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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
OCTOBER 4, 1995
SPINNAKER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-9559 06-0544125
(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
600 N. PEARL ST., SUITE 2160, DALLAS, TEXAS 75201
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (214) 855-0322
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 27, 1995, Central Products Acquisition Corp., a Delaware
corporation ("CPAC"), entered into a Stock and Asset Purchase Agreement (the
"Agreement") with Unisource Worldwide, Inc., a Delaware corporation
("Unisource"), and Alco Standard Corporation, an Ohio corporation and
Unisource's parent ("Alco").
CPAC is a newly-formed, wholly-owned subsidiary of Spinnaker Industries,
Inc., a Delaware corporation ("Spinnaker"). Pursuant to the Agreement, on
October 4, 1995, CPAC purchased from Unisource all of the outstanding capital
stock of Central Products Company, a Delaware corporation ("CP Company"), and
all the properties, assets and rights in Unisource's Central Products Division,
located in Menasha, Wisconsin. In connection and contemporaneously with the
Agreement, CPAC entered into a Purchase and Sale Agreement with Unisource to
purchase a warehouse facility (the "Warehouse") in Denver, Colorado. That
transaction is currently scheduled to close on or before January 1, 1996.
CP Company and Unisource's Central Products Division are engaged in the
business of manufacturing and selling water-activated and pressure-sensitive
carton sealing tapes. CP Company leases and operates a manufacturing plant in
Brighton, Colorado and the Central Products Division of Unisource owns and
operates a manufacturing plant in Menasha, Wisconsin. CPAC intends to continue
to operate CP Company and the assets of Unisource's former Central Products
Division in the water-activated and pressure-sensitive carton sealing tape
business.
The purchase price under the Agreement was $80 million. The amount of
consideration was determined through a bidding process and arm's-length
negotiations. The purchase price consisted of $50 million cash, a
Subordinated Promissory Note from CPAC to Alco in the amount of $5 million
(the "CPAC Subordinated Note") and a Subordinated Promissory Note from
Spinnaker to Alco in the amount of $25 million (the "Spinnaker Subordinated
Note"). The purchase price for the Warehouse will be $1.75 million,
consisting of $1 million in cash and a promissory note from CPAC to Unisource
in the amount of $750,000.
CPAC obtained the cash portion of the purchase price pursuant to a Credit
Agreement, dated as of September 29, 1995, between CPAC, as borrower, Spinnaker,
as pledgor, and Heller Financial, Inc. ("Heller"), as a lender and as agent (the
"Credit Agreement"). The Credit Agreement provides for two term loans,
designated as Term Loan A and Term Loan B, as well as a Revolving Credit
Facility (collectively, the "Bank Loans"). Term Loan A, Term Loan B and the
Revolving Credit Facility each bear interest at a variable rate that is related
to the Federal Reserve's "Bank Prime Loan" rate and CPAC's ratio of debt to cash
flow. The initial interest rate for Term Loan A and the Revolving Credit
Facility is 9.75% and the initial interest rate for Term Loan B is 10.25%.
Interest on the Bank Loans is payable quarterly beginning January 1, 1996.
Spinnaker borrowed $20 million under Term Loan A. Principal payments on Term
Loan A in amounts ranging from $375,000 to $1.5 million are due quarterly,
beginning December 31, 1995 through September 29, 2002.
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Spinnaker borrowed $16 million under Term Loan B. Principal payments on Term
Loan B in the amount of $2 million each are due quarterly, beginning December
31, 2000 through September 29, 2002. Spinnaker also borrowed approximately
$16 million of the $24 million available under the Revolving Credit Facility.
The Revolving Credit Facility matures on September 29, 2000.
CPAC expects that the $1 million cash portion of the purchase price for
the Warehouse will be provided by borrowings, internally generated funds or a
combination thereof. The $750,000 note from CPAC to Unisource will mature in
five years, bear interest at 8% a year, have one principal payment on the
maturity date, and be secured by the Warehouse.
To secure CPAC's obligations under the Credit Agreement, CPAC has pledged
to Heller all of the capital stock of CP Company, has granted a security
interest and lien to Heller on substantially all of CPAC's assets (including all
equipment, machinery, inventory, accounts receivable and intellectual property),
and granted a mortgage to Heller on the Menasha, Wisconsin, manufacturing plant.
CP Company has guaranteed CPAC's obligations under the Credit Agreement and, to
secure the guaranty, has granted a security interest and lien to Heller on
substantially all of CP Company's assets (including all equipment, machinery,
inventory, accounts receivable and intellectual property), and granted a
security interest to Heller in CP Company's leasehold interest on the Brighton,
Colorado manufacturing plant. Spinnaker has pledged to Heller all of the
capital stock of CPAC to secure CPAC's obligations under the Credit Agreement.
The $5 million CPAC Subordinated Note is interest free until September 29,
1996, and bears interest at 8% per year thereafter. Interest is payable
semi-annually, beginning March 31, 1997. The first principal payment of $1
million is due on December 31, 1998, with the balance due December 31, 1999.
However, if any debt that is senior to the CPAC Subordinated Note remains
unpaid on December 31, 1999, then the CPAC Subordinated Note will mature on
December 31, 2000. If any debt that is senior to the CPAC Subordinated Note
remains unpaid on December 31, 2000, then Alco may require Spinnaker to
purchase the CPAC Subordinated Note for cash. The purchase price for the
CPAC Subordinated Note will be equal to the unpaid principal of, and accrued
and unpaid interest on, the CPAC Subordinated Note. The CPAC Subordinated
Note is subordinate to amounts due under the Credit Agreement.
The $25 million Spinnaker Subordinated Note bears interest at the rate
of 8% on the first $15 million of principal (the "$15 Million Portion") and
at the rate of 11% on the remaining $10 million of principal (the "$10
Million Portion"). Interest on the $15 Million Portion is payable
semi-annually, beginning March 31, 1996. The $15 Million Portion matures
with a one-time payment of principal on March 31, 2003. Interest on the $10
Million Portion is payable quarterly, beginning December 31, 1995. The
principal of the $10 Million Portion is payable in four annual $2.5 million
payments, beginning September 30, 2002. The Spinnaker Subordinated Note is
subordinate to all debt incurred by Spinnaker except debt that by its terms
is not senior to the Spinnaker Subordinated Note.
Spinnaker and Alco have agreed to convert the Spinnaker Subordinated Note
into certain subordinated debt instruments and related documents (the
"Conversion Documents").
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The Conversion Documents will consist of (i) a separate $15 million subordinated
note with the same interest and principal payment structure as the $15 Million
Portion, that is convertible into Spinnaker's common stock at a price equal to
the weighted average of all sales prices for Spinnaker common stock on NASDAQ
for the period from September 18, 1995 through September 29, 1995 plus 10%;
provided, that the conversion price shall not be less than $50 per share or
greater than $60 per share, and that contains a payment in kind feature for the
first three years of its term; (ii) a Put Agreement that will allow Alco to sell
to Spinnaker the note described in clause (i) upon fifteen days' notice on or
after January 1, 1996 and before January 16, 1996, at a price equal to the
unpaid principal amount of, and accrued interest on, such note; (iii) a separate
$10 million subordinated note with the same interest and principal payment
structure as the $10 Million Portion; and (iv) a Put Agreement that will allow
Alco to sell to Spinnaker the note described in clause (iii) upon fifteen days'
notice on or after January 1, 1996 and before January 16, 1996, at a price equal
to the unpaid principal amount of, and accrued interest on, such note. The
Conversion Documents in clauses (i) and (iii) are hereinafter referred to as the
"Conversion Notes," and the Conversion Documents in clauses (ii) and (iv) are
hereinafter referred to as the "Conversion Puts."
In connection with the Spinnaker Subordinated Note, Lynch Corporation,
an Indiana corporation ("Lynch") and holder of approximately 83% of
Spinnaker's outstanding common stock, has agreed that it will (i) guarantee
the Conversion Notes and (ii) loan Spinnaker the funds necessary to satisfy
Spinnaker's obligations under the Conversion Puts to purchase the Conversion
Notes from Alco (the "Lynch Loan"). Lynch's guarantee will expire if Alco
does not exercise the Conversion Puts by January 16, 1996. By a separate
Agreement, dated October 3, 1995, between Spinnaker and Lynch, Spinnaker
agreed to pay Lynch a monthly fee of .05% of the principal amount of the
Conversion Notes guaranteed by Lynch. If the Lynch Loan is made, it will be
represented by a demand note that bears interest at a rate of 1.5% per month
for the first month, 2% per month for the second month and 2.5% per month
thereafter. The Lynch Loan and Lynch's guaranty of the Conversion Notes will
be secured by (i) second security interests in the stock of CPAC and
Brown-Bridge Industries, Inc., a Delaware corporation, approximately 81% of
the outstanding common stock of which is owned by Spinnaker (to the extent
permitted by the holders of the first liens) or certain other collateral and
covenants of Spinnaker, and (ii) first liens on any indebtedness of
Brown-Bridge Industries, Inc., CPAC or their subsidiaries to Spinnaker or its
subsidiaries.
Reference is made to the discussion in Item 2 of Spinnaker's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 with respect to
potential financing, including the acquisition of CP Company and Unisource's
Central Products Division.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired:
At this time it is impracticable to provide the required consolidated
financial statements for CP Company and Unisource's Central Products
Division; therefore, the required financial statements will be filed with
the Commission no later than December 18, 1995.
(b) Pro Forma Financial Information:
At this time it is impracticable to provide the required pro forma
financial information required pursuant to Article 11 of Regulation S-X;
therefore, all required pro forma financial information will be filed with
the Commission no later than December 18, 1995.
(c) Exhibits:
7.1 Stock and Asset Purchase Agreement, dated as of September 27,
1995, by and among Central Products Acquisition Corp., Unisource
Worldwide, Inc. and Alco Standard Corporation.
7.2 Credit Agreement, dated as of September 29, 1995, by and among
Central Products Acquisition Corp., as Borrower, Spinnaker
Industries, Inc., as Pledgor, and Heller Financial, Inc., as
Agent and a Lender.
7.3 Term Note A, dated October 4, 1995, from Central Products
Acquisition Corp. payable to the order of Heller Financial, Inc.
in the original principal amount of $20 million.
7.4 Term Note B, dated October 4, 1995, from Central Products
Acquisition Corp. payable to the order of Heller Financial, Inc.
in the original principal amount of $16 million.
7.5 Revolving Note, dated September 29, 1995, from Central Products
Acquisition Corp. payable to the order of Heller Financial, Inc.
in the maximum principal amount of $24 million.
7.6 Subordinated Promissory Note, dated September 29, 1995, from
Spinnaker Industries, Inc. payable to Alco Standard Corporation
in the original principal amount of $25 million.
7.7 Subordinated Promissory Note, dated September 29, 1995, from
Central Products Acquisition Corp. payable to Alco Standard
Corporation in the original principal amount of $5 million.
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7.8 Agreement, dated October 3, 1995, between Spinnaker Industries,
Inc. and Lynch Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPINNAKER INDUSTRIES, INC.
Date: October 18, 1995 By: /s/ Mark R. Matteson
------------------------------
Mark R. Matteson
Vice President
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EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
7.1 Stock and Asset Purchase Agreement, dated as of
September 27, 1995, by and among Central Products
Acquisition Corp., Unisource Worldwide, Inc. and Alco
Standard Corporation.
7.2 Credit Agreement, dated as of September 29, 1995, by
and among Central Products Acquisition Corp., as
Borrower, Spinnaker Industries, Inc., as Pledgor, and
Heller Financial, Inc., as Agent and a Lender.
7.3 Term Note A, dated October 4, 1995, from Central
Products Acquisition Corp. payable to the order of
Heller Financial, Inc. in the original principal amount
of $20 million.
7.4 Term Note B, dated October 4, 1995, from Central
Products Acquisition Corp. payable to the order of
Heller Financial, Inc. in the original principal amount
of $16 million.
7.5 Revolving Note, dated September 29, 1995, from
Central Products Acquisition Corp. payable to the
order of Heller Financial, Inc. in the maximum
principal amount of $24 million.
7.6 Subordinated Promissory Note, dated September 29,
1995, from Spinnaker Industries, Inc. payable to Alco
Standard Corporation in the original principal amount
of $25 million.
7.7 Subordinated Promissory Note, dated September 29,
1995, from Central Products Acquisition Corp. payable
to Alco Standard Corporation in the original principal
amount of $5 million.
7.8 Agreement, dated October 3, 1995, between Spinnaker
Industries, Inc. and Lynch Corporation.
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EXHIBIT 7.1
STOCK AND ASSET PURCHASE AGREEMENT
Agreement entered into as of September 27, 1995, by and among Central
Products Acquisition Corp., a Delaware corporation (the "Buyer"), Unisource
Worldwide, Inc., a Delaware corporation ("Seller"), which is a wholly owned
subsidiary of Alco Standard Corporation, an Ohio corporation ("Alco") and Alco.
BACKGROUND
The Seller owns all of the outstanding capital stock of Central Products
Company, a Delaware corporation ("Central"). Through its Central Products
Division and its subsidiary Central (hereinafter collectively "CPC"), Seller is
engaged in the business of manufacturing and selling water activated and
pressure sensitive carton sealing tapes from facilities in Linden, New Jersey,
Menasha, Wisconsin and Brighton, Colorado and intends to sell the business
conducted from the Menasha and Brighton facilities (the business conducted from
the Menasha and Brighton facilities are referred to herein as the "CPC
Business"). The Linden Facilities (herein so called and which are not to be
transferred as part of CPC) are in the process of being shut down with
continuing manufacturing operations having been relocated to Menasha. The
Seller also owns assets and properties in Menasha, Wisconsin (the "Menasha
Operations") including the headquarters of CPC. The CPC Business has been
operating as a division of Seller with respect to the Menasha Operations and as
a subsidiary of Seller with respect to the other manufacturing facilities.
This Agreement contemplates a transaction in which the Buyer will purchase
from the Seller, and the Seller will sell to the Buyer, for the consideration
set forth herein, all of the properties, assets and rights of the Seller used in
the Menasha Operations and all of the outstanding capital stock of Central.
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Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, reasonable amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
"Applicable Rate" shall mean 8% calculated on the basis of a 365-day year.
"Assumed Liabilities" has the meaning set forth in Section 2. b. (3) below.
"Buyer" means Central Products Acquisition Corp.
"Cash Portion" has the meaning set forth in Section 3. b. (i) below.
"Central" means Central Products Company, a subsidiary of Seller.
"Central Share" means any share of the Common Stock, par value $1.00 per
share, of Central.
"Closing" has the meaning set forth in Section 2 c. below.
"Closing Balance Sheet" has the meaning set forth in Section 4. c. below.
"Closing Date" has the meaning set forth in Section 2. c. below.
"Closing Net Book Value" has the meaning set forth in Section 4. c. below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Site" has the meaning set forth in Section 6. w. (1) below.
"Confidential Information" means any information concerning the businesses
and affairs of CPC that is not already generally available to the public.
"Contracts" has the meaning set forth in Section 6. m. below.
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"CPC" means collectively (i) Central Products Company, a Delaware
corporation and is a subsidiary of Seller and (ii) the Menasha Operations,
which have been operated as an unincorporated division of Seller.
"CPC Business" means the business of manufacturing and selling water
activated and pressure sensitive carton sealing tapes conducted by Seller
through CPC.
"Disclosure Schedule" has the meaning set forth in Section 6 a. below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is
an Employee Pension Benefit Plan, (c) qualified defined benefit retirement
plan or arrangement which is an Employee Pension Benefit Plan (including
any Multiemployer Plan), (d) Employee Welfare Benefit Plan or material
fringe benefit plan or program or (e) bonus or other compensation plans or
arrangements.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Environmental Claims" means any liabilities and obligations arising under
or imposed pursuant to Environmental laws or regulations, whether or not
attributable to actions or failures to act by the Seller, with respect to
the operation of or properties utilized in connection with the CPC Business
at any time prior to the Closing Date including, without limitation, any
property being transferred to Buyer pursuant hereto and the items described
in or relating to a specific condition described in Exhibit 2 attached
hereto.
"Environmental Laws" has the meaning set forth in Section 6. w. (9) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Closing Net Book Value" has the meaning set forth in Section 4.
a. below.
"Estimated Purchase Price" has the meaning set forth in Section 3. b.
below.
"Excluded Assets" has the meaning set forth in Section 2. b. (2) below.
"Excluded Liabilities" has the meaning set forth in Section 2. b. (4)
below.
"Financial Statements" has the meaning set forth in Section 6 g. below.
"GAAP" means generally accepted accounting principles consistently applied.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
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"Improvements" has the meaning set forth in Section 6. k. (1) (D) below.
"Indemnified Party" has the meaning set forth in Section 10 d. (1) below.
"Indemnifying Party" has the meaning set forth in Section 10 d. (1) below.
"Independent Auditor" has the meaning set forth in Section 4. d. below.
"Knowledge" means actual knowledge without independent investigation.
"Latest Balance Sheet" means the unaudited balance sheet for CPC as of
June 30, 1995.
"Materials of Environmental Concern" has the meaning set forth in
Section 6. w. (9) below.
"Menasha Operations" means the assets and properties owned by Seller
located in Menasha, Wisconsin including those assets transferred from the
Linden Facilities and shall be deemed to include all other assets, both
tangible and intangible, of the Seller used in the CPC Business but not
included in the corporate entity, Central.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Parcels" has the meaning set forth in Section 6. k. (1) below.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or
political subdivision thereof).
"Proprietary Rights" has the meaning set forth in Section 6. l. below.
"Purchase Price" has the meaning set forth in Section 3 a. below.
"Real Estate" has the meaning set forth in Section 2. b. (1) e. below.
"Re-Engineering Program" has the meaning set forth in Section 7. l. below.
"Return" or "Returns" means all returns, declarations of estimated tax
payments, reports, estimates, information returns and statements with
respect to Taxes, including any related or supporting information filed
with respect to any of the foregoing, maintained, filed or required to be
filed with
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any Taxing Authority in connection with the determination, assessment,
collection or administration of any Taxes.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable [or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings], (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"Seller" means Unisource Worldwide, Inc.
"Subordinated Note" has the meaning set forth in Section 3. b. (ii) below.
"Target Net Book Value" has the meaning set forth in Section 4. b. below.
"Tax" or "Taxes" means all Federal, state, county, local, municipal,
foreign and other taxes, assessments, duties or similar charges of any kind
whatsoever, including all corporate franchise, income, sales (including
bulk sales), use, ad valorem, intangibles, receipts, severance, single
business, value added, profits, license, withholding, payroll, employment,
excise, premium, real property, personal property, customs, net worth,
estimated, capital gains, transfer, stamp, documentary, social security,
alternative minimum, accumulated earnings, goods and services, recapture,
recording, severance, environmental (including taxes under Section 59A of
the Code), occupation and other taxes, and including any interest,
penalties and additions imposed with respect to such amounts.
"Taxing Authority" means any governmental or any quasi-governmental body
exercising any taxing authority or any other authority exercising Tax
regulatory authority.
"Third Party Claim" has the meaning set forth in Section 10. d. (1) below.
"Transferred Assets" has the meaning set forth in Section 2. b. (1) below.
"Transferred Plans" means, the Central Products Company Affiliated
Employees Pension Plan (the "Central Pension Plan") and the Central
Products Company 401(k) Plan for Union Employees (the "Central 401(k)
Plan").
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2. PURCHASE AND SALE OF CENTRAL STOCK AND TRANSFERRED ASSETS.
a. STOCK PURCHASE. On and subject to the terms and conditions set forth
in this Agreement, on the Closing Date, Buyer will purchase from Seller, and
Seller will sell and transfer to Buyer, all of the outstanding Central Shares,
free and clear of all liens, charges, security interests and other encumbrances.
b. PURCHASE OF MENASHA OPERATIONS.
(1) ASSET PURCHASE. On and subject to the terms and conditions set
forth in this Agreement, and except as set forth in this Agreement, on the
Closing Date, Buyer shall purchase from Seller and Seller shall sell, convey,
assign, transfer, and deliver to Buyer, all properties, assets, and rights owned
by Seller as of the Closing Date and used, related or incidental to, or
otherwise associated with the Menasha Operations and the CPC Business, whether
tangible or intangible, real or personal (the "Transferred Assets"), including
without limitation the following:
a. all notes, accounts receivable and long term receivables,
including intercompany receivables for products shipped or sold or services
rendered by a division, subsidiary or affiliate of Seller;
b. all prepayments, prepaid expenses and all interests in
insurance policies;
c. all raw materials, work-in-process, finished goods,
consigned goods and other inventories and related supplies;
d. all Proprietary Rights (as defined in Section 6. l. below);
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e. all real property, whether owned or leased, and all plants,
buildings and other improvements located on such owned or leased property, and
all easements, licenses, rights of way, permits and all appurtenances to such
owned or leased property, including, without limitation, all appurtenant rights
in and to public streets, whether or not vacated (collectively, the "REAL
ESTATE");
f. all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible property of any kind wherever
located;
g. all leasehold interests and improvements and all machinery,
equipment (including all transportation and office equipment), fixtures, trade
fixtures, tools, dyes and furniture, computers, automobiles and vehicles,
wherever located including, without limitation, the machinery and equipment
listed on Schedule A which have been transferred from the Linden facility to the
Menasha Operations;
h. all rights and claims existing under contracts, leases,
insurance policies, licenses, permits, supply and distribution arrangements,
sales and purchase agreements and orders, employment and consulting agreements,
consignment arrangements, warranties, consents, orders, registrations,
privileges, memberships, certificates, approvals or other similar rights and all
other agreements, arrangements and understandings;
i. all lists and records pertaining to customers, suppliers,
distributors, personnel and agents and all other files, documents,
correspondence, plats, architectural plans, drawings and specifications,
computer programs and business records of every kind and nature;
j. all claims, refunds, credits, causes of action, choses in
action, rights of recovery and rights of set-off of every kind and nature;
k. all goodwill as a going concern and all other intangible
properties;
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l. all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies;
m. all books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials; and
n. all other property and assets owned by Seller used in the
Menasha Operations on the Closing Date including all other property owned by
Seller (and not part of Central) used exclusively in the CPC Business.
(2) EXCLUDED ASSETS. Notwithstanding anything to the contrary set
forth in Section d, the following assets (the "Excluded Assets") are expressly
excluded from the purchase and sale contemplated hereby and, as such, are not
included in the Transferred Assets:
a. all prepaid taxes, prepaid insurance expenses and other
prepaid expenses not related to assets acquired by Buyer or liabilities assumed
by Buyer;
b. all cash, all intercompany deposits of Alco, and all
intercompany receivables from Alco, but not including intercompany receivables
for products shipped or sold or services rendered by CPC to another division,
subsidiary or affiliate of Alco;
c. the name "Alco Standard Corporation" or any other derivation
of the name "Alco"; provided, however, that Buyer may use media materials that
may include such name for a period of three months from the Closing Date;
d. assets relating to the Linden, New Jersey facilities and any
excluded assets listed on Exhibit 1 attached hereto.
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(3) ASSUMED LIABILITIES. On and subject to the terms and conditions
set forth in this Agreement, and except as set forth in Section 2e below, as
additional consideration for the Transferred Assets, on the Closing Date, Buyer
hereby agrees to assume and become responsible for the following liabilities and
obligations of Seller relating to the Menasha Operations (the "Assumed
Liabilities"):
a. all liabilities and obligations relating to the Menasha
Operations reflected on the liability side of the Business' June 30, 1995
unaudited balance sheet attached hereto as Exhibit 1 (the "Latest Balance
Sheet"), except for (i) liabilities and obligations reflected on the Latest
Balance Sheet for accrued income taxes, whether classified on the Latest Balance
Sheet as "Accrued Income Taxes," "Deferred Federal Income Taxes," or otherwise
and (ii) other accrued expenses as identified on Exhibit 1 attached hereto;
b. all liabilities and obligations relating to the Menasha
Operations to the extent incurred in the ordinary course of business after the
date of the Latest Balance Sheet, not including liabilities for accrued income
taxes, whether classified on the Latest Balance Sheet as "Accrued Income Taxes,"
"Deferred Federal Income Taxes," or otherwise or other excluded liabilities
identified on Exhibit 1 attached hereto;
c. all liabilities and obligations relating to the Menasha
Operations pursuant to the contracts, commitments or leases listed on Schedules
attached hereto;
d. all liabilities and obligations relating to the Menasha
Operations pursuant to the contracts, commitments or leases entered into in the
ordinary course of business and not required to be listed on the Schedules
attached hereto;
e. the Transferred Plans; and
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f. the liabilities and obligations of Seller under the
collective bargaining agreement listed in Section 6 q. (1) of the Disclosure
Schedule, attached hereto, accruing from and after the Closing Date.
(4) EXCLUDED LIABILITIES. Notwithstanding any other provision of
this Agreement, Buyer shall not assume, succeed to, be liable for, be subject
to, or be obligated for, nor shall the Transferred Assets be subject to, any
liabilities, claims, contracts or obligations of any nature whatsoever, whether
known, unknown, absolute, accrued, contingent, or otherwise, which Seller is, or
could become, subject to or liable for, other than the Assumed Liabilities (the
"EXCLUDED LIABILITIES"). The Excluded Liabilities are all liabilities, claims
and obligations of any nature whatsoever that are not specifically assumed by
Buyer under this Agreement, including but not limited to liabilities, claims and
obligations arising from or based on contract, breach of contract, warranty,
tort, strict liability, the design, manufacture or distribution of products
(including but not limited to products liability), employment, Environmental
Claims, Taxes, law, violation of law, the transfer of the Transferred Assets,
the operation of the Business prior to Closing or liabilities, claims and
obligations described in Section 7.m. Notwithstanding Buyer's assumption of the
certain contracts, the Excluded Liabilities shall include any liabilities,
claims or obligations based on Seller's nonperformance of, or misrepresentation
under, such contracts prior to the Closing Date.
c. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gardere & Wynne,
Thanksgiving Tower, 1601 Elm Street, in Dallas, Texas, commencing at 9:00 a.m.
local time on September 29, 1995 or such other date as the Buyer and the Seller
may mutually determine (the "Closing Date").
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d. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 9. a. below, (ii) the Buyer will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 9.
b. below, (iii) the Seller will deliver to the Buyer stock certificates
representing all of the Central Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 3 below.
3. CONSIDERATION.
a. The total purchase price to be paid to Seller by Buyer and to
be allocated as previously agreed for the CPC Stock and the Transferred Assets
(the "Purchase Price") will be an amount equal to the Assumed Liabilities plus
$80,000,000, plus or minus the amount of any adjustments set forth in Section 4
below.
b. The purchase price to be paid to the Seller at Closing will
be an amount equal to the Estimated Purchase Price. The "Estimated Purchase
Price" will equal $80,000,000 (plus or minus the amount determined pursuant to
Section 4 (b)). The Estimated Purchase Price shall be paid as follows:
(i) $50,000,000 (plus or minus the amount determined
pursuant to Section 4. b. (the "Cash Portion")), will be paid by Buyer to the
Seller by wire transfer of immediately available funds to account designated by
the Seller and $25,000,000 by issuance of various notes and convertible
debentures acceptable to Seller, in Seller's sole discretion; and
(ii) $5,000,000 will be paid by Buyer to the Seller by
issuance of a promissory note of Buyer in the form of Exhibit 3 attached hereto
(the "Subordinated Note").
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4. PURCHASE PRICE ADJUSTMENT.
a. At least three (3) business days prior to the Closing Date,
the Seller and Buyer in good faith shall jointly prepare an estimate of the net
book value of CPC, determined in accordance with GAAP consistent with the
methodology used in preparing Exhibit 1 as of the close of business on the
Closing Date (the "Estimated Closing Net Book Value") based on books and records
and other information then available. In the event the parties are unable to
agree on the Estimated Net Book Value prior to the Closing Date, the parties
shall use the Net Book Value as reflected on the Latest Balance Sheet attached
hereto as Exhibit 1.
b. If Estimated Closing Net Book Value exceeds Net Book Value
as of June 30, 1995 (the "Target Net Book Value"), the Estimated Purchase Price
shall be increased by the amount of such excess. If the Estimated Closing Net
Book Value is less than the Target Net Book Value, the Estimated Purchase Price
shall be decreased by the amount of such shortfall. The amount of such increase
or decrease in the Estimated Purchase Price shall be reflected by a commensurate
increase or decrease in the Cash Portion.
c. As promptly as practicable, but in no event later than
forty-five (45) days after the Closing Date, Buyer will cause the management of
the CPC Business to prepare an unaudited balance sheet of the CPC Business as of
the Closing (the "Closing Balance Sheet") for the purpose of establishing the
Net Book Value as of the close of business on the Closing Date (the "Closing Net
Book Value"). Such Closing Balance Sheet shall exclude the assets and
liabilities set forth on Exhibit 1. The Seller will have reasonable access to
(i) such management to discuss the preparation of the Closing Balance Sheet and
(ii) the work papers of such management during such forty-five-day period and
during the thirty-day period after the delivery of the Closing Balance Sheet to
the Seller. Within forty-five (45)
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days after the Closing Date, Buyer shall deliver to the Seller the Closing
Balance Sheet and its determination of the Closing Net Book Value.
d. If the Seller disagrees with Buyer's determination of
Closing Net Book Value, the Seller shall notify Buyer in writing of such
disagreement within thirty (30) days after delivery of the Closing Balance Sheet
to the Seller (such notice setting forth the basis for such disagreement in
reasonable detail), and Buyer and the Seller thereafter shall negotiate in good
faith to resolve any such disagreements. If Buyer and the Seller are unable to
resolve any such disagreements within thirty (30) days after Seller delivers its
response to Buyer, Buyer and Seller shall submit the dispute to a "Big 6"
accounting firm unaffiliated with, and mutually acceptable to, Buyer and Seller
(the "Independent Auditor") for resolution.
e. Buyer and the Seller shall use their best efforts to cause
the Independent Auditor to resolve all disagreements over the Closing Net Book
Value as soon as practicable, but in any event within 60 days after submission
of the disputes to the Independent Auditor. The resolution of such
disagreements and the determination of Closing Net Book Value by the Independent
Auditor shall be final and binding on Buyer and the Seller absent manifest
error. The Independent Auditor shall comply with the definitions used herein,
shall follow the procedures set forth in this Agreement and shall comply with
all other applicable terms of this Agreement.
f. The Independent Auditor will determine the allocation of the
costs and expenses of its determination of the Closing Net Book Value based upon
the percentage which the portion of the contested amount not awarded to a party
bears to the amount actually contested by such party. For example, if the
Seller claims the Closing Net Book Value is $1,000 greater than the amount
determined by the management of the Business, and Buyer contests only $500 of
the amount claimed by the Sellers,
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and if the Independent Auditor ultimately resolves the dispute by awarding
Seller $300 of the $500 contested, then the costs and expenses of arbitration
will be allocated 60% (i.e. 300 DIVIDED BY 500) to Buyer and 40% (i.e. 200
DIVIDED BY 500) to the Seller.
g. If Closing Net Book Value (as finally determined pursuant to
this Section 4. exceeds Estimated Closing Net Book Value, Buyer shall, within
five (5) business days after Closing Net Book Value is finally determined
pursuant to this Section 4., pay to the Seller the amount of such excess in
immediately available funds. If Closing Net Book Value is less than Estimated
Closing Net Book Value, the Seller shall, within five (5) business days after
Closing Net Book Value is finally determined pursuant to this Section 4., pay to
Buyer in immediately available funds the amount of such shortfall. Without
duplication, all amounts owed pursuant to this Section 4. (g) shall include
interest, from the Closing Date to the date of payment, at 8% calculated on the
basis of a 365-day year (the "Applicable Rate").
5. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
a. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and Alco,
jointly and severally, represent and warrant to the Buyer that the statements
contained in this Section 5(a) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 5(a)).
(1) ORGANIZATION OF SELLER. The Seller is a corporation, duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
(2) AUTHORIZATION OF TRANSACTION. The Seller has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. Except as required under the HSR Act, the Seller need not give any
notice to, make any
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filing with, or obtain any authorization, consent, or approval of any
government, governmental agency or other third party in order to consummate the
transactions contemplated by this Agreement.
(3) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or, any provision
of its Certificate of Incorporation or Bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under the Certificate of Incorporation or Bylaws of Seller or
any agreement, contract, lease, license, instrument, or other arrangement to
which the Seller is a party or by which it is bound.
(4) BROKERS' FEES. The Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(5) CENTRAL SHARES. The Seller holds of record and owns beneficially
all outstanding Central Shares, and consummation of the transactions
contemplated hereby will transfer to Buyer all outstanding Central Shares, free
and clear of any restrictions on transfer, taxes, liens, claims, encumbrances,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. The Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell, transfer,
or otherwise dispose of any capital stock of CPC. The Seller is not a party to
any voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of Central.
b. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this Section 5 b. are
correct and complete as of the date of this Agreement
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and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 5 b.).
(1) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(2) AUTHORIZATION OF TRANSACTION. The Buyer has full corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions. The Buyer need not give any notice to, make any filing with, or
obtain any authorization except as may be required under the HSR Act, consent,
or approval of any government, governmental agency or other third party in order
to consummate the transactions contemplated by this Agreement.
(3) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
the Certificate of Incorporation or Bylaws of Buyer or any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a party
or by which it is bound.
(4) BROKERS' FEES. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Seller could become
liable or obligated.
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(5) INVESTMENT. The Buyer is not acquiring Central Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
6. REPRESENTATIONS AND WARRANTIES CONCERNING THE CPC BUSINESS. Seller and
Alco, jointly and severally, represent and warrant to the Buyer that the
statements contained in this Section 6 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 6).
a. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Central is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Central is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the financial
condition, results of operations, business or prospects of Central taken as a
whole. CPC does not have any assets, employees or offices in any state other
than the states listed in Section 6 (a.) of the Disclosure Schedule delivered by
the Seller to the Buyer on the date hereof (the "Disclosure Schedule"). Central
has full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. Section 6(a) of
the Disclosure Schedule also lists the directors and officers of Central.
b. CAPITALIZATION. The entire authorized capital stock of Central
consists of 3,000 Central Shares, of which 1,000 Central Shares are issued and
outstanding. All of the issued and outstanding Central Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the Seller. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Central to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are
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no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Central.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Central, Seller or the assets of the CPC
Business are subject or any provision of the Certificate of Incorporation or
Bylaws of any of Central or Seller or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
consent under the Certificate of Incorporation or Bylaws of Central or Seller or
any agreement, contract, lease, license, instrument, or other arrangement to
which Central or Seller is a party or by which either is bound or to which any
of the assets of the CPC Business is subject or result in the imposition of any
Security Interest upon any of the assets of the Business, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the financial condition, results of operations,
business or prospects of CPC taken as a whole or on the ability of the Parties
to consummate the transactions contemplated by this Agreement. Central does not
need to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government, governmental agency or third party in
order for the Parties to consummate the transactions contemplated by this
Agreement, except for compliance with the HSR Act and except where the failure
to give notice, to file, or to obtain any authorization, consent, or approval
would not have a material adverse effect on the financial condition, results of
operations, business or prospects of CPC taken as a whole or on the ability of
the Parties to consummate the transactions contemplated by this Agreement.
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d. BROKERS' FEES. Central has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Central could become liable or
obligated.
e. TITLE TO TANGIBLE ASSETS. Central has good and marketable title to, or
a valid leasehold interest in, the tangible assets it uses in the conduct of its
businesses, free and clear of all liens, claims and encumbrances. Seller has
good and marketable title to or a valid leasehold interest in, the tangible
assets used in the conduct of the business of the Menasha Operations, free and
clear of all liens, claims and encumbrances. All such assets of Central and
Seller are reflected in the Financial Statements and the notes thereto in a
manner and to the extent required by generally accepted accounting principles.
Central owns or leases all assets legally required to conduct, or used in the
conduct of, its business as conducted immediately before the date of this
Agreement. Seller owns all of the Transferred Assets, and the Transferred
Assets are all of the assets legally required to conduct, or used in the conduct
of, the business of the Menasha Operations as conducted immediately before the
date of this Agreement.
f. SUBSIDIARIES. CPC has no subsidiaries or investments in noncorporate
entities.
g. FINANCIAL STATEMENTS. Attached hereto as Exhibit 4 are the following
financial statements (collectively the "Financial Statements"): (i) unaudited
balance sheets and statements of income, as of and for the fiscal years ended
September 30, 1994, and September 30, 1993 for CPC; and (ii) unaudited
consolidated balance sheets and statements of income, as of and for the nine,
months ended June 30, 1995, for CPC. The Financial Statements have been
prepared in accordance with generally accepted accounting principles on a
consistent basis throughout the periods covered thereby and present fairly the
financial condition of CPC as of such dates and the results of operations of CPC
for such periods; provided, however, that the Financial Statements are subject
to normal year-end adjustments and lack footnotes and other presentation items.
The Financial Statements reflect all material liabilities of
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CPC, accrued, contingent or otherwise (known or unknown and asserted or
unasserted), arising out of transactions effected or events occurring on or
prior to the date thereof. All reserves shown in the Financial Statements are
appropriate, reasonable and sufficient to provide for losses thereby
contemplated. Except as set forth in the Financial Statements, CPC is not
liable upon or with respect to, or obligated in any other way to provide funds
in respect of or to guarantee or assume in any manner, any debt, obligation or
dividend of any person, corporation, association, partnership, joint venture,
trust or other entity.
h. EVENTS SUBSEQUENT TO LATEST BALANCE SHEET. Since June 30, 1995, there
has not been any material adverse change in the financial condition, results of
operations, business or prospects of CPC. Without limiting the generality of the
foregoing, since that date CPC has not engaged in any practice, taken any
action, or entered into any transaction or incurred any liabilities outside the
Ordinary Course of Business except as set forth in the Disclosure Schedule.
i. LEGAL COMPLIANCE. CPC has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), except where the failure to comply would
not have a material adverse effect upon the financial condition, results of
operations, business or prospects of CPC, taken as a whole.
j. TAX MATTERS. Seller and Central have duly and timely filed all Tax
Returns required to be filed by either of them as of the date hereof by any
Taxing Authority and have paid or established adequate reserves for all Taxes
which have or may become due pursuant to such Tax Returns and any Tax
assessments which have been received by it or otherwise. All such Tax Returns
fairly and accurately reflect the taxes of Seller and Central in all material
respects for the periods covered thereby. Neither Seller nor Central, is
delinquent in the payment of any Tax, assessment or governmental charge, there
is
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no Tax deficiency or delinquency asserted against either of them and there is no
unpaid assessment, proposal for additional Taxes, deficiency or delinquency in
the payment of any of the Taxes of Seller or Central that could be asserted by
any Taxing Authority. No Internal Revenue Service audit of Seller or Central is
pending or threatened, and the results of any completed audits are properly
reflected in the Financial Statements. Neither Seller nor Central, has granted
any extension to any taxing authority of the limitation period during which any
tax liability may be asserted. All monies required to be withheld by Seller and
Central from employees or collected from customers for Taxes, and the portion of
any such Taxes to be paid by Seller or Central to Taxing Authorities have been
collected or withheld and either paid to the respective governmental agencies or
set aside in accounts for such purpose, or have been approved, reserved against
and entered upon the books of Seller or Central, as the case may be.
k. REAL PROPERTY.
(1) Section 6(k)(1) of the Disclosure Schedule lists all real
property that Central owns or that Seller owns and uses in the conduct of the
business of the Menasha Operations (the "Parcels"). With respect to each such
Parcel, and except for matters which would not have a material adverse effect on
the financial condition, results of operations, business or prospects of CPC:
(A) Central or the Seller has good and marketable title to each
Parcel, free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent,
recorded easements, covenants, and other restrictions, and utility easements,
building restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character;
(B) There are no leases, subleases, licenses, concessions, or
other agreements granting to any party or parties the right of use or occupancy
of any portion of the Parcels.
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(C) There are no outstanding options or rights of first refusal
to purchase the Parcels, or any portion thereof or interest therein.
(D) All improvements (the "Improvements") located on each Parcel
have been constructed and installed, and are currently in compliance with all
applicable laws, statutes, ordinances, codes, covenants, conditions and
restrictions of any kind or nature affecting the Parcel and there are not, and
as of the Closing there will not be, any structural or latent defects in any of
the Improvements. The heating, electrical, plumbing, and other building
equipment located on each Parcel are, and as of the Closing will be, in good
condition and working order, and adequate in quantity and quality for normal
operations.
(E) To the best of Alco's and Seller's knowledge, no notice has
been given to Alco, Seller or Central by any insurance carrier which has issued
a policy or has been requested to issue a policy with respect to any portion of
the Improvements located on one or more Parcels or any board of fire
underwriters or any other body exercising similar functions requesting the
performance of any repair, alterations or other work which has not been complied
with.
(F) Neither Alco nor Seller has any knowledge of any fact or
condition existing which would result or could result in the termination or
reduction of the current access from the Parcels to existing highways and roads,
or to sewer or other utility services presently serving the Parcels.
(G) To the best of Alco's and Seller's knowledge, all utilities
required for the operation of the Improvements enter the Parcels through
adjoining public streets or, if they pass through an adjoining private tract, do
so in accordance with valid public easements or private easements which will
inure to the benefit of and be enforceable by Buyer. All of said utilities are
installed and operating and all installation and connection charges have been
paid in full.
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(H) The Parcels are not within any area determined by the
Department of Housing and Urban Development to be flood prone under the Federal
Flood Protection Act of 1973.
(2) Section 6 (k)(2) of the Disclosure Schedule lists all real
property leased or subleased to Central or, in the case of the business of
the Menasha Operations, Seller. The Seller has delivered to the Buyer correct
and complete copies (as amended to date) of the leases and subleases listed
in Section 6(k)(2) of the Disclosure Schedule. Each lease and sublease
listed in Section 6(k)(2) of the Disclosure Schedule is legal, valid,
binding, enforceable, and in full force and effect, except where the
illegality, invalidity, nonbinding nature, unenforceability, or
ineffectiveness would not have a material adverse effect on the financial
condition, results of operations, business or prospects of CPC.
l. INTELLECTUAL PROPERTY.
(1) Central and Seller are, or will be prior to the Closing, the
beneficial and record owner of all patents, trademarks and copyrights, if any,
used in the business of Central or the Menasha Operations, as the case may be,
or will possess adequate licenses or other rights, if any, therefor, without
conflict with the rights of others. Set forth in Section 6(l) of the Disclosure
Schedule hereto is a true and correct description of the following ("Proprietary
Rights"):
(A) All copyrights, trademarks, trade names, service marks and
other trade designations, including common-law rights, registrations and
applications therefor, all patents and patent applications, and all other
similar intangible or intellectual property currently owned, in whole or in
part, by Central or Seller or used in the CPC Business, and all licenses,
royalties, assignments and other similar agreements relating to the foregoing to
which Central or Seller is a party (including expiration dates if applicable);
and
(B) All agreements relating to technology, know-how or
processes that Central is licensed or authorized to use by others or which
relate to the CPC Business (including, without
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limitation, the payment obligations and terms thereof), or which Central
licenses or authorizes others to use.
(C) All intangible or intellectual property rights owned or
licensed by Alco or by any direct or indirect subsidiary of Alco, other than
Central and Seller, that are used in the CPC Business.
(2) Central or Seller has the sole and exclusive right to use the
Proprietary Rights identified on Section 6(l) of the Disclosure Schedule without
infringing or violating the rights of any third parties. No consent of third
parties will be required for the use thereof by Central or Buyer as the case may
be upon consummation of the transactions contemplated by this Agreement. No
claim has been asserted by any person to the ownership of or right to use any
Proprietary Right or challenging or questioning the validity or effectiveness of
any such license or agreement, and none of Central, Seller or Alco knows of any
valid basis for any such claim. Each of the Proprietary Rights is valid and
subsisting, has not been cancelled, abandoned or otherwise terminated, is
enforceable against all others, and, if applicable, has been duly issued or
filed. Central or Seller is the sole owner of all Proprietary Rights with good
and marketable title thereto, free and clear of all liens, security interests,
charges or encumbrances, including, without limitation, claims or rights of
current or former employees, former employers, or any other person involved in
the development or creation of the Proprietary Rights.
(3) None of Central, Seller or Alco has any knowledge of any claim
that, or inquiry as to whether, any product, activity or operation of CPC
infringes upon or involves, or has resulted in the infringement of, any
Proprietary Right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened which challenge
the rights of CPC with respect thereto. Neither Central nor Seller has given
and neither is bound by any agreement of indemnification for any
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Proprietary Right as to any property manufactured, used or sold by Central or
the Menasha Operations. None of Central, the Seller or Alco has any knowledge
of any claim that, or inquiry as to whether, any of the Proprietary Rights are
being infringed by others.
(4) All nonpatented inventions, designs, software, processes,
diagrams, methods, techniques, tools, devices, apparatuses, customer lists,
financial information, accounting and control procedures and training materials
used by Central or Seller in the Business have been maintained as trade
secrets, enforceable against others, and all employees are bound by an
enforceable, written obligation of confidentiality not to disclose same.
m. CONTRACTS. Section 6 (m) of the Disclosure Schedule lists all written
contracts and other written agreements to which Central is a party or which
relate to the CPC Business the performance of which will involve consideration
or payments in excess of $100,000. Central or Seller has delivered to the Buyer
a correct and complete copy of each contract or other agreement listed in
Section 6 m. (1) of the Disclosure Schedule (as amended to date) (the
"Contracts"). There are no existing material defaults, events of default or
events, occurrences or acts that, with the giving of notice or lapse of time or
both, would constitute defaults, and no penalties have been incurred nor are
amendments pending, with respect to the Contracts. The Contracts are in full
force and effect and are valid and enforceable obligations of the parties
thereto in accordance with their terms, and no defenses, off-sets or
counterclaims have been asserted or, to the best of the knowledge of Seller and
Alco, may be made by any party thereto, nor has Central or Seller waived any
rights thereunder. Except as contemplated herein, none of Central or Seller,
Seller or Alco has received notice of any plan or intention of any other party
to any Contract to exercise any right to cancel or terminate any Contract or
agreement, and none of them knows of any fact that would justify the exercise of
such right. None of Central, Seller or Alco currently contemplates or has any
reason to believe any other person or entity currently contemplates, any
amendment or change to any Contract. To the
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knowledge of Seller and Alco, none of the customers or suppliers of the CPC
Business has refused, or communicated that it will or may refuse to purchase or
supply goods or services, as the case may be, or has communicated that it will
or may substantially reduce the amounts of goods or services that it is willing
to purchase from, or sell to, the CPC Business.
n. LITIGATION. Section 6(n) of the Disclosure Schedule sets forth each
instance in which Central or the Transferred Assets (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any pending, or the subject of any threatened action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction,
except where the injunction, judgment, order, decree, ruling, action, suit,
proceeding, hearing, or investigation would not have a material adverse effect
on the financial condition, results of operations, business or prospects of CPC.
