original Notes
Tendered Hereby."
Issue Exchange Note to: Mail Exchange Note to:
Name:___________________________________________ Name:____________________________________________
Address:________________________________________ Address:_________________________________________
- ------------------------------------------------- -------------------------------------------------
(Please Print or Type) (Please Print or Type)
</TABLE>
REGISTERED HOLDER(S) OF ORIGINAL NOTES SIGN HERE (In addition,
complete Substitute Form W-9 Below)
X______________________________________________________________________________
X______________________________________________________________________________
(Signature(s) of Registered Holder(s))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
the Original Notes or on a security position listing as the owner of the
Original Notes or by person(s) authorized to become registered holder(s) by
properly completed bond powers transmitted herewith. If signature is by
attorney-in-fact, trustee, executor, administrator, guardian, officer of a
corporation or other person acting in a fiduciary capacity, please provide the
following information.
(Please Print or Type):
Name and Capacity (full title):________________________________________________
Address (including zip):_______________________________________________________
Area Code and Telephone Number:________________________________________________
Dated:________________________
SIGNATURE GUARANTY (If required--See Instruction 4)
Authorized Signature:__________________________________________________________
(Signature of Representative of Signature Guarantor)
Name and Title:________________________________________________________________
Name of Firm:__________________________________________________________________
Area Code and Telephone Number:________________________________________________
Dated:________________________
<PAGE>
<TABLE>
<CAPTION>
PAYOR'S NAME: [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Part 1-PLEASE PROVIDE YOUR TIN IN Social security number(s)
THE BOX AT RIGHT AND CERTIFY
BY SIGNING AND DATING BELOW OR_________________________________
Employer Identification Number(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE Part 2-Certificates-Under penalties of perjury,
I certify that:
(1) The number shown on this form is my correct
Form W-9 number taxpayer identification (or I am waiting
Department of the Treasury for a number to be issued for me), and
Internal Revenue Service (2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service (IRS)
Payer's Request for Taxpayer that I am subject to backup withholding as a result
Identification Number ("TIN") of a failure to report all intrest or dividends,
or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instructions-You must cross
out item (2) above if you have been
notified by the IRS that you are currently
subject to backup withholding because of
underreporting interest or dividends on
your tax return.
- ------------------------------------------------------------------------------------------------------------------------------------
Part 3-
SIGNATURE____________________________DATE_________________ Awaiting TIN - |_|
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY INTEREST OR OTHER REPORTABLE PAYMENTS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 4 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number. Moreover, I understand that during this 60-day period, 31% of all
reportable interest payments made to me will be withheld commencing 7 business
days after the payor receives this Certificate of Awaiting Tax Identification
Number and terminating on the date I provide a certified TIN to the payor.
- ------------------------- -----------------------------
Signature Date
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of This Letter of Transmittal and Certificates.
All physically delivered Original Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Original Notes tendered by book-entry transfer, as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE ORIGINAL NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED
THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Original Notes for exchange.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR INSTRUCTIONS
VIA A FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH HEREIN, WILL NOT CONSTITUTE
A VALID DELIVERY.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Original
Notes and (i) whose Original Notes are not immediately available or (ii)
whocannot deliver their Original Notes, this Letter of Transmittal or any other
required documents to the Exchange Agent (or complete the procedures for
book-entry transfer) prior to the Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered
national securities exchange of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the Holder, the
registration number(s) of such Original Notes and the principal amount
of Original Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, this Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing the
Original Notes (or a confirmation of book-entry transfer of such
Original Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility) and any other documents required by this Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as all tendered Original Notes in
proper form for transfer (or a confirmation of book-entry transfer of
such Original Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility) and all other documents required by this Letter of
Transmittal, are received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to Holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above. Any Holder who wishes to tender
Original Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such Original Notes prior to the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of itself,
affect the validity or effect a revocation of any Letter of Transmittal form
properly completed and executed by a Holder who attempted to use the guaranteed
delivery procedures.
<PAGE>
3. Partial Tenders; Withdrawals.
If less than the entire principal amount of Original Notes evidenced by
a submitted certificate is tendered, the tendering Holder should fill in the
principal amount tendered in the column entitled "Principal Amount Tendered" of
the box entitled "Description of Original Notes Tendered Hereby". A newly issued
Original Note for the principal amount of Original Notes submitted but not
tendered will be sent to such Holder as soon as practicable after the Expiration
Date. All Original Notes delivered to the Exchange Agent will be deemed to have
been tendered in full unless otherwise indicated. Tenders of Original Notes will
be accepted only in integral multiples of $1,000.
Original Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date, after which tenders of Original Notes
are irrevocable. To be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Original Notes to be withdrawn (the "Depositor"), (ii) identify
the Original Notes to be withdrawn (including the note number(s) and principal
amount of such Original Notes, or, in the case of Original Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the Holder in the same
manner as the original signature on this Letter of Transmittal (including any
required signature guaranties) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Original Notes register the
transfer of such Original Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Original Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Original Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Original Notes so withdrawn are
validly retendered. Any Original Notes that have been tendered but not accepted
for exchange, will be returned to the Holder thereof without cost to such Holder
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer.
4. Signature On This Letter of Transmittal; Written Instruments and
Endorsements; Guaranty of Signatures.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of the Original Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration or enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the holder of the Original Notes.
If any of the Original Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Original Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Original Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution unless the
Original Notes tendered hereby are tendered (i) by a registered Holder who has
not completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or
Holders of Original Notes (which term, for the purposes described herein, shall
include a participant in the Book-Entry Transfer Facility whose name appears on
a security listing as the holder of the Original Notes) listed and tendered
hereby, no endorsements of the tendered Original Notes or separate written
instruments of transfer or exchange are required. In any other case, the
registered Holder (or acting Holder) must either properly endorse the Original
Notes or transmit properly completed bond powers with this Letter of Transmittal
(in either case, executed exactly as the name(s) of the registered Holder(s)
appear(s) on the Original Notes, and, with respect to a participant in the
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Original Notes, exactly as the name of the participant appears
on such security position listing), with the signature on the Original Notes or
bond power guaranteed by an Eligible Institution (except where the Original
Notes are tendered for the account of an Eligible Institution).
<PAGE>
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
5. Special Registration and Delivery Instructions.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Book-Entry Transfer Facility) in which the Exchange
Notes or substitute Original Notes for principal amounts not tendered or not
accepted for exchange are to be issued (or deposited), if different from the
names and addresses or accounts of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the employer
identification number or social security number of the person named must also be
indicated and the tendering Holder should complete the applicable box.
If no instructions are given, the Exchange Notes (and any Original
Notes not tendered or not accepted) will be issued in the name of and sent to
the acting Holder of the Original Notes or deposited at such Holder's account at
the Book-Entry Transfer Facility.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the
transfer and exchange of Original Notes to it or its order pursuant to the
Exchange Offer. If, however, certificates representing the Exchange Notes or the
Original Notes for the principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any other reason, other than the transfer and exchange of Original
Notes to the Company or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exception therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Original Notes listed in this Letter of
Transmittal.
7. Waiver of Conditions.
The Company reserves the absolute right to waive, in whole or in part,
any of the conditions to the Exchange Offer set forth in the Prospectus.
8. Mutilated, Lost, Stolen or Destroyed Original Notes.
Any Holder whose Original Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
9. Request For Assistance or Additional Copies.
Questions relating to the procedure for tendering as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Company at 2000 Edmund Halley Drive,
Reston, Virginia 22091-3436, Attention H. Montgomery Hougen (telephone: (703)
264-9108).
10. Validity and Form.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the
<PAGE>
right to waive any defects, irregularities or conditions of tender as to
particular Original Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Original Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify Holders of defects or irregularities with respect to tenders
of Original Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Original Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Original Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders as soon as practicable following the Expiration
Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder receiving interest on Exchange
Notes is required to provide the payor of interest with such holder's correct
TIN on Substitute Form W-9 herein. If such holder is an individual, the TIN is
the holder's social security number. The Certificate of Awaiting Taxpayer
Identification Number should be completed if the holder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future. The payor is required to report to the Internal Revenue Service the
amount of reportable interest paid to the holder on Exchange Notes. If the payor
is not provided with the correct TIN, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, interest payments that are
made to such holder on Exchange Notes may be subject to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign individuals and foreign entities) are not subject to these backup
withholding and reporting requirements. For a foreign holder to qualify as an
exempt recipient, that holder must submit to the payor of interest a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that holder's exempt status. Such forms can be obtained from the
Exchange Agent.
If backup withholding applies, the payor is required to withhold 31% of
any amounts otherwise payable to the holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be applied for with the
Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on interest payments to be made to a
holder with respect to Exchange Notes, the holder is required to notify the
payor of his or her correct TIN by completing the form herein certifying that
the TIN provided on Substitute Form W-9 is correct (or that such holder is
awaiting a TIN) and that (i) such holder has not been notified by the Internal
Revenue Service that he or she is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified such holder that he or she is no longer subject to backup
withholding.
What Number to Give the Payor
Each holder is required to give the payor the social security number or
employer identification number of the record holder(s) of the Exchange Notes. If
Exchange Notes are in more than one name or are not in the name of the actual
holder, consult the attached Guidelines for Certifying TIN for additional
guidance on which number to report.