Neither Central nor Seller is in violation of, or default with respect to, any
injunction, judgment, order, writ, decree, ruling or charge. None of Central,
Seller or Alco knows of any basis for the commencement or institution of any
action, suit, proceeding or investigation against CPC or any of its assets or
properties.
o. EMPLOYEE BENEFITS.
(1) Section 6(o)(1) of the Disclosure Schedule lists each Employee
Benefit Plan, including the Transferred Plans, that Central or Seller (with
respect to the employees of the Menasha Operations) maintains or ever has
maintained or contributes, ever has contributed or ever has been required to
contribute. Central has not and does not contribute to, or has not or is not
required to contribute to, any Multiemployer Plan.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of all laws,
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rules and regulations governing or applying to such Plan, including but not
limited to ERISA and the Code, except where the failure to comply would not have
a material adverse effect on the financial condition, results of operations,
business or prospects of CPC or would not adversely affect the rights or
benefits of participants under such Plan. The Central Products Company 401(k)
Plan and the Menasha Employees' Section 125 Plan comply, and since their
inception have complied, in form and in operation in all respects with the
applicable requirements of all laws, rules and regulations governing or applying
to such Plans, including but not limited to ERISA and the Code.
(B) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension Benefit Plan, the
funding method used in connection with such Employee Pension Benefit Plan is
acceptable under ERISA, and the actuarial assumptions used in connection with
funding each such Employee Pension Benefit Plan, in the aggregate, are
reasonable (taking into account the experience of such Employee Pension Benefit
Plan and reasonable expectations). No "accumulated funding deficiency" (as
defined in Section 302(a)(2) of ERISA) (whether or not waived and whether
arising on account of improper amortization of charges or credits in any funding
standard account, improper determination of any such charge or credit, or any
other reason) exists with respect to any plan year of any such Employee Pension
Benefit Plan subject to Title I, Subtitle B, Part 3 of ERISA.
(C) Except as disclosed on Section 6(o)(2) in the Disclosure
Schedule, each such Employee Benefit Plan which is an Employee Pension Benefit
Plan has applied for a favorable determination letter from the Internal Revenue
Service to the effect that it meets all of the requirements currently in effect
for plans qualified under Code Section 401)(a), and all amendments to such Plan
have been covered by such determination letter.
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(D) Except as disclosed on Section 6(o)(3) of the Disclosure
Schedule, the market value of assets under each Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the actuarial present value of accrued benefits thereunder (determined
in accordance with then current funding assumptions), and each such plan subject
to Title IV of ERISA could be terminated in a standard termination under Section
4041(b) of ERISA. The termination of, or withdrawal from, any Employee Benefit
Plan, on or prior to the Closing Date, has not and will not subject CPC to any
liability to the PBGC nor to any other party.
(E) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
(2) With respect to each Employee Benefit Plan that Central or Seller
(with respect to employees of the Menasha Operations) maintains or ever has
maintained or to which either of them contributes, ever has contributed, or ever
has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted. No amendment to any such Plan has
occurred which has required or could require Central or the Menasha Operations
to provide security to any such Plan under Code Section 401(a)(29).
(B) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine
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claims for benefits) is pending, except where the action, suit, proceeding,
hearing, or investigation would not have a material adverse effect on the
financial condition, results of operations, business or prospects of Central or
the Menasha Operations or will not adversely affect the rights or benefits of
participants under such Plan.
(C) Central has not incurred any liability to the PBGC (other
than PBGC premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
p. CORPORATE RECORDS; BOOKS OF ACCOUNT. The copies of the Certificate of
Incorporation and all amendments thereto and the By laws of Central that have
been delivered to Buyer are true, correct and complete copies thereof. The
minute books of Central, copies of which have been delivered to Buyer, contain
accurate minutes of all meetings of and accurate consents to all actions taken
without meetings by the Board of Directors (and any committee thereof) and the
shareholders of Central since the formation of Central. The books of account of
CPC have been kept accurately in all material respects in the ordinary course of
its business, the transactions entered therein represent bona fide transactions
and the revenues, expenses, assets and liabilities of CPC have been properly
recorded in such books in all material respects.
q. LABOR RELATIONS. Except as set forth on Section 6(q)(1) of the
Disclosure Schedule, the employees of Central or, with respect to the Menasha
Operations, Seller are not represented by any labor union, and Central or, with
respect to the Menasha Operations, Seller does not have any collective
bargaining agreements with any labor union or other representative of employees.
There is no organizing activity involving Central or, with respect to the
Menasha Operations, Seller pending or, to the knowledge of Central, Seller and
Alco, threatened, by any labor organization or group of employees of Central or,
with respect to the Menasha Operations, Seller. Except as described in Section
6(q)(2) of the Disclosure Schedule, there is not, and there has not during the
previous two years been, in existence any (i) labor strike, dispute,
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slowdown or work stoppage with respect to Central or the Menasha Operations
pending, or to the knowledge of Central, Seller, and Alco, threatened, (ii)
unfair labor practice complaint or other proceeding against Central, Seller, and
Alco pending, or to the knowledge of Central, Seller, and Alco threatened,
before the National Labor Relations Board, (iii) grievance or arbitration
proceeding arising out of or under any collective bargaining agreement and, to
the knowledge of Central, Seller, or Alco, no basis for any such grievance or
proceeding exists, or (iv) law, contract or other agreement which will obligate
Central to make any severance payment as a consequence of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
r. ACCURACY OF INFORMATION FURNISHED. To the best knowledge of Alco and
Seller, (i) all information furnished to Buyer by Seller, Central or Alco herein
or in any exhibit hereto or any instrument, agreement, document, certificate or
schedule executed or delivered in connection with the consummation of the
transactions contemplated hereby is true, correct and complete in all material
respects and (ii) such information states all material facts required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, true, correct and complete
in all material respects.
s. CONDITION OF FIXED ASSETS. All of the fixed assets owned or leased
by Central and all of the Transferred Assets are in good condition and repair
for their intended use in the ordinary course of business and conform in all
material respects with all applicable ordinances, regulations and other laws and
there are no known latent defects therein.
t. INVENTORY. All inventory of Central or, with respect to the Menasha
Operations, Seller is in good, current, standard and merchantable condition and
is not obsolete or defective except for inventory
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that is obsolete or not sellable in the ordinary course (a) that has been
written down to an amount not in excess of market value, or (b) for which
reserves have been provided in the Financial Statements.
u. ACCOUNTS RECEIVABLE. All accounts receivable of Central or, with
respect to the Menasha Operations, Seller shown on the Financial Statements, net
of an allowance for bad debts (determined consistent with past practices) will
be collected in the usual and ordinary course of business.
v. DISTRIBUTIONS. No distribution, payment or dividend of any kind has
been declared or paid by Central on any of its capital stock at any time since
June 30, 1995.
w. ENVIRONMENTAL MATTERS. Except as described in Section 6(w) of the
Disclosure Schedule:
(1) Except in accordance with Environmental Laws (defined below)
(including, without limitation, the obtaining of necessary permits), no
Materials of Environmental Concern (defined below) have been used, generated,
manufactured, stored or treated, or disposed of, landfilled or in any other way
released (and no release is threatened), on, under or about any real property or
facility owned, leased or operated by Central or, with respect to the Menasha
Operations, Seller (a "Company Site") or transported to or from any Company
Site.
(2) Neither Central nor, with respect to the Menasha Operations,
Seller is now, and neither will be in the future, as a result of the operation
or condition of the business or assets prior to or at Closing, subject to any
(x) contingent liability in connection with any release or threatened release of
any Materials of Environmental Concern into the environment whether on or off
any Company Site or (y) reclamation or remediation requirements under
Environmental Laws, or any reporting requirements related thereto or (z)
liability for any failure to comply with any Environmental Laws.
(3) Neither Central nor, with respect to the Menasha Operations,
Seller has been named as a potentially responsible party under, and none of the
Company Sites has been nominated or identified as a facility which is subject,
to any existing or potential claim under, CERCLA or comparable
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Environmental Laws, and none of the Company Sites is subject to any lien, claim
or encumbrance arising under Environmental Laws;
(4) No Materials of Environmental Concern have been incorporated into
any of the assets owned by Central or, with respect to the Menasha Operations,
Seller;
(5) There are no underground storage tanks (as defined under
Environmental Laws) located under any Company Site;
(6) CPC has not received notice that any of the off-site locations
where Materials of Environmental Concern from any Company Site or from any of
the assets of Central or, with respect to the Menasha Operations, Seller have
been stored, treated, recycled, disposed of or released has been nominated or
identified as a facility which is subject to an existing or potential claim
under CERCLA or any Environmental Laws;
(7) None of Central, Seller or Alco have received any notices of any
violation of, noncompliance with, or remedial obligation under Environmental
Laws, relating to the ownership, use, maintenance, operation of, or conduct of
business related to, any Company Site or assets of the Company, nor is there any
basis for any of the foregoing;
(8) there are no writs, injunctions, decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings or investigations pending or, to
the knowledge of the Central, Seller or Alco threatened, relating to the
ownership, use, maintenance, operation of, or conduct of business related to,
any Company Site or assets of Central or with respect to the Menasha Operations,
Seller, nor is there any basis for any of the foregoing, and
(9) There are no obligations, undertakings or liabilities arising out
of or relating to Environmental Laws which Central or, with respect to the
Menasha Operations, Seller has agreed to
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assume or retain, by contract or otherwise, except for the assumption of
liabilities and obligations, and the indemnification of Buyer as set forth
herein. As used herein, (i) the term Materials of Environmental Concern shall
mean waste, substance, chemical, material, product, pollutant, contaminant, oil,
petroleum product, commercial product or other substance regulated under any
environmental laws, including (x) which is listed, regulated or designated as
toxic or hazardous (or words of similar meaning and regulatory effect), or with
respect to which remedial obligations may be imposed, under any Environmental
Laws or (y) exposure to which may pose a health or safety hazard, and (ii)
Environmental Laws means any applicable federal, state, or local laws, rules,
regulations, ordinances, policies, guidance documents, common law or strict
liability provisions, and any judicial or administrative interpretations
thereof, including any judicial or administrative orders or judgments, relating
to health, safety, industrial hygiene, pollution or environmental matters in
effect as of the date of this Agreement.
7. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
a. GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
including satisfaction, but not waiver, of the closing conditions set forth in
Section 9 below.
b. NOTICES AND CONSENTS. The Seller will give, or cause Central to give,
any notices to third parties, and will use or cause Central to use its
reasonable best efforts to obtain any third party consents, that the Buyer
reasonably may request in connection with the matters referred to in Section 6.
c. above. Each of the Parties will give any notices to, make any filings with,
and use its reasonable best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with the
matters referred to herein. Without limiting the generality of the foregoing,
each of
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the Parties will file any Notification and Report Forms and related material
that it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the HSR Act,
will use its reasonable best efforts to obtain a waiver from the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith.
c. OPERATION OF BUSINESS. Neither the Seller nor Central will, and the
Seller will not cause or permit Central to, engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business,
and they shall use their best efforts to preserve the business of CPC intact and
to retain their present customers and suppliers so that they will be available
to Buyer after the Closing. None of Central, Seller or Alco shall take any
action that might impair the business or assets of CPC without the prior consent
of Buyer or take or fail to take any action that would cause or permit the
representations made in Section 6 hereof to be inaccurate or preclude Central,
Seller or Alco from making such representations and warranties at the Closing.
d. FULL ACCESS. The Seller will, and will cause Central, to permit
representatives of the Buyer to have full access at all reasonable times, and in
a manner so as not to interfere with the normal business operations of Central
or the Menasha Operations, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
Central or the Menasha Operations. The Buyer will treat and hold as such any
Confidential Information it receives from the Seller and Central, in the course
of the reviews contemplated by this Section 7.d., will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to the Seller and
Central, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession.
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e. EXCLUSIVITY. The Seller will not solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of the Menasha Operations or the capital stock or assets of Central.
f. MATERIAL CHANGE. Central, Seller and Alco shall promptly inform Buyer
in writing of any material adverse change in the condition of the business of
Central or the Menasha Operations or of any representation that shall become
untrue. Notwithstanding the disclosure to Buyer of any such material adverse
change, Central, Seller and Alco shall not be relieved of any liability for, nor
shall the providing of such information by Central, Seller or Alco to Buyer be
deemed a waiver by Buyer of, the breach of any representation or warranty of
Central, Seller and Alco contained in this Agreement.
g. HIRING EMPLOYEES. Seller and Alco will cooperate with all reasonable
requests made by Buyer for the purpose of allowing Buyer to hire those employees
of Seller designated by Buyer, such employment to be effective as of the Closing
Date.
h. EMPLOYEE COMPENSATION. No increase will be made in the compensation or
rate of compensation payable or to become payable to the officers or employees
of CPC, and no bonus, profit sharing, retirement, insurance, death, fringe
benefit or other extraordinary or indirect compensation shall accrue, be set
aside or be paid to, for or on behalf of any of such officers or employees other
than as required by presently existing pension, profit sharing, bonus and
similar benefit plans as presently constituted, and no agreement or plan other
than those now in effect shall be adopted or committed for.
i. CONTRACTS. Except with Buyer's prior written consent, neither Central
nor, with respect to the Menasha Operations, Seller shall waive any material
right or cancel any material contract, debt or claim nor will either of them
assume or enter into any material contract, lease, license, obligation,
indebtedness, commitment, purchase or sale.
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j. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. Neither Central nor, with
respect to the Menasha Operations, Seller will acquire or dispose of any capital
asset having an initial cost of $50,000 or more, including without limitation,
any asset related to the modification or upgrade of CPC's management information
systems (MIS), nor will Central or Seller discharge or satisfy any lien or
encumbrance or pay or perform any obligation or liability other than (i)
liabilities and obligations reflected in the Financial Statements, and (ii)
current liabilities and obligations incurred in the usual and ordinary course of
business since June 30, 1995, and, in either such case only as required by the
express terms of the agreement or other instrument pursuant to which the
obligation or liability was incurred.
k. MORTGAGES, LIENS. Except with Buyer's prior written consent, Neither
Central nor, with respect to the Menasha Operations, Seller will enter into or
assume any mortgage, pledge, conditional sale or other title retention
agreement, permit any lien, encumbrance or claim of any kind to attach to any of
its assets, whether now owned or hereafter acquired, or guarantee or otherwise
become contingently liable for any stock or dividends of any corporation,
business or other person or obligations of another except obligations arising by
reason of endorsement for collection and other similar transactions in the usual
and ordinary course of business, or make any capital contributions or
investments in any corporation, business or other person.
l. PRODUCTION ENGINEERING. Central, Seller and Alco shall cause all work
and services currently being performed pursuant to shutdown and removal of
operations from the Linden Facilities ("Re-Engineering Program") to have been
completed, and all assets to be acquired pursuant to or in connection with the
implementation of the Re-Engineering Program to have been acquired, installed
and tested, on or before the Closing Date and all payments in respect of such
work, services or purchases to have been made on or before the Closing Date.
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m. LINDEN. Prior to the Closing, Seller, Central, and Alco will take all
actions necessary to transfer from Central all assets and liabilities of every
kind relating to the Linden facilities, including all Employee Benefit Plans and
agreements with labor unions (specifically including the agreement with the
United Paperworkers International Union AFL-CIO, Local 318) so that after the
Closing neither Buyer nor Central will have, directly or indirectly, any
responsibility, obligation, or liability of any kind for or arising from or in
connection with the ownership, operation, business, assets, or liabilities of
the Linden Facilities.
n. CENTRAL BENEFIT PLANS. Prior to the Closing, Seller, Central, and Alco
will take all actions necessary to terminate or transfer all Employee Benefit
Plans of Central or covering employees of Central and will take all actions
necessary to terminate the participation of employees of the Menasha Operations
in all Employee Benefit Plans covering employees of the Menasha Operations
(other than any such Employee Pension Benefit Plan required to be maintained by
Seller pursuant to the agreement with the United Paperworkers International
Union, AFL-CIO-CLC, Local 727) so that after the Closing, neither Buyer nor
Central will have any responsibility, obligation, or liability of any kind for
or arising from or in connection with any such Employee Benefit Plan.
o. TRANSFERRED PLANS. (a) Buyer agrees to assume or cause an affiliate to
assume, and Seller agrees to transfer or cause to be transferred to Buyer,
sponsorship of the Transferred Plans effective as of the Closing Date. Buyer
agrees to assume and discharge or cause an affiliate to assume and discharge all
of Seller's obligations and liabilities arising under the Transferred Plans and
to idemnify and hold Seller harmless from any costs, liabilities, damages or
expenses arising under or associated with the Transferred Plans, in either case,
to the extent such liabilities, obligations, costs, damages or expenses relate
to periods following the Closing Date. Notwithstanding the foregoing provisions
of this Section 7 o. , in the event Buyer determines to submit the Central
401(k) Plan to the Internal Revenue Service ("IRS") to seek confirmation
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of the tax qualified status of said Plan from its inception and to verify the
pre-tax nature of all contributions to said Plan, the indemnification of Seller
set forth in the foregoing sentence shall not be applicable to any and all
costs, liabilities, damages and expenses resulting directly or indirectly from
said actions. Further, Seller agrees to pay directly or to reimburse Buyer for
any and all fees and expenses, including but not limited to reasonable legal
fees and expenses and filing fees, incurred by Buyer in seeking such IRS
confirmation and verification. Buyer agrees that Seller shall have the right,
at its own expense, to participate in the process of seeking IRS confirmation
and verification of the issues described above, including but not limited to
assuming the primary role in presenting to the IRS the position for
qualification of the plan and the pre-tax nature of all contributions. Buyer
agrees to establish or cause an affiliate to establish a trust under each of the
Transferred Plans and to appoint one or more trustees to hold the assets of each
of the Transferred Plans. As soon as practicable after Seller has received
notice from the Buyer, in the form of a certified Board of Directors resolution,
that (i) Buyer or its affiliate has adopted the Transferred Plans, and (ii) a
trust has been established and one or more trustees have been appointed under
each of the Transferred Plans, Seller will instruct the Transferred Plans'
trustees to transfer all of the assets under each of the Transferred Plans
(including assets attributable to the Funding Amount, as defined in this
section, under the Central Pension Plan) to the new trustee(s) appointed by
Buyer.
(b) Any filing and/or reports owed to the Transferred
Plans' participants or any government agency with respect to periods ending on
or before the Closing Date shall be prepared, filed and/or distributed, as the
case may be, by Seller. Any filings and/or reports owed to the Transferred
Plans' participants or any government agency with respect to periods ending
after the Closing Date shall be prepared, filed and/or distributed, as the case
may be, by Buyer. Buyer
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and Seller agree to provide each other in a timely manner all information in
their possession or under their control that is reasonably necessary to complete
such filings and/or reports.
(c) Within 120 days of the Closing Date or as soon as
practicable thereafter, Seller shall contribute to the Central Pension Plan an
amount (the "Funding Amount"), in cash, equal to (1) the difference between (i)
the present value of accrued benefits under the Central Pension Plan including
the benefit increase to $29.00 scheduled to take effect on August 1, 1997,
as of the last day of the month in which the Closing Date occurs (the "Valuation
Date I"), and (ii) the fair market value of the assets of the Central Pension
Plan, determined as of the Valuation Date I and prior to contribution of the
amount described in the foregoing clause (i), increased by (2) interest for the
period commencing on the Valuation Date I and ending on the actual date of
transfer at a rate equal to the interest rate paid on 3-month United States
Treasury bills during the week in which the Closing Date occurs, as published in
U.S. Financial Data. The Funding Amount shall be determined by the enrolled
actuary selected by Seller with the Buyer's consent, which consent shall not be
unreasonably withheld, and shall be determined on the basis of the actuarial
assumptions used for the funding standard account specified in the actuarial
report prepared for the Central Pension Plan for the plan year beginning October
1, 1994, except that the mortality table shall be the 1983 Group Annuity
Mortality Table. If the Buyer does not agree with the funding amount determined
by Seller's actuary, then the enrolled actuary selected by Buyer and Seller's
actuary shall together select a third actuary to determine the Funding Amount on
the basis specified in this Agreement and the determination of such third
actuary shall be binding on Seller and Buyer.
p. SALARIED PENSION PLAN. As of the Closing Date, all active
employees of the CPC Business whose employment with Seller terminates who are
hired by Buyer, and who are participants in the Alco Standard Corporation
Participating Companies Pension Plan (the "Alco Plan") shall become participants
in an existing or new defined benefit pension plan maintained by Buyer or an
affiliate of Buyer
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(the "New Plan"). Within 120 day of the Closing Date or as soon as practicable
thereafter, Seller shall cause the transfer from the Alco Plan to the New Plan
of the assets and liabilities, in cash, as of the Closing Date, of all active
participants in the Alco Plan employed by the CPC Business on the day before the
Closing Date who are hired by Buyer. The amount of assets to be transferred
("Transferred Amount") shall be equal to the present value of accrued benefits
of such participants as of the last day of the month in which the Closing Date
occurs ("Valuation Date II"), increased by interest for the period commencing on
the Valuation Date II and ending on the actual date of transfer at a rate equal
to the effective interest rate paid on 3-month Treasury bills during the week in
which the Closing Date occurs, as published in U.S. Financial Data. The
Transferred Amount shall be determined by an enrolled actuary selected by Seller
with the Buyer's consent, which consent shall not be unreasonably withheld. The
present value of accrued benefits shall be calculated as if each active employee
of the CPC Business terminated his employment as of the Closing Date and based
on the actuarial assumptions used for the funding standard account specified in
the actuarial report prepared for the Alco Plan for the plan year beginning
October 1, 1994, except that the interest rate shall be 30-year United States
Treasury bond rate as of the date of closing and the mortality table shall be
the 1983 Group Annuity Mortality Table. If Buyer does not agree with the
Funding Amount determined by Seller's actuary, then the enrolled actuary
selected by Buyer and Seller's actuary shall together select a third actuary to
determine the Transferred Amount on the basis specified in this Agreement and
the determination of such third actuary shall be binding on Seller and Buyer.
Within 90 days of the Closing Date, Seller shall make all required
governmental filings necessary to make the asset transfer described herein,
including the filing of Form 5310-A, Notice of Transfer of Assets, together with
any required actuarial certification of compliance with Section 414(1) of the
Code.
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Such transfer shall then be made not earlier than 30 days after the filing of
Form 5310-A and as soon as practicable thereafter.
Seller agrees that it shall retain the responsibility relating to former
employees of the CPC Business who retired and are receiving benefits under the
Alco Plan before the Closing Date or whose employment terminated before the
Closing Date or contemporaneously, with the Closing Date and who are not hired
by Buyer, and who have a right to receive benefits under the Alco Plan, and that
assets and liabilities under the Alco Plan that are attributable thereto shall
not be transferred. Buyer agrees that with respect to active employees of the
CPC Business whose benefits are transferred to the New Plan, Buyer shall grant
credit for all service with Seller for the purpose of vesting benefits accrued
under the New Plan and the benefit such employees receive from the New Plan will
be equal to the sum of the benefits they had accrued under the Alco Plan as of
the Closing Date plus the benefit, if any, they accrue under the New Plan from
the Closing Date to retirement or other termination of employment.
q. STOCK PARTICIPATION PLAN. In accordance with the terms of the
Alco Standard Corporation Stock Participation Plan ("Alco Stock Plan"), all
active employees of the CPC Business whose employment with Seller terminates as
of the Closing Date shall become fully vested in the balances standing to the
credit of their accounts under the Alco Stock Plan as of that date and shall be
entitled to receive distribution of such accounts as soon as may be
administratively practicable after the Closing Date.
8. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Closing.
a. GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
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request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 10
below).
b. CONTINUING EMPLOYMENT AND SEVERANCE OBLIGATIONS. Buyer will offer
employment to substantially all CPC employees at substantially the same terms of
employment as currently exist. Buyer will assume, and indemnify Seller against,
severance commitments made to certain key managers by Seller or Alco in that
certain letter dated April 10, 1995 addressed to Mr. John R. Powers, a copy of
which has been delivered to Buyer.
c. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Central or the Menasha Operations, each of the
other Parties shall cooperate with its counsel in the defense or contest, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the defense or contest, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 10 below).
d. EXCLUDED LIABILITIES. Seller or Alco will pay or discharge all
Excluded Liabilities.
e. ENVIRONMENTAL MATTERS. Within one year from the date of Closing,
Seller shall reimburse Buyer for all reasonable costs incurred to third parties
with respect to the environmental issues referred to on Exhibit 2 hereto,
including without limitation, the matters identified in that certain letter,
dated August 31, 1995, from Grant W. Wilkinson to William A. Herring.
9. CONDITIONS TO OBLIGATION TO CLOSE.
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a. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction, or waiver, of the following conditions:
(1) the representations and warranties set forth in Section 5 a. and
Section 6 above shall be true and correct in all material respects at and as of
the Closing Date;
(2) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(3) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;
(4) the Seller shall have delivered to the Buyer a certificate to the
effect that each of the conditions specified above in Section 9 a. (1)-(3) is
satisfied in all respects;
(5) all applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated and the Parties
shall have received all other required authorizations, consents, and approvals
of governments, governmental agencies and third parties;
(6) the Buyer shall have received from the General Counsel of the
Seller an opinion in form and substance as set forth in Exhibit 4 attached
hereto, addressed to the Buyer, and dated as of the Closing Date; and
(7) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
(8) Buyer and Seller shall have entered into a Supply Agreement
substantially in the form of Exhibit 6 hereto.
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(9) Buyer, Seller and Alco shall have entered into a letter
agreement, substantially in the form of Exhibit 7 hereto, pursuant to which
Buyer shall have received a right of first refusal to acquire the assets
described therein.
(10) Buyer, Seller and Alco shall have entered into a sublease
pertaining to the facility located at 531 N. Stiles Street in Linden, New
Jersey, which lease shall be in form and substance acceptable to Buyer, pursuant
to which Buyer shall have (a) subleased from Seller not less than _______ square
feet of such facility and (b) been furnished employees of lessor necessary for
the operation and maintenance of such facility, consistent with past practices.
(11) Buyer and Seller shall have entered into a Contract of Sale
pertaining to that certain warehouse facility located at 601 50th Street,
Denver, Colorado (the "Butler Property"), pursuant to which Seller shall agree
to sell to Buyer, and Buyer shall agree to purchase from Seller, the Butler
Property for total consideration of approximately $1.75 million within 30 days
after closing of the transaction contemplated hereby.
(12) Buyer and Alco shall have entered into a letter agreement,
substantially in the form of Exhibit 8 hereto, pursuant to which Alco shall have
agreed to furnish to the employees of CPC from the Closing through December 31,
1995, the transition services described therein.
b. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction, or waiver, of the following conditions:
(1) the representations and warranties set forth in Section 5 b. above
shall be true and correct in all material respects at and as of the Closing
Date;
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(2) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(3) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;
(4) the Buyer shall have delivered to the Seller a certificate to the
effect that each of the conditions specified above in Section 9 b. (1)-(3) is
satisfied in all respects;
(5) all applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated and the Parties
shall have received all other authorizations, consents, and approvals of
governments, governmental agencies and third parties;
(6) the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit 5 attached hereto,
addressed to the Seller, and dated as of the Closing Date; and
(7) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
10. REMEDIES FOR BREACHES OF THIS AGREEMENT.
a. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Except as permitted in the next sentence, all of the representations and
warranties contained in Section 6 above shall survive the Closing hereunder
(unless the Buyer knew of the misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of two years
thereafter. All of the representations and warranties contained in Section 5 and
in Sections 6 (e), (j), (k), (l), (o) and (w) above shall survive the Closing
(unless the damaged Party knew of the misrepresentation or breach of warranty at
the time of Closing, except that Buyer's knowledge shall not affect the survival
of the representation in Section 6 o.
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(1)(A) and continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations).
b. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
In the event the Seller or Alco breaches any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 10. a. above, provided that the Buyer makes
a written claim for indemnification against the Seller or Alco pursuant to
Section 12. g. below within such survival period, then the Seller and Alco agree
to indemnify the Buyer from and against any Adverse Consequences the Buyer shall
suffer caused by the breach; provided, however, that neither Seller nor Alco
shall have any obligation to so indemnify the Buyer until and to the extent the
Buyer has suffered Adverse Consequences by reason of all such breaches in excess
of $500,000, an aggregate deductible, and then Seller and Alco shall indemnify
Buyer for the full amount of all Adverse Consequences in excess of such
deductible. Notwithstanding the foregoing, the above described deductible shall
not be applicable to any Adverse Consequences attributable to (a) the failure of
Seller to deliver any of the Transferred Assets to Buyer or to pay or otherwise
discharge any part of the Excluded Liabilities, (b) breaches of the
representations and warranties contained in or claims under Section 6. j.
relating to Taxes and the second sentence of Section 6. o. (1)(A), or (c)
failure to perform the covenant set forth in Section 8 e.
c. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER AND ALCO. In
the event the Buyer breaches any of its representations, warranties, and
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 10 a. above, provided that the Seller or Alco makes a
written claim for indemnification against the Buyer pursuant to Section 12. g.
below within such survival period, then the Buyer agrees to indemnify the Seller
and Alco from and against the entirety of any Adverse Consequences the Seller or
Alco shall suffer caused by the breach.
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d. MATTERS INVOLVING THIRD PARTIES.
(1) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 10, then the Indemnified Party shall promptly (and in
any event within ten business days after receiving notice of the Third Party
Claim) notify each Indemnifying Party thereof in writing.
(2) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party; provided, however, that
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the payment of money
damages and does not impose an injunction or other equitable relief upon the
Indemnified Party.
(3) Unless and until an Indemnifying Party assumes the defense of the
Third Party Claim as provided in Section 10 d. (2) above, however, the
Indemnified Party may defend against the Third Party Claim in any manner it
reasonably may deem appropriate.
(4) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Parties (not to be
withheld unreasonably).
e. DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage and take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this Section 10. All
indemnification payments under this Section 10 shall be deemed adjustments to
the Purchase Price.
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f. OTHER INDEMNIFICATION PROVISIONS. The indemnification provisions in
this Section 10 are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant PROVIDED, HOWEVER, that the Buyer acknowledges and agrees
that the foregoing indemnification provisions in this Section 10 shall be the
exclusive remedy of the Buyer for any breach of the representations and
warranties in Section 5 or Section 6 above.
11. TERMINATION.
a. TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(1) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(2) the Buyer may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (A) in the event the Seller has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Seller of the
breach, and the breach, if curable, has continued without cure for a period of
30 days after the notice of breach or (B) if the Closing shall not have occurred
on or before October 15, 1995, by reason of the failure of any condition
precedent under Section 9. a. hereof (unless the failure results primarily from
the Buyer itself breaching any representation, warranty, or covenant contained
in this Agreement);
(3) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the Buyer has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, the Seller has notified the Buyer of the
breach, and the breach, if curable, has continued without cure for a period of
30 days after the notice of breach or (B) if the Closing shall not have occurred
on or before October 15, 1995, by reason of the failure
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of any condition precedent under Section 9. a. hereof (unless the failure
results primarily from the Seller itself breaching any representation, warranty,
or covenant contained in this Agreement).
b. EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 9. a. above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in Section 7. d. above shall survive
termination.
12. MISCELLANEOUS.
a. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
the Buyer and the Seller; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities
(in which case the disclosing Party will use its best efforts to advise the
other Parties prior to making the disclosure).
b. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
c. ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
d. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the
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prior written approval of the Buyer and the Seller; provided, however, that the
Buyer may (i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates, or to one or more lenders for the Buyer or such
affiliates, and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
e. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller or Alco: Copy to:
Alco Standard Corporation Ernst & Young
825 Duportail Road 787 Seventh Avenue
Wayne, PA 19087 New York, NY 10019
Attention: General Counsel Attention: Robert Del Genio
If to the Buyer: Copy to:
Central Products Acquisition Corp. Vaughan & Anderson
600 N. Pearl Street, Suite 2160 14800 Quorum Drive, Suite 510
LB 100 Dallas, Texas 75240
Dallas, Texas 75201 Attention: Timothy Vaughan, Esq.
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Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
h. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any jurisdiction.
i. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
k. EXPENSES. Each of the Parties hereto will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
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l. CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
m. INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
n. GOVERNING LAW AND VENUE. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware. If any action
is brought to enforce or interpret this Agreement, venue for such action shall
be in Dallas County, Dallas, Texas. All actions instituted by any party to
enforce this Agreement or any Agreement executed in connection herewith shall be
instituted in the United States District Court for the Northern District of
Texas. To the extent permitted by applicable law, all parties to this Agreement
waive trial by jury and waive any objection to jurisdiction or venue of any
action instituted hereunder.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CENTRAL PRODUCTS ACQUISITION CORP.
By: /s/ NED N. FLEMING, III
------------------------------
Title: President
----------------------------
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UNISOURCE WORLDWIDE, INC.
By: /s/JACK H. KEENEY
------------------------------
Title: Vice President-Finance
----------------------------
ALCO STANDARD CORPORATION
By: /s/HUGH G. MOULTON
------------------------------
Title: Executive Vice President
----------------------------
List of Exhibits Schedules
- ---------------- ---------
1 - Latest Balance Sheet of CPC A - Equipment transferred from
as of 6/30/95 Linden
2 - Environmental Summary B - Disclosure Schedule
3 - Form of Subordinated Note
4 - CPC Financial Statements
5 - Opinion of Seller's Counsel
6 - Form of Supply Agreement
7 - Letter re: certain equipment
8 - Transition Services Agreement
9 - Opinion of Buyer's Counsel
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CREDIT AGREEMENT
among
CENTRAL PRODUCTS ACQUISITION CORP.
as Borrower,
SPINNAKER INDUSTRIES, INC.
as Pledgor,
the Lenders identified on
the signature pages hereto,
as Lenders,
and
HELLER FINANCIAL, INC.,
as Agent
Dated as of
September 29, 1995
<PAGE>
SECTION 1
DEFINITIONS
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 26
SECTION 2
AMOUNTS AND TERMS OF LOANS
2.1 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(A) Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . 26
(B) Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . 27
(C) Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . 28
(D) Letters of Credit and Risk Participation Agreements . . . . . 29
(E) Borrowing Mechanics . . . . . . . . . . . . . . . . . . . . . 33
(F) Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(A) Rate of Interest. . . . . . . . . . . . . . . . . . . . . . . 35
(B) Interest Periods. . . . . . . . . . . . . . . . . . . . . . . 37
(C) Conversion or Continuation. . . . . . . . . . . . . . . . . . 38
(D) Special Provisions Governing LIBOR Rate Loans . . . . . . . . 39
(E) Computation and Payment of Interest . . . . . . . . . . . . . 42
(F) Interest Laws . . . . . . . . . . . . . . . . . . . . . . . . 43
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(A) Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . . 44
(B) Letter of Credit and Risk Participation Fees. . . . . . . . . 44
(C) Payment of Agent Fees . . . . . . . . . . . . . . . . . . . . 44
2.4 Payments and Prepayments . . . . . . . . . . . . . . . . . . . . . 44
(A) Manner and Time of Payment. . . . . . . . . . . . . . . . . . 44
(B) Payments on Business Days . . . . . . . . . . . . . . . . . . 45
(C) Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 46
(D) Voluntary Prepayments and Repayments. . . . . . . . . . . . . 48
(E) Application of Repayments and Prepayments . . . . . . . . . . 48
2.5 Term of Commitments. . . . . . . . . . . . . . . . . . . . . . . . 49
2.6 Borrower's Loan Account and Statements . . . . . . . . . . . . . . 49
2.7 Capital Adequacy and Other Adjustments . . . . . . . . . . . . . . 50
2.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(A) No Deductions . . . . . . . . . . . . . . . . . . . . . . . . 50
(B) Changes in Tax Laws . . . . . . . . . . . . . . . . . . . . . 51
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(C) Foreign Lenders . . . . . . . . . . . . . . . . . . . . . . . 52
2.9 Optional Prepayment/Replacement of Lender in Respect of Increased
Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.10 Other Letter of Credit and Risk Participation Agreement Provisions 53
(A) Obligations Absolute. . . . . . . . . . . . . . . . . . . . . 53
(B) Indemnification: Nature of Lenders' Duties. . . . . . . . . . 54
2.11 Disbursements of Advances, Payments, and Information . . . . . . . 55
(A) Revolving Loan Advances and Payments. . . . . . . . . . . . . 55
(B) Interest Payments All Loans . . . . . . . . . . . . . . . . . 55
(C) Term Loan Principal Payments. . . . . . . . . . . . . . . . . 56
(D) Lender Letters of Credit; Risk Participation Agreements . . . 56
(E) Availability of Each Lender's Pro Rata Share. . . . . . . . . 57
(F) Other Specific Payments . . . . . . . . . . . . . . . . . . . 57
2.12 Replacement of Lender. . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 3
CONDITIONS TO LOANS
3.1 Conditions to Initial Loans. . . . . . . . . . . . . . . . . . . . 58
(A) Closing Date Availability . . . . . . . . . . . . . . . . . . 58
(B) Financial Condition Certificate . . . . . . . . . . . . . . . 58
(C) Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(D) Capitalization and Issuance of Acquisition Securities . . . . 59
(E) Related Transactions Documents. . . . . . . . . . . . . . . . 59
(F) Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . 59
(G) Performance of Agreements . . . . . . . . . . . . . . . . . . 59
(H) Security Interests, UCC Filings and Stock Certificates. . . . 59
(I) Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 60
(J) Termination of Prior Indebtedness Liens and Other Liens . . . 60
(K) Borrower Documents. . . . . . . . . . . . . . . . . . . . . . 60
(L) Holdings Documents. . . . . . . . . . . . . . . . . . . . . . 63
(M) Other Loan Party Documents. . . . . . . . . . . . . . . . . . 64
(N) Alco Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 65
(O) Other Documents . . . . . . . . . . . . . . . . . . . . . . . 65
3.2 Conditions to All Loans. . . . . . . . . . . . . . . . . . . . . . 65
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SECTION 4
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.1 Organization, Powers, Capitalization, Good Standing, Business and
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(A) Organization and Powers . . . . . . . . . . . . . . . . . . . 67
(B) Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 67
(C) Qualification . . . . . . . . . . . . . . . . . . . . . . . . 67
(D) Conduct of Business . . . . . . . . . . . . . . . . . . . . . 67
(E) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 68
4.2 Authorization of Borrowing, Etc. . . . . . . . . . . . . . . . . . 68
(A) Authorization of Borrowing. . . . . . . . . . . . . . . . . . 68
(B) No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 68
(C) Governmental Consents . . . . . . . . . . . . . . . . . . . . 68
(D) Binding Obligation. . . . . . . . . . . . . . . . . . . . . . 69
(E) Valid Issuance of Acquisition Securities. . . . . . . . . . . 69
4.3 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . 69
(A) Financial Statements. . . . . . . . . . . . . . . . . . . . . 69
(B) Pro Forma . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(C) Projections . . . . . . . . . . . . . . . . . . . . . . . . . 70
4.4 Indebtedness and Contingent Obligations. . . . . . . . . . . . . . 70
4.5 No Material Adverse Change; No Stock Payments. . . . . . . . . . . 70
4.6 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . . 70
4.7 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . . . 70
4.8 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.9 Adverse Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 71
4.10 Performance of Agreements. . . . . . . . . . . . . . . . . . . . . 71
4.11 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . 71
4.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 72
(A) No Other Plans. . . . . . . . . . . . . . . . . . . . . . . . 72
(B) Compliance With Law and Liability . . . . . . . . . . . . . . 72
(C) Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(D) Prohibited Transactions and Payments. . . . . . . . . . . . . 73
(E) No Termination Event. . . . . . . . . . . . . . . . . . . . . 73
(F) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 73
(G) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 73
4.14 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 74
4.15 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . 74
(A) No Environmental Claims . . . . . . . . . . . . . . . . . . . 74
(B) Storage of Hazardous Materials. . . . . . . . . . . . . . . . 74
(C) Compliance with Environmental Laws. . . . . . . . . . . . . . 74
4.16 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . 75
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4.17 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
4.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
4.19 Use of Proceeds and Margin Security. . . . . . . . . . . . . . . . 76
4.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.21 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.22 Representations and Warranties from the Acquisition Documents. . . 76
(A) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 76
(B) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.23 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 77
4.24 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 5
AFFIRMATIVE COVENANTS
5.1 Financial Statements and Other Reports . . . . . . . . . . . . . . 77
(A) Monthly Financials. . . . . . . . . . . . . . . . . . . . . . 78
(B) Year-End Financials . . . . . . . . . . . . . . . . . . . . . 78
(C) Borrower Compliance Certificate . . . . . . . . . . . . . . . 78
(D) Accountants' Reports. . . . . . . . . . . . . . . . . . . . . 78
(E) Borrowing Base Certificate and Agings; Schedule of Inventory. 78
(F) Management Report . . . . . . . . . . . . . . . . . . . . . . 78
(G) Collateral Value Report . . . . . . . . . . . . . . . . . . . 79
(H) Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . 79
(I) Projections . . . . . . . . . . . . . . . . . . . . . . . . . 79
(J) SEC Filings and Press Releases. . . . . . . . . . . . . . . . 79
(K) Subordinated Indebtedness Notices . . . . . . . . . . . . . . 80
(L) Events of Default, Etc. . . . . . . . . . . . . . . . . . . . 80
(M) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 80
(N) Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 80
(O) Termination Events. . . . . . . . . . . . . . . . . . . . . . 81
(P) ERISA Notices . . . . . . . . . . . . . . . . . . . . . . . . 81
(Q) Supplemented Schedules; Notice of Corporate Changes . . . . . 81
(R) Other Information . . . . . . . . . . . . . . . . . . . . . . 81
5.2 Access to Accountants. . . . . . . . . . . . . . . . . . . . . . . 82
5.3 Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . 82
5.4 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . 82
5.5 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . 82
5.6 Inspection; Lender Meeting . . . . . . . . . . . . . . . . . . . . 83
5.7 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . 83
(A) Environmental Laws. . . . . . . . . . . . . . . . . . . . . . 83
(B) Indemnification . . . . . . . . . . . . . . . . . . . . . . . 83
(C) Remedial Action . . . . . . . . . . . . . . . . . . . . . . . 83
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(D) Further Assurance . . . . . . . . . . . . . . . . . . . . . . 84
5.8 Environmental Disclosure . . . . . . . . . . . . . . . . . . . . . 84
5.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 85
5.10 Covenants in Acquisition Documents . . . . . . . . . . . . . . . . 85
5.11 Mortgages; Title Insurance; Surveys. . . . . . . . . . . . . . . . 85
(A) Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 85
(B) Additional Mortgaged Property . . . . . . . . . . . . . . . . 85
(C) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
5.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 86
5.13 Interest Rate Agreement. . . . . . . . . . . . . . . . . . . . . . 86
5.14 Enforcement of Remedies under Acquisition Documents. . . . . . . . 86
SECTION 6
FINANCIAL COVENANTS
6.1 Capital Expenditure Limits . . . . . . . . . . . . . . . . . . . . 87
6.2 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
6.3 Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . . . . . 89
6.4 Total Interest Coverage. . . . . . . . . . . . . . . . . . . . . . 89
6.5 Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 7
NEGATIVE COVENANTS
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.2 Liens and Related Matters. . . . . . . . . . . . . . . . . . . . . 91
(A) No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 91
(B) No Negative Pledges . . . . . . . . . . . . . . . . . . . . . 92
(C) No Restrictions on Subsidiary Distributions to Borrower . . . 92
7.3 Investments; Joint Ventures. . . . . . . . . . . . . . . . . . . . 92
7.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . 92
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . 93
7.6 Restriction on Fundamental Changes . . . . . . . . . . . . . . . . 94
7.7 Disposal of Assets or Subsidiary Stock . . . . . . . . . . . . . . 95
7.8 Restriction on Operating Leases. . . . . . . . . . . . . . . . . . 95
7.9 Sales and Lease-Backs. . . . . . . . . . . . . . . . . . . . . . . 95
7.10 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 95
7.11 Management Fees and Compensation . . . . . . . . . . . . . . . . . 96
7.12 Environmental Liabilities. . . . . . . . . . . . . . . . . . . . . 96
7.13 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 96
7.14 Changes Relating to Subordinated Indebtedness and Borrower Preferred
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
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7.15 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.16 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . 97
7.17 Press Release; Public Offering Materials . . . . . . . . . . . . . 98
7.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
7.19 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 8
DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 98
(A) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
(B) Default in Other Agreements . . . . . . . . . . . . . . . . . 98
(C) Breach of Certain Provisions. . . . . . . . . . . . . . . . . 99
(D) Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . 99
(E) Other Defaults Under Loan Documents . . . . . . . . . . . . . 99
(F) Involuntary Bankruptcy: Appointment of Receiver, Etc. . . . . 99
(G) Voluntary Bankruptcy; Appointment of Receiver, Etc. . . . . . 99
(H) Governmental Liens. . . . . . . . . . . . . . . . . . . . . . 100
(I) Judgment and Attachments. . . . . . . . . . . . . . . . . . . 100
(J) Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . 100
(K) Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . 100
(L) Injunction. . . . . . . . . . . . . . . . . . . . . . . . . . 100
(M) ERISA - Pension Plans . . . . . . . . . . . . . . . . . . . . 100
(N) ERISA - Multiemployer Plans . . . . . . . . . . . . . . . . . 100
(O) Invalidity of Loan Documents. . . . . . . . . . . . . . . . . 100
(P) Damage, Strike, Casualty. . . . . . . . . . . . . . . . . . . 101
(Q) Licenses and Permits. . . . . . . . . . . . . . . . . . . . . 101
(R) Failure of Security . . . . . . . . . . . . . . . . . . . . . 101
(S) Change in Control . . . . . . . . . . . . . . . . . . . . . . 101
8.2 Suspension of Commitments. . . . . . . . . . . . . . . . . . . . . 101
8.3 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8.4 Performance by Agent . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 9
ASSIGNMENT AND PARTICIPATION
9.1 Assignments and Participations in Loans and Notes. . . . . . . . . 103
9.2 Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
(A) Appointment . . . . . . . . . . . . . . . . . . . . . . . . . 104
(B) Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . 104
(C) Rights Exculpation, Etc.. . . . . . . . . . . . . . . . . . . 105
(D) Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 105
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(E) Indemnification . . . . . . . . . . . . . . . . . . . . . . . 106
(F) Heller Individually . . . . . . . . . . . . . . . . . . . . . 106
(G) Successor Agent . . . . . . . . . . . . . . . . . . . . . . . 106
(H) Collateral Matters. . . . . . . . . . . . . . . . . . . . . . 107
(I) Agency for Perfection . . . . . . . . . . . . . . . . . . . . 108
(J) Notice of Default . . . . . . . . . . . . . . . . . . . . . . 108
9.3 Amendments, Consents and Waivers for Certain Actions . . . . . . . 108
9.4 Set Off and Sharing of Payments. . . . . . . . . . . . . . . . . . 109
SECTION 10
MISCELLANEOUS
10.1 Expenses and Attorneys' Fees . . . . . . . . . . . . . . . . . . . 110
10.2 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 112
10.4 Retention of Borrower Documents. . . . . . . . . . . . . . . . . . 114
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
10.6 Survival of Warranties and Certain Agreements. . . . . . . . . . . 115
10.7 Failure or Indulgence Not Waiver: Remedies Cumulative. . . . . . . 115
10.8 Marshaling; Payments Set Aside . . . . . . . . . . . . . . . . . . 116
10.9 Independence of Covenants. . . . . . . . . . . . . . . . . . . . . 116
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.11 Lenders' Obligations Several: Independent Nature of Lenders'
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.13 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.14 Successors and Assigns: Subsequent Holders of Notes. . . . . . . . 117
10.15 No Fiduciary Relationship. . . . . . . . . . . . . . . . . . . . . 117
10.16 Consent To Jurisdiction And Service Of Process . . . . . . . . . . 117
10.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 118
10.18 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 119
10.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 119
10.20 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . . . 119
10.21 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . 119
10.22 No Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
10.23 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
10.24 Additional Subordinated Indebtedness . . . . . . . . . . . . . . . 120
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EXHIBITS
Exhibit A Term Note A
Exhibit B Term Note B
Exhibit C Revolving Note
Exhibit D Borrowing Base Certificate
Exhibit E Notice of Borrowing
Exhibit F Notice of Conversion/Continuation
Exhibit G Compliance Certificate
Exhibit H Borrower Security Agreement
Exhibit I Holdings Pledge Agreement
Exhibit J Seller Subordination Agreement
Exhibit K Financial Condition Certificate
Exhibit L Borrower Pledge Agreement
Exhibit M Subsidiary Guaranty
Exhibit N Subsidiary Security Agreement
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SCHEDULES
Schedule 1.1(A) Prior Indebtedness
Schedule 1.1(B) Pro Forma
Schedule 1.1(C) Mortgaged Property
Schedule 1.1(D) Permitted Liens
Schedule 4.1(A) Organization of Loan Parties
Schedule 4.1(B) Capitalization of Loan Parties
Schedule 4.1(C) Qualification of Loan Parties
Schedule 4.1(D) Conduct of Business
Schedule 4.2(B) Approvals and Consents
Schedule 4.3 Projections
Schedule 4.7 Litigation
Schedule 4.12 Employee Benefit Plans
Schedule 4.13 Intellectual Property
Schedule 4.14 Broker's Fees
Schedule 4.15(A) Environmental Claims
Schedule 4.15(B) Hazardous Materials
Schedule 4.15(C) Environmental Laws and Permits
Schedule 4.16 Employee Matters
Schedule 4.21 Insurance Policies
Schedule 4.22 Bank Accounts
Schedule 4.24 Investments
Schedule 7.1 Permitted Indebtedness
Schedule 7.4 Existing Contingent Obligations
Schedule 7.9 Permitted Affiliate Transactions
Schedule 7.10 Management Fees and Consulting Fees
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CREDIT AGREEMENT
This CREDIT AGREEMENT (this "Agreement") is dated as of September 29,
1995, and entered into by and among CENTRAL PRODUCTS ACQUISITION CORP., a
Delaware corporation, (the "Borrower"), with its chief executive office and
principal place of business at 748 Fourth Street, Menasha, Wisconsin, 54952-
0330; SPINNAKER INDUSTRIES, INC., a Delaware corporation ("Holdings"), with its
chief executive office and principal place of business at 600 N. Pearl Street,
Suite 2160, Dallas, Texas 75201; the LENDERS LISTED ON THE SIGNATURE PAGES
HEREOF and HELLER FINANCIAL, INC., a Delaware corporation (in its individual
capacity, "HELLER"), with offices at 500 West Monroe, Chicago, Illinois 60661,
for itself, as a Lender, and as Agent for the Lenders (such term and other
capitalized terms used herein are defined in Section 1 of this Agreement).
RECITALS:
WHEREAS, Holdings is the owner and holder of all of the issued and
outstanding capital stock of Borrower; and
WHEREAS, Borrower has been formed for the purpose of acquiring certain
assets of Unisource Worldwide, Inc., a Delaware corporation ("Unisource") and a
wholly owned subsidiary of Alco Standard Corporation, an Ohio corporation
("Alco"), including all of the issued and outstanding capital stock of Central
Products Company, formerly known as Central Products Company-Linden, a Delaware
corporation ("Central"); and
WHEREAS, the acquisition will be accomplished by the purchase of certain
assets of Unisource, including all of the outstanding shares of capital stock of
Central by Borrower pursuant to that certain Stock and Asset Purchase Agreement
dated as of September 27, 1995, by and among Unisource, Alco and Borrower (the
"Purchase Agreement"); and
WHEREAS, Holdings and Borrower desire that Lenders extend certain term
credit facilities and a revolving credit facility to Borrower to fund the
Acquisition, to provide funds for the payment of certain fees, costs and
expenses incurred by Borrower in connection with the Acquisition, to provide
working capital financing for Borrower and its Subsidiaries and to provide funds
for other general corporate purposes of Borrower and its Subsidiaries; and
WHEREAS, Borrower desires to secure all of its obligations under the
Loan Documents by pledging to Agent, on behalf of Lenders, the capital stock of
its Subsidiaries and by granting to Agent, on behalf of Lenders, a security
interest in and lien upon all of its personal and real property; and
CREDIT AGREEMENT-Page 1
<PAGE>
WHEREAS, Holdings is willing to grant to Agent, on behalf of Lenders, a
security interest in and lien upon all of the capital stock of Borrower to
secure the obligations of Borrower under the Loan Documents;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holdings, Borrower, Lenders and Agent
agree as follows:
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS
The terms defined below are used in this Agreement as so defined. Terms
defined in the preamble and recitals to this Agreement are used in this
Agreement as so defined.
"ACCOUNTING CHANGES" has the meaning assigned to that term in subsection
1.2.
"ACCOUNTS" means, on any date of determination, the unpaid portion of
the obligations as stated on the respective invoices issued to a customer of
Borrower or any of its Subsidiaries with respect to Inventory sold and shipped
or services performed in the ordinary course of business, net of any credits,
rebates or offsets owed by Borrower or any of its Subsidiaries to the respective
customer and net of any commissions payable by Borrower or any of its
Subsidiaries to third parties.
"ACQUISITION" means the acquisition by Borrower of certain assets of
Unisource and all of the issued and outstanding capital stock of Central
pursuant to the Purchase Agreement.
"ACQUISITION DOCUMENTS" means the Purchase Agreement, and all other
documents, agreements and certificates executed in connection therewith;
excluding, however, all Loan Documents, Capitalization Documents and
Subordinated Loan Documents.
"ACQUISITION SECURITIES" means collectively the Borrower Capital Stock
and the Subordinated Notes.
"ADDITIONAL MORTGAGED PROPERTY" has the meaning assigned to that term in
subsection 5.11(B).
"ADJUSTMENT DATE" has the meaning assigned to that term in subsection
2.2(A).
"AFFECTED LENDER" has the meaning assigned to that term in subsections
2.7(B) and 2.7(C).
"AFFILIATE" means any Person (other than Agent or any Lender): (a)
directly or indirectly controlling, controlled by, or under common control with
Borrower; (b) directly or indirectly owning
CREDIT AGREEMENT-Page 2
<PAGE>
or holding five percent (5%) or more of any equity interest in Borrower; or (c)
five percent (5%) or more of whose voting stock or other equity interest is
directly or indirectly owned or held by Borrower. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") 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 or by contract or otherwise. Notwithstanding the foregoing,
in no event shall any shareholder of Lynch be deemed an Affiliate of Holdings,
Borrower or any of its Subsidiaries unless such Person becomes an Affiliate of
Holdings, Borrower or any of its Subsidiaries of the type described in clause
(b) or (c) of the foregoing for reasons other than ownership of voting stock or
an equity interest in Lynch.
"AGENT" means Heller in its capacity as agent for the Lenders under this
Agreement and any successor appointed pursuant to subsection 9.2.
"ALCO INDEMNITY AGREEMENT" means that certain Indemnity Agreement, dated
September 29, 1995, by and between Alco and Agent.
"ASSET DISPOSITION" means the disposition of the following, whether by
sale, lease, transfer, loss, damage, destruction, condemnation or otherwise:
(a) any of the Securities of any of Borrower's Subsidiaries or (b) any or all of
the other assets of Borrower or any of Borrower's Subsidiaries other than sales
of Inventory in the ordinary course of business.
"BANK AGENCY AGREEMENT" means an agreement satisfactory to Agent among
Agent, for the benefit of Lenders, Borrower and its Subsidiaries and each bank
at which Borrower or any of its Subsidiaries maintain depository accounts.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time and all rules and regulations
promulgated thereunder.
"BASE RATE" means a variable rate of interest per annum equal to the
higher of (i) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve statistical release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (ii) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. The applicable Bank Prime Loan rate for any date not set forth
shall be the rate set forth for the last preceding date. In the event the Board
of Governors of the Federal Reserve System ceases to publish a Bank Prime Loan
rate or equivalent, the term "Base Rate" shall mean a variable rate of interest
per annum equal to the highest of the "prime rate," "reference rate," "base
rate" or other similar rate announced from time to time by any of Bankers Trust
Company, The Chase Manhattan Bank (National Association) or Chemical Bank (or
their respective successors) as selected from time to time by Agent in its sole
discretion and without requirement of notice to Borrower (with the understanding
that any such rate may merely
CREDIT AGREEMENT-Page 3
<PAGE>
be a reference rate and may not necessarily represent the lowest or best rate
actually charged to any customer by such bank).
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2(A)(1).
"BASE RATE MARGIN" has the meaning assigned to that term in subsection
2.2(A).
"BIG SIX ACCOUNTING FIRM" means any of Arthur Andersen & Co., KPMG Peat
Marwick, Coopers & Lybrand, Ernst & Young, Deloitte & Touche and Price
Waterhouse or any of their respective successors.
"BORROWER CAPITAL STOCK" means Borrower's 1,000 authorized shares of
common stock, $1.00 par value per share.
"BORROWER PLANS" means the Employee Benefit Plans described in
subsection 4.12(A) and on Schedule 4.12; and any other Employee Benefit Plans
sponsored, maintained or contributed to by any Loan Party or Loan Party
Affiliate.
"BORROWER PLEDGE AGREEMENT" means the stock pledge agreement to be
executed and delivered by Borrower in favor of Agent, for the benefit of
Lenders, in form and substance satisfactory to Agent, pertaining to the capital
stock of Central substantially in the form of Exhibit "L".
"BORROWER SECURITY AGREEMENT" means the security agreement dated as of
the Closing Date substantially in the form of Exhibit "H".
"BORROWING BASE" has the meaning assigned to that term in subsection
2.1(C).
"BORROWING BASE CERTIFICATE" means a certificate duly executed by a
Responsible Officer of Borrower appropriately completed and in substantially the
form of Exhibit "D".
"BOYLE/FLEMING" means Boyle, Fleming & Co., Inc., a Delaware
corporation.
"BUSINESS DAY" means (a) for all purposes other than as covered by
clause (b) below, any day excluding Saturday, Sunday and any day which either is
a legal holiday under the laws of the State of Illinois, the Commonwealth of
Pennsylvania or the State of Wisconsin or is a day on which national banking
associations located in any of such states are closed, and (b) with respect to
all notices, determinations, fundings and payments in connection with the LIBOR,
any day that is a Business Day described in clause (a) and that is also a day
for trading by and between banks in Dollar deposits in the applicable LIBOR
market.
"CALCULATION PERIOD" has the meaning assigned to that term in subsection
2.2(A).
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"CALENDAR QUARTER" means the period of three consecutive calendar months
ending on March 31, June 30, September 30, or December 31, of each calendar
year.
"CAPITAL EXPENDITURES" means, without duplication, for any period, the
aggregate of all expenditures on a consolidated basis including deposits
(whether paid in cash or property or accrued as liabilities and including the
aggregate amount of all principal payments due for the entire term under all
Capital Leases which are required to be capitalized on the balance sheet) made
by Borrower and its Subsidiaries that, in conformity with GAAP, are required to
be included in the property, plant, or equipment, or similar fixed asset
account; provided, however, there shall be excluded from the calculation of
Capital Expenditures permitted under subsection 6.1 hereof only that portion of
all such expenditures which Borrower is permitted to reinvest or use for
replacement or restoration of assets through the use of insurance proceeds,
awards of compensation arising from condemnation or eminent domain proceedings
or from Net Proceeds of Asset Dispositions.
"CAPITAL EXPENDITURE LIMIT" shall have the meaning assigned to that term
in Section 6.1.
"CAPITALIZATION DOCUMENTS" means, collectively: (a) any or all of the
stock certificates, partnership certificates, notes or debentures representing
Acquisition Securities; (b) the indentures or other documents pursuant to which
such certificates, notes and debentures are issued or to be issued; (c) each
document governing the issuance of, or setting forth the terms of, such notes or
debentures; and (d) any stockholders, voting trust, intercreditor, partnership
or other agreement among or between the holders of Acquisition Securities or
Borrower Capital Stock.
"CAPITAL LEASE" means any lease of any property (whether real, personal
or mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"CASH EQUIVALENTS" means: (a) marketable direct obligations issued or
unconditionally guarantied 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; (b)
commercial paper maturing no more than one year from the date issued and, at the
time of acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (c)
certificates of deposit or bankers' acceptances maturing within one year from
the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000 and not subject to
setoff rights in favor of such bank; and (d) time deposits maturing no more than
thirty (30) days from the date of creation thereof with commercial banks having
membership in the Federal Deposit Insurance Corporation in amounts not exceeding
the lesser of $100,000 or the maximum amount of insurance applicable to the
aggregate amount of Borrower's deposits at such institution); and (e) deposits
or investments in mutual or similar funds offered or sponsored by brokerage or
other companies having membership in the Securities Investor Protection
Corporation in amounts not exceeding the lesser of $100,000 or the maximum
amount of insurance applicable to the aggregate amount of Borrower's deposits at
such institution.
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<PAGE>
"CLOSING DATE" means September 29, 1995.
"COLLATERAL" means, collectively: (a) all capital stock and other
property pledged pursuant to the Pledge Agreements; (b) all "Collateral" as
defined in the Security Agreements; (c) all real and personal property mortgaged
pursuant to the Mortgages; and (d) any property or interest provided in addition
to or in substitution for any of the foregoing.
"COMMITMENT" or "COMMITMENTS" means the commitment or commitments of a
Lender or Lenders to make the Loans as set forth in subsection 2.1 and of the
Agent or any Lender to issue Lender Letters of Credit and Risk Participation
Agreements as set forth in subsection 2.1(D).
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of Exhibit "G."
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (a) with respect
to any indebtedness, lease, dividend or other obligation of another Person if
the primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (b) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (c) under
Interest Rate Agreements; (d) under any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect that
Person against fluctuations in currency values; or (e) under any commodity
futures contract. Contingent Obligations shall include (i) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (ii) the obligation to
make take-or-pay or similar payments if required regardless of nonperformance by
any other party or parties to an agreement, and (iii) any liability of such
Person for the obligations of another through any agreement to purchase,
repurchase or otherwise acquire such obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance sheet
item or level of income of another. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guarantied or otherwise
supported or, if a fixed and determined amount, the maximum amount so
guarantied.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other 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, including, without limitation,
the Related Transactions Documents.
"DAILY INTEREST AMOUNT" has the meaning assigned to that term in
subsection 2.11(B).
"DAILY INTEREST RATE" has the meaning assigned to that term in
subsection 2.11(B).
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"DAILY LOAN BALANCE" has the meaning assigned to that term in subsection
2.11(B).
"DEFAULT" means a condition or event that, after notice or lapse of time
or both, would constitute an Event of Default if that condition or event were
not cured or removed within any applicable grace or cure period.
"DOLLARS" and the sign "$" means the lawful money of the United States
of America.
"EBITDA" means, without duplication, for any period, for Borrower and
its Subsidiaries on a consolidated basis, the following, each calculated for
such period: (a) Net Income; plus (b) any provision for (or less any benefit
from) income and franchise taxes included in the determination of Net Income;
plus (c) Interest Expense deducted in the determination of Net Income; plus (d)
amortization and depreciation deducted in the determination of Net Income; plus
(e) losses from (or less gains from) Asset Dispositions or other non-cash items
(excluding sales, expenses or losses related to current assets) included in the
determination of Net Income; less (f) after tax extraordinary gains (or plus
after tax extraordinary losses) (in each case as defined under GAAP); plus (g)
expenses of the Related Transactions included in the determination of Net Income
provided that such expenses were accrued for or otherwise identified in the Pro
Forma and described on Schedule 1.1(A); plus (h) changes pursuant to the last
sentence of subsection 1.2 applicable to, but not included in, the Pro Forma.
"ELIGIBLE ACCOUNTS" means, as of any date of determination, the aggregate
of all Accounts excluding, however, the following:
(a) Accounts which, at the date of issuance of the respective invoice
therefor, were payable more than thirty (30) days after the date of
issuance of such invoice;
(b) Accounts which remain unpaid for more than sixty (60) days after
the due date specified in the original invoice or for more than ninety (90)
days after invoice date if no due date was specified;
(c) Accounts due from a customer whose principal place of business is
located outside the United States of America unless such Account is backed
by a letter of credit which has been issued or confirmed by a bank that is
organized under the laws of the United States of America or a State thereof
and has capital and surplus in excess of $500,000,000, provided that, such
letter of credit is delivered to Agent as additional Collateral under the
Security Documents, together with such other documentation as may be
reasonably requested by Agent;
(d) Accounts due from a customer which Agent has notified Borrower
has an unsatisfactory credit standing (as determined in the reasonable
discretion of Agent);
CREDIT AGREEMENT-Page 7
<PAGE>
(e) Accounts with respect to which the customer is the United States
of America, any State of the United States of America, or any political
subdivision, department, agency or instrumentality of either, UNLESS (i)
Borrower has, with respect to Accounts owed by the United States of
America, complied with the Federal Assignment of Claims Act (31 U.S.C.,
Section 3727) or (ii) with respect to Accounts owned by any State of the
United States of America, or any department, political subdivision, agency
or instrumentality thereof, (A) contractual or state law restrictions on
the assignability of contracts or accounts of such Person or of the
proceeds thereof do not exist; or (B) such restrictions are complied with
and the Agent is satisfied it has a perfected, first priority security
interest in such Accounts that can be enforced against the State or any
department, political subdivision, agency or instrumentality thereof;
(f) Accounts with respect to which the customer is an Affiliate of
any Loan Party or is a director, officer, agent, stockholder or employee of
any Loan Party or any of their Affiliates to the extent such Accounts
exceed $250,000 (but only to the extent of such excess);
(g) Accounts due from a customer if more than twenty percent (20%) of
the aggregate amount of the Accounts of such customer have at the time
remained unpaid for more than ninety (90) days after invoice date;
(h) Accounts with respect to which there is any unresolved dispute
with the respective customer (but only to the extent of such dispute);
(i) Accounts evidenced by an instrument or chattel paper (as defined
in Article 9 of the UCC) not in the possession of Agent;
(j) Accounts with respect to which Agent does not have a valid, first
priority and fully perfected security interest, and Accounts subject to any
Lien except those in favor of Agent on behalf of the Lenders and the
Permitted Encumbrances;
(k) Accounts with respect to which the customer is the subject of any
bankruptcy or other insolvency proceeding;
(l) Accounts due from a customer to the extent that such Accounts
exceed in the aggregate an amount equal to twenty percent (20%) of the
aggregate of all Accounts at said date (but only to the extent of such
excess);
(m) Accounts with respect to which the customer's obligation to pay
is conditional or subject to a repurchase obligation or right to return,
including bill and hold sales, guarantied sales, sale or return
transactions, sales on approval or consignment sales; and
CREDIT AGREEMENT-Page 8
<PAGE>
(n) Accounts with respect to which the customer is located in New
Jersey, Minnesota, or any other state denying creditors access to its
courts in the absence of a Notice of Business Activities Report or other
similar filing, unless Borrower has either qualified as a foreign
corporation authorized to transact business in such state or has filed a
Notice of Business Activities Report or similar filing with the applicable
state agency for the then current year.
PROVIDED that Accounts excluded solely as a result of the foregoing clause (a)
which, at the date of issuance of the respective invoice therefor, were payable
no more than sixty (60) days after the date of issuance of such invoice may be
included as "ELIGIBLE ACCOUNTS" to the extent such Accounts do not exceed
fifteen percent (15%) of the aggregate amount of all Eligible Accounts
determined without including the Accounts described in this proviso.
"ELIGIBLE INVENTORY" means, as any date of determination, the value
(determined at the lower of cost or market on a first-in, first-out basis and
net of any reserve for obsolete or slow moving Inventory) of all Inventory owned
by Borrower (or any of its Subsidiaries) and located in the United States of
America except the following: (a) Inventory with respect to which Agent does
not have a valid, first priority and fully perfected security interest; (b)
Inventory with respect to which there exists any Lien (other than Permitted
Encumbrances) in favor of any Person other than Agent on behalf of Lenders; (c)
Inventory produced in violation of the Fair Labor Standards Act and subject to
the so-called "hot goods" provisions contained in Title 29 U.S.C. SECTION 215
(a); (d) (i) so long as no default or event of default has occurred and is
continuing under the Alco Indemnity Agreement, Inventory located at the Linden
Facility to the extent the value (determined at the lower of cost or market on a
first-in, first-out basis and net of any reserve for obsolete or slow moving
Inventory) exceeds $5,000,000 (but only to the extent of such excess), and (ii)
in the event a default or event of default has occurred or is continuing under
the Alco Indemnity Agreement, any and all Inventory located at the Linden
Facility; PROVIDED that Inventory excluded as a result of the foregoing clauses
(d)(i) and (d)(ii) may be included if Borrower has caused to be executed and
delivered to Agent an agreement with the landlord of the Linden Facility
containing such consents and waivers as required by Agent; and (e) Inventory in
the possession of Persons other than Borrower (or any of its Subsidiaries);
PROVIDED that, such Inventory excluded as a result of the foregoing clause (e)
may be included if Borrower shall: (i) notify such third Person of the security
interests created pursuant to the Security Documents; (ii) instruct such Person
to hold all such Collateral for Agent's account subject to Agent's instructions;
and (iii) take all other actions the Agent deems necessary to perfect and
protect its and the Borrower's interests in such Collateral pursuant to the
requirements of the Uniform Commercial Code of the applicable jurisdiction where
the warehouseman, bailee, agent, processor or other third Person is located
(including the filing of a financing statement in the proper jurisdiction naming
the applicable third Person as debtor and the Borrower as secured party).
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA, and all other employee profit-sharing, incentive,
deferred compensation, welfare, pension, retirement, severance, group insurance
and other employee benefit plans, arrangements, agreements and practices which
relate to employee benefits.
CREDIT AGREEMENT-Page 9
<PAGE>
"ENVIRONMENTAL CLAIMS" has the meaning assigned to such term in Section
4.15(A).
"ENVIRONMENTAL LAWS" means all applicable federal, state or local laws,
statutes, ordinances, codes, rules, regulations, orders, decrees or directives
imposing liability or standards of conduct for or relating to the environment,
industrial hygiene, land use or the protection of human health, safety or
welfare, plant life or animal life, natural resources, the environment or
property from pollution or waste management.
"EQUITY SECURITIES" means any stock, shares, voting trust certificates,
partnership interests, options, warrants or other evidences of equity securities
or rights or interest therein or relating thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all applicable regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person who is a member of a group which is
under common control with any Loan Party or is treated as a single employer with
any Loan Party as determined under Section 414(b), (c), (m) or (o) of the IRC.
"EVENT OF DEFAULT" means each of the events set forth in subsection 8.1.
"EXCESS CASH FLOW" means, for any period, without duplication, the total of
the following for Borrower and its Subsidiaries on a consolidated basis, each
calculated for such period: (a) EBITDA: LESS (b) any provision for (or plus
any benefit from) income or franchise taxes included in the determination of Net
Income; PLUS (c) decreases in Working Capital; less (d) increases in Working
Capital; plus (d) decreases (increases) in long-term deferred tax assets; PLUS
(e) increases (decreases) in the long-term portion of reserves and accrued
liabilities; PLUS (f) increases (decreases) in long-term deferred tax
liabilities; LESS (g) the unfinanced portion of Capital Expenditures pursuant to
subsections 7.1(e) and 7.1(f) less (h) scheduled amortization of Indebtedness
actually paid; LESS (i) the aggregate of all voluntary prepayments of the Term
Loans made in accordance with subsection 2.4(D); LESS (j) Interest Expenses;
LESS (k) Restricted Junior Payments made in cash and otherwise permitted under
subsection 7.5(a) of this Agreement. For purposes of this definition and this
Agreement; (i) "Working Capital" means current assets LESS current liabilities,
excluding cash, Cash Equivalents, the current portion of long term Indebtedness,
the principal balance of the Revolving Loan and any amounts due to or due from
Affiliates, and (ii) "unfinanced portion of Capital Expenditures" includes
Capital Expenditures funded with advances under the Revolving Loan.
"EXCESS INTEREST" has the meaning assigned to that term in subsection
2.2(F).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
CREDIT AGREEMENT-Page 10
<PAGE>
"EXPIRY DATE" means the earlier of (a) the termination of the Revolving
Commitments pursuant to subsection 8.3 or (b) the Termination Date applicable to
the Revolving Loan Commitments.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, 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 on the next
following Business Day by the Federal Reserve Bank of New York or, if such rate
is not published for any Business Day, the average of the quotations for the day
of the requested Loan received by the Agent from three Federal funds brokers of
recognized standing selected by Agent.
"FINANCIAL CONDITION CERTIFICATE" means a certificate delivered to Agent by
Borrower pursuant to subsection 3.1(B) and substantially in the form of Exhibit
"K".
"FEE LETTER" has the meaning assigned to that term in Section 3.1(C).
"FISCAL YEAR" means a twelve month period ending on the last day of
December in each year; PROVIDED that, with respect to the Fiscal Year ending on
December 31, 1995, "FISCAL YEAR" means the period from the Closing Date through
December 31, 1995.
"FIXED CHARGE COVERAGE" means, for any period, (a) Operating Cash Flow for
such period divided by (b) Fixed Charges for such period.
"FIXED CHARGES" means, without duplication, for any period, the following,
each calculated for such period: (a) Interest Expenses; plus (b) any provision
for (or less any benefit from) income or franchise taxes included in the
determination of Net Income, excluding any changes in deferred tax asset and
liability accounts; plus (c) scheduled payments of principal with respect to all
Indebtedness (including scheduled payments of Capital Leases) of Borrower and
its Subsidiaries on a consolidated basis, but excluding reductions of the
Revolving Loan, plus (d) Restricted Junior Payments made in cash and otherwise
permitted under this Agreement.
"FUNDING DATE" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit or a Risk Participation Agreement.
"GAAP" means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning of 'Present
Fairly in Conformance with Generally Accepted Accounting Principles in the
Independent Auditors Reports'" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or any successor
authority) that are applicable to the circumstances as of the date of
determination.
"HAZARDOUS MATERIAL" means all or any of the following: substances that
are defined or listed in, or otherwise classified pursuant to, any applicable
Environmental Laws as "hazardous
CREDIT AGREEMENT-Page 11
<PAGE>
substances", "hazardous materials", "hazardous wastes", "toxic substances" or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity";
including, or in addition, any or all of the following: (a) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (b) any flammable substances, explosives or any radioactive
materials; (c) underground storage tanks, whether empty or containing any
substance; and (d) asbestos in any form; and (e) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
"HOLDINGS NOTE" means that certain Subordinated Promissory Note in the
stated principal amount of $25,000,000, dated September 29, 1995, from Holdings,
as Maker, to Alco, as Payee.
"HOLDINGS PLEDGE AGREEMENT" means that certain pledge agreement to be
executed and delivered by Holdings to Agent substantially in the form of Exhibit
"I".
"INDEBTEDNESS", as applied to any Person, means: (a) all indebtedness for
borrowed money; (b) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP; (c) notes payable, acceptances and drafts accepted representing extensions
of credit whether or not representing obligations for borrowed money; (d) any
obligation owed for all or any part of the deferred purchase price of property
or services if the purchase price is due more than six months from the date the
obligation is incurred or is evidenced by a note or similar written instrument;
and (e) all indebtedness secured by any Lien on any property or asset owned or
held by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements constitute Contingent Obligations and
not Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in
subsection 10.2.
"INDEMNITEES" has the meaning assigned to that term in subsection 10.2.
"INTELLECTUAL PROPERTY" has the meaning assigned to that term in subsection
4.13.
"INTEREST EXPENSE" means, without duplication, for any period, the
following, each calculated for such period: interest expense (net of any
interest income) deducted in the determination of Net Income excluding: (a) the
amortization of fees and costs incurred with respect to the Related Transactions
which have been capitalized as transaction costs; (b) any interest paid in kind.
"INTEREST INCREASE TRIGGER DATE" has the meaning assigned to that term in
subsection 2.2(A).
"INTEREST PERIOD" means any interest period applicable to a Loan as
determined pursuant to subsection 2.2(B).
CREDIT AGREEMENT-Page 12
<PAGE>
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Borrower or any of its Subsidiaries against
fluctuations in interest rates.
"INTEREST RATE DETERMINATION DATE" means the date on which Agent
determines the interest rate applicable to any LIBOR Loan pursuant to subsection
2.2(A) hereof, which shall be the second LIBOR Business Day prior to the first
day of the Interest Period applicable to such LIBOR Loan.
"INTEREST RATIO" has the meaning assigned to that term in subsection
2.11(B).
"INTEREST SETTLEMENT DATE" has the meaning assigned to that term in
subsection 2.11(B).
"INVENTORY" means inventory (as defined in Article 9 of the UCC) to the
extent comprised of materials, products or goods of a type manufactured, sold or
consumed by Borrower or any of its Subsidiaries in the ordinary course of
business.
"INVESTMENT" means (a) any direct or indirect purchase or other acquisition
by Borrower or any of its Subsidiaries of any beneficial interest in, including
stock, partnership interest or other Securities of, any other Person (other than
a Person that prior to the relevant purchase or acquisition was a Subsidiary of
Borrower), or (b) any direct or indirect loan, advance or capital contribution
by Borrower or any of its Subsidiaries to any other Person (other than a
Subsidiary of Borrower), including all indebtedness and accounts receivable from
that other Person that are not current assets or did not arise from sales to
that other Person in the ordinary course of business. The amount of any
Investment shall be the original cost of such Investment plus the cost of all
additions thereto, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment.
"IRC" means the Internal Revenue Code of 1986, as amended and any rule or
regulation promulgated thereunder from time to time.
"IRS" means the United States Internal Revenue Service.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form.
"LENDER" or "LENDERS" means Heller and each of the other financial
institutions listed on the signature pages hereof, together with their
respective successors and permitted assigns pursuant to subsection 9.1.
"LENDER ADDITION AGREEMENT" means an agreement among Agent, a Lender and
such Lender's assignee regarding their respective rights and obligations with
respect to assignments of the Loans, the Commitments and other interests under
this Agreement and the other Loan Documents executed in accordance with the
terms of Subsection 9.1.
CREDIT AGREEMENT-Page 13
<PAGE>
"LENDER LETTER OF CREDIT" means a letter of credit issued by Agent or any
Lender under the terms of subsection 2.1(D) of this Agreement.
"LIBOR" means, for each Interest Period, a rate of interest determined by
Agent equal to:
(a) the rate of interest determined by Agent at which deposits in
Dollars for the relevant Interest Period are offered based on information
presented on the Reuters Screen LIBO Page as of 11:00 A.M. (London time) on
the day which is two (2) Business Days prior to the first day of such
Interest Period for the same time period as that Interest Period; PROVIDED
that if at least two such offered rates appear on the Reuters Screen LIBO
Page in respect of such Interest Period, the arithmetic mean of all such
rates will be the rate used; provided, further, that if fewer than two
offered rates appear or if Reuters ceases to provide LIBOR quotations, such
rate shall be the rate of interest at which deposits in Dollars are offered
for the relevant Interest Period by any of Bankers Trust Company, The Chase
Manhattan Bank (National Association) or Chemical Bank (or their respective
successors) to first class banks in the London interbank market as of 11:00
A.M. (London time) on the applicable Interest Rate Determination Date,
divided by
(b) a number equal to 1.0 MINUS the average of the rates (expressed
as a decimal fraction) of reserve requirements in effect on the day which
is two (2) Business Days prior to the beginning of such Interest Period
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation
D) which are required to be maintained by a member bank of the Federal
Reserve System;
(such rate to be adjusted upward to the next whole multiple of one sixteenth of
one percent (1/16) of 1%).
"LIBOR INTEREST RATIO" has the meaning assigned to that term in subsection
2.11(B).
"LIBOR LOANS" means Loans bearing interest at rates determined by
reference to the LIBOR as provided in subsection 2.2(A)(2).
"LIBOR MARGIN" has the meaning assigned to that term in subsection 2.2(A).
"LIBOR SETTLEMENT DATE" has the meaning assigned to that term in subsection
2.11(B).
"LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
CREDIT AGREEMENT-Page 14
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"LINDEN FACILITY" has the meaning assigned to such term in subsection
3.1(K)(8).
"LOAN" or "LOANS" means an advance or advances under the Term Loan
Commitments or the Revolving Loan Commitment and also means, as applicable when
the context requires, LIBOR Loan or Loans or Base Rate Loan or Loans.
"LOAN ACCOUNT" has the meaning assigned to that term in subsection 2.6.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security Documents,
the Pledge Agreements, the Subsidiary Guaranty, the Security Agreements, the
Mortgages, the Lender Letters of Credit, the Fee Letter, the Risk Participation
Agreements, the applications for the Lender Letters of Credit and Risk
Participation Agreements, any Interest Rate Agreement between Borrower and/or
its Subsidiaries and any Lender, and all other instruments, documents and
agreements executed by or on behalf of any Loan Party and delivered concurrently
herewith or at any time hereafter to or for the benefit of Agent or Lenders in
connection with the Loans and other transactions contemplated by this Agreement,
all as amended, supplemented or modified from time to time, but excluding all
Acquisition Documents, Capitalization Documents, and Subordinated Loan
Documents.
"LOAN PARTIES" means, collectively, Holdings, Borrower and Borrower's
Subsidiaries, and any other Person (other than Agent or any Lender) which is or
becomes a party to any Loan Document, or individually, a "Loan Party".
"LOAN PARTY AFFILIATE" means any Subsidiary of Holdings or Borrower which
is under common control with Holdings or Borrower or is treated as a single
employer with either Holdings or Borrower as determined under Section 414(b),
(c), (m) or (o) of the IRC.
"LOSS PROCEEDS" has the meaning assigned to that term in subsection
2.4(C)(2).
"LYNCH" means Lynch Corporation, an Indiana corporation.
"LYNCH/FLEMING GROUP" has the meaning assigned to such term in subsection
8.1(S).
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of any Borrower or its Subsidiaries (on an individual basis); (b) the impairment
of the ability of any Loan Party to perform its obligations under any Loan
Document to which it is a party; or (c) the material impairment of the ability
of Agent or any Lender to enforce or collect any of the Obligations, including
the obligations of any Loan Party to perform. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding that
such event does not itself have such effect, a Material Adverse Effect shall be
deemed to have occurred if the cumulative effect of such event and all other
then existing events would result in a Material Adverse Effect.
"MAXIMUM AVAILABLE AMOUNT" has the meaning assigned to that term in
subsection 8.3.
CREDIT AGREEMENT-Page 15
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"MAXIMUM RATE" has the meaning assigned to that term in subsection 2.2(D).
To the extent, if any, that Texas law may apply, the Lenders hereby notify and
disclose to the Borrower that, for purposes of Tex. Rev. Civ. Stat., Ann., art.
5069-1.04, as it may be amended from time to time, the applicable rate ceiling
shall be the "indicated rate" ceiling from time-to-time in effect as limited by
Art. 5069-1.04(b); provided, however, that, to the extent permitted by
applicable law, the Lenders shall have the right to change the applicable rate
ceiling from time to time in accordance with applicable law.
"MAXIMUM REVOLVING LOAN AMOUNT" has the meaning assigned to that term in
subsection 2.1(C).
"MORTGAGE" means each of the mortgages, deeds of trust, deeds to secure
debt, leasehold mortgages, leasehold deeds of trust, leasehold deeds to secure
debt, collateral assignments of leases or other real estate security documents
delivered by any Loan Party to Agent with respect to Mortgaged Property or the
Additional Mortgaged Property, all in form and substance satisfactory to Agent.
"MORTGAGE POLICIES" has the meaning assigned to that term in subsection
5.10(A).
"MORTGAGED PROPERTY" means the real property owned or leased by Borrower
and designated on Schedule 1.1(C).
"MULTI-EMPLOYER PLAN" means a "multi-employer plan" as defined in Section
4001(a)(3) of ERISA and when used with respect to any Loan Party shall include
any such "multi-employer plan" which any Loan Party or, with respect to such
plans subject to Title IV of ERISA, any ERISA Affiliate is making, or is
accruing an obligation to make contributions or has made, or been obligated to
make, contributions within the preceding six years.
"NET INCOME" means, without duplication, for any period, the net income (or
loss) of Borrower and its Subsidiaries on a consolidated basis after provision
for or benefits from income and franchise taxes determined in accordance with
GAAP, but excluding: (a) the income (or loss) of any Person (other than
Subsidiaries of Borrower) in which Borrower or any of its Subsidiaries has an
ownership interest unless received by Borrower or its Subsidiary in a cash
distribution; and (b) the income (or loss) of any Person accrued prior to the
date it became a Subsidiary of Borrower or is dissolved or merged into or
consolidated with Borrower or that Person's assets are acquired by Borrower or
any of its Subsidiaries.
"NET PROCEEDS" means proceeds received by Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including payments under notes
or other debt Securities received in connection with any Asset Disposition and
insurance proceeds and awards of condemnation but excluding proceeds permitted
under this Agreement to be used for replacement assets) net of (a) the costs of
such sale, lease, transfer or other disposition (including taxes attributable to
such sale lease
CREDIT AGREEMENT-Page 16
<PAGE>
or transfer), and (b) amounts applied to repayment of Indebtedness (other than
the Obligations) secured by a lien, security interest, claim or encumbrance on
the asset or property disposed.
"NET WORTH" means, on any date of determination, the total assets of
Borrower and its Subsidiaries on a consolidated basis less the total liabilities
of Borrower and its Subsidiaries on a consolidated basis, as determined in
accordance with GAAP.
"NON-CONSENTING LENDER" has the meaning assigned to that term in subsection
2.12.
"NOTE" or "NOTES" means one or more of the Term Notes or Revolving Notes,
or any combination thereof.
"NOTICE OF BORROWING" means a notice with respect to a proposed borrowing
substantially in the form of Exhibit "E".
"NOTICE OF CONVERSION/CONTINUATION" means a notice with respect to a
proposed continuation or conversion of a Loan substantially in the form of
Exhibit "F".
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or any Lender under
any one or more of the Loan Documents including the principal amount of all
debts, claims and indebtedness, accrued and unpaid interest and all fees, costs
and expenses, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable whether before or after the filing of a proceeding under the Bankruptcy
Code by or against Borrower or its Subsidiaries. With respect to any specified
Loan Party, "Obligations" of such specified Loan Party means all obligations,
liabilities and indebtedness of such Loan Party to any Lender or Agent under any
Loan Document to which such Loan Party is a party.
"OPERATING CASH FLOW" means, for any period, the remainder of (a) EBITDA
for such period minus (b) the unfinanced portion of Capital Expenditures, minus
(c) Other Capitalized Costs.
"OTHER CAPITALIZED COSTS" means, for any period, the gross amount
capitalized for long term assets in accordance with GAAP (net of cash received
in respect of long term assets), other than (a) Capital Expenditures and (b)
fees and expenses capitalized with respect to the Related Transactions.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means any Employee Benefit Plan which is subject to the
provisions of Title IV of ERISA or Section 412 of the IRC and which (a) is
maintained for employees of any Loan Party or any of their ERISA Affiliates or
(b) has at any time within the preceding six years been maintained for the
employees of any Loan Party, any of their ERISA Affiliates, or any other Person
who, within the preceding six (6) years, would be treated as an ERISA Affiliate
by any Loan Party.
CREDIT AGREEMENT-Page 17
<PAGE>
"PERMITTED ENCUMBRANCES" means the following types of Liens:
(a) Liens (other than Liens relating to Environmental Claims or
ERISA) for taxes, assessments or other governmental charges not yet due and
payable;
(b) Statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred in
the ordinary course of business for sums not more than thirty (30) days
delinquent or which are being contested in good faith; PROVIDED that a
reserve or other appropriate provision, shall have been made therefor;
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations, surety, stay,
customs and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) Deposits, in an aggregate amount not to exceed $100,000 made in
the ordinary course of business to secure liability to insurance carriers;
(e) Liens for purchase money obligations; PROVIDED that: (i) the
purchase of the asset subject to any such Lien is permitted under
subsection 6.1; (ii) the Indebtedness secured by any such Lien is permitted
under subsection 7.1; and (iii) any such Lien encumbers only the asset so
purchased and does not attach to any Inventory;
(f) Any attachment or judgment Lien not constituting an Event of
Default under subsections 8.1(H) or 8.1(I) of this Agreement;
(g) Leases or subleases granted to others not interfering in any
material respect with the business of any Loan Party or any Loan Party's
Subsidiaries and otherwise permitted under the terms of this Agreement;
(h) Easements, rights-of-way, restrictions, and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of Borrower or any of its Subsidiaries;
(i) Any interest or title of a lessor or sublessor under any lease
permitted by subsection 7.8.
(j) Liens arising from filing Uniform Commercial Code financing
statements regarding leases permitted by this Agreement;
CREDIT AGREEMENT-Page 18
<PAGE>
(k) Liens in favor of Agent, on behalf of Lenders; and
(l) Liens existing on the date hereof and renewals and extensions
thereof, which Liens are set forth on Schedule 1.1(D) hereto or Schedule II
to the Security Agreements.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).
"PLEDGE AGREEMENTS" means, collectively, the Holdings Pledge Agreement and
the Borrower Pledge Agreement.
"PRIOR INDEBTEDNESS" means the indebtedness of Borrower or its Subsidiaries
identified on Schedule 1.1(A), which is to be paid in full on the Closing Date.
"PRO FORMA" means the unaudited consolidated balance sheet of Borrower and
its Subsidiaries as of the Closing Date after giving effect to the Related
Transactions as determined by the good faith estimate of Borrower and its senior
management. Notwithstanding any other term contained in this Agreement, should
the application of purchase or other accounting principles permit Borrower, in
accordance with GAAP, to characterize certain expenditures as capital items
rather than expense, then such expenditures shall be treated as expense in the
period such expenditures were incurred or paid for all purposes under this
Agreement unless such expenditure was identified and capitalized in the Pro
Forma. The Pro Forma is annexed hereto as Schedule 1.1(B).
"PRO RATA SHARE" means (a) with respect to matters relating to a particular
Commitment of a Lender (including the making or repayment of Loans pursuant to
that Commitment), the percentage obtained by dividing (i) such Commitment of
that Lender by (ii) all such Commitments of all Lenders and (b) with respect to
all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all Lenders, in
either case as such percentage may be adjusted by assignments permitted pursuant
to subsection 9.1.
"PROJECTIONS" means (1) on the Closing Date, the projections attached
hereto as Schedule 4.3 and (2) for projections delivered after the Closing Date,
Borrower's forecasted consolidated: (a) balance sheets; (b) profit and loss
statements; (c) cash flow statements; and (d) capitalization statements, all
prepared consistently with Borrower's historical financial statements, together
with appropriate supporting details and a statement of underlying assumptions in
a form acceptable to Agent and otherwise complying with the requirements of
Section 5.1(I).
CREDIT AGREEMENT-Page 19
<PAGE>
"PURCHASE AGREEMENT" has the meaning assigned to such term in the recitals
of this Agreement.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System.
"RELATED TRANSACTIONS" means the Acquisition, the execution and delivery of
the Related Transactions Documents, the funding of the Term Loans and each
borrowing under the Revolving Loan on the Closing Date, the funding of the
Subordinated Indebtedness, the repayment of the Prior Indebtedness and the
payment of all fees, costs and expenses associated with all of the foregoing.
"RELATED TRANSACTIONS DOCUMENTS" means the Acquisition Documents, the Loan
Documents, the Subordinated Loan Documents and Capitalization Documents.
"REQUISITE LENDERS" means Lenders having (a) 66 2/3% or more of the Total
Loan Commitments or, (b) if the Term Loan Commitments have been terminated, 66
2/3% or more of the sum of the Revolving Loan Commitments and the aggregate
outstanding principal amount of the Term Loans, if any, or (c) if all
Commitments have been terminated, 66 2/3% or more of the aggregate outstanding
principal amount of the Revolving Loan, the Term Loan and the Risk Participation
Reserve.
"RESPONSIBLE OFFICER" means, the President, the Chief Executive Officer,
Chief Financial Officer, an Executive Vice President or with respect to any
report or statement to be certified, or any certification to be delivered, under
the terms hereof, an officer of the applicable Loan Party who has responsibility
at the Loan Party for the matters certified.
"RESTRICTED JUNIOR PAYMENT" means: (a) any dividend or other distribution,
direct or indirect, on account of shares of any class of stock of Borrower or
any of its Subsidiaries now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock to the holders of that class; (b) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of stock of Borrower or any of its Subsidiaries now or hereafter
outstanding; (c) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any Subordinated
Indebtedness; and (d) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Borrower or any of its Subsidiaries now or hereafter outstanding.
"REVOLVING LOANS" means all advances made by Lenders pursuant to subsection
2.1(C) and any amounts added to the principal balance of the Revolving Loans
pursuant to this Agreement.
"REVOLVING LOAN COMMITMENT" means (a) as to any Lender, the commitment of
such Lender to make Revolving Loans as set forth opposite its name on the
signature pages hereof or in the most
CREDIT AGREEMENT-Page 20
<PAGE>
recent Lender Addition Agreement, if any, executed by such Lender and (b) as to
all Lenders, the aggregate commitment of all Lenders to make Revolving Loans and
to purchase participations in Lender Letters of Credit and Risk Participation
Agreements pursuant to subsection 2.1(D), as such Commitments may be adjusted
from time to time pursuant to this Agreement.
"REVOLVING NOTE" means each promissory note of Borrower substantially in
the form of Exhibit "C" issued pursuant to subsection 2.1(F)(1).
"RISK PARTICIPATION AGREEMENT" means a Risk Participation Agreement as such
term is defined in subsection 2.1(D).
"RISK PARTICIPATION LIABILITY" means, as to each Lender Letter of Credit
and each Risk Participation Agreement, all reimbursement obligations of Borrower
to the issuer of the Lender Letter of Credit or to the issuer of the letter of
credit with respect to the transaction for which the Risk Participation
Agreement was executed and delivered, consisting of (a) the amount available to
be drawn or which may become available to be drawn; (b) all amounts which have
been paid and made available by the issuing bank to the extent not reimbursed;
and (c) all accrued and unpaid interest, fees and expenses with respect thereto.