Certificate of Awaiting Taxpayer Identification Number
If the holder of Exchange Notes has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future, write
"Applied For" in the space for the TIN on Substitute Form W-9, check the box in
Part 4, sign and date the form and the Certificate of Awaiting Taxpayer
Identification Number and return them to the Exchange Agent. If such certificate
is completed and the payor of interest on the Exchange Notes is not provided
with the TIN within 60 days, the payor will withhold 31% of all payments made
thereafter until a TIN is provided to the payor. Moreover, even if a TIN is
provided within such 60-day period, the payor is required to withhold 31% of any
reportable interest payments made to the payee 7 days following receipt by the
payor of the Certificate of Awaiting Tax Identification Number. The payor must
refund these amounts withheld if it receives the payee's certified TIN within
the 60-day period and the payee was not otherwise subject to backup withholding
during the period.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
THEREOF (TOGETHER WITH ORIGINAL NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
DYNCORP
NOTICE OF GUARANTEED DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTY)
As set forth in the Prospectus dated , 1997 (the "Prospectus") of
DynCorp (the "Company") in the section entitled "The Exchange Offer--Procedures
for Tendering" and in the accompanying Letter of Transmittal (the "Letter of
Transmittal") and Instruction 2 thereto, this form or one substantially
equivalent hereto must be used to accept the Exchange Offer if certificates
representing the Company's 9 1/2% Senior Subordinated Notes Due 2007 (the
"Original Notes"), are not immediately available to the Holder thereof or time
will not permit the Holder to deliver its Original Notes or other required
documents to the Exchange Agent, or to complete the procedures for book-entry
transfer, before the Expiration Date. Capitalized terms used but not defined
herein have the respective meanings given to them in the Prospectus. This form
may be delivered by hand or sent by overnight courier, facsimile transmission or
registered or certified mail to the Exchange Agent and must be received by the
Exchange Agent before 5:00P.M., New York City time on , 1997.
<TABLE>
<CAPTION>
To United States Trust Company of New York
(the "Exchange Agent")
<S> <C> <C>
BY OVERNIGHT COURIER OR BY HAND DELIVERY
BY HAND DELIVERY UP TO 4:30P.M.: AFTER 4:30P.M.: BY REGISTERED OR CERTIFIED MAIL:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
111 Broadway 770 Broadway Box 843
Lower Level 13th Floor Peter Cooper Station
New York, NY 10005 New York, NY 10003 New York, NY 10276
Attn: Corporate Trust Attn: Corporate Trust Service Attn: Corporate Trust
Window
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
United States Trust Company of New York
(212) 420-6152
Confirm: (800) 548-6565
FOR INFORMATION:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTY MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER OF
TRANSMITTAL FOR GUARANTY OF SIGNATURES.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to DynCorp, the principal amount of
the Original Notes listed below, upon the terms of and subject to the conditions
set forth in the Prospectus and the related Letter of Transmittal and the
instructions thereto (which together constitute the "Exchange Offer"), receipt
of which is hereby acknowledged, pursuant to the guaranteed delivery procedures
set forth in the Prospectus, as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C>
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT TENDERED
NOTE NOS. AMOUNT OF NOTE(S) (MUST BE IN INTEGRAL MULTIPLES OF $1000)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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====================================================================================================================================
</TABLE>
The Book-Entry Transfer Facility Sign Here:
Account Number (if Original Notes
will be tendered by book-entry transfer)
X_______________________________
_________________________ X_______________________________
Account Number Signature(s)
------------------------- --------------------------------
Principal Amount Tendered Number and Street or P.O. Box
(must be in integral multiples of $1,000)
--------------------------------
City, State, Zip Code
Dated:___________________, 1997
<PAGE>
GUARANTY
(NOT TO BE USED FOR SIGNATURE GUARANTY)
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office in the United States,
guarantees (a) that the above named person(s) "own(s)" the principal amount of 9
1/2% Senior Subordinated Notes due 2007 (the "Original Notes"), tendered hereby
within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended, (b) that such tender of such Original Notes complies with Rule 14e-4
and (c) to deliver to the Exchange Agent the certificates representing the
Original Notes tendered hereby or confirmation of book-entry transfer of such
Original Notes into the Exchange Agent's account at The Depository Trust
Company, in proper form for transfer, together with the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guaranties and any other required documents, within five New York
Stock Exchange trading days after the Expiration Date.
Name of Firm____________________________ Title_______________________________
Authorized Signature____________________ Address_____________________________
Zip Code
Name____________________________________
Please Type or Print Area Code and Telephone No._________
Dated:____________________, 1997
NOTE: DO NOT SEND ORIGINAL NOTES WITH THIS FORM. ORIGINAL NOTES SHOULD
BE SENT ONLY WITH A LETTER OF TRANSMITTAL.