"RISK PARTICIPATION RESERVE" means, at any time, an amount equal to (a) the
aggregate amount of Risk Participation Liability with respect to all Lender
Letters of Credit and all Risk Participation Agreements outstanding at such time
plus (b) to the extent not included in clause (a), the aggregate amount
theretofore paid by the Agent or any Lender under Lender Letters of Credit or
Risk Participation Agreements for which Agent or the Lender has not been
reimbursed or which has not been debited to the Loan Account pursuant to
subsection 2.1(D)(2); provided, that if the issuer of any letter of credit does
not provide automatic daily reporting of the outstanding letters of credit and
the amounts drawn thereunder, Risk Participation Reserve shall mean the maximum
amount of Risk Participation Liability with respect to each such letter of
credit.
"SCHEDULED INSTALLMENT" means any Scheduled Term Loan A Installment or any
Scheduled Term Loan B Installment.
"SCHEDULED TERM LOAN A INSTALLMENT" has the meaning assigned to that term
in subsection 2.1(A).
"SCHEDULED TERM LOAN B INSTALLMENT" has the meaning assigned to that term
in subsection 2.1(B).
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, bonds, debentures, options, warrants, notes, or evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates
CREDIT AGREEMENT-Page 21
<PAGE>
for the purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.
"SECURITY AGREEMENTS" means, collectively, the Borrower Security Agreement
and the Subsidiary Security Agreements.
"SECURITY DOCUMENTS" means all instruments, documents and agreements
executed by or on behalf of any Loan Party to guaranty or provide collateral
security with respect to the Obligations and other transactions contemplated by
this Agreement including the Subsidiary Guaranty, the Pledge Agreements, the
Mortgages, the Security Agreements and all instruments, documents and agreements
executed pursuant to the terms of the foregoing, including those executed
pursuant to the Security Agreements.
"SETTLEMENT DATE" has the meaning assigned to that term in subsection
2.11(A).
"SELLER SUBORDINATED NOTE" means that certain promissory note, dated the
Closing Date, in the stated principal amount of $5,000,000, from Borrower, as
maker, to Seller, as payee, and any amendments, renewals, extensions and
modifications thereof.
"SELLER SUBORDINATION AGREEMENT" means a subordination agreement dated as
of the Closing Date substantially in the form of Exhibit "J".
"STUB PERIOD" has the meaning assigned to that term in subsection 2.11(B).
"SUBORDINATED INDEBTEDNESS" means the Indebtedness evidenced by the Seller
Subordinated Note and all other Indebtedness of Borrower or any of its
Subsidiaries which is subordinated in right of payment to the Obligations
pursuant to documentation that is in form and substance satisfactory to Agent.
"SUBORDINATED LOAN DOCUMENTS" means the Seller Subordinated Note, the
Seller Subordination Agreement and all other instruments, agreements and
documentation delivered concurrently therewith or at any time hereafter to
evidence the repayment of the Seller Subordinated Note, to set forth agreements
governing the Seller Subordinated Note or to secure or guaranty the Seller
Subordinated Note.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of Securities (or equivalent ownership or controlling interest) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
CREDIT AGREEMENT-Page 22
<PAGE>
"SUBSIDIARY GUARANTY" means a Guaranty to be executed and delivered by
Borrower's Subsidiaries for the benefit of Lenders, in form and substance
satisfactory to Agent and substantially in the form of Exhibit "M".
"SUBSIDIARY SECURITY AGREEMENT" means a Security Agreement to be executed
and delivered by Borrower's Subsidiaries in favor of Agent, for the benefit of
Lenders, in form and substance satisfactory to Agent and substantially in the
form of Exhibit "N".
"TAX LIABILITIES" has the meaning assigned to that term in subsection
2.10(A).
"TERM LOAN" or "TERM LOANS" means Term Loan A and Term Loan B.
"TERM LOAN A" means the term loan to be made by the Lenders to the Borrower
pursuant to Section 2.1(A).
"TERM LOAN B" means the term loan to be made by the Lenders to the Borrower
pursuant to Section 2.1(B).
"TERM LOAN A COMMITMENT" means (a) as to any Lender, the commitment of such
Lender to make its Pro Rata Share of Term Loan A as set forth opposite its name
on the signature pages hereof or in the most recent Lender Addition Agreement,
if any, executed by such Lender and (b) as to all Lenders, the aggregate
commitment of all Lenders to make Term Loan A.
"TERM LOAN B COMMITMENT" means (a) as to any Lender, the commitment of such
Lender to make its Pro Rata Share of Term Loan B as set forth opposite its name
on the signature pages hereof or in the most recent Lender Addition Agreement,
if any, executed by such Lender and (b) as to all Lenders, the aggregate
commitment of all Lenders to make Term Loan B.
"TERM LOAN B EXPIRY DATE" means the earlier of (a) the Termination of the
Term Loan B Commitment pursuant to subsection 8.3 or (b) the Termination Date
applicable to the Term Loan B Commitments.
"TERM LOAN COMMITMENTS" means the aggregate of the Term Loan A Commitment
and the Term Loan B Commitment.
"TERM NOTE" and "TERM NOTES" means Term Note A and Term Note B.
"TERM NOTE A" means each promissory note of Borrower substantially in the
form of Exhibit "A", issued pursuant to subsection 2.1(F)(2).
"TERM NOTE B" means each promissory note of Borrower substantially in the
form of Exhibit "B" issued pursuant to subsection 2.1 (F)(3).
CREDIT AGREEMENT-Page 23
<PAGE>
"TERMINATION DATE" means, (a) September 29, 2000, with respect to the
Revolving Loan Commitments, the Revolving Loans, the Term Loan A Commitment, the
Term Loan A, the Risk Participation Agreements and the Lender Letters of Credit,
and (b) September 29, 2002, with respect to Term Loan B and the Term Loan B
Commitment.
"TERMINATION EVENT" means: (a) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder with respect to a Title IV
Plan for which the 30-day notice to the PBGC has not been waived; or (b) the
withdrawal of any Loan Party or any ERISA Affiliate from a Title IV Plan during
a plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the occurrence of an event described in Section 4062(e)
of ERISA with respect to a Title IV Plan; or (c) the termination of a Title IV
Plan, the filing of a notice of intent to terminate a Title IV Plan or the
treatment of a Title IV Plan amendment as a termination under Section 4041 of
ERISA; or (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Title IV Plan by the PBGC; or (e) any other event
or condition which would constitute grounds under Section 4042(a) of ERISA for
the termination of, or the appointment of a trustee to administer, any Title IV
Plan provided that with respect to subsection 7.16(a) hereof, any such other
event or condition shall not be a "Termination Event" for purposes of subsection
7.16(a), unless the event or condition is or was within the control of a Loan
Party or one of its Subsidiaries; or (f) the partial or complete withdrawal of
any Loan Party or any ERISA Affiliate from a Multi-employer Plan; or (g) the
imposition of a Lien pursuant to Section 412 of the IRC or Section 302 of ERISA;
or (h) any event or condition which results in the reorganization or insolvency
of a Multi-employer Plan under Sections 4241 or 4245 of ERISA; or (i) any event
or condition which results in the termination of a Multi-employer Plan under
Section 4041A of ERISA or the institution by the PBGC of proceeding to terminate
a Multi-employer Plan under Section 4042 of ERISA.
"TITLE IV PLAN" means a Pension Plan, other than a Multi-employer Plan,
which is covered by Title IV of ERISA.
"TOTAL DEBT" means, as at any date of determination, the sum of all
Indebtedness (including all Loans and Capital Leases; PROVIDED that, for
purposes of determining the sum of the Revolving Loans on such date of
determination, the sum of the Revolving Loans shall be the arithmetic average of
the aggregate principal amount of all Revolving Loans outstanding as of the last
day of each of the twelve calendar months immediately preceding such date of
determination for which Agent has received the financial statements required by
Section 5.1(A)) of Borrower and its Subsidiaries which in conformity with GAAP
would be included in determining total liabilities on a consolidated balance
sheet of Borrower and its Subsidiaries and, without duplication, the sum of the
face amounts of all then outstanding letters of credit (including, without
duplication, all Lender Letters of Credit and all Risk Participation Agreements)
which have been issued for the account of Borrower or any of its Subsidiaries.
"TOTAL DEBT TO OCF RATIO" means, on any date of determination, the ratio of
(a) Total Debt to (b) Operating Cash Flow for the period of twelve consecutive
months immediately preceding such
CREDIT AGREEMENT-Page 24
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date of determination for which Agent has received the financial statements
required by Section 5.1(A).
"TOTAL INTEREST COVERAGE" means, for any period, (a) Operating Cash Flow
for such period divided by (b) Interest Expense.
"TOTAL LOAN COMMITMENT" means, as to any Lender, the aggregate commitments
of such Lender with respect to the Revolving Loan Commitment and the Term Loan
Commitments, and, as to all Lenders the aggregate of the Revolving Loan
Commitment and the Term Loan Commitment.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Illinois.
"UNISOURCE" has the meaning assigned to that term in the recitals to this
Agreement.
"WELFARE PLAN" means any Employee Benefit Plan, which is an employee
welfare benefit plan, other than a Multi-employer Plan, within the meaning of
Section 3(l) of ERISA.
"YEARLY LIMIT" shall have the meaning assigned to that term in Section 6.1
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT
For purposes of this Agreement, all accounting terms not otherwise defined
herein shall have the meanings assigned to such terms in conformity with GAAP.
Financial statements and other information furnished to Agent or any Lender
pursuant to subsection 5.1 shall be prepared in accordance with GAAP as in
effect at the time of such preparation. No "Accounting Changes" (as defined
below) shall effect financial covenants, standards or terms in this Agreement;
provided, that Borrower shall prepare footnotes to each Compliance Certificate
and the financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards
Board, the American Institute of Certified Public Accountants or the Securities
and Exchange Commission (or successors thereto or agencies with similar
functions) after the Closing Date; (b) changes in accounting principles
recommended by Borrower's certified public accountants; and (c) changes in
carrying value of Borrower's (or any of its Subsidiaries') assets, liabilities
or equity accounts resulting from (i) the application of purchase accounting
principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the Related
Transactions or (ii) as the result of any other adjustments that, in each case,
were applicable to, but not included in, the Pro Forma. All such adjustments
resulting from expenditures made subsequent to the Closing Date (including, but
not limited to, capitalization of costs and
CREDIT AGREEMENT-Page 25
<PAGE>
expenses or payment of pre-Closing Date liabilities) shall be treated as
expenses in the period the expenditures are made and deducted as part of the
calculation of EBITDA in such period.
1.3 OTHER DEFINITIONAL PROVISIONS
References to "Sections", "subsections", "Exhibits" and "Schedules" shall
be to Sections, subsections, Exhibits and Schedules, respectively, of this
Agreement unless otherwise specifically provided. Any of the terms defined in
subsection 1.1 may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference. In this Agreement, "hereof,"
"herein," "hereto," "hereunder" and the like mean and refer to this Agreement as
a whole and not merely to the specific section, paragraph or clause in which the
respective word appears; words importing any gender include the other genders;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to agreements and other contractual instruments shall be deemed to
include subsequent amendments, assignments, restatements, supplements,
extensions, renewals, replacements and other modifications thereto, but only to
the extent such amendments, assignments, restatements, supplements, extensions,
renewals, replacements and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2
AMOUNTS AND TERMS OF LOANS
2.1 LOANS
(A) TERM LOAN A. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower herein set
forth, each Lender agrees to lend on the Closing Date to Borrower its Pro Rata
Share (calculated based on its Term Loan A Commitment) of Term Loan A; provided,
however, that the aggregate amount of Term Loan A of a Lender outstanding at any
time shall not exceed such Lender's Term Loan A Commitment. The aggregate
amount of Term Loan A shall be $20,000,000. Any portion of Term Loan A repaid
may not be reborrowed. Borrower shall make principal payments in the amounts of
the applicable Schedule Term Loan A Installments (or such lesser principal
amount of such Term Loan A Installment as shall then be due on the date of
payment as a result of prepayments applied in accordance with this Agreement) on
the dates and in the amounts set forth below.
"SCHEDULED TERM LOAN A INSTALLMENT" means, for each date set forth below,
the amount set forth opposite such date.
CREDIT AGREEMENT-Page 26
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Date Scheduled Installment
- -------------------------------------------------------------------------------
<S> <C>
December 31, 1995 $ 375,000
- -------------------------------------------------------------------------------
March 31, 1996 $ 375,000
- -------------------------------------------------------------------------------
June 30, 1996 $ 375,000
- -------------------------------------------------------------------------------
September 30, 1996 $ 375,000
- -------------------------------------------------------------------------------
December 31, 1996 $ 625,000
- -------------------------------------------------------------------------------
March 31, 1997 $ 625,000
- -------------------------------------------------------------------------------
June 30, 1997 $ 625,000
- -------------------------------------------------------------------------------
September 30, 1997 $ 625,000
- -------------------------------------------------------------------------------
December 31, 1997 $1,125,000
- -------------------------------------------------------------------------------
March 31, 1998 $1,125,000
- -------------------------------------------------------------------------------
June 30, 1998 $1,125,000
- -------------------------------------------------------------------------------
September 30, 1998 $1,125,000
- -------------------------------------------------------------------------------
December 31, 1998 $1,375,000
- -------------------------------------------------------------------------------
March 31, 1999 $1,375,000
- -------------------------------------------------------------------------------
June 30, 1999 $1,375,000
- -------------------------------------------------------------------------------
September 30, 1999 $1,375,000
- -------------------------------------------------------------------------------
December 31, 1999 $1,500,000
- -------------------------------------------------------------------------------
March 31, 2000 $1,500,000
- -------------------------------------------------------------------------------
June 30, 2000 $1,500,000
- -------------------------------------------------------------------------------
September 29, 2000 $1,500,000
- -------------------------------------------------------------------------------
</TABLE>
(B) TERM LOAN B. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower herein set
forth, each Lender agrees to lend on the Closing Date, to Borrower its Pro Rata
Share (calculated based on its Term Loan B Commitment) of Term Loan B; provided,
however that the aggregate amount of Term Loan B of a Lender outstanding at any
time shall not exceed such Lender's Term Loan B Commitment. The aggregate
amount of Term Loan B shall be $16,000,000. Any portion of Term Loan B repaid
may
CREDIT AGREEMENT-Page 27
<PAGE>
not be reborrowed. Borrower shall make principal payments in the amounts of the
applicable Scheduled Term Loan B Installments (or such lesser principal amount
of such Term Loan B Installment as shall then be due on the date of payment as a
result of prepayments applied in accordance with this Agreement) on the dates
and in the amounts set forth below.
"SCHEDULED TERM LOAN B INSTALLMENT" means, for each date set forth below,
the amount set forth opposite such date.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Date Scheduled Installment
- -------------------------------------------------------------------------------
<S> <C>
December 31, 2000 $2,000,000
- -------------------------------------------------------------------------------
March 31, 2001 $2,000,000
- -------------------------------------------------------------------------------
June 30, 2001 $2,000,000
- -------------------------------------------------------------------------------
September 30, 2001 $2,000,000
- -------------------------------------------------------------------------------
December 31, 2001 $2,000,000
- -------------------------------------------------------------------------------
March 31, 2002 $2,000,000
- -------------------------------------------------------------------------------
June 30, 2002 $2,000,000
- -------------------------------------------------------------------------------
September 29, 2002 $2,000,000
- -------------------------------------------------------------------------------
</TABLE>
(C) REVOLVING LOANS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender agrees, severally and not jointly, to lend to
Borrower from time to time during the period from the Closing Date to but
excluding the Expiry Date, its Pro Rata Share (based on its Revolving Loan
Commitment) of the Revolving Loans; provided, however, that the aggregate
amount of Revolving Loans of a Lender outstanding at any time shall not exceed
such Lender's Revolving Loan Commitment. The aggregate amount of all Revolving
Loan Commitments shall be $24,000,000 as the same may be reduced from time to
time pursuant to the terms of this Agreement, with any such reduction to be
applied to the Revolving Loan Commitments of the Lenders based on their Pro Rata
Share of such Commitments. Amounts borrowed under this subsection 2.1(C) may be
repaid and reborrowed at any time prior to the Expiry Date. No Lender shall
have any obligation to make advances under this subsection 2.1(C) to the extent
any requested advance would cause such Lender's Pro Rata Share (based on its
Revolving Loan Commitment) of the principal balance of the Revolving Loans then
outstanding to exceed such Lender's Pro Rata Share of the Maximum Revolving Loan
Amount; PROVIDED that, (1) Requisite Lenders may, in their sole discretion,
elect from time to time to make Revolving Loans in excess of the Maximum
Revolving Loan Amount so long as such Revolving Loans, together with the then
outstanding principal
CREDIT AGREEMENT-Page 28
<PAGE>
balance of the Revolving Loans do not exceed the lesser of (i) the Maximum
Revolving Loan Amount plus $2,000,000, or (ii) the aggregate amount of Lenders'
Revolving Loan Commitments, and the outstanding principal balance of all
Revolving Loans does not exceed the Maximum Revolving Loan Amount for more than
90 days during any period of 180 consecutive days, and, (2) PROVIDED further,
that Agent may, in its sole discretion, elect from time to time to make
Revolving Loans in excess of a Maximum Revolving Loan Amount so long as such
Revolving Loans, together with the then outstanding principal balance of the
Revolving Loans do not exceed the lesser of (i) the Maximum Revolving Loan
Amount plus $250,000, or (ii) the aggregate amount of Lenders' Revolving Loan
Commitments and the outstanding principal balance of all Revolving Loans does
not exceed the Maximum Revolving Loan Amount for more than ninety (90) days
during any period of 180 consecutive days. If Revolving Loans in excess of the
Maximum Revolving Loan Amount are made pursuant to the approval of the Requisite
Lenders or by Agent as set forth in the proviso to the preceding sentence, then
for purposes of this SUBSECTION 2.1(C), (i) the Maximum Revolving Loan Amount
shall be deemed increased by such amount but only for so long as the Requisite
Lenders allow such Revolving Loans to be outstanding, and (ii) all Lenders with
Revolving Loan Commitments and not just the Lenders with Revolving Loan
Commitments voting to make such Loans, or Agent, as the case may be, shall be
bound to make such Revolving Loans in accordance with the terms of this
Agreement.
(a) "MAXIMUM REVOLVING LOAN AMOUNT" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitments minus the
Risk Participation Reserve and (b) the Borrowing Base minus the Risk
Participation Reserve, each such amount calculated as of such date of
determination.
(b) "BORROWING BASE" means, as of any date of determination, the
sum of (a) eighty-five percent (85%) of Eligible Accounts, plus (b) sixty-
five percent (65%) of Eligible Inventory. The Borrowing Base shall be
determined based on the most recent Borrowing Base Certificate timely
delivered pursuant to subsection 5.1(E).
(D) LETTERS OF CREDIT AND RISK PARTICIPATION AGREEMENTS. Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of each Loan Party in the Loan Documents, the Revolving Loan
Commitment may, in addition to advances under the Revolving Loans, be utilized,
upon the request of Borrower, for (i) the issuance of letters of credit by Agent
or any Lender (each such letter of credit, a "Lender Letter of Credit") or (ii)
the issuance by Agent of risk participation agreements to banks reasonably
acceptable to Agent (each such agreement a "Risk Participation Agreement") to
confirm payment to such banks which issue letters of credit for the account of
Borrower or its Subsidiaries; provided that no Lender is obligated to issue a
Lender Letter of Credit and regardless of whether the letter of credit is a
Lender Letter of Credit, such letters of credit, including any Lender Letters of
Credit shall have a term of not more than one year, but may be renewable for an
unlimited number of successive terms of not more than one year provided that,
the expiration date of such letter of credit or Lender Letter of Credit shall be
a date which is at least thirty (30) days before the Termination Date and the
issuer of the letter of credit or Lender Letter of Credit provides at least
sixty days notice of its intent not to renew such letter of credit or Lender
Letter of Credit, as the case may be. At the time of issuance of each Lender
Letter of Credit or Risk Participation Agreement, Agent, or if applicable, the
Lender issuing the
CREDIT AGREEMENT-Page 29
<PAGE>
letter of credit or Risk Participation Agreement in question, shall be deemed,
without further action by any party hereto, to have sold to each Lender (other
than itself), and each such Lender shall be deemed, without further action by
any party hereto, to have purchased from Agent or, if applicable, the Lender
issuing the Letter of Credit or Risk Participation Agreement in question, a
participation to the extent of such Lender's Pro Rata Share (calculated based on
its Revolving Loan Commitment) in such Lender Letter of Credit or Risk
Participation Agreement and the related Risk Participation Liability.
(1) MAXIMUM AMOUNT. The aggregate amount of Risk Participation
Liability with respect to all Lender Letters of Credit and Risk
Participation Agreements outstanding at any time shall not exceed
$2,000,000.
(2) REIMBURSEMENT. Borrower shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other
formalities of any kind, to reimburse Agent, for the benefit of Agent and
Lenders, for any amounts paid by Agent or any Lender with respect to a
Lender Letter of Credit or a Risk Participation Agreement issued for the
account of Borrower or its Subsidiaries, including all fees, costs and
expenses paid by Agent or any Lender to any bank that issues letters of
credit. Borrower hereby authorizes and directs Agent, at Agent's option
and without the need for prior notice, to debit the Loan Account (by
increasing the principal balance of the Revolving Loan in the amount of any
payment made by Agent or any Lender with respect to any Lender Letter of
Credit or any Risk Participation Agreement. All amounts paid by Agent or
any Lender with respect to any Lender Letter of Credit or Risk
Participation Agreement that are not immediately repaid by Borrower with
the proceeds of the Revolving Loan, or otherwise shall bear interest at the
interest rate applicable to Revolving Loans. In the event that Borrower
shall fail to reimburse Agent on the date of any payment by Agent under a
Lender Letter of Credit or Risk Participation Agreement in an amount equal
to the amount of such payment, Agent shall promptly notify each Lender of
the unreimbursed amount of such payment together with accrued interest
thereon and each Lender agrees to purchase, and shall be deemed to have
purchased, a participation in such Lender Letter of Credit or Risk
Participation Agreement, as the case may be, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Lender Letter of
Credit or Risk Participation Agreement, as the case may be, and each Lender
agrees to pay to Agent such Lender's Pro Rata Share of any payments made by
Agent under such Lender Letter of Credit and Risk Participation Agreement.
The obligation of each Lender to deliver to Agent an amount equal to its
respective Pro Rata Share pursuant to the foregoing sentence shall be
absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3. In
the event any Lender fails to make available to Agent the amount of such
Lender's Pro Rata Share of any payments made by Agent in respect of such
Lender Letter of Credit or Risk Participation Agreement as provided in this
subsection 2.1(D)(2), Agent shall be entitled to recover such amount on
demand from such Lender together with interest at the Base Rate.
CREDIT AGREEMENT-Page 30
<PAGE>
(3) CONDITIONS OF ISSUANCE OF LETTERS OF CREDIT OR RISK
PARTICIPATION AGREEMENTS. In addition to all other terms and conditions
set forth in this Agreement, the issuance by Agent of any Lender Letter of
Credit or Risk Participation Agreement shall be subject to the conditions
precedent that the Lender Letter of Credit, the Risk Participation
Agreement or the letter of credit for which Borrower requests a Risk
Participation Agreement shall support a transaction entered into in the
ordinary course of Borrower's business or for purposes otherwise
satisfactory to Agent and shall be in such form, be for such amount, and
contain such terms and conditions as are reasonably satisfactory to Agent.
Each Lender Letter of Credit and each Risk Participation Agreement shall be
in form and substance reasonably satisfactory to Agent. The expiration
date of each Lender Letter of Credit shall be on a date which is no later
than one year from its date of issuance but may be renewable for an
unlimited number of successive terms of not more than one year provided,
that, the expiration date of such letter of credit or Lender Letter of
Credit shall be a date which is at least thirty (30) days before the
Termination Date and the issuer of the letter of credit or Lender Letter of
Credit provides at least thirty (30) days notice of its intent not to renew
such letter of credit or Lender Letter of Credit, as the case may be. Each
Risk Participation Agreement shall provide that the agreement terminates
and all demands or claims for payment must be presented by a date certain,
which date will be at least thirty (30) days before the Termination Date.
(4) REQUEST FOR LETTERS OF CREDIT OR RISK PARTICIPATION AGREEMENTS.
With respect to each Lender Letter of Credit or Risk Participation
Agreement, Borrower shall give Agent at least five (5) Business Days prior
notice specifying the date a Lender Letter of Credit or Risk Participation
Agreement (or a letter of credit to be issued under a Risk Participation
Agreement) is to be issued, identifying the beneficiary and describing the
nature of the transactions proposed to be supported thereby. The notice
shall be accompanied by the form of the Lender Letter of Credit or the
letter of credit to which such Risk Participation Agreement relates.
(5) OTHER LETTER OF CREDIT AND RISK PARTICIPATION AGREEMENT
PROVISIONS
(a) OBLIGATIONS ABSOLUTE. The obligation of Borrower to
reimburse Agent and Lenders for payments made under any Lender Letter of Credit
or Risk Participation Agreement shall be unconditional and irrevocable and shall
be paid strictly in accordance with the terms of this Agreement under all
circumstances including the following circumstances:
(i) any lack of validity or enforceability of any Lender
Letter of Credit or Risk Participation Agreement or any other agreement;
CREDIT AGREEMENT-Page 31
<PAGE>
(ii) the existence of any claim, set-off, defense or other
right which Borrower or any of its Affiliates, Agent or any Lender may at any
time have against a beneficiary or any transferee of any Lender Letter of Credit
or Risk Participation Agreement (or any persons or entities for whom any such
transferee may be acting), Agent, any Lender, or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between Borrower or
any of its Affiliates and the beneficiary for which the Lender Letter of Credit
or Risk Participation Agreement was procured);
(iii) any draft, demand, certificate or any other document
presented under any Lender Letter of Credit or Risk Participation Agreement
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by Agent or any Lender under any Lender Letter
of Credit or Risk Participation Agreement against presentation of a demand,
draft or certificate or other document which does not comply with the terms of
such Lender Letter of Credit or Risk Participation Agreement; provided that, in
the case of any payment by Agent or any Lender under any Lender Letter of Credit
or Risk Participation Agreement, Agent or such Lender has not acted with gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit or Risk Participation Agreement complies on its face with any
applicable requirements for a demand for payment under such Lender Letter of
Credit or Risk Participation Agreement;
(v) any other circumstance or happening whatsoever, which
is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall
have occurred and be continuing.
(b) NATURE OF LENDERS' DUTIES. As between Agent and Borrower
and each Lender and Borrower, Borrower assumes all risks of the acts and
omissions of, or misuse of any Lender Letter of Credit or Risk Participation
Agreement by beneficiaries of any Lender Letter of Credit or Risk Participation
Agreement. In furtherance and not in limitation of the foregoing, neither Agent
nor any Lender shall be responsible: (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document by any party in connection
with the application for and issuance of any Lender Letter of Credit or Risk
Participation Agreement, even if it should in fact prove to be
CREDIT AGREEMENT-Page 32
<PAGE>
in any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Lender Letter of Credit or Risk
Participation Agreement 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; (iii) for failure of the beneficiary of any Lender Letter of Credit
or Risk Participation Agreement to comply fully with conditions required in
order to demand payment under such Lender Letter of Credit or Risk Participation
Agreement; provided that, in the case of any payment by Agent under any Lender
Letter of Credit or Risk Participation Agreement, Agent has not acted with gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit or Risk Participation Agreement complies on its face with any
applicable requirements for a demand for payment under such Lender Letter of
Credit or Risk Participation Agreement; (iv) for 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; (v) for
errors in interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any Lender Letter of Credit or Risk Participation Agreement or of the
proceeds thereof; (vii) for the credit of the proceeds of any drawing under any
Lender Letter of Credit or Risk Participation Agreement; and (viii) for any
consequences arising from causes beyond the control of Agent or any Lender. None
of the above shall affect, impair, or prevent the vesting of any of Agent's or
any Lender's rights or powers hereunder.
In furtherance and extension of and not in limitation of, the specific
provisions hereinabove set forth, any action taken or omitted by Agent or any
Lender under or in connection with any Lender Letter of Credit or Risk
Participation Agreement, if taken or omitted in good faith, shall not put Agent
or any Lender under any resulting liability to Borrower.
(E) BORROWING MECHANICS. All Base Rate Loans made on any Funding Date
shall be in a minimum principal amount of $10,000.00. All LIBOR Rate Loans made
on any Funding Date shall be in a minimum principal amount of $1,000,000.00.
When Borrower desires to borrow under this subsection 2.1, it shall deliver to
Agent a Notice of Borrowing no later than 11:00 A.M. (Chicago, Illinois time)
(i) on the proposed Funding Date in the case of a requested Base Rate Loan in an
aggregate principal amount not to exceed $5,000,000.00 and (ii) at least one (1)
Business Days in advance of the proposed Funding Date in the case of a requested
Base Rate Loan in an aggregate principal amount in excess of $5,000,000.00 and
(iii) at least three (3) Business Days in advance of the proposed Funding Date
in the case of a requested LIBOR Loan. Loans made on the Closing Date shall be
made and continued as Base Rate Loans for at least ten (10) days after the
Closing Date. Loans may be continued as or converted into Base Rate Loans and
LIBOR Loans, as the case may be, in the manner provided in subsection 2.2(C) on
and after the date ten (10) days after the Closing Date. A notice of Borrowing
for a LIBOR Loan (or telephone notice in lieu thereof) shall be irrevocable once
given and Borrower shall be bound to make a borrowing in accordance therewith.
In lieu of delivering the above described Notice of Borrowing, Borrower may give
Agent telephonic notice by the required time of the proposed borrowing; PROVIDED
that such notice shall be promptly, and in any event within one Business Day,
confirmed in writing by delivery of a Notice
CREDIT AGREEMENT-Page 33
<PAGE>
of Borrowing to Agent. Neither Agent nor any Lender shall incur any liability
to Borrower for acting upon any telephonic notice that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to borrow on behalf of Borrower or for otherwise acting in good faith under this
subsection 2.1(E). The making of an advance pursuant to telephonic notice
shall constitute a Loan under this Agreement. Agent may disburse funds and
settle the accounts with Lenders as provided in subsection 2.11, or at Agent's
option, Agent may promptly after receipt of a Notice of Borrowing (or telephonic
notice in lieu thereof), notify each Lender of the proposed borrowing; provided
that Agent shall promptly after receipt of a Notice of Borrowing relating to a
LIBOR Loan notify each Lender of such proposed borrowing.
If Agent so requests, each Lender shall then make the amount of its
Loan available to Agent, in same day funds, not later than 11:00 A.M. (Chicago,
Illinois time) on the applicable Funding Date by wire transfer to the following
account:
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
ABA No. 0710-0001-3
Account No. 5500540
Reference: Heller Corporate Finance
Group for the benefit of Central
Products Company
or at such other place as Agent may direct from time to time by notice to
Lenders. If Agent, on behalf of Lenders, disburses funds to Borrower for Loans
requested and any Lender fails to pay the amount of its Pro Rata Share
(calculated with respect to the applicable Commitment for the Loan in question)
forthwith upon Agent's demand, Agent shall promptly notify Borrower, and
Borrower shall immediately repay such amount to Agent with interest thereon at
the rate payable under subsection 2.2. Nothing in this subsection 2.1(E) shall
be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that Borrower may have against any Lender as a result of
any default by such Lender hereunder. Upon satisfaction or waiver of the
applicable conditions precedent specified in Section 3, Agent shall make the
proceeds of such Loans available to Borrower on such Funding Date by causing an
amount of same day funds equal to the proceeds of all such
CREDIT AGREEMENT-Page 34
<PAGE>
Loans received by Agent to be deposited in such account of Borrower as Borrower
may from time to time designate to Agent in writing.
(F) NOTES. Borrower shall execute and deliver to each Lender (1) a
Revolving Note to evidence the Revolving Loans, such Revolving Note to be in the
principal amount of the Revolving Loan Commitment of such Lender and with other
appropriate insertions, (2) a Term Note A to evidence Term Loan A, such Term
Note A to be in the principal amount of Term Loan A Commitment of such Lender
and with other appropriate insertions, and (3) a Term Note B to evidence Term
Loan B, such Term Note B to be in the principal amount of the Term Loan B
Commitment of such Lender and with other appropriate insertions. In the event
of an assignment under subsection 2.12 or subsection 9.1, Borrower shall, upon
surrender of the assigning Lender's Notes, issue new Notes to reflect the new
Commitments and Loans of the assigning Lender and its assignee.
2.2 INTEREST
(A) RATE OF INTEREST. Except as otherwise provided herein, the Loans and
all other Obligations shall bear interest from the date such Loans are made or
such other Obligations become due to the date paid at a rate per annum (meaning
360 days) determined by reference to the Base Rate or the LIBOR. The applicable
basis for determining the rate of interest shall be selected by Borrower
initially at the time a Notice of Borrowing is given pursuant and subject to
subsection 2.1(E). The basis for determining the interest rate with respect to
any Loan may be changed from time to time pursuant and subject to subsection
2.2(C). If on any day a Loan is outstanding with respect to which notice has
not been delivered to Agent in accordance with the terms of this Agreement
specifying the basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate Loans.
The Loans shall bear interest from the date such Loans are made to the date
paid:
(1) if a Base Rate Loan, then at the sum of the Base Rate PLUS the
Base Rate Margin; and
(2) if a LIBOR Loan, then at the sum of the LIBOR plus the LIBOR
Margin.
"Base Rate Margin" shall mean (i) during the period commencing on the
Closing Date and ending on but not including the first Adjustment Date, 1.00%
per annum for Revolving Loans and Term Loan A, and 1.50% per annum for Term Loan
B, and (ii) during each period, from and including one Adjustment Date to but
excluding the next Adjustment Date (herein a "Calculation Period"), the percent
per annum determined by reference to the Total Debt to OCF Ratio on the date of
commencement of such Calculation Period as set forth in the table below under
the heading for the applicable Loan.
CREDIT AGREEMENT-Page 35
<PAGE>
"LIBOR Margin" shall mean (i) during the period commencing on the Closing
Date and ending on but not including the first Adjustment Date, 3.00% per annum
for Revolving Loans and Term Loan A, and 3.50% per annum for Term Loan B, and
(ii) during each Calculation Period, the percent per annum determined by
reference to the Total Debt to OCF Ratio on the date of commencement of such
Calculation Period as set forth in the table below under the heading for the
applicable Loan.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Base Rate Margin LIBOR Margin
- -------------------------------------------------------------------------------------------
Revolver/ Revolver/
Total Debt to OCF Ratio Term Loan A Term Loan B Term Loan A Term Loan B
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater than 5.50:1 1.50% 2.00% 3.50% 4.00%
- -------------------------------------------------------------------------------------------
4.50 to 5.49:1 1.25% 1.75% 3.25% 3.75%
- -------------------------------------------------------------------------------------------
3.50 to 4.49:1 1.00% 1.50% 3.00% 3.50%
- -------------------------------------------------------------------------------------------
2.50 to 3.49:1 0.75% 1.25% 2.75% 3.25%
- -------------------------------------------------------------------------------------------
Less than 2.49:1 0.50% 1.00% 2.50% 3.00%
- -------------------------------------------------------------------------------------------
</TABLE>
Upon delivery of the Compliance Certificate delivered pursuant to subsection
5.1(C) in connection with the financial statements of Borrower and its
Subsidiaries required to be delivered pursuant to subsection 5.1(A) for the
months of March, June, September and December, commencing with such Compliance
Certificate delivered for the month of September, 1997, the Base Rate Margin and
the LIBOR Margin (for Interest Periods commencing after the applicable
Adjustment Date) shall automatically be adjusted in accordance with the Total
Debt to OCF Ratio set forth therein and the table set forth above, such
automatic adjustment to take effect as of the first Business Day after the
receipt by the Agent of the related Compliance Certificate pursuant to
subsection 5.1(C) (each such Business Day when the Base Rate Margin and LIBOR
Margin change pursuant to this sentence or the next following sentence, herein
an "Adjustment Date"). If Borrower fails to deliver such Compliance Certificate
which so sets forth the Total Debt to OCF Ratio within the period of time
required by subsection 5.1(A), the Base Rate Margin and the LIBOR Margin shall
automatically be adjusted, at Agent's discretion, to 1.50% per annum and 3.50%
per annum, respectively, for the Revolving Loan and Term Loan A, and to 2.00%
per annum and 4.00% per annum, respectively, for Term Loan B, such automatic
adjustment to take effect as of the first Business Day after the last day on
which Borrower was required to deliver the applicable Compliance Certificate in
accordance with subsection 5.1(A) and to remain in effect until the first
Business Day after the delivery of a Compliance Certificate.
At the election of Agent in its sole discretion, after the occurrence of
an Event of Default for so long as such Event of Default continues, the Loans
and all other Obligations shall bear interest until paid in full, at a rate per
annum that is two percent (2%) in excess of the rate of interest otherwise
payable under this Agreement; PROVIDED that, in the case of LIBOR Loans, until
the
CREDIT AGREEMENT-Page 36
<PAGE>
expiration of any then applicable Interest Period, all such LIBOR Loans shall
bear interest payable upon demand at the rate which is two percent (2%) in
excess of the LIBOR. Thereafter, upon the expiration of the Interest Period in
effect at the time any such increase in interest rate is effective, such LIBOR
Loans shall thereupon become Base Rate Loans and thereafter bear interest
payable upon demand at a rate which is two percent (2%) per annum in excess of
the interest rate otherwise payable under this Agreement for Base Rate Loans.
(B) INTEREST PERIODS. In connection with each LIBOR Loan, Borrower shall
elect an interest period (each an "INTEREST PERIOD") to be applicable to such
Loan, which Interest Period shall be, during the three consecutive months
following the Closing Date, a one month period, and thereafter a one, two, three
or six month period; PROVIDED that:
(1) the initial Interest Period for any Loan shall commence on the
Funding Date of such Loan;
(2) in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(3) if an Interest Period would otherwise expire on a day that is not
a Business Day, such Interest Period shall expire on the next succeeding
Business Day; PROVIDED that if any Interest Period would otherwise expire
on a day that is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(4) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to part (5) below, end on the last Business Day of a calendar
month;
(5) no Interest Period shall extend beyond the Termination Date;
(6) no Interest Period may extend beyond a date on which Borrower is
required to make a scheduled payment of principal of the Loans unless the
sum of the aggregate principal amount of Loans that are Base Rate Loans or
that have Interest Periods expiring on or before such date and the
available, unused Revolving Loan Commitment equals or exceeds the principal
amount required to be paid on the Loans of Borrower on such date; and
(7) the Interest Period for a Loan that is converted pursuant to
subsection 2.2(F) shall commence on the date of such conversion and shall
expire on the date on which the Interest Period for the Loans so converted
expires; and
CREDIT AGREEMENT-Page 37
<PAGE>
(8) there shall be no more than six (6) Interest Periods relating to
LIBOR Loans outstanding at any time.
(C) CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.2(D) this subsection 2.2(C) and subsection 2.2(B)(8), Borrower shall have the
option to (i) convert at any time all or any part of any outstanding Loans equal
to or greater than $1,000,000 from Loans bearing interest at a rate determined
by reference to one basis to Loans bearing interest at a rate determined by
reference to an alternative basis, or (ii) upon the expiration of any Interest
Period applicable to a LIBOR Loan, to continue all or any portion of such Loan
equal to or greater than $1,000,000 as a LIBOR Loan and the succeeding Interest
Period(s) of such continued Loan shall commence on the last day of the Interest
Period of the Loan to be continued; provided, that LIBOR Loans may only be
converted into Loans bearing interest determined by reference to an alternative
basis on the expiration date of an Interest Period applicable thereto; and
PROVIDED, FURTHER, that no outstanding Loan may be continued as, or be converted
into, a LIBOR Loan when any Default or Event of Default has occurred and is
continuing; and PROVIDED, FURTHER, that no Loan may be converted to a LIBOR Loan
until ten (10) days after the Closing Date.
Borrower shall deliver a Notice of Conversion/Continuation to Agent no
later than 11:00 A.M. (Chicago, Illinois time) at least three (3) Business Days
in advance of the proposed conversion/continuation date in the case of the
conversion of any Base Rate Loans into LIBOR Loans or the continuation of any
LIBOR Loans.
A Notice of Conversion/Continuation shall certify: (1) the proposed
conversion/continuation date (which shall be a Business Day), (2) the amount of
the Loan to be converted/continued, (3) the nature of the proposed
conversion/continuation, (4) in the case of a conversion to, or a continuation
of, a LIBOR Loan, the requested Interest Period, and (5) that no Default or
Event of Default has occurred and is continuing or would result from the
proposed conversion/continuation. In lieu of delivering the above-described
Notice of Conversion/Continuation, Borrower may give Agent telephonic notice by
the required time of any proposed conversion/continuation under this subsection
2.2(C); provided that such notice shall be promptly confirmed in writing by
delivery of a Notice of Conversion/Continuation to Agent on or before the
proposed conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to Borrower in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Borrower or for otherwise acting in good faith under this
subsection 2.2(C).
Except as provided in subsection 2.2(D)(4), a Notice of
Conversion/Continuation for conversion to, or continuation of, a LIBOR Loan
(or telephonic notice in lieu thereof) shall be irrevocable once given, and
Borrower shall be bound to convert or continue in accordance therewith and
Agent shall have no liability for acting in accordance with Borrower's
instructions contained therein.
CREDIT AGREEMENT-Page 38
<PAGE>
(D) SPECIAL PROVISIONS GOVERNING LIBOR RATE LOANS
Notwithstanding any other provision of this Agreement, the following
provisions shall govern with respect to LIBOR Rate Loans as to the matters
covered:
(1) DETERMINATION OF INTEREST RATE. As soon as practicable after
11:00 A.M. (Chicago time) on each Interest Rate Determination Date, Agent shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the LIBOR Rate Loans for which an interest rate is then being determined for the
applicable Interest Period and shall promptly give notice thereof (in writing or
by telephone confirmed in writing) to Borrower and each Lender. In the event
that Agent shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any LIBOR Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market, adequate and fair means
do not exist for determining the interest rate applicable to such Loans on the
basis provided for in the definition of LIBOR, Agent shall on such date give
notice (by telecopy or by telephone confirmed in writing) to Borrower and each
Lender of such determination, whereupon (1) no Loans may be made as, or
converted into, LIBOR Loans until such time as Agent notifies Borrower and
Lenders that the circumstances giving rise to such notice no longer exist and
(2) any Notice of Borrowing or Notice of Conversion/Continuation given by
Borrower with respect to the Loans in respect of which such determination was
made shall be deemed to be modified by Borrower and the LIBOR Loans then being
requested shall be made or continued by Lenders as Base Rate Loans.
(2) SUBSTITUTED RATE OF BORROWING. If any Lender (including Agent)
shall have determined (which determination shall be final and conclusive and
binding upon all parties), with respect to any LIBOR Loan and any pending
Interest Period that by reason of (a) any change after the date hereof in any
applicable law or governmental rule, regulation or order (or any interpretation
thereof and including the introduction of any new law or governmental rule,
regulation or order) or (b) other circumstances affecting that Lender or the
LIBOR market or the position of that Lender in such market (such as for example,
but not limited to, official reserve requirements required by Regulation D to
the extent not given effect in the LIBOR), the LIBOR shall not represent the
effective pricing to that Lender for Dollar deposits of comparable amounts for
the relevant period, then, and in any such event, that Lender shall be an
"Affected Lender" and it shall promptly (and in any event as soon as possible
after being notified of a borrowing, conversion or continuation) give notice (by
telephone confirmed in writing) to Borrower and Agent (which notice Agent shall
promptly transmit to each other Lender) of such determination. Thereafter, if
the Lender shall notify the Borrower by written demand made on or before a date
which is one (1) year after the termination of the applicable Interest Period,
Borrower shall pay to the Affected Lender, upon written demand therefor, such
additional amounts in the form of an increased rate of, or a different method of
calculating, interest or otherwise as the Affected Lender in its sole discretion
shall determine. A certificate as to additional amounts owed the Affected
Lender, showing in reasonable detail the basis for the
CREDIT AGREEMENT-Page 39
<PAGE>
calculation thereof, submitted in good faith to Borrower and Agent by the
Affected Lender within the time requirements set forth herein shall, absent
manifest error, be final and conclusive and binding upon all of the parties
hereto.
(3) REQUIRED TERMINATION AND PREPAYMENT. If on any date any Lender
shall have reasonably determined (which determination shall be final and
conclusive and binding upon all parties) that the making or continuation of its
LIBOR Loans has become unlawful or impossible under any law, governmental rule,
regulation or order with which such Lender believes, in good faith, it must
comply (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, that Lender
shall be an "Affected Lender" and it shall promptly give notice (by telephone
confirmed in writing) to Borrower and Agent (which notice Agent shall promptly
transmit to each Lender) of that determination. Subject to the prior withdrawal
of a Notice of Borrowing or a Notice of Conversion/Continuation or prepayment of
the LIBOR Loans of the Affected Lender as contemplated by the following
subsection 2.2(D)(4), the obligation of the Affected Lender to make or maintain
its LIBOR Loans during any such period shall be terminated at the earlier of the
termination of the Interest Period then in effect or when required by law and
Borrower shall no later than the termination of the Interest Period in effect at
the time any such determination pursuant to this subsection 2.2(D)(3) is made
or, earlier, when required by law, repay or prepay the LIBOR Loans of the
Affected Lender, together with all interest accrued thereon.
(4) OPTIONS OF BORROWER. In lieu of paying an Affected Lender such
additional moneys as are required by subsection 2.2(D) (2) or the prepayment of
an Affected Lender required by subsection 2.2 (D) (3), Borrower may exercise any
one of the following options:
(a) If the determination by an Affected Lender relates only to LIBOR
Loans then being requested by Borrower pursuant to a Notice of Borrowing or a
Notice of Conversion/Continuation, Borrower may by giving notice (by telephone
confirmed in writing) to Agent (who shall promptly give similar notice to each
Lender) no later than the date immediately prior to the date on which such LIBOR
Loans are to be made, withdraw that Notice of Borrowing or Notice of
Conversion/Continuation and the LIBOR Loans then being requested shall be made
by Lenders as Base Rate Loans; or
(b) Upon written notice to Agent and each Lender, Borrower may
terminate the obligations of Lenders to make or maintain Loans as, and to
convert Loans into, LIBOR Loans and in such event, Borrower shall, prior to the
time any payment pursuant to subsection 2.2(D) (3) is required to be made or, if
the provisions of subsection 2.2(D) (3) are applicable, at the end of the then
current Interest Period, convert all of the LIBOR Loans into Base Rate Loans in
the manner contemplated by subsection 2.2(C) but without satisfying the advance
notice requirements therein.
CREDIT AGREEMENT-Page 40
<PAGE>
(5) COMPENSATION. Borrower shall compensate each Lender, upon
written request by that Lender (which request shall set forth in reasonable
detail the basis for requesting such amounts and which shall, absent manifest
error, be conclusive and binding upon all parties hereto), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss
(including interest paid) sustained by that Lender in connection with the re-
employment of such funds), that Lender may sustain: (1) if for any reason (other
than a default by that Lender) a borrowing of any LIBOR Loan does not occur on a
date specified therefor in a Notice of Borrowing, a Notice of
Conversion/Continuation or a telephonic request for borrowing or
conversion/continuation therefor is given pursuant to subsection 2.2(C); (2) if
any prepayment of any of its LIBOR Loans occurs on a date that is not the last
day of an Interest Period applicable to that Loan; (3) if any prepayment of any
of its LIBOR Loans is not made on any date specified in a notice of prepayment
given by Borrower; or (4) as a consequence of any other default by Borrower to
repay its LIBOR Loans when required by the terms of this Agreement; provided
that during the period while any such amounts have not been paid, Lenders shall
reserve an equal amount from amounts otherwise available to be borrowed under
the Revolving Loans.
(6) BOOKING OF LIBOR LOANS. Any Lender may make, carry or transfer
LIBOR Loans at, to, or for the account of, any of its branch offices or the
office of an affiliate of that Lender.
(7) INCREASED COSTS. Except as provided in subsection 2.2(D) (2)
with respect to certain determinations on Interest Rate Determination Dates, if,
after the date hereof by reason of, (1) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any treaty, law, rule, or
regulation, or (2) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally (whether or not having
the force of law):
(a) any Lender (or its applicable lending office) shall be subject to
any tax, duty, levy, cost or other charge (except for taxes on the overall net
income or alternative minimum taxable income of such Lender or its applicable
lending office imposed by the jurisdiction in which such Lender's principal
executive office or applicable lending office is organized, located or is doing
business) with respect to its LIBOR Loans or its obligation to make LIBOR Loans,
or the recording, registration, notarization or other formalization of the LIBOR
Loans or the basis of taxation of payments to any Lender of the principal of or
interest or commitment fees or any amount payable on its LIBOR Loans or its
obligation to make LIBOR Loans shall change; or
(b) any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System), special deposit or similar
requirement against assets of,
CREDIT AGREEMENT-Page 41
<PAGE>
deposits with or for the account of, or credit extended by, any Lender's
applicable lending office shall be imposed on any Lender or its applicable
lending office or the interbank LIBOR market, and as a result thereof there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining LIBOR Loans, or there shall be a reduction in the amount
received or receivable by that Lender or its applicable lending office, then
Borrower shall from time to time, upon written notice from and demand by that
Lender made within one (1) year after any such reserve, special deposit or
similar requirement is imposed against such Lender, its applicable lending
office or the interbank LIBOR market or the reduction in the amount received or
receivable by such Lender occurs (with a copy of such notice and demand to
Agent), pay to Agent for the account of that Lender, within five (5) Business
Days after receipt of such notice, demand and appropriate proof of such cost,
additional amounts sufficient to indemnify that Lender against such increased
cost or reduced amount. A certificate as to the amount of such increased cost
or reduced amount, submitted to Borrower and Agent by that Lender within the
time requirements set forth herein and showing in reasonable detail the basis
for the calculation thereof, shall, except for manifest error, be final,
conclusive and binding for all purposes. Any payments to be made by Borrower
under subsections 2.2(D) (2), 2.2(D) (5), 2.2(D) (7) or 2.1(D) (5) in respect of
LIBOR Loans are to be without duplication.
(8) ASSUMPTIONS CONCERNING FUNDING OF LIBOR LOANS. Calculation of
all amounts payable to a Lender under this subsection 2.2(D) shall be made as
though that Lender had actually funded its relevant LIBOR Loan through the
purchase of a LIBOR deposit bearing interest at the LIBOR in an amount equal to
the amount of that LIBOR Loan and having a maturity comparable to the relevant
Interest Period and through the transfer of such LIBOR deposit from an offshore
office to a domestic office in the United States of America; PROVIDED, HOWEVER,
that each Lender may fund each of its LIBOR Loans in any manner it sees fit and
the foregoing assumption shall be utilized only for the calculation of amounts
payable under this subsection 2.2(D).
(9) LIBOR RATE LOANS AFTER DEFAULT. Unless Agent and Requisite
Lenders shall otherwise agree, after the occurrence of and during the
continuance of a Default or Event of Default, Borrower may not elect to have a
Loan be made or continued as, or converted to, a LIBOR Loan after the expiration
of any Interest Period then in effect for that Loan.
(E) COMPUTATION AND PAYMENT OF INTEREST. Interest on the Loans and all
other Obligations shall be computed on the daily principal balance on
the basis of a 360-day year for the actual number of days elapsed in
the period during which it accrues. In computing interest on any
Loan, the date of funding of the Loan or the first day of an Interest
Period applicable to such Loan or, with respect to a Base Rate Loan
being converted from a LIBOR Loan, the date of conversion of such
LIBOR Loan to such Base Rate Loan, shall be included and the date of
payment of such Loan or the expiration date of an Interest Period
applicable to such Loan, or with respect to a Base Rate Loan being
converted to a LIBOR
CREDIT AGREEMENT-Page 42
<PAGE>
Loan, the date of conversion of such Base Rate Loan to such LIBOR
Loan, shall be excluded; PROVIDED that if a Loan is repaid on the same
day on which it is made, one (1) day's interest shall be paid on that
Loan. Interest on the Base Rate Loans and all other Obligations
(other than LIBOR Loans) shall be payable to Agent, for the benefit of
Lenders, quarterly in arrears on the first day of each January, April,
July and October commencing January 1996, and at maturity, whether by
acceleration or otherwise. Interest on LIBOR Loans shall be payable to
Agent, for the benefit of Lenders, on the last day of the applicable
Interest Period for such Loan and at maturity, whether by acceleration
or otherwise. In addition, for each LIBOR Loan having an Interest
Period longer than three months, interest accrued on such Loan shall
also be payable on the first day of each third month during such
Interest Period.
(F) INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Borrower shall not be
required to pay, and neither Agent nor any Lender shall be permitted to collect,
any amount of interest in excess of the maximum amount of interest permitted by
applicable law ("EXCESS INTEREST"). If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any of the other Loan Documents, then in such event: (1)
the provisions of this subsection 2.2(F) shall govern and control; (2) neither
Borrower nor any other Loan Party shall be obligated to pay any Excess Interest;
(3) any Excess Interest that Agent or any Lender may have received hereunder
shall be, at Agent's option, (a) applied as a credit against the outstanding
principal balance of the Obligations or accrued and unpaid interest (not to
exceed the maximum amount permitted by law), (b) refunded to the payor thereof,
or (c) any combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the "MAXIMUM RATE"), and this Agreement or
the other Loan Documents, as applicable shall be deemed to have been and shall
be, reformed and modified to reflect such reduction; and (5) neither Borrower
nor any other Loan Party shall have any action against Agent or any Lender for
any damages arising out of the payment or collection of any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on any
Obligations is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such Obligations shall remain at
the Maximum Rate until each Lender shall have received the amount of interest
which such Lender would have received during such period on such Obligations had
the rate of interest not been limited to the Maximum Rate during such period.
To the extent, if any, that Texas law may apply, the parties hereto agree that,
except for Section 15.10(b) thereof, the provisions of Article 5069-15.01 et
seq. of The Revised Civil Statutes of Texas, 1925, as amended (regulating
certain revolving credit loans and revolving triparty accounts), shall not apply
to the Loans or the Loan Documents.
CREDIT AGREEMENT-Page 43
<PAGE>
2.3 FEES
(A) UNUSED LINE FEE. From and after the Closing Date, Borrower shall
pay to Agent a fee in an amount equal to (i) the Revolving Loan Commitment less
the sum of (A) the average daily balance of the Revolving Loan during each
calendar month and (B) the daily average face amount of Risk Participation
Liability during such calendar month, multiplied by (ii) one-half of one percent
(0.50%) per annum, such fee to be calculated monthly on the basis of a 360-day
year for the actual number of days elapsed and to be payable monthly in arrears
on the first day of each month commencing November, 1995. The fees paid to
Agent under this subsection 2.3(A) shall be distributed by Agent to Lenders
ratably in accordance with each Lender's Pro Rata Share (calculated in
accordance with its Revolving Loan Commitment).
(B) LETTER OF CREDIT AND RISK PARTICIPATION FEES. Borrower shall pay
to Agent fees for each Lender Letter of Credit, and each Risk Participation
Agreement for the period from and including the date of issuance of same, to and
excluding the date of expiration or termination, equal to the face amount of
Risk Participation Liability multiplied by two percent (2%) per annum, such fees
to be calculated on the basis of a 360-day year for the actual number of days
elapsed and to be payable monthly, in arrears, until such Lender Letter of
Credit or Risk Participation Agreement expires or terminates. The foregoing
fees paid to Agent under this subsection 2.3(B) shall be distributed by Agent to
Lenders ratably in accordance with each Lender's Pro Rata Share (calculated in
accordance with its Revolving Loan Commitment). Borrower shall also reimburse
Agent for its own account for any and all fees and expenses, if any, paid by
Agent to the issuer of the letter of credit or other written contract which is
the subject of a Risk Participation Agreement.
(C) PAYMENT OF AGENT FEES. Borrower shall pay to Agent such fees in the
amounts and at the times agreed upon between Agent and Borrower in the Fee
Letter.
2.4 PAYMENTS AND PREPAYMENTS
(A) MANNER AND TIME OF PAYMENT. All payments by Borrower of the
Obligations shall be made without deduction, defense, setoff or counterclaim and
in same day funds and delivered to Agent by wire transfer to the following
account:
CREDIT AGREEMENT-Page 44
<PAGE>
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
ABA No. 0710-0001-3
Account No. 5500540
Reference: Heller Corporate Finance
Group for the benefit of Central
Products Company
or at such other place as Agent may direct from time to time by written notice
to Borrower. Borrower shall receive credit for such funds on the date received
if Borrower has given Agent telephonic notice by 10:00 A.M. (Chicago, Illinois
time) of the transfer of such funds and such funds are received by Agent by 1:00
P.M. (Chicago, Illinois time) on such day. In the absence of timely notice and
receipt, such funds shall be deemed to have been paid by Borrower on the next
succeeding Business Day. In order to cause timely payment to be made to Agent
of all Obligations as and when due, Borrower hereby authorizes and directs
Agent, at Agent's option, to debit the Loan Account (by increasing the principal
balance of the Revolving Loan, each Lender to share in such increase in
accordance with its Pro Rata Share thereof, calculated based on the Revolving
Loan Commitments) when such Obligations become due, in which event payment would
be credited on the date of such debit.
If Agent pays an amount to any Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Agent from Borrower or any other Loan Party and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from
Borrower or such Lender without setoff, counterclaim, or deduction of any kind
together with interest thereon from the date such amounts are paid by Agent to
the date recovered at the Federal Funds Effective Rate. If Agent determines at
any time that any amount received by Agent under this Agreement or any other
Loan Document must be returned to Borrower or paid to any other Person pursuant
to any insolvency law or otherwise, then, notwithstanding any other term or
condition of this Agreement, Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without set-off, counterclaim, or deduction of
any kind.
(B) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next
CREDIT AGREEMENT-Page 45
<PAGE>
succeeding Business Day and such extension of time shall be included in the
computation of the amount of interest or fees due hereunder.
(C) MANDATORY PREPAYMENTS.
(1) REVOLVING LOAN OVERADVANCE. Subject to the exception set forth
in subsection 2.1(C) which allows Agent or the Requisite Lenders to
temporarily increase the Maximum Revolving Loan Amount at any time that the
principal balance of the Revolving Loans exceeds the Maximum Revolving Loan
Amount, Borrower shall immediately repay the Revolving Loan to the extent
necessary to reduce the principal balance to an amount that is equal to or
less than the Maximum Revolving Loan Amount.
(2) PREPAYMENTS FROM ASSET DISPOSITIONS. Immediately upon receipt by
Borrower or any of its Subsidiaries of Net Proceeds of any Asset
Disposition, which proceeds when aggregated with all other Net Proceeds
from Asset Dispositions received during the same Fiscal Year exceed
$300,000, Borrower shall prepay the Loans in an amount equal to the Net
Proceeds of such Asset Disposition in accordance with subsection 2.4(E).
Notwithstanding the foregoing, in the event that Borrower (or any
Subsidiary) may retain proceeds as hereafter provided from an Asset
Disposition if no Event of Default exists and in the event that the Person
disposing of asset or assets in question:
(i) has an accrued tax liability with respect to an Asset Disposition
or (ii) reasonably expects the Net Proceeds of such Asset Disposition
to be reinvested within one hundred fifty (150) days in productive
assets of a kind then used or useable in the business of Borrower and
its Subsidiaries, then Borrower shall deliver such proceeds of Asset
Dispositions or portion thereof in an amount equal to such accrued tax
liability to Agent to be held by Agent in a cash collateral account
bearing interest payable to Borrower at a rate per annum (meaning 360
days) equal to (a) the same rate of interest payable hereunder with
respect to the Revolving Loan for that portion of such proceeds not in
excess of the balance of the Revolving Loan and (b) the Base Rate
minus two percent (2.0%) for any amount in excess of the balance of
the Revolving Loan. Upon Borrower's request, Agent shall release such
proceeds to Borrower for payment of the accrued tax liability or for
reinvestment as described above. In the event Borrower is not
required to pay all or any portion of the accrued tax liability or
fails to reinvest such proceeds within one hundred twenty (120) days,
Borrower authorizes and directs Agent to apply such amount as a
prepayment of the Loans in accordance with subsection 2.4(E).
(3) PREPAYMENT FROM EQUITY OFFERINGS. In the event that Borrower or
any of its Subsidiaries issues Equity Securities, no later than the third
Business Day following the date of receipt of the proceeds from any sale of such
Equity Securities, (other than: (i) proceeds of the issuance of Borrower Capital
Stock received on or before the Closing Date, or (ii)
CREDIT AGREEMENT-Page 46
<PAGE>
proceeds constituting capital contributions by Holdings to Borrower or by
Borrower to any of its Subsidiaries), Borrower shall prepay the Loans in an
amount equal to the lesser of (i) the amount of such proceeds, net of
underwriting discounts and commissions, all due diligence costs and expenses
paid for or reimbursed by the issuer or any of its Subsidiaries, all attorneys'
fees paid for by or reimbursed by the issuer or its Subsidiaries and other
reasonable costs associated therewith or (ii) the amount of the Obligations then
outstanding. Prepayments made under this subsection 2.4(C)(3) shall be applied
to the Loans in accordance with subsection 2.4(E).
(4) PREPAYMENTS FROM EXCESS CASH FLOW. Within one hundred (100) days
after the end of each Fiscal Year set forth below, beginning with the
Fiscal Year ending on the last day of December, 1996, Borrower shall prepay
the Loans in an amount equal to fifty percent (50%) of Excess Cash Flow for
such prior Fiscal Year calculated on the basis of the AUDITED financial
statements for such Fiscal Year delivered to Lender pursuant to subsection
5.1(B). All such prepayments of the Loans from Excess Cash Flow shall be
applied in accordance with subsection 2.4(E). Concurrently with the making
of any such payment, Borrower shall deliver to Agent a certificate of a
Responsible Officer of Borrower demonstrating its calculation of the amount
required to be paid.
(5) PREPAYMENT FROM PENSION PLAN REVERSION. Upon the return to
Borrower or any of its Subsidiaries of any surplus assets of any Pension
Plan, Borrower shall prepay the Loans in an amount equal to such returned
surplus assets net of transaction costs (including income, excise or other
taxes or penalties) incurred in obtaining such return in accordance with
subsection 2.4(E). Concurrently with the making of any such payment,
Borrower shall deliver to Agent a certificate of a Responsible Officer of
Borrower demonstrating its calculation of the amount required to be paid.
(6) PREPAYMENT FROM ACQUISITION DOCUMENT PROCEEDS. Immediately upon
receipt by Borrower of any amounts payable under or pursuant to adjustments
under the Acquisition Documents after the Closing Date (other than amounts
payable as a result of a claim by Borrower for indemnification under the
Acquisition Documents to the extent that the amounts so recovered are
applied by Borrower for the purpose of replacing, repairing or restoring
any assets or properties of Borrower, or satisfying claims made against
Borrower, or otherwise remedying or correcting the condition giving rise to
the claim for indemnification or otherwise covering any fees or expenses
incurred by Borrower in obtaining such indemnification), Borrower shall
apply the amounts so received attributable to net adjustments in current
assets less current liabilities of the Central Products Division of
Unisource and Central, on a consolidated basis, to the outstanding balance
of the Revolving Loan and any amount so received in excess of the amount
attributable to such adjustment to the Term Loans in the manner provided in
subsection 2.4(C)(7). All amounts so applied to the Revolving Loan may be
reborrowed in accordance with subsection 2.1(C). Concurrently with the
making of any such payment, Borrower shall deliver to Lender a
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certificate of Borrower's chief executive officer or chief financial
officer demonstrating its calculation of the amount required to be paid.
(7) APPLICATION OF PROCEEDS. With respect to the mandatory
prepayments described in subsections 2.4(C)(2), 2.4(C)(3), 2.4(C)(4),
2.4(C)(5) and 2.4(C)(6) (to the extent any mandatory prepayments described
in subsection 2.4(C)(6) is to be applied to the Term Loans) such
prepayments shall be applied as follows: (a) first in payment of the
Scheduled Installments of the Term Loan which remain unpaid on a pro rata
basis (calculated for each such Scheduled Installment by multiplying the
amount of such prepayment or repayment by a fraction, the numerator of
which is the amount of such Scheduled Installment and the denominator of
which is the aggregate outstanding principal balance of all Scheduled
Installments which remain unpaid as of the date of such prepayment or
repayment); and (b) at any time after the Term Loan shall have been repaid
in full, then to the Revolving Loan. As long as the Revolving Loan
Commitment has not terminated, all amounts repaid on the Revolving Loan may
be reborrowed in accordance with subsection 2.1(C).
(D) VOLUNTARY PREPAYMENTS AND REPAYMENTS. Borrower may, upon at least
three (3) Business Day's prior written notice to Agent in the case of LIBOR
Loans and upon at least one (1) Business Day's prior written notice to Agent in
the case of Base Rate Loans, prepay the Loans in whole or at any time or from
time to time in part without premium or penalty; provided that (1) each partial
prepayment under the Loans shall be in the minimum principal amount of $50,000
and (2) Borrower may prepay or repay LIBOR Loans only on the last day of the
applicable Interest Periods therefor unless Borrower concurrently with such
payment pays all amounts due under subsection 2.2(D)(5). Upon prepayment in full
of the Term Loans and termination of the Revolving Loan Commitment, Borrower
shall cause Agent and each Lender to be released from all liability under all
Lender Letters of Credit and Risk Participation Agreements or, at Agent's
option, Borrower will deposit cash collateral with Agent in an amount equal to
the Risk Participation Liability with respect to each Lender Letter of Credit
and each Risk Participation Agreement that will remain outstanding after
prepayment in full. Any partial prepayment of the Term Loans shall be applied
in accordance with Section 2.4(E).
(E) APPLICATION OF REPAYMENTS AND PREPAYMENTS. All prepayments and
repayments under Section 2.4 (other than prepayments and repayments under
Section 2.4(C)(1) and 2.4(C)(6)) shall include payment of accrued interest on
the principal amount so prepaid and repaid and shall be applied to the payment
of interest before application to principal. Considering Term Loans and
Revolving Loans being prepaid separately, any prepayment under this subsection
2.4(E) shall be applied first to Base Rate Loans and after payment in full of
the Base Rate Loans then to LIBOR Loans, in the order determined by Agent.
CREDIT AGREEMENT-Page 48
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2.5 TERM OF COMMITMENTS
Unless earlier terminated in accordance herewith, the Commitments shall
terminate on the earlier of (a) the date on which the Term Loans are paid in
full and (b) the Termination Date applicable to such Commitments, provided,
however, that upon such payment in full of the Term Loans or on the Termination
Date applicable to the Revolving Loan Commitments, Lenders holding Revolving
Notes and Borrower may, in their sole discretion and without the consent or
agreement of any other Lender, mutually agree to extend the Termination Date
applicable to Revolving Loan Commitments for one or more consecutive periods of
one year, however, the Revolving Loan Commitments of only those Lenders voting
to extend their respective Revolving Loan Commitments shall be so extended. In
addition, the Commitments may be terminated as set forth in Section 8.3 hereof.
On the Termination Date applicable to the Commitments, all Obligations relating
to Revolving Loans, the Term Loans, Risk Participation Agreements and Lender
Letters of Credit (including, without limitation, all Revolving Loans, the Term
Loans and all Risk Participation Agreement Liabilities) shall become immediately
due and payable without notice or demand. Upon acceleration in accordance with
Section 8.3, all unpaid Obligations shall become immediately due and payable
without notice or demand. Notwithstanding any termination, until all
Obligations have been fully paid and satisfied, Agent, on behalf of Lenders,
shall be entitled to retain security interests in and liens upon all Collateral,
and even after payment of all Obligations hereunder, Borrower's obligation to
indemnify Agent and Lenders and the Lenders' obligations to indemnify the Agent
in accordance with the terms hereof shall continue.
2.6 BORROWER'S LOAN ACCOUNT AND STATEMENTS
Agent shall maintain a loan account for Borrower (the "LOAN ACCOUNT") on
its books to record: (a) all Loans and payments, if any, made under Lender
Letters of Credit and Risk Participation Agreements; (b) all payments made by
Borrower; and (c) all other appropriate debits and credits as provided in this
Agreement with respect to the Obligations. All entries in the Loan Account
shall be made in accordance with Agent's customary accounting practices as in
effect from time to time. Borrower promises to pay all Obligations as such
amounts become due or are declared due pursuant to the terms of this Agreement.
After the occurrence and during the continuance of an Event of Default, Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times thereafter received by Agent or any Lender from or on
behalf of Borrower, and Borrower hereby irrevocably agrees that Agent shall have
the continuing exclusive right to apply and to reapply any and all payments
received at any time or times after the occurrence and during the continuance of
an Event of Default against the Obligations in such manner as Agent acting on
behalf of the Lenders may deem advisable notwithstanding any previous entry by
Agent upon the Loan Account or any other books and records; provided that with
respect to the application by Agent of any such payments to the outstanding
principal balance of the Loans, each such payment shall be applied to the
outstanding principal balance of the Loans in amounts as the Requisite Lenders
shall determine.
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The balance in the Loan Account, as recorded on Agent's most recent
printout or other written statement, shall be presumptive evidence against
Borrower of the amounts due and owing to Lenders by Borrower; PROVIDED that any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrower's obligation to pay the Obligations. Not more than twenty (20)
days after the last day of each calendar month, Agent shall render to Borrower a
statement setting forth the principal balance of the Loan Account and the
calculation of interest due thereon. Each statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be presumed correct and binding upon Borrower, and shall constitute an account
stated unless, within thirty (30) days after receipt of such statement, Borrower
shall deliver to Agent and the Lenders its written objection thereto specifying
the error or errors, if any, contained in such statement. In the absence of a
written objection delivered to Agent as set forth above, Agent's statement of
the Loan Accounts shall be, absent manifest error, conclusive evidence against
Borrower of the amount of the Obligations. Notwithstanding anything contained in
this subsection 2.6, by written notice to Agent, each Lender shall have the
right to modify the Loan Account or any statement relating thereto, at any time,
to correctly reflect the Obligations owing to such Lender.
2.7 CAPITAL ADEQUACY AND OTHER ADJUSTMENTS
In the event that any Lender shall have determined that the adoption after
the date hereof of any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve requirements
or similar requirements or compliance by any Lender or any corporation
controlling such Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) from any central bank or governmental agency or body having
jurisdiction does or shall have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender or any
corporation controlling such Lender and thereby reducing the rate of return on
such Lender's or such corporation's capital as a consequence of its obligations
hereunder, then Borrower shall from time to time within fifteen (15) days after
notice and demand from such Lender (together with the certificate referred to in
the next sentence and with a copy to Agent) pay to Agent, for the account of
such Lender, additional amounts sufficient to compensate such Lender for such
reduction. A certificate as to the amount of such cost and showing the basis of
the computation of such cost submitted by such Lender to Borrower and Agent
within one hundred eighty (180) days after the occurrence of the event giving
rise to such cost, shall, absent manifest error, be final, conclusive and
binding for all purposes.
2.8 TAXES
(A) NO DEDUCTIONS. Any and all payments or reimbursements made hereunder
or under the Notes shall be made free and clear of and without deduction for any
and all taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto; excluding, however, the following: taxes
imposed on the net income of a Lender or Agent by the jurisdiction under the
laws of which such Lender or Agent is organized or doing business or any
political subdivision thereof and taxes imposed on its net income by the
jurisdiction of such Lender's or
CREDIT AGREEMENT-Page 50
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Agent's applicable lending office or any political subdivision thereof (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto excluding such taxes imposed on net income, herein "Tax
Liabilities"). If Borrower shall be required by law to deduct any such amounts
from or in respect of any sum payable hereunder to any Lender or Agent, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, such Lender or Agent receives an amount equal to
the sum it would have received had no such deductions been made.
(B) CHANGES IN TAX LAWS. In the event that, subsequent to the Closing
Date, (l) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (2) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (3)
compliance by Agent or any Lender with any request or directive (whether or not
having the force of law) from any governmental authority, agency or
instrumentality:
(a) does or shall subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made or Risk Participation Agreements or Lender Letters of Credit issued
hereunder, or change the basis of taxation of payments to Agent or such Lender
of principal, fees, interest or any other amount payable hereunder (except for
net income taxes, or franchise taxes imposed in lieu of net income taxes,
imposed generally by federal, state or local taxing authorities with respect to
interest or commitment or other fees payable hereunder or changes in the rate of
Agent or tax on the overall net income of Agent or such Lender); or
(b) does or shall impose on Agent or any Lender any other condition
or increased cost (other than those determined in accordance with subsection
2.2(D)) in connection with the transactions contemplated hereby or
participations herein;
and the result of any of the foregoing is to increase the cost to Agent or any
such Lender of issuing any Risk Participation Agreement or Lender Letter of
Credit or making or continuing any Loan hereunder, as the case may be, or to
reduce any amount receivable hereunder, then, in any such case, Borrower shall
promptly pay to Agent or such Lender, upon its demand, any additional amounts
necessary to compensate Agent or such Lender, on an after-tax basis, for such
additional cost or reduced amount receivable, as determined by Agent or such
Lender with respect to this Agreement or the other Loan Documents. If Agent or
such Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify Borrower of the event by reason of which
Agent or such Lender has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent or such
Lender to Borrower and Agent within one hundred eighty (180) days after the
occurrence of the event giving rise to such additional amount and showing in
reasonable detail the basis for the calculation thereof, shall, absent manifest
error, be final, conclusive and binding for all purposes.
CREDIT AGREEMENT-Page 51
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(C) FOREIGN LENDERS. Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") as to which payments
to be made under this Agreement or under the Notes are exempt from United States
withholding tax or are subject to United States withholding tax at a reduced
rate under an applicable statute or tax treaty shall provide to Borrower and
Agent (l) a properly completed and executed Internal Revenue Service Form 4224
or Form 1001 or other applicable form, certificate or document prescribed by the
Internal Revenue Service of the United States certifying as to such Foreign
Lender's entitlement to such exemption or reduced rate of withholding with
respect to payments to be made to such Foreign Lender under this Agreement and
under the Notes (a "Certificate of Exemption") or (2) a letter from any such
Foreign Lender stating that it is not entitled to any such exemption or reduced
rate of withholding (a "Letter of Non-Exemption"). Prior to becoming a Lender
under this Agreement and within fifteen (15) days after a reasonable written
request of Borrower or Agent from time to time thereafter, each Foreign Lender
that becomes a Lender under this Agreement shall provide a Certificate of
Exemption or a Letter of Non-Exemption to Borrower and Agent.
If a Foreign Lender is entitled to an exemption with respect to payments to
be made to such Foreign Lender under this Agreement (or to a reduced rate of
withholding) and does not provide a Certificate of Exemption to Borrower and
Agent within the time periods set forth in the preceding paragraph, Borrower
shall withhold taxes from payments to such Foreign Lender at the applicable
statutory rates and Borrower shall not be required to pay any additional amounts
as a result of such withholding; provided, however, that all such withholding
shall cease upon delivery by such Foreign Lender of a Certificate of Exemption
to Borrower and Agent.
2.9 OPTIONAL PREPAYMENT/REPLACEMENT OF LENDER IN RESPECT OF INCREASED
COSTS
Within fifteen (15) days after receipt by Borrower of written notice and
demand from any Lender (an "Affected Lender") for payment of additional costs as
provided in subsections 2.2(D) or 2.9, Borrower may, at its option, notify Agent
and such Affected Lender of its intention to do one of the following:
(A) Borrower may obtain, at Borrower's expense, a replacement Lender
("Replacement Lender") for such Affected Lender, which Replacement Lender shall
be reasonably satisfactory to Agent; In the event Borrower obtains a Replacement
Lender within ninety (90) days following notice of its intention to do so, the
Affected Lender shall sell and assign its Loans and Commitments to such
Replacement Lender provided that Borrower has reimbursed such Affected Lender
for its increased costs for which it is entitled to reimbursement under this
Agreement through the date of such sale and assignment.
(B) Borrower may prepay in full all outstanding Obligations owed to such
Affected Lender and terminate such Affected Lender' s Commitments. Borrower
shall, within ninety (90) days following notice of its intention to do so,
prepay in full all outstanding Obligations owed to such Affected Lender
(including such Affected Lender's increased costs for which it is entitled to
CREDIT AGREEMENT-Page 52
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reimbursement under this Agreement through the date of such prepayment and
terminate such Affected Lender's Commitments.
2.10 OTHER LETTER OF CREDIT AND RISK PARTICIPATION AGREEMENT PROVISIONS
(A) OBLIGATIONS ABSOLUTE. The obligation of Borrower to reimburse Agent
and Lenders for payments made under or in connection with any Lender Letter of
Credit or Risk Participation Agreement shall be unconditional and irrevocable
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances including the following circumstances:
(1) any lack of validity or enforceability of any Lender Letter of
Credit or Risk Participation Agreement or any other agreement;
(2) the existence of any claim, set-off, defense or other right which
Borrower or any of its Affiliates, Agent or any Lender may at any time have
against a beneficiary or any transferee of any Lender Letter of Credit or
Risk Participation Agreement (or any Persons for whom any such transferee
may be acting), Agent, any Lender, or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between
Borrower or any of its Affiliates and the beneficiary for which the Lender
Letter of Credit or Risk Participation Agreement was procured);
(3) any draft, demand, certificate or any other document presented
under any Lender Letter of Credit or Risk Participation Agreement proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(4) payment by Agent or any Lender under any Lender Letter of Credit
or Risk Participation Agreement against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such
Lender Letter of Credit or Risk Participation Agreement; provided that, in
the case of any payment by Agent or any Lender under any Lender Letter of
Credit or Risk Participation Agreement, Agent or such Lender has not acted
with gross negligence or willful misconduct (as determined by a court of
competent jurisdiction) in determining that the demand for payment under
such Lender Letter of Credit or Risk Participation Agreement complies on
its face with any applicable requirements for a demand for payment under
such Lender Letter of Credit or Risk Participation Agreement;
(5) any other circumstance or happening whatsoever, which is similar
to any of the foregoing; or
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(6) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(B) INDEMNIFICATION: NATURE OF LENDERS' DUTIES. In addition to amounts
payable as elsewhere provided in this Agreement, Borrower hereby agrees to
protect, indemnify, pay and save Agent and each Lender harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees and allocated costs of internal
counsel) which Agent or any Lender may incur or be subject to as a consequence,
direct or indirect, of (1) the issuance of any Lender Letter of Credit or Risk
Participation Agreement, other than as a result of the gross negligence or
willful misconduct of Agent or the Lender seeking indemnification as determined
by a court of competent jurisdiction or (2) the failure of Agent or the Lender
seeking indemnification to honor a demand for payment under any Lender Letter of
Credit or Risk Participation Agreement 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.
As between Agent and Borrower and Lenders and Borrower, Borrower assumes
all risks of the acts and omissions of, or misuse of any Lender Letter of Credit
or Risk Participation Agreement by beneficiaries of any Lender Letter of Credit
or Risk Participation Agreement. In furtherance and not in limitation of the
foregoing, neither Agent nor any Lender shall be responsible: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document by
any party in connection with the application for and issuance of any Lender
Letter of Credit or Risk Participation Agreement, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged unless such facts were actually known to Agent or such Lender; (ii)
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assigning any Lender Letter of Credit or Risk
Participation Agreement 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; (iii) for failure of the beneficiary of any Lender Letter of Credit
or Risk Participation Agreement to comply fully with conditions required in
order to demand payment under such Lender Letter of Credit or Risk Participation
Agreement; provided that, in the case of any payment by Agent or any Lender
under any Lender Letter of Credit or Risk Participation Agreement, Agent or such
Lender has not acted with gross negligence or willful misconduct (as determined
by a court of competent jurisdiction) in determining that the demand for payment
under such Lender Letter of Credit or Risk Participation Agreement complies on
its face with any applicable requirements for a demand for payment under such
Lender Letter of Credit or Risk Participation Agreement; (iv) for 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;
(v) for errors in interpretation of technical terms; (vi) for any loss or delay
in the transmission or otherwise of any document required in order to make a
payment under any Lender Letter of Credit or Risk Participation Agreement or of
the proceeds thereof; (vii) for the credit of the proceeds of any drawing under
any Lender Letter of Credit or Risk Participation Agreement; and (viii) for any
consequences arising from causes beyond the control of Agent or any Lender.
None of the above shall affect, impair, or prevent the vesting of any of Agent's
or any Lender's rights or powers hereunder except as otherwise specifically
provided in this subsection 2.10.
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In furtherance and extension of, and not in limitation of, the specific
provisions hereinabove set forth, any action taken or omitted by Agent or any
Lender under or in connection with any Lender Letter of Credit or Risk
Participation Agreement, if taken or omitted in good faith, shall not put Agent
or any Lender under any resulting liability to Borrower.
2.11 DISBURSEMENTS OF ADVANCES, PAYMENTS, AND INFORMATION
(A) REVOLVING LOAN ADVANCES AND PAYMENTS. The Revolving Loan balance may
fluctuate from day to day through Agent's disbursement of funds to and receipt
of funds from Borrower. In order to minimize the frequency of transfers of
funds between Agent and each Lender, Revolving Loan advances and payments will
be settled according to the procedures described in this subsection 2.11(A).
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any Loans under the Revolving Loan Commitment made by Agent to Borrower will
commence on the date such Loans are made by Agent. Such payments will be made
by such Lender without setoff, counterclaim, or reduction of any kind. On the
second Business Day of each week, or more frequently, if Agent so elects (each
such day being a "Settlement Date"), Agent will advise each Lender by telephone
(followed by a facsimile), telex, or telecopy of the amount of such Lender's Pro
Rata Share of the Revolving Loan balance as of the close of business on the
second Business Day immediately preceding the Settlement Date. In the event
that payments are necessary to adjust such Lender's Pro Rata Share of the
Revolving Loan balance so that it equals such Lender's Pro Rata Share of the
Revolving Loan as of any Settlement Date, the party from whom such payment is
due will pay the other, in same day funds, by wire transfer to the other's
account not later than 12:00 Noon (Chicago, Illinois time) on the Business Day
following the Settlement Date. Notwithstanding the above, any principal payment
of a LIBOR Loan that is not converted or continued will be paid to the Lenders
by the Agent on the same day as received.
(B) INTEREST PAYMENTS ALL LOANS. For purposes of this subsection 2.11(B),
the following terms and conditions will have the meanings indicated:
(i) "Daily Loan Balance" means an amount calculated as of the end of
each calendar day by subtracting (a) the cumulative principal amount
paid by Agent to a Lender on account of a Loan from the Closing Date
through and including such calendar day from (b) the cumulative
principal amount advanced by such Lender to Agent for the benefit of
Borrower under that Loan from the Closing Date through and including
such calendar day.
(ii) "Daily Interest Rate" means an amount calculated by dividing the
interest rate payable to a Lender on its Pro Rata portion of a Loan
(as determined in accordance with subsection 2.2) as of each calendar
day by three hundred sixty (360).
(iii) "Daily Interest Amount" means an amount calculated by
multiplying the Daily Loan Balance of a Loan by the Daily Interest
Rate on that Loan.
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(iv) "Interest Ratio" means a number calculated by dividing the total
amount of the interest on a Loan received by Agent during the
immediately preceding Calendar Quarter by the total amount of interest
on that Loan due from Borrower during the immediately preceding
Calendar Quarter.
(v) "LIBOR Interest Ratio" means a number calculated by dividing the
total amount of the interest on a LIBOR Loan received by Agent during
the applicable Stub Period (as defined below) by the total amount of
interest on such LIBOR Loan due from Borrower during such Stub Period.
On the first Business Day of each Calendar Quarter (the "Interest
Settlement Date"), Agent will advise each Lender by telephone (followed by a
facsimile), telex, or telecopy of the amount of such Lender's share of interest
accrued on Base Rate Loans as of the end of the last day of the immediately
preceding Calendar Quarter. Provided that such Lender has made all payments
required to be made by it under this Agreement, Agent will pay to such Lender,
by wire transfer to such Lender's account not later than 12:00 Noon (Chicago,
Illinois time) on the next Business Day following the Interest Settlement Date,
such Lender's share of such interest. Such Lender's share of interest on each
Base Rate Loan will be calculated by adding together the Daily Interest Amounts
for each calendar day of the prior Calendar Quarter for that Loan and
multiplying the total thereof by the associated Interest Ratio for that Loan.
On the last day of any Interest Period relating to any LIBOR Loan (the "LIBOR
Settlement Date"), Agent will advise each Lender by telephone (followed by a
facsimile), telex, or telecopy of the amount of such Lender's share of interest
accrued as of the end of such Interest Period for such LIBOR Loan. Provided
that such Lender has made all payments required to be made by it under this
Agreement, Agent will pay to such Lender, by wire transfer to such Lender's
account not later than 12:00 Noon (Chicago, Illinois time) on such LIBOR
Settlement Date, such Lender's share of such interest. Such Lender's share of
interest on each such LIBOR Loan will be calculated for that LIBOR Loan by
adding together the Daily Interest Amounts for each calendar day commencing on
the immediately preceding Interest Settlement Date and ending on such LIBOR
Settlement Date (the "Stub Period") for such LIBOR Loan and multiplying the
total thereof by the associated Interest Ratio for that LIBOR Loan.
(C) TERM LOAN PRINCIPAL PAYMENTS. Agent will advise each Lender by
telephone, telex, or telecopy of the amount of each Lender's Pro Rata Share of
any payments of the Term Loans principal received by Agent. Provided that such
Lender has made all payments required to be made by it under this Agreement,
Agent will pay to such Lender its Pro Rata Share of all such payments received
by Agent by wire transfer to such Lender's account on the same Business Day
Agent is deemed to have received such payments in accordance with subsection
2.4(A).
(D) LENDER LETTERS OF CREDIT; RISK PARTICIPATION AGREEMENTS. Agent or any
Lender issuing a Lender Letter of Credit, as applicable, will advise each other
Lender on the first Business Day of each week of the issuance or cancellation of
any Lender Letters of Credit or any Risk Participation Agreements since the last
such notice.
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(E) AVAILABILITY OF EACH LENDER'S PRO RATA SHARE.
(1) Unless Agent has been notified by a Lender prior to a
Funding Date of such Lender's intention not to fund such Lender's Pro Rata
Share of the Loan amount requested by Borrower, Agent may assume that such
Lender will make such amount available to Agent, at Agent's option, on the
next Business Day or on the Business Day following the next Settlement Date
and Agent in its sole discretion may, but shall not be obligated to, make
available to Borrower a corresponding amount on such Funding Date. If such
amount is not, in fact, made available to Agent by such Lender when due,
Agent will be entitled to recover such amount on demand from such Lender
with interest at the Federal Funds Effective Rate for one Business Day and
thereafter at the Base Rate without set-off, counterclaim or deduction of
any kind.
(2) Nothing contained in this subsection 2.11(E) will be deemed
to relieve any Lender of its obligation to fulfill its Commitments or to
prejudice any rights Borrower may have against such Lender as a result of
any default by such Lender under this Agreement.
(F) OTHER SPECIFIC PAYMENTS. Any amounts received by Agent hereunder
(for example payments to the account of an Affected Lender under Section 2.2(D)
of this Agreement) that are received for the account of a specific Lender shall
be promptly paid to such Lender by Agent.
2.12 REPLACEMENT OF LENDER
If at any time (a) any of the provisions of subsection 2.2(D)(2),
subsection 2.2(D)(3), subsection 2.2(D)(3), subsection 2.7 or subsection 2.8
shall become applicable to and utilized by any Lender so as to cause Borrower to
pay any material amount to such Lender under any such subsection or (b) any
Lender becomes insolvent and its assets become subject to a receiver,
liquidator, trustee, custodian, or other officer having similar powers or (c)
the senior debt securities or long term deposits of a Lender are rated below
"Baa-3" by Moody's Investor Services, Inc. or "BBB-" by Standard & Poor's
Corporation, or (d) a Lender becomes a Nonconsenting Lender (as defined below in
this subsection 2.12), the Borrower shall have the right to replace such Lender
with another Person; provided that (i) such new Person shall be reasonably
acceptable to the Agent and such new Person shall execute a Lender Addition
Agreement, (ii) Borrower shall have no right to replace Heller, (iii) neither
the Agent nor any Lender shall have any obligation to Borrower to find such
other Person, and (iv) in the event of a replacement of a Nonconsenting Lender
or a Lender utilizing the subsections described in clause (a) above, in order
for Borrower to be entitled to replace such a Lender, such replacement must take
place no later than 180 days after (A) the date the Nonconsenting Lender shall
notify Borrower and the Agent of its failure to agree to any requested consent,
waiver or other modification or (B) the Lender demanded payment under one of the
subsections described in clause (a) above, as applicable. Each Lender (other
than Heller) agrees to its replacement at the option of the Borrower pursuant to
this Section 2.12 and in accordance with Section 9; provided that the successor
lender shall purchase without recourse such Lender's interest
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in the Obligations of the Borrower to such Lender for cash in an aggregate
amount equal to the aggregate unpaid principal thereof, all unpaid interest
accrued thereon, all unpaid commitment fees accrued for the account of such
Lender, any breakage costs incurred by the selling Lender because of the
prepayment of any LIBOR Loans, all other fees (if any) applicable thereto and
all other amounts (including any amounts under subsection 2.2(D)(2), 2.2(D)(3),
2.2(D)(5), 2.2(D)(7), 2.7 or 2.8 then owing to such Lender hereunder or under
any other Loan Document and the Loan Parties shall execute a release addressed
to such Lender releasing such Lender from all claims arising in connection with
the Loan Documents. In the event that (x) the Borrower or Agent has requested
the Lenders to consent to a departure or waiver of any provisions of the Loan
Documents or to agree to any other modification thereto, (y) the consent, waiver
or other modification in question requires the agreement of all Lenders (or all
Lenders holding Revolving Notes) in accordance with the terms of subsection 10.3
and (z) Lenders holding at least eighty percent (80%) of the Total Loan
Commitment (or in the case of Lenders holding Revolving Notes, eighty percent
(80%) of the Revolving Loan Commitments) have agreed to such consent, waiver or
other modification, then any Lender who does not agree to such consent, waiver
or other modification shall be deemed a "Nonconsenting Lender".
SECTION 3
CONDITIONS TO LOANS
The obligations of each Lender to make Loans, the obligations of Agent to
issue Lender Letters of Credit or Risk Participation Agreements are subject to
satisfaction of the conditions as set forth below.
3.1 CONDITIONS TO INITIAL LOANS
The obligations of Lenders to make the initial Loans and the obligations of
Agent or any Lender to issue the initial Lender Letter of Credit, if any Lender
has agreed to issue a Letter of Credit pursuant to subsection 2.1(D)(3), or Risk
Participation Agreement are, in addition to the conditions precedent specified
in subsection 3.2, subject to the prior or concurrent satisfaction of all of the
conditions set forth below.
(A) CLOSING DATE AVAILABILITY. After giving effect to each borrowing
under the Revolving Loan on the Closing Date and the issuance of any Lender
Letter of Credit or Risk Participation Agreement, the Maximum Revolving Loan
Amount on the Closing Date shall exceed the principal balance of the Revolving
Loan by at least $2,700,000.
(B) FINANCIAL CONDITION CERTIFICATE. Borrower shall have delivered to
Agent a Financial Condition Certificate dated the Closing Date (which shall be
executed by the chief financial officer of Borrower) substantially in the form
of Exhibit "L", with appropriate attachments demonstrating that, after giving
effect to the Related Transactions, the fair salable value of the assets
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of Borrower on a consolidated basis will exceed the probable liability on its
debts, that Borrower will be able to pay its debts as they mature and that
Borrower will not have unreasonably small capital to conduct its business. Agent
shall have received such opinions of value, other appropriate factual
information and expert advice supporting the conclusions reached in such letter
as Agent may reasonably request, all in form and substance satisfactory to
Agent.
(C) FEES. Borrower shall have paid the fees payable on the Closing Date
referred to in that certain letter agreement dated September 11, 1995, between
Holdings and Heller (the "Fee Letter").
(D) CAPITALIZATION AND ISSUANCE OF ACQUISITION SECURITIES. Borrower shall
have issued and sold the Seller Subordinated Note and Holdings shall have issued
and sold the Holdings Note and as a result thereof the Net Worth of Borrower in
accordance with GAAP, is not less than $25,000,000. In addition, all
certificates, opinions and letters delivered to Agent and Lenders in connection
with the Related Transactions shall be addressed to Agent and Lenders and
accompanied by a written authorization from the Person delivering such
certificate, opinion or letter stating that Agent and Lenders may rely on such
document as though it were addressed to them.
(E) RELATED TRANSACTIONS DOCUMENTS. Each of the Related Transactions
Documents shall be in form and substance reasonably satisfactory to Agent.
(F) PURCHASE AGREEMENT. On the Closing Date: (1) Agent shall have received
executed or conformed copies of the Purchase Agreement and any amendments
thereto; (2) the Purchase Agreement shall be in full force and effect and no
material term or condition thereof shall have been amended, modified or waived
after the execution thereof except with the prior written consent of Agent; (3)
none of the parties to the Purchase Agreement shall have failed to perform any
material obligation or covenant required by the Purchase Agreement to be
performed or complied with by it on or before the Closing Date; and (4) Agent
shall have received a certificate from Borrower's chief executive or chief
financial officer to the effect set forth in clauses (1), (2) and (3) above. In
addition, all certificates, opinions and letters delivered in connection with
the Purchase Agreement shall be addressed to Agent and Lenders or accompanied by
a written authorization from the person delivering such certificate, opinion or
letter stating that Agent and Lenders may rely on such document as though it
were addressed to it.
(G) PERFORMANCE OF AGREEMENTS. Each of the Loan Parties shall have
performed in all material respects all agreements which this Agreement provides
shall be performed on or before the Closing Date except as otherwise agreed to
in writing by Agent.
(H) SECURITY INTERESTS, UCC FILINGS AND STOCK CERTIFICATES. Agent shall
have received satisfactory evidence that Agent (for the benefit of Lenders) has
a valid and perfected first priority security interest in the Collateral,
subject only to Permitted Encumbrances. Borrower and the other Loan Parties
shall have delivered to or caused to be delivered to Agent executed documents
(including financing statements under the UCC and other applicable documents
under the laws of
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any jurisdiction with respect to the perfection of Liens) as Agent may deem
necessary to perfect its security interests in the Collateral. Borrower and each
other applicable Loan Party, pursuant to the appropriate Pledge Agreements,
shall have delivered or caused to be delivered to Agent certificates (which
certificates shall be properly endorsed in blank for transfer or accompanied by
irrevocable undated stock powers duly endorsed in blank) representing all of the
capital stock of Borrower and each Subsidiary of Borrower. Agent shall have
received certified copies of UCC search reports listing all effective financing
statements that name Holdings, Borrower or any Subsidiary of Borrower as debtor
together with copies of such financing statements (none of which shall cover the
Collateral except to the extent evidencing Permitted Encumbrances).
(I) OPINIONS OF COUNSEL. Agent shall have received written opinions of
Haynes & Boone, L.L.P., counsel for Borrower, and such local counsel as Agent
may request, in form and substance satisfactory to Agent and its counsel,
addressed to Agent and the Lenders and dated as of the Closing Date together
with a letter from Borrower to such counsel authorizing and directing such
counsel to issue such opinion to Agent for the benefit of the Lenders.
(J) TERMINATION OF PRIOR INDEBTEDNESS LIENS AND OTHER LIENS. Agent shall
have received a pay-off letter from each holder of Prior Indebtedness, together
with duly executed UCC-3 termination statements, mortgage releases and such
other instruments, in form and substance satisfactory to Agent, as shall be
necessary to terminate and satisfy all Liens created pursuant to the Prior
Indebtedness and all other Liens except Permitted Encumbrances.
(K) BORROWER DOCUMENTS. On or before the Closing Date, Borrower shall
deliver or cause to be delivered to Agent the documents listed below, each,
unless otherwise noted, dated the Closing Date, duly executed, in form and
substance satisfactory to Agent and in quantities designated by Agent (except
for the Notes, of which only the originals shall be signed).
(1) AGREEMENT. NOTES. This Agreement, the Term Notes and the
Revolving Notes.
(2) BORROWER SECURITY AGREEMENT. The Borrower Security Agreement and
all instruments, documents and agreements executed pursuant to the Security
Agreement.
(3) PLEDGE AGREEMENT. The Borrower Pledge Agreement.
(4) SUBORDINATION AGREEMENTS. The Seller Subordination Agreement.
(5) INITIAL BORROWING BASE CERTIFICATE. The initial Borrowing Base
Certificate dated not more than five days prior to the Closing Date
reflecting information concerning Eligible Accounts and Eligible Inventory
and giving effect to the Related Transactions.
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(6) OFFICER'S CERTIFICATE. A certificate executed by the President
and/or senior financial officer of Borrower, stating that: (a) on such
date, and after giving effect to the Related Transactions, no Default or
Event of Default has occurred and is continuing; (b) to the best knowledge
of Borrower after due inquiry, no material adverse change in the Collateral
or the financial condition or operations of the business of Borrower or any
of its Subsidiaries or the projected cash flow of Borrower and its
Subsidiaries has occurred since September 30, 1994; (c) the representations
and warranties set forth in Section 4 are true and correct in all material
respects on and as of such date with the same effect as though made on and
as of such date; and (d) Borrower on such date is in compliance with all
the terms and provisions set forth in this Agreement on its part to be
observed and performed.
(7) MORTGAGES. TITLE INSURANCE. SURVEYS. Mortgages covering the
real property owned or leased by Borrower or any of its Subsidiaries
designated on Schedule 1.1C ("Mortgaged Property") together with: (a) title
insurance policies and surveys as required under subsection 5.11; (b)
evidence that counterparts of the Mortgages have been recorded in all
places to the extent necessary or desirable, in the judgment of Agent, to
create a valid and enforceable first priority lien (subject to Permitted
Encumbrances) on each Mortgaged Property in favor of Agent for the benefit
of Lenders (or in favor of such other trustee as may be required or desired
under local law); and (c) an opinion of counsel in each state in which any
Mortgaged Property is located in form and substance and from counsel
satisfactory to Agent.
(8) LANDLORD CONSENTS. Agreements with the landlords of all premises
leased by Borrower or any of its Subsidiaries (other than the premises
leased by Borrower in Union County, New Jersey generally described as 531
N. Stiles Street, Linden, New Jersey, or 1201 Fuller Road, Linden, New
Jersey (together the "Linden Facilities") containing such consents and
waivers as required by Agent.
(9) INSURANCE POLICIES AND ENDORSEMENTS. Copies of policies of
insurance required to be maintained under this Agreement and the other Loan
Documents together with endorsements satisfactory to Agent naming Agent as
loss payee and additional insured under such policies.
(10) ENVIRONMENTAL REPORT. An environmental audit report in scope and
substance satisfactory to Agent and its counsel, concerning the properties
and business of Borrower prepared by Dames & Moore.
(11) ACCOUNTANTS LETTER. A letter in accordance with subsection 5.2
authorizing the independent certified public accountants of Borrower and
acknowledging the reliance by Agent and Lenders on future financial
statements.
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(12) BANK AGENCY AGREEMENTS. A Bank Agency Agreement with the bank at
which Borrower maintains the depository accounts into which the proceeds of
Loans are funded and such other depository accounts as Agent may from time
to time specify.
(13) BAILEE LETTERS. Bailee letters from each warehouseman or bailee
having possession of any Inventory.
(14) CHARTER AND GOOD STANDING. Copies of the certificate of
incorporation of Borrower together with good standing certificates
(including verification of tax status) from the state of its incorporation,
from the state in which its principal place of business is located and from
all states in which the laws thereof require Borrower to be qualified
and/or licensed to do business, each to be dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized governmental entity and in the case of the certificate of
incorporation, also certified as of the Closing Date by its corporate
secretary or assistant secretary.
(15) BYLAWS. Copies of the bylaws of Borrower certified as of the
Closing Date by its corporate secretary or an assistant secretary.
(16) RESOLUTIONS. Resolutions of the Board of Directors of Borrower
approving and authorizing the execution, delivery and performance of the
Related Transactions Documents to which Borrower is a party, certified as
of the Closing Date by Borrower's corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment.
(17) INCUMBENCY CERTIFICATES. Signature and incumbency certificates
of the officers of Borrower executing the Loan Documents.
(18) CAPITALIZATION DOCUMENTS. Copies of executed originals of each
Capitalization Document to which Borrower is a party.
(19) MANAGEMENT INCENTIVE AGREEMENTS. Copies of all management
incentive agreements certified by the secretary or assistant secretary of
Borrower as being true and correct.
(20) LETTER OF DIRECTION. A letter of direction from Borrower
addressed to Agent, on behalf of the Lenders, with respect to the
disbursement of the proceeds of the Term Loans, the initial advance under
the Revolving Loan and any initial Lender Letter of Credit or Risk
Participation Agreement.
(21) COLLATERAL ASSIGNMENT OF REPRESENTATIONS, WARRANTIES. COVENANTS
AND INDEMNITIES. Evidence reasonably satisfactory to Agent that all
representations warranties
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covenants and indemnities set forth in the Acquisition Documents have been
collaterally assigned to Agent for the benefit of the Lenders.
(22) FINANCIAL STATEMENTS. Financial statements as of the dates and
for the periods set forth in subsection 4.3(A), together with interim
financial statements as of, and for the months ending, June 30, 1995.
(23) PRO FORMA. The Pro Forma.
(24) PROJECTIONS. Projections for the period commencing on the date
hereof and concluding on December 31, 2000, which Projections are annexed
hereto as Schedule 4.3.
(25) GOVERNMENT APPROVALS. Evidence of the prior approval of the
Federal Trade Commission or U.S. Justice Department under the Hart-Scott-
Rodino Anti-Trust Improvements Act of the transactions contemplated by the
Acquisition Documents or expiration of the applicable waiting period
without adverse action.
(26) APPOINTMENT OF AGENT FOR SERVICE. Letter acknowledging the
appointment of CT Corporation System as Borrower's, Central's and Holdings'
agent for service of process.
(27) NON-COMPETE AGREEMENTS. Copies of executed originals of Non-
Compete Agreements among Borrower, Alco and Unisource.
(28) BUSINESSMAN'S REVIEW. A businessman's review prepared by a Big
Six Accounting Firm of the operations and assets to be acquired by Borrower
pursuant to the Purchase Agreement in form and substance reasonably
acceptable to Agent and reasonably satisfactory to Agent.
(29) COLLECTIVE BARGAINING AGREEMENT. Copies of all collective
bargaining agreements to which Borrower is a party certified by the
President or any Vice President of Borrower as being true and correct.
(30) OTHER BORROWER DOCUMENTS. Such other documents respecting
Borrower as Agent may reasonably request.
(L) HOLDINGS DOCUMENTS. On or before the Closing Date, Borrower shall
deliver or cause to be delivered to Agent the documents listed below, each,
unless otherwise noted, dated the
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Closing Date, duly executed, in form and substance satisfactory to Agent and in
quantities designated by Agent.
(1) CHARTER AND GOOD STANDING. Certified copies of the certificate of
incorporation and articles of Holdings together with good standing
certificates (including verification of tax status) from the state of its
incorporation and from the state in which its principal place of business
is located, each to be dated a recent date prior to the Closing Date and
certified by the applicable Secretary of State or other authorized
governmental entity and, in the case of the certificates of incorporation,
also certified as of the Closing Date by its corporate secretary or
assistant secretary.
(2) BYLAWS. Copies of the bylaws of Holdings certified as of the
Closing Date by its corporate secretary or an assistant secretary.
(3) RESOLUTIONS. Resolutions of the Board of Directors of Company
approving and authorizing the execution, delivery and performance of the
Related Transaction Documents to which it is a party and the consummation
of the transactions contemplated thereby in the manner contemplated
thereby, certified as of the Closing Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment.
(4) INCUMBENCY CERTIFICATES. Signature and incumbency certificates
of the officers of Holdings executing the Related Transactions Documents.
(5) HOLDINGS PLEDGE AGREEMENT. Executed originals of the Holdings
Pledge Agreement.
(6) CAPITALIZATION DOCUMENTS. Copies of executed originals of each
Capitalization Document to which Holdings is a party.
(7) OTHER COMPANY DOCUMENTS. Such other documents respecting
Holdings as Agent may reasonably request.
(M) OTHER LOAN PARTY DOCUMENTS. On or before the Closing Date, Borrower
shall deliver, or cause to be delivered, to Agent the documents listed below,
each, unless otherwise noted, dated the Closing Date, duly executed, in form and
substance satisfactory to Agent and in quantities designated by Agent.
(1) LOAN GUARANTY. Executed originals of the Subsidiary Guaranty.
(2) SUBSIDIARY SECURITY AGREEMENT. Executed originals of the
Subsidiary Security Agreement.
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(3) CHARTER AND GOOD STANDING. Certified copies of the certificates
of incorporation and articles of each Subsidiary of Borrower (including
verification of tax status) together with good standing certificates from
the respective states of incorporation and the respective states in which
the principal places of business of each is located and from all states in
which the activities of such Subsidiaries require them to be qualified
and/or licensed to do business, each to be dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized governmental entity and, in the case of the certificates of
incorporation, also certified as of the Closing Date by their respective
corporate secretaries or assistant secretaries.
(4) BYLAWS. Copies of the bylaws of each Loan Party certified as of
the Closing Date by their respective corporate secretaries or an assistant
secretary.
(5) INCUMBENCY CERTIFICATES. Signature and incumbency certificates of
the officers of each Loan Party executing the Loan Documents to which any
of them is a party.
(6) RESOLUTIONS. Resolutions of the Boards of Directors of each Loan
Party each certified as of the Closing Date by its corporate secretary or
an assistant secretary as being in full force and effect without
modification or amendment, each authorizing and approving the execution,
delivery and performance of Related Transactions Document to which such
Person is to be a party.
(7) OTHER LOAN PARTY DOCUMENTS. Such other documents as Agent may
reasonably request.
(N) ALCO INDEMNITY. Executed originals of the Alco Indemnity Agreement.
(O) OTHER DOCUMENTS. Borrower shall have delivered such other documents
as Agent may reasonably request.
3.2 CONDITIONS TO ALL LOANS
The obligations of Agent and each Lender to make Loans, the obligation of
Agent to issue Lender Letters of Credit or Risk Participation Agreements and the
agreement of each Lender to consider issuing Lender Letters of Credit on each
Funding Date are subject to all of the conditions precedent set forth below.
(A) Agent shall have received, in accordance with the provisions of
subsection 2.1(E), a Notice of Borrowing or, in the case of each Lender issuing
a Lender Letter of Credit, Agent and each such Lender shall have received, in
accordance with subsection 2.1(D), a notice requesting issuance of a Lender
Letter of Credit.
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(B) The representations and warranties contained herein and in the Loan
Documents shall be true, correct and complete in all material respects on and as
of that Funding Date to the same extent as though made on and as of that date,
except for any representation or warranty limited by its terms to a specific
date and taking into account any amendments to the Schedules or Exhibits as a
result of any disclosures made in writing by Borrower to Agent after the Closing
Date and approved by Agent.
(C) No event shall have occurred and be continuing or would result from
the consummation of the borrowing contemplated by such Notice of Borrowing (or
notice requesting issuance of a Lender Letter of Credit or Risk Participation
Agreement) that would constitute an Event of Default or a Default.
(D) Each Loan Party shall have performed in all material respects all
agreements and satisfied all conditions which any Loan Document provides shall
be performed by it on or before that Funding Date.
(E) No order, judgment or decree of any court, arbitrator or governmental
authority shall purport to enjoin or restrain Agent or any Lender from making
any Loans or issuing any Lender Letters of Credit or Risk Participation
Agreements.
(F) The making of the Loans or issuance of the Lender Letter of Credit or
Risk Participation Agreement requested on such Funding Date shall not violate
Regulation G, Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System or any other law, rule or regulation
applicable to Agent or any Lender and in the case of the issuance of a Lender
Letter of Credit, no request or directive (whether or not having the force of
law and whether or not the failure to comply therewith would be unlawful) from
any governmental authority with jurisdiction over the applicable issuer of any
Letter of Credit shall prohibit or request the applicable issuer of any Letter
of Credit to refrain from the issuance of such letters of credit generally.
(G) There shall not be pending or, to the knowledge of Borrower,
threatened, any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration against any Loan Party or any of their
respective Subsidiaries or affecting any property of any Loan Party or any of
their respective Subsidiaries that has not been disclosed by Borrower in writing
to the extent required by subsections 4.7, 4.15 or 5.1(M), and there shall have
occurred no development in any such action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration that, in the
opinion of Agent, could reasonably be expected to have a Material Adverse
Effect. No injunction or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any material
damages or obtain relief as a result of, the transactions contemplated by this
Agreement.
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SECTION 4
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Agent and each Lender to enter into this Agreement, to
make Loans and to issue Lender Letters of Credit and Risk Participation
Agreements, Holdings and Borrower each represent and warrant to Agent and each
Lender that the following statements are and, after giving effect to the Related
Transactions will be true, correct and complete:
4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES
(A) ORGANIZATION AND POWERS. Each of the Loan Parties is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation (which jurisdiction is set forth on Schedule 4.1(A)). Each of the
Loan Parties is duly formed and validly existing under the laws of its state of
formation. Each Loan Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, to enter into each Loan Document to which it is a party and to
carry out the transactions contemplated by the Loan Documents to which it is a
party.
(B) CAPITALIZATION. The authorized capital stock of Holdings, Borrower
and each of its Subsidiaries is as set forth on Schedule 4.1(B). All issued and
outstanding shares of capital stock of Borrower and each of its Subsidiaries are
duly authorized and validly issued, fully paid, nonassessable, free and clear of
all Liens other than those in favor of Agent, for the benefit of Lenders, and
such shares were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. The capital stock of Borrower and each
of its Subsidiaries is owned by the stockholders and in the amounts set forth on
Schedule 4.1(B). The number of shares of capital stock of Holdings owned by
each of Lynch and Boyle/Fleming is set forth on Schedule 4.1(B). No shares of
the capital stock of Borrower or any of its Subsidiaries other than those
described above, are issued and outstanding. Except as set forth on Schedule
4.1(B) there are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from Holdings, Borrower or any of its Subsidiaries of and shares of
capital stock or other securities of any such entity.
(C) QUALIFICATION. Borrower and each of its Subsidiaries is duly
qualified and in good standing wherever necessary to carry on its present
business and operations, except in jurisdictions in which the failure to be
qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect. All jurisdictions in which Borrower and each of its
Subsidiaries is qualified to do business are set forth on Schedule 4.1(C).
Borrower shall give Agent prompt notice of any additional jurisdictions in which
Borrower or any of its Subsidiaries becomes qualified to do business after the
Closing Date.
(D) CONDUCT OF BUSINESS. Prior to the Closing Date, Borrower has not
engaged in any business or incurred any liabilities except for activities,
expenses and liabilities incident to its
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organization and to the carrying out of the transactions contemplated hereby and
by the Related Transactions Documents. On and after the date hereof Borrower
will be engaged only in businesses of the type described on Schedule 4.1(D).
(E) SUBSIDIARIES. On the Closing Date, Borrower has no Subsidiaries other
than Central. Borrower owns all of the issued and outstanding capital stock of
Central.
4.2 AUTHORIZATION OF BORROWING, ETC.
(A) AUTHORIZATION OF BORROWING. Borrower has the corporate power and
authority to incur the Indebtedness evidenced by the Notes. The execution,
delivery and performance of each of the Related Transactions Documents and the
consummation of the Related Transactions by Borrower have been duly authorized
by all necessary corporate and shareholder action. On the Closing Date, the
execution, delivery and performance of the Related Transactions Documents by
Borrower and each other Loan Party signatory thereto will have been duly
authorized by all necessary corporate and shareholder action of such Person.
(B) NO CONFLICT. The execution, delivery and performance by each Loan
Party of each Related Transactions Document to which it is a party and the
consummation of the Related Transactions do not and will not: (1) violate any
provision of law applicable to Unisource or any Loan Party, the certificate of
incorporation or bylaws of Unisource or any Loan Party, or any order, judgment
or decree of any court or other agency of government binding on Unisource or any
Loan Party; (2) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Unisource or any Loan Party; (3) result in or require the creation or imposition
of any material Lien upon any of the properties or assets of Unisource or any
Loan Party (other than Liens in favor of Agent, for the benefit of Lenders); or
(4) require any approval or consent of any Person under any Contractual
Obligation of Unisource or any Loan Party, except, with respect to each of the
clauses (1) through (4) above for (a) such approvals or consents to be obtained
on or before the Closing Date, which are disclosed on Schedule 4.2(B) and (b)
such violations, conflicts, breaches, Liens and defaults which could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
(C) GOVERNMENTAL CONSENTS. The execution, delivery and performance by
each Loan Party of each Related Transactions Document to which it is a party,
and the consummation of the Related Transactions do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except for filings required by federal or state securities laws (which
filings have been made and true and complete copies of which have been delivered
to Agent), filings required in connection with the perfection of security
Interests granted pursuant to the Loan Documents, and other filings,
authorizations, consents and approvals, all of which have been made or obtained
or the absence of which would not have a Material Adverse Effect. The waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has
expired without any adverse action.
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(D) BINDING OBLIGATION. This Agreement is, and the Acquisition Documents
and the other Related Transactions Documents, including the Notes, when executed
and delivered will be, the legally valid and binding obligations of the
applicable Loan Parties and Unisource, each enforceable against the Loan Parties
or Unisource, as applicable, in accordance with their respective terms.
(E) VALID ISSUANCE OF ACQUISITION SECURITIES. The Borrower Capital Stock
to be sold on or before the Closing Date will be duly authorized, validly
issued, fully paid and nonassessable. The issuance and sale of Borrower Capital
Stock, upon issuance and sale, will either have been registered or qualified
under applicable federal and state securities laws or be exempt therefrom.
Borrower has the corporate power and authority to incur the Indebtedness
evidenced by the Subordinated Note and to issue the Subordinated Note. Such
Securities, when issued and paid for, will be the legally valid and binding
obligations of Borrower enforceable against Borrower in accordance with their
respective terms (including those pertaining to subordination). Borrower has
delivered to Agent and each of the Lenders a complete and correct copy of the
Subordinated Loan Documents and each of the representations and warranties given
by Borrower therein is true and correct in all material respects. The
subordination provisions of the Subordinated Loan Documents will be enforceable
against the holders of the Subordinated Notes by the holder of any Notes which
has not effectively waived the benefits thereof. All obligations, including the
Obligations to pay principal of and interest on the Loans, constitute senior
Indebtedness entitled to the benefits of subordination created by the
Subordinated Loan Documents. The principal of and interest on the Notes and all
other Obligations will constitute "senior debt" as that or any similar term is
or may be used in any other instrument evidencing or applicable to any other
Subordinated Indebtedness of Borrower. Borrower acknowledges that Agent and
each Lender are entering into this Agreement and/or each Lender Addition
Agreement and are extending the Total Loan Commitment in reliance upon the
subordination provisions of the Subordinated Loan Documents and this subsection
4.2(E).
4.3 FINANCIAL CONDITION
(A) FINANCIAL STATEMENTS. All financial statements concerning Central and
Borrower which have been or will hereafter be furnished by Borrower to Agent or
any Lender pursuant to this Agreement, including those listed below, have been
or will be prepared in accordance with GAAP consistently applied (except as
disclosed therein) and do or will present fairly the financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
(1) The unaudited consolidated balance sheets at September 30, 1994,
and the related statement of income of the Central Products Division of
Unisource and Central for the fiscal years then ended.
(2) The unaudited consolidated balance sheet at August 31, 1995, and
the related statement of income of the Central Products Division of
Unisource and Central for the eleven (11) months then ended.
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(B) PRO FORMA. The Pro Forma was prepared by Borrower based on the
unaudited consolidated balance sheet of the Central Products Division of
Unisource and Central dated August 31, 1995, and was prepared, in the good faith
estimate of Borrower, in accordance with GAAP, with only such adjustments
thereto as would be required in accordance with GAAP.
(C) PROJECTIONS. The Projections delivered and to be delivered (including
the Projections annexed hereto as Schedule 4.3) have been and will be prepared
by Borrower in light of the past operations of the business of Borrower and the
Central Products Division of Unisource and Central. The Projections represent
and will represent as of the date thereof the good faith estimate of Borrower
and its senior management concerning the most probable course of its business.
4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS
As of the Closing Date after giving effect to the Related Transactions,
Borrower has no Indebtedness or Contingent Obligations except (a) as set forth
on the Pro Forma and (b) as set forth on Schedule 4.4.
4.5 NO MATERIAL ADVERSE CHANGE; NO STOCK PAYMENTS
Since the date of its corporate formation (in the case of Borrower) and
since September 30, 1994, (in the case of the Central Products Division of
Unisource and Central), to the best knowledge of Borrower after due inquiry no
event or change has occurred that has caused or evidences, either individually
or together with such other events or changes, a Material Adverse Effect.
Neither Borrower nor its Subsidiaries has or will have, as of the Closing Date,
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 by subsection 7.5.
4.6 TITLE TO PROPERTIES; LIENS
Borrower and its Subsidiaries has good, sufficient and legal title, subject
to Permitted Encumbrances, to all their respective material properties and
assets. Except for Permitted Encumbrances, all such properties and assets are
free and clear of Liens. There are no actual, threatened or alleged defaults
with respect to any leases of real property under which Borrower or any of its
Subsidiaries is lessee or lessor which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
4.7 LITIGATION; ADVERSE FACTS
Except as set forth on Schedule 4.7, there are no judgments outstanding
against Borrower or any of its Subsidiaries or affecting any property of
Borrower or any of its Subsidiaries nor is there any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
now pending or, to the best knowledge of Borrower after due inquiry, threatened
against
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Borrower or any of its Subsidiaries, or affecting any property of Borrower or
any of its Subsidiaries. Neither Borrower nor any of its Subsidiaries has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed to any liability or disadvantage which could
reasonably be expected to result in any Material Adverse Effect. The actions,
charges, claims, demand, suits, proceedings, petitions, investigations and
arbitrations set forth on Schedule 4.7 or disclosed pursuant to subsection
5.1(M) will not result, if adversely determined, and could not reasonably be
expected to result, either individually or in the aggregate, in any Material
Adverse Effect and do not relate to and will not affect the consummation of the
Related Transactions.
4.8 PAYMENT OF TAXES
Except to the extent permitted by subsection 5.4, all material tax returns
and reports of Borrower and each of its Subsidiaries (and their predecessors in
interest required to be filed by any of them have been timely filed, and all
taxes, assessments, fees and other governmental charges upon such Persons and
upon their respective properties, assets, income and franchises which are shown
on such returns as due and payable have been paid when due and payable. None of
the United States income tax returns of Borrower and each of its Subsidiaries
are under audit. No tax liens have been filed and no claims are being asserted
with respect to any such taxes. The charges, accruals and reserves on the books
of Borrower and each of its Subsidiaries in respect of any taxes or other
governmental charges are in accordance with GAAP.
4.9 ADVERSE CONTRACTS
Neither Borrower nor any of its Subsidiaries is a party to nor is it or any
of its property subject to or bound by any forward purchase contract, futures
contract, covenant not to compete, unconditional purchase, take or pay or other
agreement which restricts its ability to conduct its business or, either
individually or in the aggregate, has a Material Adverse Effect or could
reasonably be expected to have a Material Adverse Effect.
4.10 PERFORMANCE OF AGREEMENTS
Neither Borrower nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default.
4.11 GOVERNMENTAL REGULATION
Neither Borrower nor any of its Subsidiaries is, or after giving effect to
any loan will be, subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to
any federal or state statute or regulation limiting its ability to incur
Indebtedness for borrowed money.
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4.12 EMPLOYEE BENEFIT PLANS
(A) NO OTHER PLANS. No Loan Party or Loan Party Affiliate maintains or
contributes to, or has any obligation under or liability with respect to, any
Employee Benefit Plans other than those identified on Schedule 4.12. Borrower
has provided Agent accurate and complete copies of all contracts, agreements and
documents relating to the establishment or maintenance of the Employee Benefit
Plans described on Schedule 4.12. Except as set forth in Schedule 4.12, no
other trade or business is, or, at any time within the past six years, has been
treated, together with any Loan Party, as a single employer under Section 414 of
the IRC or Section 4001 of ERISA.
(B) COMPLIANCE WITH LAW AND LIABILITY. All Borrower Plans are being, and
have been, maintained, operated and administered in all respects in accordance
with their respective terms and in compliance with all applicable laws, rules
and regulations governing or applying to the Borrower Plans, including ERISA and
the IRC, and all filings and notices required to be made or given with respect
to each Borrower Plan have been timely made or given, as the case might be.
Each Borrower Plan intended to be qualified under Section 401(a) of the IRC has
been determined by the Internal Revenue Service ("IRS") to be so qualified, or
if not so qualified each such plan may still be amended within the remedial
amendment period to cure any qualification defect to the extent permitted by
applicable law, and each trust created thereunder which is intended to be exempt
from federal income tax under the provisions of Section 501(a) of the IRC has
been determined by the IRS to be so exempt and no fact or event has occurred
since the date of such determination by the IRS to adversely affect the
qualified status of any Borrower Plan or the exempt status of any such trust
except where failure to comply would not result in a material liability to
Borrower or any of its Subsidiaries. No material liabilities, including fines
and penalties, have been incurred by any Loan Party or Loan Party Affiliate
which remain unsatisfied with respect to any Employee Benefit Plan previously
maintained or contributed to by Borrower or any other Person, or to which
Borrower or any other Person previously had an obligation to contribute.
(C) FUNDING. All contributions which are due have been paid to each
Borrower Plan, the funding method used in connection with each Borrower Plan is
acceptable under ERISA, and the actuarial assumptions used in connection with
funding each Borrower Plan, in the aggregate, are reasonable (taking into
account the experience of such Borrower Plan and reasonable expectations). No
"accumulated funding deficiency" (as defined in Section 302(a)(2) of ERISA)
(whether or not waived and whether arising on account of improper amortization
of charges or credits in any funding standard account, improper determination of
any such charge or credit, or any other reason) exists with respect to any plan
year of any Borrower Plan. Except as disclosed on Schedule 4.12(C), the market
value of assets under each Borrower Plan (other than any Multiemployer Plan)
equals or exceeds the actuarial present value of accrued benefits thereunder
(determined in accordance with then current funding assumptions). The
termination of, or withdrawal from, any Borrower Plan or to the knowledge of any
Loan Party or Loan Party Affiliate, any Pension Plan, on or prior to the Closing
Date, has not and will not subject any Loan Party to any liability to the PBGC
or to any other party, nor has there been any event requiring any disclosure
under Section 4041(c) (3) (c),
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4063(a) or 4068(f) of ERISA with respect to any Borrower Plan or to the
knowledge of any Loan Party or Loan Party Affiliate, with respect to any Pension
Plan.
(D) PROHIBITED TRANSACTIONS AND PAYMENTS. No Loan Party or Loan Party
Affiliate has: (l) engaged in a nonexempt prohibited transaction described in
Section 406 of ERISA or Section 4975 of the IRC; (2) incurred any liability to
the PBGC which remains outstanding other than the payment of premiums and there
are no premium payments which are due and unpaid; (3) failed to make a required
contribution or payment to a Multiemployer Plan; or (4) failed to make a
required installment or other required payment under Section 412 of the IRC.
(E) NO TERMINATION EVENT. To the best knowledge of the Loan Parties after
due inquiry, no Termination Event has occurred or is reasonably expected to
occur for which any Loan Party or Loan Party Affiliate has or would have any
material liability.
(F) LITIGATION, CLAIMS AND INVESTIGATIONS. Except as set forth in
Schedule 4.12(F), there are no actions or claims pending or, to the knowledge of
any Loan Party or Loan Party Affiliate, threatened, with respect to any Borrower
Plan (other than routine claims for benefits), and there are no investigations
or audits of any Borrower Plan by any governmental authority currently pending
and there have been no such investigations or audits that have been concluded
that resulted in any liability of any Loan Party or Loan Party Affiliate that
has not been fully discharged.
(G) LIENS. No Lien has been filed by any person or entity and no Lien
exists by operation of law or otherwise on any of the assets of any Loan Party
or Loan Party Affiliate relating to, or as a result of, the operation or
maintenance of any Employee Benefit Plan, and no Loan Party or Loan Party
Affiliate, has any knowledge of the existence of facts or circumstances that
would reasonably be expected to result in the imposition of such Lien.
4.13 INTELLECTUAL PROPERTY
Borrower and each of its Subsidiaries owns, is licensed to use or otherwise
has the right to use, all patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of its
business as currently conducted that are material to the condition (financial or
other), business or operations of Borrower or its Subsidiaries (collectively
called "INTELLECTUAL Property") and all such Intellectual Property is identified
on Schedule 4.13 and, except as otherwise disclosed on Schedule 4.13, fully
protected and/or duly and properly registered, filed or issued in the
appropriate office and jurisdictions for such registrations, filing or
issuances. All Intellectual Property that is registered or for which
application for registration is pending is identified on Schedule 4.13. Except
as disclosed in Schedule 4.13, no material claim has been asserted by any Person
with respect to the use of any Intellectual Property, or challenging or
questioning the validity or effectiveness of any Intellectual Property. Except
as disclosed in Schedule 4.13, the use of such Intellectual Property by Borrower
and its Subsidiaries does not infringe on the rights of any Person, subject to
such claims and infringements as do not, in the
CREDIT AGREEMENT - Page 73
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aggregate, give rise to any liabilities on the part of Borrower and its
Subsidiaries that are material to Borrower or its Subsidiaries.
4.14 BROKER'S FEES
Except as set forth in Schedule 4.14, no broker's or finder's fee,
commission or similar compensation will be payable with respect to the issuance
and sale of the Notes and the Acquisition Securities or any of the other
transactions contemplated hereby or by any Related Transactions Document. No
other similar fees or commissions will be payable by any Loan Party for any
other services rendered to Borrower or any of its Subsidiaries ancillary to the
transactions contemplated hereby including the sale of the Acquisition
Securities.
4.15 ENVIRONMENTAL COMPLIANCE
(A) NO ENVIRONMENTAL CLAIMS. Except as set forth on Schedule 4.15(A),
there are no claims, liabilities, investigations, litigation, administrative
proceedings, judgments or orders relating to any Hazardous Materials
(collectively called "Environmental Claims") pending, asserted or, to the best
knowledge of Borrower after due inquiry, threatened against Borrower or any of
its Subsidiaries, or relating to any real property currently or formerly owned,
leased or operated by Borrower or any of its Subsidiaries. Except as set forth
on Schedule 4.15(A), neither Borrower, its Subsidiaries, nor any other Person
has caused or permitted any Hazardous Material to be used, generated, reclaimed,
transported, released, treated, stored or disposed of in a manner which could
form the basis for an Environmental Claim against Borrower or any of its
Subsidiaries. Except as set forth on Schedule 4.15A, neither Borrower nor any
of its Subsidiaries has assumed (by contract or by operation of law) any
liability of any Person for cleanup, remediation compliance or required Capital
Expenditures in connection with any Environmental Claim. The items disclosed
pursuant to this subsection 4.15(A) could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.
(B) STORAGE OF HAZARDOUS MATERIALS. Except as set forth on Schedule
4.15(B), no Hazardous Materials are or were stored or otherwise located, and no
surface impoundments are or were located, on real property currently or
formerly owned, leased or operated by Borrower or any of its Subsidiaries, or to
the best knowledge of Borrower after due inquiry, on adjacent parcels of real
property, and no part of such real property or, to the best knowledge of
Borrower after due inquiry, no part of such adjacent parcels of real property,
including the groundwater located thereon, is presently contaminated by
Hazardous Materials. The items disclosed pursuant to this subsection 4.15(B)
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
(C) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on Schedule
4.15(C), Borrower and each of its Subsidiaries has been and is currently in
compliance with all applicable Environmental Laws, including obtaining and
maintaining in effect all permits, licenses or other
CREDIT AGREEMENT - Page 74
<PAGE>
authorizations required by applicable Environmental Laws. The items disclosed
pursuant to this subsection 4.15(C) will not, either individually or in the
aggregate, have a Material Adverse Effect.
4.16 EMPLOYEE MATTERS
Except as set forth on Schedule 4.16, (a) neither Borrower nor any of its
Subsidiaries nor any of their respective employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of Borrower or any of its Subsidiaries and
no union or collective bargaining unit has sought such certification or
recognition with respect to the employees of Borrower or any of its Subsidiaries
and (c) there are no strikes, slowdowns, work stoppages or controversies pending
or, threatened between Borrower, its Subsidiaries and their respective
employees, other than employee grievances arising in the ordinary course of
business which could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect. Except as set forth on Schedule
4.16, neither Borrower nor any of its Subsidiaries is subject to an employment
contract.
4.17 SOLVENCY
As of and from and after the date of this Agreement and after giving effect
to the consummation of the Related Transactions, Borrower: (a) owns and will own
assets the fair saleable value of which are (i) greater than the total amount of
liabilities (including contingent liabilities) of Borrower and (ii) greater than
the amount that will be required to pay the probable liabilities of Borrower's
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to
Borrower; (b) has capital that is not unreasonably small in relation to its
business as presently conducted or any contemplated or undertaken transaction;
and (c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.
4.18 DISCLOSURE
No representation or warranty of Holdings, Borrower, any of its
Subsidiaries contained in this Agreement, the financial statements referred to
in subsection 4.3, the other Related Transactions Documents or any other
document, certificate or written statement furnished to Agent or any Lender by
or on behalf of any such Person for use in connection with the Loan Documents or
the Related Transactions Documents contain any untrue statement of a material
fact or omitted, omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
There is no material fact known to Borrower that has had or will have a Material
Adverse Effect and
CREDIT AGREEMENT - Page 75
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that has not been disclosed herein or in such other documents, certificates and
statements furnished to Agent or any Lender for use in connection with the
transactions contemplated hereby.
4.19 USE OF PROCEEDS AND MARGIN SECURITY
Borrower shall use the proceeds of all Loans and the Subordinated Notes for
proper business purposes (as described in the recitals to this Agreement)
consistent with all applicable laws, statutes, rules and regulations. No
portion of the proceeds of any Loan shall be used by Borrower or any of its
Subsidiaries in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act.
4.20 INSURANCE
Schedule 4.20 sets forth a complete and accurate description of all
policies of insurance that will be in effect as of the Closing Date for Borrower
and its Subsidiaries. Borrower and its Subsidiaries are adequately insured
under such policies, no notice of cancellation has been received with respect to
such policies and Borrower and its Subsidiaries are in compliance with all
conditions contained in such policies.
4.21 BANK ACCOUNTS
Schedule 4.21 sets forth the account numbers and location of all bank
accounts of Borrower and its Subsidiaries.
4.22 REPRESENTATIONS AND WARRANTIES FROM THE ACQUISITION DOCUMENTS.
(A) WARRANTIES. Borrower and Holdings represent and warrant that each of
the representations and warranties given by each party to the Acquisition
Documents are true and correct in all material respects as of the date hereof
and as of the Closing Date, and such representations and warranties are hereby
incorporated herein by this reference as of such dates with the same effect as
though set forth in their entirety herein.
(B) SURVIVAL. Notwithstanding anything in the Acquisition Documents to
the contrary, the representations and warranties of each party to the
Acquisition Documents incorporated in this Agreement by subsection 4.22 (A)
shall, solely for the purposes of this Agreement, survive the execution and
delivery of the Acquisition Documents, the execution and delivery of this
Agreement, the making of the Loans hereunder, the execution and delivery of the
Notes and the issuance of the Lender Letters of Credit and the Risk
Participation Agreements.
CREDIT AGREEMENT - Page 76
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4.23 COMPLIANCE WITH LAWS.
Borrower and each of its Subsidiaries are not in violation of any law,
ordinance, rule, regulation, order, policy, guideline or other requirement of
any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of their respective businesses or the
ownership of their respective properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would subject Borrower or any such
Subsidiary, or any of their respective officers to criminal liability or could
reasonably be expected to have, either individually or together with all such
other violations, a Material Adverse Effect and no such violation has been
alleged. Each Loan Party has filed in a timely manner all reports, documents
and other materials required to be filed by them with any governmental bureau,
agency or instrumentality (and the information contained in each of such filings
is true, correct and complete in all respects), except where failure to make
such filings would not have a Material Adverse Effect. Each Loan Party has
retained all records and documents required to be retained by it pursuant to any
law, ordinance, rule, regulation, order, policy, guideline or other requirement
of any governmental authority, except where failure to retain such records would
not subject Borrower or any such Subsidiary or any of their respective officers
to criminal liability and could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
4.24 INVESTMENTS.
Except as set forth on Schedule 4.24, neither Borrower nor any of its
Subsidiaries has an Investment in any Person other than Investments permitted
under subsection 7.3.
SECTION 5
AFFIRMATIVE COVENANTS
Holdings and Borrower covenant and agree that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit and Risk
Participation Agreements, unless the (Requisite Lenders (or Agent, as provided
below in this Section 5) shall otherwise give their or its prior written
consent, Borrower shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 5 applicable to such Person.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
Borrower will maintain a system of accounting established and administered
in accordance with sound business practices to permit preparation of financial
statements in a manner consistent with GAAP (subject to year end adjustments and
the omission of footnotes). Borrower will deliver to Agent (with sufficient
copies for each Lender, which Agent shall, within a reasonable period of time,
deliver to the Lenders) the financial statements and other reports described
below.
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(A) MONTHLY FINANCIALS. As soon as available and in any event within
thirty (30) days after the end of each month beginning with the month of
October, 1995, Borrower will deliver (1) the consolidated and consolidating
balance sheets of Borrower (showing intercompany eliminations), as at the end of
such month and the related consolidated and consolidating statements of income
(showing intercompany eliminations), stockholders' equity and cash flow for such
month and for the period from the beginning of the then current Fiscal Year to
the end of such month and (2) a schedule of the outstanding Indebtedness for
borrowed money of Borrower and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan.
(B) YEAR-END FINANCIALS. As soon as available and in any event within
ninety (90) days after the end of each Fiscal Year, Borrower will deliver: (1)
the consolidated balance sheet of Borrower as of the end of such Fiscal Year and
the related consolidated statements of income, stockholders' equity and cash
flow for such Fiscal Year; (2) a schedule of the outstanding Indebtedness for
borrowed money of Borrower and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan; and
(3) a report with respect to the financial statements from a Big Six Accounting
Firm selected by Borrower, which report shall be prepared in accordance with
Statement of Auditing Standards No. 58 (the "Statement") entitled "Reports on
Audited Financial Statements" and such report shall be "Unqualified" (as such
term is defined in such Statement).
(C) BORROWER COMPLIANCE CERTIFICATE. Together with each delivery of
financial statements of Borrower and its Subsidiaries pursuant to subsections
5.1(A) and 5.1(B), Borrower will deliver a fully and properly completed
Compliance Certificate signed by Borrower's chief executive officer or chief
financial officer.
(D) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, Borrower will
deliver copies of all significant reports submitted by Borrower's Big Six
Accounting Firm in connection with each annual, interim or special audit of the
financial statements of Borrower made by such accountants, including the comment
letter submitted by such accountants to management in connection with their
annual audit.
(E) BORROWING BASE CERTIFICATE AND AGINGS; SCHEDULE OF INVENTORY. As soon
as available and in any event within ten (10) Business Days after the end of
each month, and from time to time upon the request of Agent, Borrower will
deliver to Agent a Borrowing Base Certificate as of the last day of such period.
From time to time upon the request of Agent, Borrower will deliver to Agent,
within ten (10) Business Days of such request, the following: (1) a summary
aging of Accounts and a summary aging of all then existing accounts payable; and
(2) a detailed schedule of all Inventory each such report in form and substance
satisfactory to Agent.
(F) MANAGEMENT REPORT. Together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to subsections 5.1(A) and
5.1(B), this Borrower will deliver
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a management report: (1) describing the operations and financial condition of
Borrower and its Subsidiaries for the month then ended and the portion of the
current Fiscal Year then elapsed (or for the Fiscal Year then ended in the case
of year-end financials); (2) setting forth in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the most recent Projections for the current Fiscal
Year delivered to Lenders pursuant to 5.1 (I); and (3) discussing the reasons
for any significant variations. The information above shall be presented in
reasonable detail and shall be certified by the senior financial officer of
Borrower to the effect that such information fairly presents the results of
operations and financial condition of Borrower and its Subsidiaries as at the
dates and for the periods indicated.
(G) COLLATERAL VALUE REPORT. Not more than once each Fiscal Year prior to
an Event of Default, and at any time while and so long as an Event of Default
shall have occurred and be continuing, Borrower will obtain and deliver to Agent
a report of an independent collateral auditor satisfactory to Agent (which may
be, or be affiliated with, a Lender) with respect to the Accounts and Inventory
components included in the Borrowing Base, which report shall indicate whether
or not the information set forth in the Borrowing Base Certificate most recently
delivered is accurate and complete in all material respects based upon a review
by such auditors of the Accounts (including verification with respect to the
amount, aging, identity and credit of the respective account debtors and the
billing practices of Borrower) and Inventory (including verification as to the
value, location and respective types).
(H) APPRAISALS. From time to time, if Agent determines that obtaining
appraisals is necessary in order to comply with applicable laws or regulations,
Agent will obtain appraisal reports in form and substance and from appraisers
satisfactory to Agent stating the then current fair market values of all or any
portion of the real estate owned by Borrower or any of its Subsidiaries. In
addition, not more than once each Fiscal Year prior to an Event of Default, and
at any time while and so long as an Event of Default shall have occurred and be
continuing, Borrower, will obtain and deliver to Agent appraisal report's in
form and substance and from appraisers, at the request of Agent, satisfactory to
Agent, stating (1) the then current fair market and orderly liquidation values
of all or any portion of the equipment and real estate owned by Borrower or any
of its Subsidiaries and (2) the then current business value of Borrower or any
of its Subsidiaries.
(I) PROJECTIONS. As soon as available and in any event no later than the
end of each Fiscal Year of Borrower, Borrower will deliver Projections of
Borrower and its Subsidiaries for the forthcoming three (3) Fiscal Years, year
by year, and for the forthcoming Fiscal Year, month by month.
(J) SEC FILINGS AND PRESS RELEASES. Promptly upon their becoming
available, Borrower will deliver copies of: (1) all financial statements,
reports, notices and proxy statements sent or made available by any Loan Party
to their security holders; (2) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Loan Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private
CREDIT AGREEMENT - Page 79
<PAGE>
securities regulatory authority; and (3) all press releases and other statements
made available by any Loan Party to the public concerning developments in the
business of any such Person.
(K) SUBORDINATED INDEBTEDNESS NOTICES. Borrower shall promptly deliver
copies of all notices given or received by Borrower or Holdings with respect to
noncompliance with any term or condition related to any Subordinated
Indebtedness, and shall notify Agent within two (2) Business Days of any
potential or actual event of default with respect to any Subordinated
Indebtedness.
(L) EVENTS OF DEFAULT, ETC. Promptly upon any officer of Borrower
obtaining knowledge of any of the following events or conditions, Borrower shall
deliver a certificate of a Responsible Officer of Borrower specifying the nature
and period of existence of such condition or event and what action Borrower has
taken, is taking and proposes to take with respect thereto: (1) any condition or
event that constitutes an Event of Default or Default; (2) any notice that any
Person has given to Borrower or any of its Subsidiaries or any other action
taken with respect to a claimed default or event or condition of the type
referred to in subsection 8.1(B); or (3) any Material Adverse Effect.
(M) LITIGATION. Promptly upon any officer of Borrower obtaining knowledge
of (1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting any Loan Party or any property
of any Loan Party not previously disclosed by Borrower to Agent or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting any Loan Party or any
property of any Loan Party, which, in each case, is reasonably likely to have a
Material Adverse Effect, Borrower will promptly give notice thereof to Agent and
each Lender and provide such other information as may be reasonably available to
them to enable Agent, Lenders and their counsel to evaluate such matter.
(N) EMPLOYEE BENEFIT PLANS. With reasonable promptness, and in any event
within thirty (30) days of the occurrence of any of the events described below,
Borrower will give notice of and/or, as applicable, deliver to Agent copies of:
(1) the establishment of any new material Borrower Plan, the commencement of
contributions to any Employee Benefit Plan (within the meaning of Section 3(3)
of ERISA) to which any Loan Party or any Loan Party Affiliate was not previously
contributing or any material increase in the benefits of any Borrower Plan; (2)
each funding waiver request filed with respect to any Borrower Plan and each
funding waiver request with respect to any other Pension Plan for which any Loan
Party or Loan Party Affiliate receives actual notice from a plan sponsor,
contributing employer or regulatory agency and all material communications
received or sent by any Loan Party or Loan Party Affiliate with respect to such
request; (3) the failure of any Loan Party or Loan Party Affiliate to make a
required installment or payment under Section 302 of ERISA or Section 412 of the
IRC to any Pension Plan by the due date; and (4) noncompliance with any law or
regulation applicable to a Borrower Plan that could result in a material
liability to any Loan Party or Loan Party Affiliate.
CREDIT AGREEMENT - Page 80
<PAGE>
(O) TERMINATION EVENTS. Promptly and in any event within ten (10) days of
becoming aware of the occurrence of or forthcoming occurrence of any of the
following: (l) Termination with respect to any Borrower Plan or any other Title
IV Plan for which any Loan Party or Loan Party Affiliate receives actual notice
from a plan sponsor, contributing employer or regulatory agency, (2) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the IRC) in connection with any Borrower Plan that is a Pension Plan or any
trust created thereunder, or (3) receipt of any notice by any Loan Party or Loan
Party Affiliate of the PBGC 's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan, Borrower will deliver to Agent
a notice specifying the nature thereof, what action Borrower has taken, is
taking or proposes to take with respect thereto and, when known, any action
taken or threatened by the IRS, the Department of Labor or the PBGC with respect
thereto.
(P) ERISA NOTICES. With reasonable promptness but in any event within
thirty (30) days for purposes of clauses (l), (2) and (3), Borrower will deliver
to Agent copies of: (l) any favorable or unfavorable determination letter from
the IRS regarding the qualification of a Borrower Plan under Section 401(a) of
the IRC; (2) each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by any Loan Party or Loan Party Affiliate with the IRS with
respect to each Borrower Plan that is a Pension Plan; and (3) all material
notices received by any Loan Party or Loan Party Affiliate from a Multi-employer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA. Borrower will notify Agent in writing within
five (5) Business Days of Borrower obtaining knowledge that any Loan Party or
Loan Party Affiliate or any other Person has filed or intends to file a notice
of intent to terminate any Pension Plan under a distress termination within the
meaning of Section 4041(c) of ERISA.
(Q) SUPPLEMENTED SCHEDULES; NOTICE OF CORPORATE CHANGES. Annually,
concurrently with Borrower's delivery of the Projections required by subsection
5.1(I), Borrower shall supplement in writing and deliver to Agent revisions of
the Schedules annexed to this Agreement to the extent necessary to disclose new
or changed facts or circumstances after the Closing Date; PROVIDED that
subsequent disclosures shall not constitute a cure or waiver of any Default or
Event of Default resulting from the matters disclosed. Borrower shall provide
written notice to the Agent of (1) all jurisdictions in which Borrower and its
Subsidiaries becomes qualified after the Closing Date to transact business, (2)
any material change after the Closing Date in the authorized and issued capital
stock or other equity interests of Borrower or any of its Subsidiaries or any
other material amendment to their charter, by-laws or other organization
documents and (3) any Subsidiary created or acquired by Borrower after the
Closing Date, such notice, in each case, to identify the applicable
jurisdictions, capital structures or Subsidiaries, as applicable.
(R) OTHER INFORMATION. With reasonable promptness, each Loan Party will
deliver such other information and data with respect to any Loan Party or any
Subsidiary of Borrower as from time to time may be reasonably requested by Agent
or any Lender.
CREDIT AGREEMENT - Page 81
<PAGE>
5.2 ACCESS TO ACCOUNTANTS
Borrower and each Subsidiary authorizes Lenders to discuss the financial
condition of Borrower and any of its Subsidiaries with their independent public
accountants after reasonable notice to Borrower of its intention to do so.
Prior to such discussions, Borrower shall be given the reasonable opportunity to
participate in any such discussion. Borrower shall deliver a letter to such
accountants authorizing them to comply with the provisions of subsection 5.1 and
this subsection 5.2.
5.3 CORPORATE EXISTENCE, ETC.
Except as otherwise permitted by Section 7.6, Borrower will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business.
5.4 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION
Borrower will, and will cause each of their respective Subsidiaries to, pay
(a) all taxes, assessments and other governmental charges imposed upon it or any
of its properties or assets or with respect to any of its franchises, business,
income or property before any penalty accrues thereon and (b) all claims
(including claims for labor, services, materials and supplies) for sums that
have become due and payable and that by law have or may become a Lien upon any
of its properties or assets before any penalty or fine is incurred with respect
thereto; provided, that no such tax charge or claim need be paid if it is
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if Borrower or such Subsidiary has established such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP.
5.5 MAINTENANCE OF PROPERTIES; INSURANCE
Borrower will maintain or cause to be maintained in good repair, working
order and condition all material properties used in the business of Borrower and
its Subsidiaries and will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Borrower will maintain or cause to be
maintained, with financially sound and reputable insurers, public liability and
property damage insurance with respect to its business and properties and the
business and properties of its Subsidiaries against loss or damage of the kinds
customarily carried or maintained by corporations of established reputation
engaged in similar businesses and in amounts acceptable to Agent and will
deliver evidence thereof to Agent. Borrower will maintain business interruption
insurance in an amount not less than $5,000,000. Borrower shall cause Agent,
for the benefit of Lenders, to be named as loss payee (in the case of casualty
insurance) and additional insured (in all other cases) on all insurance policies
pursuant to appropriate endorsements in form and substance reasonably
satisfactory to Agent. Borrower shall apply any proceeds received from policies
of insurance maintained pursuant to this subsection 5.5 in accordance with the
provisions of subsection 2.4(E).
CREDIT AGREEMENT - Page 82
<PAGE>
5.6 INSPECTION; LENDER MEETING
Borrower shall permit any authorized representatives designated by Agent or
by any Lender to visit and inspect any of the properties of Borrower or any of
its Subsidiaries, including its and their financial and accounting records, and
to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and business with its and their officers and independent
public accountants, at such reasonable times during normal business hours and as
often as may be reasonably requested; PROVIDED that Lender shall coordinate such
visits through Agent. Without in any way limiting the foregoing, Borrower will
participate and will cause its key management personnel to participate in a
meeting of Agent and Lenders at least once during each Fiscal Year to be held at
such time and at such place as may be agreed to by Borrower and Agent.
5.7 ENVIRONMENTAL COMPLIANCE
(A) ENVIRONMENTAL LAWS. Borrower and each of its Subsidiaries shall at
all times comply with all applicable Environmental Laws.
(B) INDEMNIFICATION. Borrower shall indemnify, pay and hold Agent and
each Lender harmless from and against any and all losses, costs (including
attorneys' fees), claims, liabilities, injuries, expenses and damages whatsoever
incurred by Agent or such Lender by reason of any violation of any applicable
Environmental Law for which Borrower or any of its Subsidiaries is or may be
liable or which is related to any real property owned, leased or operated by
Borrower or any of its Subsidiaries, or by reason of the imposition of any
governmental Lien for the recovery of environmental cleanup or response costs
expended by reason of any such violation, or by reason of any breach of any
representation, warranty or affirmative or negative covenant in this Agreement,
or by reason of any matter disclosed in Schedules 4.15(A), (B) or (C).
(C) REMEDIAL ACTION. Borrower and each of its Subsidiaries shall promptly
take any and all necessary remedial actions in response to the presence,
storage, use, disposal, transportation, release or discharge of any Hazardous
Materials on, under or about any real property owned, leased or operated by
Borrower or any of its Subsidiaries. In the event Borrower or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Material on, under or about any real property owned, leased or operated by
Borrower or any of its Subsidiaries, such Loan Party shall conduct and complete
such remedial action in compliance with all applicable Environmental Laws, and
in accordance with the policies, orders and directives of all federal, state and
local governmental authorities except when such Loan Party's liability for such
presence, storage, use, disposal, transportation, release or discharge of any
Hazardous Material is being contested in good faith by such Loan Party and
appropriate reserves therefor have been established in accordance with GAAP. In
addition to the foregoing, on or before the first anniversary of the Closing
Date, Borrower shall and shall cause its Subsidiaries to commence and diligently
pursue completion of each of the remedial actions and additional investigations
described and identified on Exhibit 2 of the Purchase Agreement and shall have
sought reimbursement for the costs of such actions and investigations from Alco
or Unisource in accordance with the terms of the Purchase Agreement.
CREDIT AGREEMENT - Page 83
<PAGE>
(D) FURTHER ASSURANCE. If Agent or any Lender at any time has a
reasonable basis to believe that there may be a material violation of any
Environmental Law by, or any material liability arising thereunder of, Borrower
or any of its Subsidiaries or related to any real property owned, leased or
operated by Borrower or any of its Subsidiaries or real property adjacent to
such real property, then Borrower agrees, upon request from Agent or such
Lender, to provide Agent and such Lender with such reports, certificates,
engineering studies or other written material or data as Agent or such Lender
may require so as to satisfy Agent and such Lender that such Loan Party is in
compliance with all applicable Environmental Laws.
5.8 ENVIRONMENTAL DISCLOSURE
(A) Borrower shall promptly advise Agent in writing and in reasonable
detail of: (1) any release, disposal or discharge by Borrower or any of its
Subsidiaries of any Hazardous Material required to be reported to any federal,
state or local governmental or regulatory agency under all applicable
Environmental Laws except such releases, disposals or discharges pursuant to and
in compliance with valid permits, authorizations or registrations under said
Environmental Laws; (2) any and all written communications sent or received by
Borrower or any of its Subsidiaries with respect to any Environmental Claims or
any release, disposal or discharge of Hazardous Material required to be reported
to any federal, state or local governmental or regulatory agency; (3) any
remedial action taken by Borrower or any of its Subsidiaries or any other Person
in response to any Hazardous Material on, under or about any real property
owned, leased or operated by Borrower or any of its Subsidiaries, the existence
of which could result in an Environmental Claim that could have a Material
Adverse Effect; (4) the discovery by Borrower or any of its Subsidiaries of any
occurrence or condition on any real property adjoining or in the vicinity of any
real property owned, leased or operated by Borrower or any of its Subsidiaries
that could cause such real property or any part thereof to be classified as
"border-zone property" or to be otherwise subject to any restrictions on the
ownership, occupancy, transferability or use thereof under any Environmental
Laws; and (5) any request for information from any governmental agency that
indicates such agency is investigating whether Borrower or any of its
Subsidiaries may be potentially responsible for a release, disposal or discharge
of Hazardous Materials.
(B) Borrower shall promptly notify Agent of (1) any proposed acquisition
of stock, assets, or property by Borrower or any of its Subsidiaries that could
reasonably be expected to expose such Loan Party to, or result in, Environmental
Claims that could have a Material Adverse Effect and (2) any proposed action to
be taken by Borrower or any of its Subsidiaries to commence any operations that
could reasonably be expected to subject such Loan Party to additional laws,
rules or regulations, including laws, rules and regulations requiring additional
or amended environmental permits or licenses. Borrower shall, at its own
expense, provide copies of such documents or information as Agent may reasonably
request in relation to any matters disclosed pursuant to this subsection 5.8.
CREDIT AGREEMENT - Page 84
<PAGE>
5.9 COMPLIANCE WITH LAWS
Borrower will (a) comply with and will cause each of its Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority as now in effect and which may be imposed
in the future in all jurisdictions in which Borrower or its Subsidiaries are now
doing business or may hereafter be doing business, other than those laws, rules,
regulations and orders the noncompliance with which would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect, and (b) maintain and will cause each of its Subsidiaries to maintain, as
the case may be, all licenses and permits now held or hereafter acquired by
Borrower or any of its Subsidiaries, the loss, suspension, or revocation of
which, or failure to renew, could have a Material Adverse Effect.
5.10 COVENANTS IN ACQUISITION DOCUMENTS
At all times prior to the effective date of the Acquisition, Borrower shall
comply with its covenants under the Acquisition Documents.
5.11 MORTGAGES; TITLE INSURANCE; SURVEYS
(A) TITLE INSURANCE. On the Closing Date (or within thirty (30) days
following delivery of any mortgage with respect to Additional Mortgaged
Property), Borrower shall deliver or cause to be delivered to Agent ALTA
lender's title insurance policies issued by title insurers reasonably
satisfactory to Agent (the "MORTGAGE POLICIES") in form and substance and in
amounts reasonably satisfactory to Agent assuring Agent that the Mortgages are
valid and enforceable first priority mortgage liens on the respective Mortgaged
Property or Additional Mortgaged Property, free and clear of all defects and
encumbrances except Permitted Encumbrances. The Mortgage Policies shall be in
form and substance reasonably satisfactory to Agent and shall include an
endorsement insuring against the effect of future advances under this Agreement,
for mechanics' liens and for any other matter that Agent may reasonably request,
and shall provide for affirmative insurance and such reinsurance as Agent may
reasonably request. In the case of each leasehold constituting Mortgaged
Property or Additional Mortgaged Property, Agent (for the benefit of Lenders)
shall have received such estoppel letters, consents and waivers from the
landlords and non-disturbance agreements from any holders of mortgages or deeds
of trust on such real estate as may have been requested by Agent, which letters
shall be in form and substance satisfactory to Agent.
(B) ADDITIONAL MORTGAGED PROPERTY. Agent may from time to time designate
real property or leasehold interests of Borrower or any of its Subsidiaries
after the date hereof as "Additional Mortgaged Property", in which case Borrower
shall as promptly as possible (and in any event within sixty (60) days after
such designation) deliver to Agent a fully executed Mortgage, in form and
substance satisfactory to Agent together with title insurance policies and
surveys as required by this subsection 5.11. Borrower agrees that, following
the taking of the actions with respect to any Additional Mortgaged Property
required by the immediately preceding sentence,
CREDIT AGREEMENT - Page 85
<PAGE>
Agent shall have a valid and enforceable first priority mortgage on the
respective Additional Mortgaged Property, free and clear of all defects and
encumbrances except for Permitted Encumbrances.
(C) SURVEYS. On or before the Closing Date (or within thirty (30) days
following delivery of any Mortgage with respect to Additional Mortgaged
Property), Borrower shall deliver or cause to be delivered to Agent current
surveys, certified by a licensed surveyor, for all real property that is the
subject of the Mortgage Policies including Additional Mortgaged Property for
which a Mortgage Policy is issued. All such surveys shall be sufficient to
allow the issuer of the mortgage policy to issue an ALTA lender's policy.
5.12 FURTHER ASSURANCES
(A) Borrower shall and shall cause each Loan Party to, from time to time,
execute such guaranties, financing statements, documents, security agreements
and reports as Agent at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents.
(B) At Agent's request, Borrower shall cause any Subsidiaries of Borrower
promptly to guaranty the Obligations and to grant to Agent, for the benefit of
Lenders, a security interest in the real, personal and mixed property of such
Subsidiary to secure the Obligations. The documentation for such guaranty or
security shall be substantially similar to the Loan Documents with such
modifications as are reasonably requested by Agent.
5.13 INTEREST RATE AGREEMENT
Within sixty (60) days after the request of Agent, Borrower shall enter
into, and thereafter shall maintain, Interest Rate Agreements with
counterparties acceptable to Agent providing for interest rate protection (i)
for an aggregate notional amount of not less than fifty percent (50%) of the
then outstanding principal amount of the Term Loans, (ii) for a maximum interest
rate with respect to such notional amount based on LIBOR plus the LIBOR Margin
then in effect plus an amount not in excess of three percent (3.0%), (iii) for a
three (3) year period from the request of Agent for the Interest Rate Agreement
and (iv) with other terms and conditions satisfactory to the Agent.
5.14 ENFORCEMENT OF REMEDIES UNDER ACQUISITION DOCUMENTS
If Borrower becomes aware of or otherwise has knowledge of any facts that
could give rise to any claim for indemnification from any party under any
Acquisition Document, Borrower will assert or cause the assertion of such claim
against such party before the date on which such claim may no longer be made
under such Acquisition Document, and in asserting any such claim shall comply
with all requirements for asserting such claims under the Acquisition Documents;
PROVIDED, HOWEVER, that such claim need not be asserted if the Board of
Directors determines in good faith that
CREDIT AGREEMENT - Page 86
<PAGE>
the best interests of Borrower would be served by not asserting such claim. No
more than sixty (60) nor less than thirty (30) days prior to the expiration of
the period in which claims for indemnification under the Acquisition Documents
may be asserted against any party, Borrower shall deliver to Agent and each
Lender a certificate executed on its behalf by its President or Senior financial
officer stating either that such officer has no knowledge of any claim that may
be asserted against any such party or setting forth any such claims and the
actions Borrower has taken or proposes to take in asserting them. Nothing
contained in this Section 5.14 shall restrict or otherwise affect any rights of
Agent or any Lender under any other Loan Documents.
SECTION 6
FINANCIAL COVENANTS
Holdings and Borrower covenant and agree that so long as any of the
Commitments remain in effect and until payment in full of all Obligations and
termination of all Lender Letters of Credit and Risk Participation Agreements,
unless Requisite Lenders shall otherwise give their prior written consent,
Borrower shall comply with and shall cause each of its Subsidiaries to comply
with all covenants in this Section 6 applicable to such Person.
6.1 CAPITAL EXPENDITURE LIMITS
The aggregate amount of all Capital Expenditures of Borrower and its
Subsidiaries during any Fiscal Year will not exceed the applicable Capital
Expenditure Limit for such Fiscal Year. The term "CAPITAL EXPENDITURE LIMIT"
means, for the Fiscal Years set forth below, the sum of (i) the Dollar amount
set forth in the table below opposite the applicable Fiscal Year (the Dollar
amount as set forth for each Fiscal Year herein the "YEARLY LIMIT") plus (ii)
one hundred percent (100%) of the portion of the Yearly Limit from the
immediately preceding Fiscal Year, which was not expended by Borrower or its
Subsidiaries for Capital Expenditures in such preceding Fiscal Year, if any. In
calculating compliance with this Section 6.1, Capital Expenditures made in a
Fiscal Year shall first be debited against the Yearly Limit for such Fiscal Year
then debited against the carry over of the Yearly Limit, if any, from the
preceding Fiscal Year.
<TABLE>
<CAPTION>
--------------------------------------------------
--------------------------------------------------
Fiscal Year Dollar Amount
--------------------------------------------------
<S> <C>
1995 750,000
--------------------------------------------------
1996 2,500,000
--------------------------------------------------
1997 2,500,000
--------------------------------------------------
1998 and each Fiscal Year
thereafter 1,500,000
--------------------------------------------------
--------------------------------------------------
</TABLE>
CREDIT AGREEMENT - Page 87
<PAGE>
6.2 EBITDA
A. Borrower shall not permit EBITDA for the period beginning on the
Closing Date and ending on the date set forth below to be less than the Dollar
amount set forth below for such period.
<TABLE>
<CAPTION>
--------------------------------------------------
--------------------------------------------------
Date Dollar Amount
--------------------------------------------------
<S> <C>
December 31, 1995 $2,700,000
--------------------------------------------------
March 31, 1996 5,900,000
--------------------------------------------------
June 30, 1996 9,000,000
--------------------------------------------------
September 30, 1996 12,500,000
--------------------------------------------------
--------------------------------------------------
</TABLE>
B. Borrower shall not permit EBITDA for the twelve (12) month period
ending on the date set forth below to be less than the Dollar amount set forth
below for such period.
<TABLE>
<CAPTION>
--------------------------------------------------
--------------------------------------------------
Date Dollar Amount
--------------------------------------------------
<S> <C>
December 31, 1996 $13,000,000
--------------------------------------------------
--------------------------------------------------
March 31, 1997 13,200,000
--------------------------------------------------
--------------------------------------------------
June 30, 1997 13,500,000
--------------------------------------------------
--------------------------------------------------
September 30, 1997 13,700,000
--------------------------------------------------
--------------------------------------------------
December 31, 1997 14,000,000
--------------------------------------------------
--------------------------------------------------
March 31, 1998 14,500,000
--------------------------------------------------
--------------------------------------------------
June 30, 1998 14,500,000
--------------------------------------------------
--------------------------------------------------
September 30, 1998 14,500,000
--------------------------------------------------
--------------------------------------------------
December 31, 1998 14,500,000
--------------------------------------------------
--------------------------------------------------
March 31, 1999 and the last
day of each Calendar
Quarter thereafter 15,000,000
--------------------------------------------------
--------------------------------------------------
</TABLE>
CREDIT AGREEMENT - Page 88
<PAGE>
6.3 FIXED CHARGE COVERAGE
A. Borrower shall not permit Fixed Charge Coverage for the period
beginning from the Closing Date and ending on the last day of each Calendar
Quarter prior to October 1, 1996 to be less than 1.10 to 1.00 for such period.
B. Borrower shall not permit Fixed Charge Coverage for the twelve (12)
month period ending on the last day of each Calendar Quarter after October 1,
1996 and prior to January 1, 1998 to be less than 1.10 to 1.00 for such period.
C. Borrower shall not permit Fixed Charge Coverage for the twelve (12)
month period ending on the last day of each Calendar Quarter after January 1,
1998 to be less than 1.20 to 1.00.
6.4 TOTAL INTEREST COVERAGE
A. Borrower shall not permit Total Interest Coverage for the period
beginning on the Closing Date and ending on the date set forth below to be less
than the amount set forth below for such period.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Date Total Interest Coverage
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C>
December 31, 1995 1.3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
March 31, 1996 1.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
June 30, 1996 1.7
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
September 30, 1996 1.9
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
B. Borrower shall not permit Total Interest Coverage for the twelve (12)
month period ending on the date set forth below to be less than the amount set
forth below for such period.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Date Total Interest Coverage
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C>
December 31, 1996 2.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
March 31, 1997 2.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
June 30, 1997 2.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
September 30, 1997 2.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
December 31, 1997 2.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CREDIT AGREEMENT - Page 89
<PAGE>
March 31, 1998 3.0
- ------------------------------------------------------------------------------
June 30, 1998 3.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
September 30, 1998 3.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
December 31, 1998 3.0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
March 31, 1999 3.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
June 30, 1999 3.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
September 30, 1999 3.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
December 31, 1999 3.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
March 31, 2000 and the last day of each Calendar Quarter
thereafter 3.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
6.5 NET WORTH
Borrower shall not permit Net Worth as of the last day of any Calendar
Quarter to be less than the sum of (i) $17,000,000, PLUS, (ii) seventy percent
(70%) of aggregate Net Income for the period beginning on the Closing Date and
ending on the last day of such Calendar Quarter, excluding any month in which
Net Income was less than zero (0.00).
SECTION 7
NEGATIVE COVENANTS
Holdings and Borrower covenant and agree that so long as any of the
Commitments remain in effect and until payment in full of all Obligations and
termination of all Lender Letter of Credit and Risk Participation Agreements,
unless Requisite Lender shall otherwise give its prior written consent, Borrower
shall comply with and shall cause each of Borrower's Subsidiaries to comply with
all covenants in this Section 7 applicable to such Person.
7.1 INDEBTEDNESS
Borrower will not and will not permit any of its Subsidiaries directly or
indirectly to create, incur, assume, guaranty, or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness except:
(a) The Obligations;
CREDIT AGREEMENT - Page 90
<PAGE>
(b) Intercompany Indebtedness among Borrower and its Subsidiaries;
PROVIDED that the obligations of each obligor of such Indebtedness shall:
(i) be subordinated in right of payment to the Obligations from and after
such time as any portion of the Obligations shall become due and payable
(whether at stated maturity, by acceleration or otherwise); (ii) be
evidenced by promissory notes, which shall have been pledged to Agent, for
the benefit of Lenders, as security for the Obligations; and (iii) have
such other terms and provisions as Agent may reasonably require;
(c) Indebtedness arising as a result of Contingent Obligations
permitted under subsection 7.4;
(d) Indebtedness of Borrower evidenced by the Seller Subordinated
Note;
(e) Indebtedness existing on the Closing Date and set forth on
Schedule 7.1 and all replacements, renewals, extensions or amendments
thereof so long as (i) the principal amount of such Indebtedness after such
replacement, renewal, extension or amendment shall not exceed the principal
amount of such Indebtedness which was outstanding immediately prior to such
replacement, renewal, extension or amendment, (ii) such Indebtedness shall
not be secured by any assets other than assets securing such Indebtedness
prior to such replacement, renewal, extension or amendment, and (iii) in
the case of any replacement of such Indebtedness, the interest rate,
amortization rate and other terms of the replacement Indebtedness are not
materially different from the Indebtedness being replaced;
(f) Indebtedness not to exceed $200,000 in the aggregate at any time
outstanding secured by purchase money Liens; and
(g) Indebtedness incurred with respect to Capital Leases not in
excess of 500,000 in the aggregate during each Fiscal Year.
(h) Indebtedness incurred with respect to the acquisition by Borrower
or one of its Subsidiaries of certain real property located in Denver
County, Colorado and generally described as 601 50th Street, Denver,
Colorado, in an initial principal amount not to exceed $750,000; PROVIDED
that Agent and Requisite Lenders have given prior written approval of the
terms and conditions of such Indebtedness.
7.2 LIENS AND RELATED MATTERS
(A) NO LIENS. Borrower will not nor will Borrower permit any of its
Subsidiaries directly or indirectly to create, incur, assume or permit to exist
any Lien on or with respect to any property or asset (including any document or
instrument with respect to goods or accounts receivable) of Borrower or any of
its Subsidiaries, whether now owned or hereafter acquired, or any income or
profits therefrom, except Permitted Encumbrances.
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(B) NO NEGATIVE PLEDGES. Neither Borrower nor any Subsidiary of Borrower
shall enter into or assume any agreement (other than the Loan Documents)
prohibiting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired.
(C) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER. Except as
provided herein, Borrower will not and will not permit any of its Subsidiaries
directly or indirectly to create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary to: (1) pay dividends or make any other distribution on
any of such Subsidiary's capital stock owned by Borrower or any Subsidiary of
Borrower; (2) subject to subordination provisions, pay any Indebtedness owed to
Borrower or any other Subsidiary of Borrower; (3) make loans or advances to
Borrower or any other Subsidiary of Borrower; or (4) transfer any of its
property or assets to Borrower or any other Subsidiary of Borrower.
7.3 INVESTMENTS; JOINT VENTURES
Borrower will not and will not permit any of its Subsidiaries directly or
indirectly to, make or own any Investment in any Person including any Joint
Venture, except:
(a) Borrower and its Subsidiaries may make and own Investments in
Cash Equivalents; PROVIDED that such Cash Equivalents are not subject to
setoff rights in favor of the issuing bank arising from any banking
relationship of Borrower or its Subsidiaries unless the issuing bank is a
Lender;
(b) Borrower and its Subsidiaries may make intercompany loans to the
extent permitted under subsection 7.1.
(c) Borrower and its Subsidiaries may make loans and advances to
employees for moving, entertainment, travel and other similar expenses in
the ordinary course of business not to exceed $100,000 in the aggregate at
any time outstanding;
(d) Investments in Central existing on the Closing Date and so long
as no Default or Event of Default exists or would result thereof, Borrower
may make cash capital contributions to Central after the Closing Date.
(e) Interest Rate Agreements entered into in compliance with
subsection 7.4(C);
7.4 CONTINGENT OBLIGATIONS
Borrower will not and will not permit any of its Subsidiaries directly or
indirectly to create or become or be liable with respect to any Contingent
Obligation except:
(a) Contingent Obligations resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
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(b) Contingent Obligations under the Subsidiary Guaranty and any
other Contingent Obligations arising under the Loan Documents;
(c) Contingent Obligations under Interest Rate Agreements required
hereunder or approved by Agent in its sole discretion, with respect to the
Loans;
(d) Contingent Obligations existing on the Closing Date and set forth
on Schedule 7.4;
(e) Contingent Obligations with respect to Lender Letters of Credit
or letters of credit which are the subject of a Risk Participation
Agreement;
(f) Contingent Obligations under indemnity agreements to title
insurers to cause such title insurers to issue to Agent mortgagee title
insurance policies, as provided in subsection 5.10;
(g) Contingent Obligations with respect to customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Dispositions;
(h) Contingent Obligations incurred in the ordinary course of
business with respect to surety and appeal bonds, performance and return-
of-money bonds, and other similar obligations, not exceeding at any time
outstanding $250,000 in aggregate liability;
(i) Contingent Obligations with respect to Indebtedness permitted by
subsection 7.1; and
(j) In addition to the Contingent Obligations permitted by clauses
(a) through (k) above, Borrower and its Subsidiaries may become and remain
liable with respect to Contingent Obligations not to exceed in the
aggregate at any time outstanding $100,000.
7.5 RESTRICTED JUNIOR PAYMENTS
(A) Borrower will not and will not permit any of its Subsidiaries to
directly or indirectly declare, order, pay, make or set apart any sum for any
Restricted Junior Payment, except that:
(i) So long as no Default or Event of Default has occurred or is
continuing, or would arise as a result of the following, Borrower may make
regularly scheduled payments with respect to the Subordinated Notes and any
other Indebtedness permitted by subsection 7.1 that constitutes
Subordinated Indebtedness as required in accordance with the terms thereof,
but only, in each case, to the extent required by, and subject to the
subordination provisions contained in, the indenture or other agreement
pursuant to which such Indebtedness was issued or otherwise as approved in
writing by Requisite Lenders; PROVIDED
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THAT, after giving effect to any payment of the Seller Subordinated Note
(i) the Fixed Charge Coverage Ratio as of such date of payment is at least
1.30 to 1.0, and (ii) the Maximum Revolving Loan Amount exceeds the
principal balance of the Revolving Loans by at least $3,000,000;
(ii) Subject to the limitations set forth in the proviso concluding
this clause (ii), Borrower may make payments and distributions to Holdings
to permit Holdings to pay federal and state income taxes then due and
owing, franchise taxes and other similar licensing expenses incurred in the
ordinary course of business with respect to the income or assets of
Borrower net of any refunds or credit with respect to such income or
assets; provided, however, Borrower's contribution to taxes as a result of
the filing of a consolidated return by Holdings shall not be greater, nor
the receipt of tax benefits less, than they would have been had Borrower
not filed a consolidated return with Holdings; and
(iii) Subsidiaries of Borrower may make Restricted Junior Payments
with respect to their common stock to the extent necessary to permit
Borrower to pay the Obligations and to make any Restricted Junior Payments
permitted under clauses (i) and (ii) above and to permit Borrower to pay
expenses incurred in the ordinary course of business.
(B) Notwithstanding any other provision of this Agreement to the contrary,
Borrower will not and will not permit any of its Subsidiaries to make any
portion of the payments permitted under clauses (i) through (iii) of subsection
7.5(A) with the proceeds derived from the issuance by Borrower of capital stock.
7.6 RESTRICTION ON FUNDAMENTAL CHANGES
Neither Borrower nor any of its Subsidiaries will: (a) amend, modify or
waive any term or provision of its articles of incorporation or by-laws unless
required by law; (b) enter into any transaction of merger or consolidation; (c)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); (d) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its business or assets, or the capital stock of or other equity interests in
any of its Subsidiaries, whether now owned or hereafter acquired; or (e) acquire
by purchase or otherwise all or any substantial part of the business or assets
of, or stock or other evidence of beneficial ownership of, any Person, except:
(i) the Loan Parties may enter into transactions contemplated by the Acquisition
Documents and may consummate the Acquisition; (ii) Borrower and its Subsidiaries
may make Capital Expenditures permitted under subsection 6.1 and Investments
permitted under subsection 7.3; and (iii) any Subsidiary of Borrower may be
merged with or into Borrower (provided that Borrower is the surviving entity) or
any other Subsidiary of Borrower.
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7.7 DISPOSAL OF ASSETS OR SUBSIDIARY STOCK
(A) Neither Borrower nor any of its Subsidiaries will sell, lease,
transfer or otherwise dispose of any of its property, business or assets, or
grant any Person an option to acquire any such property, business or assets
except for (a) bona fide sales of Inventory to customers for fair value in the
ordinary course of business and dispositions of obsolete equipment not used or
useful in the business and (b) Asset Dispositions if all of the following
conditions are met notwithstanding the prohibition set forth in subsection 7.6:
(i) the market value of assets sold or otherwise disposed of in any Fiscal Year
does not exceed $500,000; (ii) the consideration received is at least equal to
the fair market value of such assets; (iii) the sole consideration received is
cash; (iv) the Net Proceeds of such Asset Disposition are applied as required by
subsection 2.4(C) (2); (v) after giving effect to the sale or other disposition
of the assets included within the Asset Disposition and the repayment of
Indebtedness with the proceeds thereof, Borrower is in compliance on a pro forma
basis with the covenants set forth in Section 6 recomputed for the most recently
ended month for which information is available and is in compliance with all
other terms and conditions contained in this Agreement; and (vi) no Default or
Event of Default shall result from such sale or other disposition.
(B) Except as permitted elsewhere in this Agreement, Borrower will not and
will not permit any of its Subsidiaries directly or indirectly to sell, assign,
pledge or otherwise encumber or dispose of any shares of capital stock or other
equity securities in Borrower or any such Subsidiary including warrants, rights
or options to acquire shares or other equity securities of any of its
Subsidiaries, except to Borrower or another Subsidiary of Borrower.
7.8 RESTRICTION ON OPERATING LEASES
Borrower will not and will not permit any of its Subsidiaries to become or
remain liable in any way, whether directly or by assignment or as a guarantor or
other surety, for the obligations of the lessee under any operating lease (other
than intercompany leases between Borrower and its Subsidiaries), if the
aggregate amount of all rents paid by Borrower and its Subsidiaries under all
such leases would exceed $2,000,000 in any Fiscal Year.
7.9 SALES AND LEASE-BACKS
Borrower will not and will not permit any of its Subsidiaries directly or
indirectly to become or remain liable as lessee or as guarantor or other surety
with respect to any lease of any property whether real or personal or mixed or
whether now owned or hereafter acquired which Borrower or any of its
Subsidiaries has sold or transferred or intends to sell or transfer to any other
Person.
7.10 TRANSACTIONS WITH AFFILIATES
Borrower will not and will not permit any of its Subsidiaries directly or
indirectly to enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower or with any director, officer
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or employee of any Loan Party, except (a) as set forth on Schedule 7.10 or (b)
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of Borrower or any of its Subsidiaries and upon
fair and reasonable terms which are fully disclosed to Agent and Lenders and are
no less favorable to Borrower or such Subsidiary than would be obtained in a
comparable arm's length transaction with a Person that is not an Affiliate of
Borrower. Notwithstanding the foregoing, no payments may be made with respect
to any items set forth on Schedule 7.10 upon the occurrence and during the
continuation of a Default or Event of Default.
7.11 MANAGEMENT FEES AND COMPENSATION
Borrower will not and will not permit any of its Subsidiaries to pay any
management, consulting or similar fees to any Affiliate of Borrower or to any
director, officer or employee of any Loan Party except as set forth on Schedule
7.11 and only in the amounts set forth thereon. Notwithstanding the foregoing,
no payments may be made with respect to any such items set forth on Schedule
7.11 upon the occurrence and during the continuation of a Default or Event of
Default.
7.12 ENVIRONMENTAL LIABILITIES
Borrower will not and will not permit any of its Subsidiaries to: (a)
violate any applicable Environmental Law; or (b) dispose of any Hazardous
Materials into or onto or (except in accordance with applicable law) from, any
real property owned, leased or operated by Borrower or any of its Subsidiaries;
or (c) permit any Lien imposed pursuant to any Environmental Law to be imposed
or to remain on any real property owned, leased or operated by any Loan Party.
7.13 CONDUCT OF BUSINESS
From and after the Closing Date, Borrower will not and will not permit any
of its Subsidiaries to engage in any business other than businesses of the type
described on Schedule 4.1(D).
7.14 CHANGES RELATING TO SUBORDINATED INDEBTEDNESS AND BORROWER PREFERRED
STOCK
Borrower will not and will not permit any of its Subsidiaries to change or
amend the terms of any Subordinated Indebtedness or Borrower Preferred Stock, if
the effect of such amendment is to: (a) increase the interest rate on such
Indebtedness or the amount or nature of the dividends payable with respect to
Borrower Preferred Stock; (b) change the dates upon which payments of principal,
interest or dividends are due on such Indebtedness or on Borrower Preferred
Stock; (c) change any event of default or change or add any covenant with
respect to such Indebtedness; (d) change the redemption or prepayment provisions
of such Indebtedness; (e) change the subordination provisions thereof (or the
subordination terms of any guaranty thereof); or (f) change or amend any other
term if such change or amendment would materially increase the obligations of
the obligor or confer additional material rights on the holder of such
Indebtedness or Borrower Preferred Stock in a manner adverse to Borrower, any of
its Subsidiaries, Agent or any Lender.
CREDIT AGREEMENT - Page 96
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7.15 FISCAL YEAR
Neither Borrower nor any Subsidiary of Borrower shall change its Fiscal
Year.
7.16 COMPLIANCE WITH ERISA
No Loan Party or Loan Party Affiliate shall:
(a) permit the occurrence of any Termination Event with respect to a
Borrower Plan which would result in a liability to any Loan Party or Loan
Party Affiliate in excess of $300,000;
(b) permit the present value of all benefit liabilities (determined in
accordance with then current funding standards) under all Pension Plans to
which any Loan Party or Loan Party Affiliate is required to contribute to
exceed the current value of the assets of such Pension Plans allocable to
such benefit liabilities by more than $800,000;
(c) permit any accumulated funding deficiency in excess of $100,000
(as defined in Section 302 of ERISA and Section 412 of the IRC) with
respect to any Pension Plan to which any Loan Party or Loan Party Affiliate
is required to contribute, whether or not waived;
(d) fail to make any contribution or payment to any Multiemployer
Plan which any Loan Party or Loan Party Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto which results in or is likely to result in a liability
in excess of $250,000;
(e) engage, or permit any Loan Party or Loan Party Affiliate to
engage, in any prohibited transaction under Section 406 of ERISA or Section
4975 of the IRC for which a civil penalty pursuant to Section 502(i) of
ERISA or a tax pursuant to Section 4975 of the IRC in excess of $200,000 is
imposed;
(f) permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee Benefit
Plan which establishment or amendment could result in liability to any Loan
Party or Loan Party Affiliate or increase the obligation of any Loan Party
or Loan Party Affiliate to a Multiemployer Plan which liability or
increase, individually or together with all similar liabilities and
increases, is material to any Loan Party or Loan Party Affiliate; or
(g) fail, or permit any Loan Party or Loan Party Affiliate to fail,
to establish, maintain and operate each Employee Benefit Plan covering
employees of any Loan Party or Loan Party Affiliate, including any
"multiple employer welfare arrangement" as described in Section 3(40)(A) of
ERISA, in compliance in all material respects with the provisions of
CREDIT AGREEMENT - Page 97
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ERISA, the IRC and all other applicable laws, including state insurance
law, and the regulations and interpretations thereof.
7.17 PRESS RELEASE; PUBLIC OFFERING MATERIALS
Borrower will not and will not permit any of its Subsidiaries to disclose
the name of Agent or any Lender in any press release or in any prospectus, proxy
statement or other materials filed with any governmental entity relating to a
public offering of the capital stock of Borrower or any of its Subsidiaries
without Agent's or the affected Lender's prior written consent which shall not
be unreasonably withheld.
7.18 SUBSIDIARIES
Borrower will not and will not permit any of its Subsidiaries to establish,
create or acquire any new Subsidiary.
7.19 BANK ACCOUNTS
Borrower will not and will not permit any of its Subsidiaries to establish
any new bank accounts without prior written notice to Agent and unless the bank
enters into a Bank Agency Agreement.
SECTION 8
DEFAULT, RIGHTS AND REMEDIES
8.1 EVENT OF DEFAULT
"EVENT OF DEFAULT" shall mean the occurrence or existence of any one or
more of the following:
(A) PAYMENT. Failure to pay when due any installment of principal of any
Loan, or to reimburse Agent or any Lender for any payment made by Agent or such
Lender under or in respect of any Lender Letter of Credit or Risk Participation
Agreement on the date due, or failure to pay, within five (5) days after the due
date, any interest on any Loan or any other amount due under this Agreement or
any of the other Loan Documents; or
(B) DEFAULT IN OTHER AGREEMENTS. (1) Failure of Borrower or any of its
Subsidiaries to pay when due or within any applicable grace period any principal
or interest on Indebtedness (other than the Loans) or any Contingent Obligations
or (2) a breach or default of Borrower or any of its Subsidiaries with respect
to any Indebtedness or any Contingent Obligations if, in any case, the effect of
such failure to pay, default or breach is to cause or to permit the holder or
holders then to cause, Indebtedness and/or Contingent Obligations having an
individual principal amount in
CREDIT AGREEMENT - Page 98
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excess of $100,000 or having an aggregate principal amount in excess of $200,000
to become or be declared due prior to their stated maturity, whether or not such
failure to pay, default or breach is waived by such holder or holders; or
(C) BREACH OF CERTAIN PROVISIONS. Failure of Borrower to perform or
comply with any term or condition contained in subsection 5.1, that portion of
subsection 5.5 relating to Borrower's obligation to maintain insurance,
subsection 5.6 or contained in Section 6 or Section 7; or
(D) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Loan Party in any Loan Document or in any statement
or certificate at any time given by such Person in writing pursuant to or in
connection with any Loan Document is false in any material respect on the date
made or deemed made; or
(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. Borrower or any other Loan Party
defaults in the performance of or compliance with any or the other Loan
Documents and such default is not remedied or waived within twenty (20) days
after receipt by Borrower of notice from Agent or any Lender of such default
(other than occurrences described in other provisions of this subsection 8.1 for
which a different grace or cure period is specified or which constitute
immediate Events of Default); or
(F) INVOLUNTARY BANKRUPTCY: APPOINTMENT OF RECEIVER, ETC. (1) A court
enters a decree or order for relief with respect to Borrower or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed or any other similar relief is granted under any
applicable federal or state law; or (2) the continuance of any of the following
events for sixty (60) days unless dismissed, bonded or discharged: (a) an
involuntary case is commenced against Borrower or any of its Subsidiaries under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over any Loan Party or over all or a substantial part of its property, is
entered; or (c) an interim receiver, trustee or other custodian is appointed
without the consent of Borrower or any of its Subsidiaries Party for all or a
substantial part of the property of Borrower or any such Subsidiary; or
(G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) An order for
relief is entered with respect to Borrower or any of its Subsidiaries commences
a voluntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents 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 consents to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or (2) any such Loan Party makes
any assignment for the benefit of creditors generally; or (3) the Board of
Directors of any Loan Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(G); or
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(H) GOVERNMENTAL LIENS. Any lien, levy or assessment is filed or recorded
with respect to or otherwise imposed upon all or any part of the Collateral or
the assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances) and such lien,
levy or assessment is not stayed, vacated, paid or discharged within ten (10)
days; or
(I) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process (other than those described in subsection 8.1(H))
involving (1) an amount in any individual case in excess of $200,000 or (2) an
amount in the aggregate at any time in excess of $300,000 (in either case not
adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against Borrower or any of its
Subsidiaries or any of their respective assets and remains undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days or in any event
later than five (5) days prior to the date of any proposed sale thereunder; or
(J) DISSOLUTION. Any order, judgment or decree is entered against
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Borrower or that Subsidiary and such order remains undischarged or unstayed for
a period in excess of twenty (20) days; or
(K) SOLVENCY. Borrower ceases to be solvent (as represented by Borrower
in subsection 4.17) or admits in writing its present or prospective inability
to pay its debts as they become due; or
(L) INJUNCTION. Borrower or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
(M) ERISA - PENSION PLANS. (1) Any Loan Party or any Loan Party Affiliate
fails to make full payment when due of all amounts which, under the provisions
of any Pension Plan or Section 412 of the IRC, any Loan Party or any Loan Party
Affiliate is required to pay as contributions thereto and such failure results
in or is likely to result in a Material Adverse Effect; or (2) an accumulated
funding deficiency in excess of $200,000 occurs or exists, whether or not
waived, with respect to any Borrower Plan; or (3) a Termination Event occurs
which results in or is likely to result in a Material Adverse Effect; or
(N) ERISA - MULTIEMPLOYER PLANS. Any Loan Party or any Loan Party
Affiliate as employers under one or more Multiemployer Plans makes a complete or
partial withdrawal from such Multiemployer Plans and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$200,000; or
(O) INVALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents for any
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and
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effect or is declared to be null and void, or any Loan Party denies that it has
any further liability under any Loan Documents to which it is party, or gives
notice to such effect; or
(P) DAMAGE, STRIKE, CASUALTY. Any material damage to, or loss, theft or
destruction of, any collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect; or
(Q) LICENSES AND PERMITS. The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could have a Material Adverse Effect; or
(R) FAILURE OF SECURITY. Agent does not have or ceases to have a valid
and perfected first priority security interest in the Collateral (subject to
Permitted Encumbrances), in each case, for any reason other than Agent's or
Lender's actions or the failure of Agent or Lender to take any action within its
control; or
(S) CHANGE IN CONTROL. (1) Any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") other than Lynch,
together with Boyle/ Fleming (the "Lynch/Fleming Group") has "beneficial
ownership" (within the meaning of Section 13(d) under the Exchange Act) in
excess of 49% of the total voting power of all classes of capital stock then
outstanding of Holdings entitled (without regard to the occurrence of any
contingency) to vote in elections of directors of Holdings unless the
Lynch/Fleming Group continues, directly or indirectly, through proxy or
otherwise, to control, or have the power to elect, a majority of the members of
the board of directors of Holdings; (2) the Lynch/Fleming Group ceases to
beneficially own and control at least sixty percent (60%) of the aggregate
number of shares of Holdings Common Stock owned by such group on the Closing
Date; or (3) Boyle/Fleming ceases to beneficially own and control or have the
right to own and control at least sixty percent (60%) of the aggregate number of
shares of Holdings Common Stock which Boyle/Fleming either owned or had the
right to purchase on the Closing Date.
8.2 SUSPENSION OF COMMITMENTS
Upon the occurrence of any Default or Event of Default, notwithstanding any
grace period or right to cure, Lenders, without notice or demand, may
immediately cease making additional Loans and issuing additional Lender Letters
of Credit or Risk Participation Agreements and the Commitments and any
obligation to make any Loans or to issue any Lender Letter of Credit or Risk
Participation Agreement shall be suspended; PROVIDED that, in the case of a
Default, if the subject condition or event is waived, cured or removed within
any applicable grace or cure period, the Commitments and any obligation to make
any Loans or to issue any Lender Letter of Credit or Risk Participation
Agreement shall be reinstated.
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8.3 ACCELERATION
Upon the occurrence of any Event of Default described in the foregoing
subsections 8.1(F) or 8.1(G), the unpaid principal amount of and accrued
interest and fees on the Loans, payments under the Lender Letters of Credit and
Risk Participation Agreements and all other Obligations shall automatically
become immediately due and payable, without presentment, notice of intent to
accelerate, notice of acceleration, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Borrower, and the Commitments
and any obligation to make any Loans or to issue any Lender Letter of Credit or
Risk Participation Agreement shall thereupon terminate. Upon the occurrence and
during the continuance of any other Event of Default, Agent may, if the
Requisite Lenders consent, and shall, upon demand by Requisite Lenders, by
written notice to Borrower (a) declare all or any portion of the Loans and all
or some of the other Obligations to be, and the same shall forthwith become,
immediately due and payable together with accrued interest thereon, and the
Commitments and any obligation to make any Loans or to issue any Lender Letter
of Credit or Risk Participation Agreement shall thereupon terminate and (b)
demand that Borrower immediately deposit with Agent a cash amount equal to the
Risk Participation Liability (whether or not any beneficiary under any Lender
Letter of Credit or any issuer of any letter of credit shall have presented, or
shall be entitled at such time to present, the drafts and other documents
required to draw under any Lender Letter of Credit or Risk Participation
Agreement) to enable Agent and any Lender that has issued a Lender Letter of
Credit to make payments under the Lender Letters of Credit and Risk
Participation Agreements when required and such amount shall become immediately
due and payable; provided that the foregoing shall not affect in any way the
obligations of Lenders to make Revolving Loans by remitting to Agent the
unreimbursed amount of any payments made by Agent or any Lender under any Lender
Letters of Credit or Risk Participation Agreement as provided in subsection
2.1(D)(2).
8.4 PERFORMANCE BY AGENT
If any Loan Party shall fail to perform any covenant, duty, or agreement
contained in any of the Loan Documents, Agent may perform or attempt to perform
such covenant, duty, or agreement on behalf of the applicable Loan Party after
the expiration of any cure or grace periods set forth herein. In such event,
Borrower shall, at the request of Agent, promptly pay any amount reasonably
expended by Agent in such performance or attempted performance to Agent,
together with interest thereon at the rate of interest in effect upon the
occurrence of an Event of Default as specified in subsection 2.2(A) for Base
Rate Loans from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly agreed that Agent shall not have any liability or
responsibility for the performance of any obligation of any Loan Party under
this Agreement or any other Loan Document.
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SECTION 9
ASSIGNMENT AND PARTICIPATION
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND NOTES
Subject to the provisions of the following paragraph, Heller may assign its
rights and delegate its obligations under this Agreement and further may assign,
or sell participations in, all or any part of its Loans, its Commitments or any
other interest herein or in its Notes to an Affiliate or to another Person.
Borrower hereby acknowledges that in making any such assignment or selling any
such participation, so long as Borrower's Obligations to the Agent and the
Lenders are unaffected thereby, Agent, so long as Heller is Agent, shall have
the right to divide, recombine and reclassify any features of the Loans, the
Risk Participation Agreements or the Lender Letters of Credit and any of its
other rights hereunder or under the other Loan Documents among itself and any
such other Lenders or participants into Loans having varying levels of
seniority, interest rates and maturities and with varying levels of rights in
and to any Collateral.
Each Lender may assign its rights and delegate its obligations under this
Agreement to another Person; PROVIDED that (a) such Lender shall first obtain
the written consent of Heller, (b) the amount of Commitments and Loans of the
assigning Lender being assigned shall in no event be less than the lesser of (i)
$5,000,000 or (ii) the entire amount of Commitments and Loans of such assigning
Lender and (c) as a condition to the effectiveness of such assignment, Borrower
shall have complied with its obligations under the last sentence of subsection
2.1(F). In the case of an assignment authorized under this subsection 9.1, the
assignee shall have, to the extent of such assignment, the same rights, benefits
and obligations as it would if it were a Lender hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitment or
assigned portion thereof. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender".
Each Lender may sell participations in all or any part of any Loans made by
it to another Person; PROVIDED that any such participation shall be in a minimum
amount of $5,000,000 and PROVIDED FURTHER that all amounts payable by Borrower
hereunder shall be determined as if that Lender had not sold such participation
and the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
effecting the items listed in subsections 10.3(A)(1)(a) through 10.3(A)(1)(j)
and the items listed in 10.3(B). Borrower hereby acknowledges and agrees that
any participation will give rise to a direct obligation of Borrower to the
participant, and the participant shall for purposes of subsections 2.2(D), 2.8,
2.9, 9.4 and 10.2 be considered to be a "Lender".
Except as otherwise provided in this subsection 9.1 no Lender shall, as
between Borrower and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Loans, the Notes or other
Obligations owed to such Lender. Each Lender may furnish any information
concerning Borrower and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees and
participants), subject to the provisions of subsection 10.18.
CREDIT AGREEMENT - Page 103
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Agent shall provide Borrower with written notice of the name and address of
any new Lender after the date hereof. Notwithstanding anything to the contrary
contained herein, the right to the principal of, and interest on, the Notes may
be transferred only through the surrender of a Note and the reissuance by the
Borrower of a new Note to the assignee. Any transfer or other assignment by a
Lender of an interest in any Note shall be conditioned upon and shall not be
effective until (i) such Lender notifies the Borrower, or the Agent on behalf of
the Borrower, of the identity of the Lender's assignee and the interest in
principal and interest transferred to such assignee in order for a new Note to
be issued and (ii) Agent receives as a fee for processing such transfer or
assignment the sum of $3,500.
Notwithstanding anything to the contrary contained in this subsection 9.1,
any Lender may, in the ordinary course of its business, pledge its Notes to any
United States Federal Reserve Bank to secure advances made by such Federal
Reserve Bank to such Lender.
Notwithstanding anything contained in this Agreement to the contrary, so
long as the Requisite Lenders shall remain capable of making LIBOR Loans, no
Person shall become a "Lender" hereunder unless such Person shall also be
capable of making LIBOR Rate Loans.
9.2 AGENT
(A) APPOINTMENT. Each Lender hereby designates and appoints Heller as its
Agent under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action or to refrain from taking 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. Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsection 9.3. Agent agrees to act as such on the express
conditions contained in this subsection 9.2. The provisions of this subsection
9.2 are solely for the benefit of Agent and Lenders and neither Borrower nor any
Loan Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for Borrower or any Loan Party. Agent may perform any of its duties
hereunder, or under the Loan Documents, by or through its agents or employees.
(B) NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement or in the Loan Documents.
The duties of Agent shall be mechanical and administrative in nature. Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender. Nothing in this Agreement or any of the Loan Documents, express
or implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial
CREDIT AGREEMENT - Page 104
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condition and affairs of Borrower in connection with the extension of credit
hereunder and shall make its own appraisal of the credit worthiness of Borrower,
and Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto (other than financial information received by it in
accordance herewith), whether coming into its possession before the Closing Date
hereunder or at any time or times thereafter. If Agent seeks the consent or
approval of any Lenders to the taking or refraining from taking any action
hereunder, then Agent shall send notice thereof to each Lender. Agent shall
promptly notify each Lender any time that the Requisite Lenders have instructed
Agent to act or refrain from acting pursuant hereto.
(C) RIGHTS EXCULPATION, ETC. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. 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 Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and if such instructions are promptly requested, 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 Requisite Lenders
or all of the Lenders, as applicable. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement, the Notes, or any of the
other Loan Documents in accordance with the instructions of Requisite Lenders.
(D) RELIANCE. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message or
other communication (including any writing, telex, telecopy or telegram)
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
CREDIT AGREEMENT - Page 105
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to this Agreement or any of the Loan Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it. Agent shall be entitled to
rely upon the advice of legal counsel, independent accountants, and other
experts selected by Agent in its sole discretion.
(E) INDEMNIFICATION. Lenders will reimburse and indemnify Agent for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any of
the Loan Documents or any action taken or omitted by Agent under this Agreement
for any of the Loan Documents, in proportion to each Lender's Pro Rata Share;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, advances or disbursements resulting from Agent' s gross
negligence or willful misconduct. The obligations of Lenders under this
subsection 9.2(E) shall survive the payment in full of the Obligations and the
termination of this Agreement.
(F) HELLER INDIVIDUALLY. With respect to its Revolving Loan Commitment,
the Loans made by it, and the Notes issued to it, Heller shall have and may
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 Heller in its individual
capacity as a Lender or one of the Requisite Lenders. Heller may lend money to,
and generally engage in any kind of banking, trust or other business with any
Loan party as if it were not acting as Agent pursuant hereto.
(G) SUCCESSOR AGENT.
(1) RESIGNATION. 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 Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) APPOINTMENT OF SUCCESSOR. Upon any such notice of resignation
pursuant to clause (G) (1) above, Requisite Lenders shall, upon receipt of
Borrower's prior consent which shall not unreasonably be withheld, appoint
a successor Agent. If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the retiring Agent, upon
notice to Borrower, shall then appoint a successor Agent who shall serve as
Agent until such time, if any, as Requisite Lenders, upon receipt of
Borrower's prior written consent which shall not be unreasonably withheld,
appoint a successor Agent as provided above.
CREDIT AGREEMENT - Page 106
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(3) SUCCESSOR AGENT. Upon the acceptance of any appointment as Agent
under the Loan Documents 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 obligations under the Loan Documents.
After any retiring Agent's resignation as Agent under the Loan Documents,
the provisions of this subsection 9.2 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under the
Loan Documents.
(H) COLLATERAL MATTERS.
(1) RELEASE OF COLLATERAL. Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to release any Lien granted to
or held by Agent upon any property covered by the Security Documents (i)
upon termination of the Commitments and payment and satisfaction of all
Obligations; or (ii) constituting property being sold or disposed of if
Borrower certifies to Agent that the sale or disposition is made in
compliance with the provisions of this Agreement (and the Agent may rely
conclusively on any such certificate, without further inquiry); or (iii)
constituting property in which any Loan Party owned no interest at the time
the Lien was granted or at any time thereafter; (iv) constituting property
leased to a Loan Party under a lease which has expired or been terminated
in a transaction permitted under this Agreement or is about to expire and
which has not been, and is not intended by the Loan Party to be, renewed or
extended; or (v) in accordance with the provisions of subsection 9.3(B).
Upon request by Agreement at any time, any Lender will confirm in writing
Agent's authority to release particular types of items of property covered
by the Security Documents pursuant to this subsection 9.2(H)(1) or
subsection 9.3(B).
(2) CONFIRMATION OF AUTHORITY: EXECUTION OF RELEASES. Without in any
manner limiting Agent's authority to act without any specific or further
authorization or consent by the Requisite Lenders (as set forth in
subsection 9.2(H)(1)), each Lender agrees to confirm in writing, upon
request by Borrower, the authority to release any property covered by the
Security Documents conferred upon the Agent under clauses (i) through (iv)
of subsection 9.2(H)(1) and under subsection 9.3(C). So long as no Default
or Event of Default is then continuing, upon receipt by Agent of
confirmation from the Requisite Lenders or from Lenders required by
subsection 9.3(C), as the case may be, of its authority to release any
particular item or types of property covered by the Security Documents, and
upon at least five (5) Business Days prior written request by Borrower,
Agent shall (and is hereby irrevocably authorized by the Lenders to)
execute such documents as may be necessary to evidence the release of the
Liens granted to the Agent for the benefit of the Lenders herein or
pursuant hereto upon such Collateral; PROVIDED, HOWEVER, that (i) Agent
shall not be required to execute any such document on terms which, in
Agent's opinion, would expose Agent to liability or create any obligation
or entail any consequence other than the release of such Liens without
recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the obligations or any Liens upon (or
obligations of any Loan
CREDIT AGREEMENT - Page 107
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Party in respect of), all interests retained by any Loan Party, including
(without limitation) the proceeds of any sale, all of which shall continue to
constitute part of the property covered by the Security Documents.
(3) ABSENCE OF DUTY. Agent shall have no obligation whatsoever to
any Lender or any other Person to assure that the property covered by the
Security Documents exists or is owned by Borrower or any other Loan Party
or is cared for, protected or insured or has been encumbered or that the
Liens granted to Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Agent in this subsection 9.2(H) or in any of the Loan
Documents, it being understood and agreed that in respect of the property
covered by the Security Documents or any act, omission or event related
thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given the Agent's own interest in property covered by the
Security Documents as one of the Lenders and that the Agent shall have no
duty or liability whatsoever to any of the other Lenders.
(I) AGENCY FOR PERFECTION. Each Lender hereby appoints each other Lender
as agent for the purpose of perfecting Lenders' security interest in assets
which, in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver
such Collateral to Agent or in accordance with Agent's instructions. Each
Lender agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to realize upon any Collateral securing the
Loans, it being understood and agreed that such rights and remedies may be
exercised only by Agent.
(J) NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless
Agent has actual knowledge thereof or Agent has received notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
Agent receives such a notice, Agent shall give prompt notice thereof to Lenders.
9.3 AMENDMENTS, CONSENTS AND WAIVERS FOR CERTAIN ACTIONS
(A) Except as otherwise provided in this subsection 9.3, in subsection
10.3, or in any Lender Addition Agreement and except as to matters set forth in
other subsections hereof as requiring only Agent's consent, the consent of
Requisite Lenders will be required to (i) amend, modify, terminate, or waive any
provision of this Agreement, including, but not limited to, any amendment,
modification, termination, or waiver with regard to Sections 6 and 7, or (ii)
amend, modify, terminate or waive any subordination provision of the
Subordination Agreements.
CREDIT AGREEMENT - Page 108
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(B) Agent may release or compromise any Collateral and the proceeds
thereof having a value not greater than ten percent (10%) of the total book
value of all Collateral, either in a single transaction or in a series of
related transactions, with the consent of Lenders owning a total of at least
eighty percent (80%) of (a) the Total Loan Commitments, or (b) if the Term Loans
have been made, the sum of the Revolving Loan Commitments and the outstanding
principal amount of the Term Loans, if any, or (c) if all Commitments have been
terminated, the sum of the aggregate outstanding principal amounts of the
Revolving Loan and the Term Loans. In no event, however, will Agent, acting
under the authority granted to it in this subsection 9.3(B), release or
compromise Collateral or the proceeds thereof having a total book value in
excess of twenty percent (20%) of the book value of all Collateral, as
determined by Agent, during any one calendar year period.
(C) Notwithstanding anything to the contrary contained herein, Agent may,
at its sole discretion, release or compromise Collateral and the proceeds
thereof to the extent permitted by subsection 9.2(H)(1).
(D) In the event Agent requests the consent of a Lender and does not
receive a written denial thereof within ten (10) Business Days after such
Lender's receipt of such request, then such Lender will be deemed not to have
given such consent.
(E) In the event Agent requests the consent of a Lender and such consent
is denied, then Heller or the Lender which assigned its interest in the Loans to
such Lender (the "Assigning Lender") may, at its option, require such Lender to
reassign its interest in the Loans to Heller or the Assigning Lender, as
applicable, for a price equal to the then outstanding principal amount thereof
plus accrued and unpaid interest and fees due such Lender, which interest and
fees will be paid when collected from Borrower. In the event that Heller or the
Assigning Lender elects to require any Lender to reassign its interest to Heller
or the Assigning Lender, Heller or the Assigning Lender, as applicable, will so
notify such Lender in writing within forty-five (45) days following such
Lender's denial, and such Lender will, subject to receipt of amounts owing to
such Lender, reassign its interest to Heller or the Assigning Lender, as
applicable, no later than five (5) days following receipt of such notice.
(F) In the event Agent waives (1) any Default arising under subsection
8.1(E) as a result of the breach of any of the provisions of Section 5 of this
Agreement (other than any such breach which constitutes an Event of Default) or
(2) any Default constituting a condition to the funding of any Revolving Loan or
issuance of any Lender Letter of Credit or Risk Participation Agreement, such
waiver shall expire on the date upon which the Default which was the subject of
such waiver matures into an Event of Default pursuant to the terms of this
Agreement.
9.4 SET OFF AND SHARING OF PAYMENTS
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, each Lender and each holder of any Note is
hereby authorized by Borrower at any time or
CREDIT AGREEMENT - Page 109
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from time to time, with reasonably prompt subsequent notice to Borrower (any
prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender or such
holder at any of its offices for the account of Borrower or any of its
Subsidiaries (regardless of whether such balances are then due to Borrower or
its Subsidiaries), and (B) other property at any time held or owing by such
Lender or such holder to or for the credit or for the account of Borrower or any
of its Subsidiaries, against and on account of any of the Obligations which are
not paid when due. Any Lender or holder of any Note hereby agrees that all
amounts set off and applied pursuant to this subsection shall be shared among
the Lenders or holders in accordance with their respective Pro Rata Shares and
each Lender or holder hereby agrees to promptly pay to such other Lender or
holder or to purchase for cash (and the other Lender's or holder shall sell)
participations in such other Lender's or holder's Pro Rata Share of the
Obligations in order to effect such sharing at the time of such set off and
application. Borrower agrees, to the fullest extent permitted by law, that (a)
any Lender or holder may exercise its right to set off with respect to amounts
in excess of its Pro Rata Share of the Obligations and may sell participations
to other Lenders and holders, all as more particularly set forth in the
preceding sentence and (b) any Lender or holder so purchasing a participation in
the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of Loans and other Obligations in the amount of such
participation.
SECTION 10
MISCELLANEOUS
10.1 EXPENSES AND ATTORNEYS' FEES
Whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to promptly pay all of the following fees, costs and expenses
(including, as applicable, reasonable attorney's fees, allocated costs of
internal counsel and reasonable fees of environmental consultants, industry
consultants, accountants and other professionals retained by Agent or Lenders)
all which shall be part of the Obligations, payable on demand and secured by the
Collateral:
(A) all reasonable fees, costs and expenses incurred by Agent in
connection with any matters contemplated by or arising out of this Agreement or
the other Loan Documents, including the following, (i) such fees, costs and
expenses incurred in connection with the examination, review, due diligence
investigation, documentation, syndication and closing of the financing
arrangements evidenced by the Loan Documents; (ii) such fees, costs and expenses
incurred in connection with the negotiation, preparation, execution, syndication
and administration of the Loan Documents, the Loans, and any amendments,
modifications and waivers relating thereto; (iii) such fees, costs and expenses
incurred in creating, perfecting and maintaining perfection of Liens in favor of
Agent, on behalf of Lenders, pursuant to any Loan Document, including lien
search fees, filing and recording fees, taxes and expenses, title insurance
policy fees, fees and expenses of attorneys for providing
CREDIT AGREEMENT - Page 110
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such opinions as Agent may reasonably request and fees and expenses of attorneys
to Agent; (iv) such fees, costs and expenses incurred in connection with the
review, documentation, negotiation, closing and administration of any
subordination or intercreditor agreements; (v) fees, costs and expenses incurred
in connection with forwarding to Borrower the proceeds of Loans including
Agent's standard wire transfer fee; and (vi) fees, costs, expenses and bank
charges, including bank charges for returned checks, incurred by Agent in
establishing, maintaining and handling lock box accounts, blocked accounts or
other accounts for collection of the Collateral;
(B) all reasonable fees, costs and expenses incurred by any issuer of any
Lender Letter of Credit in connection with the issuance and administration of
Lender Letters of Credit, including standard charges assessed by the issuer of
any Lender Letter of Credit in connection with the negotiation, amendment or
cancellation of any Lender Letter of Credit and standard wire transfer fees;
(C) all reasonable fees, costs and expenses incurred by Agent or any
Lender in any action to enforce this Agreement or the other Loan Documents or to
collect any payments due from Borrower or any other Loan Party under this
Agreement, the Notes or any other Loan Document or incurred in connection with
any actual or proposed refinancing or restructuring of the credit arrangements
provided under this Agreement whether in the nature of a "workout" or in
connection with any insolvency or bankruptcy proceedings or otherwise.
Borrower hereby authorizes and directs Agent, at Agent's option, to debit
the Loan Account (by increasing the principal balance of the Revolving Loan) in
the amount of any such fees and expenses when due.
10.2 INDEMNITY
IN ADDITION TO THE PAYMENT OF EXPENSES PURSUANT TO SUBSECTION 10.1 AND IN
ADDITION AND NOT IN LIMITATION OF ANY OTHER INDEMNIFICATION PROVISIONS ELSEWHERE
IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, WHETHER OR NOT THE TRANSACTIONS
CONTEMPLATED HEREBY ARE CONSUMMATED, BORROWER AGREES TO INDEMNIFY, PAY AND HOLD
AGENT, EACH LENDER, AND ANY HOLDER OF ANY OF THE NOTES, AND THE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, AFFILIATES AND ATTORNEYS OF AGENT, EACH LENDER AND
SUCH HOLDERS (COLLECTIVELY CALLED THE "INDEMNITEES") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER (INCLUDING THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
FOR SUCH INDEMNITEES IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR
JUDICIAL PROCEEDING COMMENCED OR THREATENED, WHETHER OR NOT SUCH INDEMNITEE
SHALL BE DESIGNATED A PARTY THERETO) THAT MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST THAT INDEMNITEE, IN ANY MANNER RELATING TO OR
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ARISING OUT OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, THE STATEMENTS
CONTAINED IN THE COMMITMENT OR FEE LETTERS, IF ANY, DELIVERED BY ANY LENDER, ANY
LENDER'S AGREEMENT TO MAKE THE LOANS HEREUNDER, THE USE OR INTENDED USE OF THE
PROCEEDS OF ANY OF THE LOANS OR THE EXERCISE OF ANY RIGHT OR REMEDY HEREUNDER OR
UNDER THE OTHER LOAN DOCUMENTS (THE "INDEMNIFIED LIABILITIES"); PROVIDED THAT
BORROWER SHALL HAVE NO OBLIGATION TO AN INDEMNITEE HEREUNDER WITH RESPECT TO
INDEMNIFIED LIABILITIES ARISING FROM (A) VALID CLAIMS (AS DETERMINED PURSUANT TO
A NONAPPEALABLE ORDER OF ANY COURT OF COMPETENT JURISDICTION) ARISING OUT OF THE
BREACH BY THAT INDEMNITEE OF ANY LOAN DOCUMENT OR (B) THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THAT INDEMNITEE, AS EITHER OF THE FOREGOING SHALL BE
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, BORROWER SHALL CONTRIBUTE THE MAXIMUM PORTION THAT IT IS PERMITTED TO
PAY AND SATISFY UNDER APPLICABLE LAW TO THE PAYMENT AND SATISFACTION OF ALL
INDEMNIFIED LIABILITIES INCURRED BY THE INDEMNITEES OR ANY OF THEM. IN THE EVENT
OF ANY CONFLICT BETWEEN THE INDEMNIFICATION PROVISIONS CONTAINED IN THIS
SUBSECTION 10.2 AND ANY OTHER INDEMNIFICATION PROVISION CONTAINED IN THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE OTHER INDEMNIFICATION PROVISIONS
CONTAINED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AS APPLICABLE, SHALL
CONTROL.
10.3 AMENDMENTS AND WAIVERS
(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement or of any other Loan
Document or consent to any departure by any Loan Party therefrom, shall in any
event be effective unless the same shall be in writing and signed by Requisite
Lenders and the applicable Loan Party; PROVIDED, that (1) no amendment,
modification, termination or waiver shall, unless in writing and signed by all
Lenders, do any of the following: (a) increase the Commitment of any Lender; (b)
reduce the principal of, rate of interest on or fees payable with respect to any
Loan; (c) extend or defer the date for the payment of interest or fees on any
Loans; (d) extend the final scheduled maturity date of the principal amount of
the Loans; (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans, or the percentage of Lenders which shall
be required for Lenders or any of them to take any action hereunder; (f) release
Collateral (except if the sale or disposition of such Collateral is permitted
under subsection 9.2(H)(l) and 9.3(C) or any other Loan Document) or release any
Loan Party or any Subsidiary of Borrower from its guaranty of the Obligations
under the Loan Guaranties; (g) amend or waive this subsection 10.3 or the
definitions of the terms used in this subsection 10.3 insofar as the definitions
affect the substance of this subsection 10.3; (h) amend the definition of
"Requisite Lenders"; (i) consent to the assignment or other transfer by any
CREDIT AGREEMENT - Page 112
<PAGE>
Loan Party of any of its rights and obligations under any Loan Document; and (j)
change the advance rates used for the calculation of the Borrowing Base; (2) no
amendment, modification, termination or waiver affecting the rights or duties of
Agent under any Loan Document shall in any event be effective, unless in writing
and signed by Agent, in addition to Lenders required herein to take such action;
(3) without the consent or agreement of any other Lenders, the Lenders holding
the Revolving Notes may agree to extend the Termination Date applicable to the
Revolving Loan Commitments; and (4) no amendment, modification or change in
Section 2.4(E) with respect to the application of prepayments and repayments
shall be effective unless in writing and signed by Requisite Lenders with
respect to each of the Revolving Loan Commitment, the Term Loan A Commitment and
the Term Loan B Commitment. Each amendment, modification, termination or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given. No amendment, modification, termination or waiver shall
be required for Agent to take additional Collateral pursuant to any Loan
Document. No amendment, modification, termination or waiver of any provision of
any Note shall be effective without the written concurrence of the holder of
that Note. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 10.3 shall be binding upon each
holder of the Notes at the time outstanding, each, future holder of the Notes,
and, if signed by a Loan Party, on such Loan Party.
(B) Notwithstanding subsection 10.3(A), Agent may extend the scheduled
maturity date of any Scheduled Installment to a date not later than one (1) year
after the date such Scheduled Installment was originally due with the consent of
Lenders owning a total of at least 90% of the Total Loan Commitment in which
event all Lenders will be bound to extend such scheduled maturity; provided that
(i) in no event will such extension be granted as to the final Scheduled
Installment, nor (ii) will any maturity date for either of the Term Loans be
extended beyond the final scheduled maturity date of such Term Loan, nor (iii)
will the aggregate principal amount of all Scheduled Installments for which the
scheduled maturity has been extended exceed at any one time outstanding an
amount equal to 25% of the Term Loan Commitment as originally in effect.
(C) In the event Agent requests a consent or a waiver from any Lender or
requests that such Lender otherwise agree to a modification to a Loan Document
and such consent or waiver is denied, or such Lender does not agree to such
other modification, then Agent or any other Lender may, at its option, require
such Lender to reassign without recourse its interest in the Loans to the Person
requesting such reassignment for a price equal to the then outstanding principal
amount thereof plus accrued and unpaid interest and fees due such Lender and any
breakage costs shall be paid on the date of such reassignment. In the event
that Agent or such other Lender elects to require such Lender to reassign its
interest to Agent or such other Lender, Agent or such other Lender will so
notify such Lender in writing within forty-five (45) Business Days following
such Lender's denial or failure to agree, and such Lender will assign its
interest to Agent or such other Lender no later than five (5) Business Days
following receipt of such notice.
CREDIT AGREEMENT - Page 113
<PAGE>
10.4 RETENTION OF BORROWER DOCUMENTS
Agent and any Lender may, in accordance with Agent's or such Lender's
customary practices, destroy or otherwise dispose of all documents, schedules,
invoices or other papers, other than the Notes, delivered by any Loan Party to
Agent or such Lender unless Borrower requests in writing that same be returned.
At Borrower's expense, and, except in the case of the Notes, upon Borrower's
request, Agent or such Lender shall return such papers when Agent's or such
Lender's actual or anticipated need for same has terminated and each Lender
shall return the originals of the Notes payable to such Lender to Borrower when
all Obligations have been satisfied.
10.5 NOTICES
Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given shall be in writing addressed to
the respective party as set forth below and may be personally served,
telecopied, or sent by overnight courier service or United States mail and shall
be deemed to have been given: (a) if delivered in person, when delivered; (b) if
delivered by telecopy, on the date of transmission if transmitted on a Business
Day before 4:00 P.M. (Chicago, IllInois time) or, if not, on the next succeeding
Business Day; (c) if delivered by overnight courier, two days after delivery to
such courier properly addressed; or (d) if by U.S. Mail, four Business Days
after depositing in the United States mail, with postage prepaid and properly
addressed.
Notices shall be addressed as follows:
If to Borrower or
any other Loan Party:
Central Products Company
748 Fourth Street
Menasha, Wisconsin 54952-0330
Telephone No.: (414) 729-4227
Telecopy No.: (414) 729-4117
Attn: Alan Johnson
With a copy to:
Spinnaker Industries, Inc.
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201
Telephone No.: (214) 855-0322
Telecopy No.: (214) 855-0093
Attn: James Toman
And a copy to: Timothy Vaughan
Vaughan & Anderson
CREDIT AGREEMENT - Page 114
<PAGE>
14800 Quorum Drive, Suite 510
Dallas, Texas 75240
Telephone No. (214) 386-7767
Telecopy No. (214) 991-5446
If to Agent or
to Heller: Heller Financial, Inc.
500 West Monroe
Chicago, Illinois 60661
Attention: Portfolio Manager
Corporate Finance Group
Telephone Number: 312-441-7500
Telecopy Number: 312-441-7367
With a copy to: Heller Financial, Inc.
500 West Monroe
Chicago, Illinois 60661
Attention: Legal Department
Corporate Finance Group
Telephone Number: 312-441-7309
Telecopy Number: 312-441-7367
A notice not given as provided above shall, if it is in writing, be deemed
given if and when actually received by the party to whom given.
10.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS
All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement, the making of the Loans hereunder
and the execution and delivery of the Notes. Notwithstanding anything in this
Agreement or implied by law to the contrary, (i) the agreements of Borrower set
forth in subsections 2.2(D), 2.1(C)(2) and (5), 2.7, 2.8, 2.9, 2.10, 4.14, 5.7,
10.1 and 10.2 and the agreements of Lenders set forth in subsection 9.3 shall
survive the payment of the Loans and the termination of this Agreement. Subject
to subsection 10.8, all other representations, warranties, and agreements of
Borrower, Agent and Lenders set forth in this Agreement shall terminate upon
payment of the Loans and the termination of this Agreement.
10.7 FAILURE OR INDULGENCE NOT WAIVER: REMEDIES CUMULATIVE
No failure or delay on the part of Agent or any Lender or any holder of any
Note in the exercise of any power, right or privilege hereunder under any other
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
CREDIT AGREEMENT - Page 115
<PAGE>
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement, and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.8 MARSHALING; PAYMENTS SET ASIDE
Neither Agent nor any Lender shall be under any obligation to marshal any
assets in favor of any Loan Party or any other party or against or in payment of
any or all of the Obligations. To the extent that any Loan Party makes a payment
or payments to Agent and/or any Lender or Agent and/or any Lender enforce their
security interests or exercise their 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
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights 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.
10.9 INDEPENDENCE OF COVENANTS
All covenants hereunder shall be given in any jurisdiction independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
10.10 SEVERABILITY
The invalidity, illegality or unenforceability in any jurisdiction of any
provision in or obligation under this Agreement, the Notes or other Loan
Documents shall not affect or impair the validity, legality or enforceability of
the remaining provisions or obligations under this Agreement, the Notes or other
Loan Documents or of such provision or obligation in any other jurisdiction.
10.11 LENDERS' OBLIGATIONS SEVERAL: INDEPENDENT NATURE OF LENDERS'
RIGHTS
The obligation of each Lender hereunder is several and not joint and no
Lender shall be responsible for the obligation or commitment of any other Lender
hereunder. In the event that any Lender at any time should fail to make a loan
as herein provided, the Lenders, or any of them, at their sole option, may make
the Loan that was to have been made by the Lender so failing to make such Loan.
Nothing contained in any Loan Document and no action taken by Agent or any
Lender pursuant hereto or thereto shall be deemed to constitute Lenders to be a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and, subject to the terms of any Lender Addition Agreement,
each Lender shall be entitled to protect and enforce its rights arising out of
this
CREDIT AGREEMENT - Page 116
<PAGE>
Agreement and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
10.12 HEADINGS
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.13 APPLICABLE LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
10.14 SUCCESSORS AND ASSIGNS: SUBSEQUENT HOLDERS OF NOTES
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, the Indemnitees (a defined in subsection 10.2) and their
respective successors and assigns except that neither Borrower or any other Loan
Party may assign its rights or obligations hereunder without the written consent
of all Lenders. Lenders' rights of assignment are subject to subsection 9.1.
10.15 NO FIDUCIARY RELATIONSHIP
No provision in this Agreement or in any of the other Loan Documents and no
course of dealing between the parties shall be deemed to create any fiduciary
duty by Agent or any Lender to Borrower or any other Loan Party.
10.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS
BORROWER AND EACH OTHER LOAN PARTY HEREBY EACH CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREE THAT, SUBJECT TO AGENT'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES
OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER AND
EACH OTHER LOAN PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT,
SUCH NOTE, SUCH OTHER LOAN DOCUMENT, OR SUCH OBLIGATION. BORROWER AND EACH
OTHER LOAN PARTY DESIGNATES AND APPOINTS CT CORPORATION SYSTEMS, 208 SOUTH
LASALLE, CHICAGO,
CREDIT AGREEMENT - Page 117
<PAGE>
ILLINOIS 60604, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY BORROWER
OR EACH OTHER LOAN PARTY WHICH AGREE IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER AND EACH OTHER LOAN
PARTY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO BORROWER AND EACH OTHER
LOAN PARTY AT ITS ADDRESS PROVIDED IN SUBSECTION 10.5 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY BORROWER OR
ANY OTHER LOAN PARTY REFUSES TO ACCEPT SERVICE, BORROWER AND EACH OTHER LOAN
PARTY HEREBY AGREES THAT SERVICE UPON THEM BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST BORROWER OR ANY OTHER LOAN PARTY IN THE COURTS OF ANY OTHER
JURISDICTION.
10.17 WAIVER OF JURY TRIAL
BORROWER, EACH OTHER LOAN PARTY, AGENT AND EACH LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. TO THE EXTENT PERMITTED
BY LAW, BORROWER, EACH OTHER LOAN PARTY, AGENT AND EACH LENDER ALSO WAIVE ANY
BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF THE AGENT OR LENDERS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. BORROWER, EACH OTHER LOAN PARTY, AGENT AND EACH LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. BORROWER, EACH OTHER LOAN PARTY, AGENT AND EACH LENDER FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
CREDIT AGREEMENT - Page 118
<PAGE>
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.18 CONFIDENTIALITY
Each Lender agrees to exercise its best efforts to keep any non-public
information delivered or made available to such Lender pursuant to the Loan
Documents confidential from any Person other than Persons employed or retained
by such Lender who are or are expected to become engaged in evaluating,
approving, structuring, or administering the Loans; PROVIDED that, nothing
herein shall prevent any Lender from disclosing such information to any bona
fide assignee, transferee or participant or any potential assignee, transferee
or participant that has agreed to comply with this subsection 10.18 in
connection with the contemplated assignment or transfer of any Loans or
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process or as required by the order
of any court of competent jurisdiction or as required in connection with the
exercise of any remedy under the Loan Documents.
10.19 ENTIRE AGREEMENT
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN
EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY
AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.
10.20 COUNTERPARTS; EFFECTIVENESS
This Agreement and any amendments, waivers, consents, or supplements may be
executed in any number of counterparts and on telecopy counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
10.21 LIMITATION OF LIABILITY
Neither Agent, any Lender, nor any Affiliate, officer, director, employee,
attorney, or agent of Agent or any Lender shall have any liability with respect
to, and Borrower, Holdings (and by its execution of the Loan Documents to which
it is a party, each other Loan Party) hereby waives,
CREDIT AGREEMENT - Page 119
<PAGE>
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by any Loan
Party in connection with, arising out of, or in any way related to, this
Agreement, any of the transactions contemplated by this Agreement or any of the
other Loan Documents. Borrower, Holdings (and by its execution of the Loan
Documents to which it is a party, each other Loan Party) hereby waives,
releases, and agrees not to sue Agent or any Lender or any of Agent's or any
Lender's Affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement, or any of the transactions contemplated
by this Agreement or any of the other Loan Documents.
10.22 NO DUTY
All attorneys, accountants, appraisers, and other professional Persons and
consultants retained by Agent or any Lender shall have the right to act
exclusively in the interest of Agent or such Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to Borrower, any Loan Party, any of Borrower's
shareholders or any other Person.
10.23 CONSTRUCTION
Agent, Holdings, Borrower and Lenders acknowledge that each of them has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel and that this Agreement, the other Loan Documents shall be construed as
if jointly drafted by Agent, Holdings, Borrower and Lenders.
10.24 ADDITIONAL SUBORDINATED INDEBTEDNESS
Agent and Lenders acknowledge that, prior to the Closing Date, Borrower has
informed Agent and Lenders that after the Closing Date, Borrower intends to
request that Agent and Lenders consent to the issuance by Borrower of additional
Subordinated Indebtedness in the aggregate principal amount of $10,000,000.
Each Loan Party agrees that the acknowledgment of the receipt of such notice
from Borrower by Agent and Lenders does not constitute the consent of or the
granting of permission by Agent or any Lender to such additional Subordinated
Indebtedness nor does it obligate Agent or any Lender to consent to or permit
such additional Subordinated Indebtedness.
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
CREDIT AGREEMENT - Page 120
<PAGE>
Witness the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
CENTRAL PRODUCTS ACQUISITION CORP.
By: /s/ Ned N. Fleming, III
-----------------------------------------
Ned N. Fleming, III, President
SPINNAKER INDUSTRIES, INC.
By: /s/ Ned N. Fleming, III
-----------------------------------------
Ned N. Fleming, III, President
Term Loan A Commitment: HELLER FINANCIAL, INC.,
$20,000,000
as Agent and as a Lender
Term Loan B Commitment: By: /s/ Charles Nelson Rolfe, IV
$16,000,000 -----------------------------------------
Charles Nelson Rolfe, IV, Vice President
Revolving Loan Commitment:
$24,000,000
CREDIT AGREEMENT - Signature Page
<PAGE>
EXHIBIT 7.3
TERM NOTE A
$20,000,000.00 September 29, 1995
FOR VALUE RECEIVED, CENTRAL PRODUCTS ACQUISITION CORP., a Delaware
corporation ("Borrower"), promises to pay to the order of HELLER FINANCIAL,
INC., a Delaware corporation ("PAYEE"), on or before the Scheduled Term Loan A
Installment dates (as defined in the Credit Agreement referred to below), the
lesser of (i) TWENTY MILLION and No/100 DOLLARS ($20,000,000.00), or (ii) the
unpaid principal amount of all advances made by Payee to Borrower in connection
with Term Loan A under the Credit Agreement referred to below.
Borrower also promises to pay interest on the unpaid principal amount of
this Term Note A at the rates and at the times which shall be determined in
accordance with the provisions of the Credit Agreement dated as of September 29,
1995, by and among Borrower, Spinnaker Industries, Inc. and Heller Financial,
Inc. (said Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT"; capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement).
This Term Note A is the "Term Note A" as defined in the Credit Agreement
and is issued pursuant to, and entitled to the benefits of, the Credit Agreement
to which reference is hereby made for a more complete statement of the terms and
conditions under which the Term Loan A evidenced hereby is made and is to be
repaid. This Term Note A is executed to evidence the indebtedness incurred under
the Term Loan A made pursuant to the Credit Agreement.
Borrower shall make principal payments on this Term Note A on such dates as
required pursuant to the terms of the Credit Agreement and in an amount
determined in accordance with the provisions thereof; PROVIDED that the last
such installment shall be in an amount sufficient to repay the entire unpaid
principal balance on this Term Note A, together with all unpaid interest
thereon.
All payments of principal and interest due in respect of this Term Note A
shall be made without deduction, defense, set-off or counterclaim, in lawful
money of the United States of America, and in same day funds and delivered to
Heller by wire transfer to Heller's Account, ABA No. 0710-0001-3, Account No.
5500540 at First National Bank of Chicago, One First National Plaza, Chicago,
Illinois 60670, Reference: Heller Corporate Finance Group for the benefit of
Central Products Acquisition Corp. or at such other place as shall be designated
by notice for such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Term Note A shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Term Note A.
Payee and any subsequent holder of this Term Note A agree that before
disposing of this Term Note A or any part hereof, it will make a notation hereon
of all principal payments previously made hereunder and of the date to which
interest hereon has been paid; PROVIDED, HOWEVER, that the failure to make a
notation of any payment made on this Term Note A shall not limit, enlarge or
otherwise affect the obligation of Borrower hereunder with respect to payments
of principal or interest on this Term Note A.
This Term Note A is subject to mandatory and voluntary prepayment by
Borrower as provided in Section 2.4 of the Credit Agreement.
TERM NOTE A - Page 1
<PAGE>
THIS TERM NOTE A SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Term Note A may become, or may be declared to be, due
and payable in the manner, upon the conditions and with the effect provided in
the Credit Agreement.
The terms of this Term Note A are subject to amendment only in the manner
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Term
Note A or the Credit Agreement shall alter or impair the obligation of Borrower,
which is absolute and unconditional, to pay the principal of and interest on
this Term Note A at the place, at the respective times, and in the currency
herein prescribed.
Borrower promises to pay pursuant and subject to Section 10.1(C) of the
Credit Agreement all costs and expenses, including reasonable attorneys' fees,
incurred in the collection and enforcement of this Term Note A. Borrower hereby
waives diligence, presentment, protest, demand, notice of intent to accelerate,
notice of acceleration and any other notice of every kind (except such notices
as may be required under the Credit Agreement) and, to the full extent permitted
by law, the right to plead any statute of limitations as a defense to any demand
hereunder.
IN WITNESS WHEREOF, Borrower has caused this Term Note A to be executed and
delivered by its duly authorized officer, as of the day and year first written
above.
CENTRAL PRODUCTS ACQUISITION CORP.
Signature: /s/ Ned N. Fleming, III
------------------------------
Ned N. Fleming, III, President
TERM NOTE A - Page 2
<PAGE>
EXHIBIT 7.4
TERM NOTE B
$16,000,000.00 September 29, 1995
FOR VALUE RECEIVED, CENTRAL PRODUCTS ACQUISITION CORP., a Delaware
corporation ("Borrower"), promises to pay to the order of HELLER FINANCIAL,
INC., a Delaware corporation ("PAYEE"), on or before the Term Loan B Expiry Date
(as defined in the Credit Agreement referred to below), the lesser of
(i) SIXTEEN MILLION and No/100 DOLLARS ($16,000,000.00), or (ii) the unpaid
principal amount of all advances made by Payee to Borrower in connection with
Term Loan B under the Credit Agreement referred to below.
Borrower also promises to pay interest on the unpaid principal amount of
this Term Note B at the rates and at the times which shall be determined in
accordance with the provisions of the Credit Agreement dated as of September 29,
1995, by and among Borrower, Spinnaker Industries, Inc. and Heller Financial,
Inc. (said Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT"; capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement).
This Term Note B is the "Term Note B" as defined in the Credit Agreement
and is issued pursuant to, and entitled to the benefits of, the Credit Agreement
to which reference is hereby made for a more complete statement of the terms and
conditions under which the Term Loan B evidenced hereby is made and is to be
repaid. This Term Note B is executed to evidence the indebtedness incurred under
the Term Loan B made pursuant to the Credit Agreement.
Borrower shall make principal payments on this Term Note B on such dates as
required pursuant to the terms of the Credit Agreement and in an amount
determined in accordance with the provisions thereof; PROVIDED that the last
such installment shall be in an amount sufficient to repay the entire unpaid
principal balance on this Term Note B, together with all unpaid interest
thereon.
All payments of principal and interest due in respect of this Term Note B
shall be made without deduction, defense, set-off or counterclaim, in lawful
money of the United States of America, and in same day funds and delivered to
Heller by wire transfer to Heller's Account, ABA No. 0710-0001-3, Account No.
5500540 at First National Bank of Chicago, One First National Plaza, Chicago,
Illinois 60670, Reference: Heller Corporate Finance Group for the benefit of
Central Products Acquisition Corp. or at such other place as shall be designated
by notice for such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Term Note B shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Term Note B.
Payee and any subsequent holder of this Term Note B agree that before
disposing of this Term Note B or any part hereof, it will make a notation hereon
of all principal payments previously made hereunder and of the date to which
interest hereon has been paid; PROVIDED, HOWEVER, that the failure to make a
notation of any payment made on this Term Note B shall not limit, enlarge or
otherwise affect the obligation of Borrower hereunder with respect to payments
of principal or interest on this Term Note B.
TERM NOTE B - Page 1
<PAGE>
This Term Note B is subject to mandatory and voluntary prepayment by
Borrower as provided in Section 2.4 of the Credit Agreement.
THIS TERM NOTE B SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Term Note B may become, or may be declared to be, due
and payable in the manner, upon the conditions and with the effect provided in
the Credit Agreement.
The terms of this Term Note B are subject to amendment only in the manner
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Term
Note B or the Credit Agreement shall alter or impair the obligation of Borrower,
which is absolute and unconditional, to pay the principal of and interest on
this Term Note B at the place, at the respective times, and in the currency
herein prescribed.
Borrower promises to pay pursuant and subject to Section 10.1(C) of the
Credit Agreement all costs and expenses, including reasonable attorneys' fees,
incurred in the collection and enforcement of this Term Note B. Borrower hereby
waives diligence, presentment, protest, demand, notice of intent to accelerate,
notice of acceleration and any other notice of every kind (except such notices
as may be required under the Credit Agreement) and, to the full extent permitted
by law, the right to plead any statute of limitations as a defense to any demand
hereunder.
IN WITNESS WHEREOF, Borrower has caused this Term Note B to be executed and
delivered by its duly authorized officer, as of the day and year first written
above.
CENTRAL PRODUCTS ACQUISITION CORP.
By: /s/ Ned N. Fleming, III
--------------------------------
Ned N. Fleming, III, President
TERM NOTE B - Page 2
<PAGE>
EXHIBIT 7.5
REVOLVING NOTE
$24,000,000.00 September 29, 1995
FOR VALUE RECEIVED, CENTRAL PRODUCTS ACQUISITION CORP., a Delaware
corporation ("Borrower"), promises to pay to the order of HELLER FINANCIAL,
INC., a Delaware corporation ("Payee"), on or before the Expiry Date (as defined
in the Credit Agreement referred to below), the lesser of (i) TWENTY-FOUR
MILLION and No/100 DOLLARS ($24,000,000.00), or (ii) the unpaid principal amount
of all advances made by Payee to Borrower under the Revolving Loan pursuant to
the Credit Agreement referred to below.
Borrower also promises to pay interest on the unpaid principal amount of
this Revolving Note (this "Note") at the rates and at the times which shall be
determined in accordance with the provisions of the Credit Agreement dated as of
September 29, 1995, by and among Borrower, Spinnaker Industries, Inc. and Heller
Financial, Inc. (said Credit Agreement, as it may hereafter be amended,
restated, supplemented or otherwise modified from time to time, being the
"CREDIT AGREEMENT"; capitalized terms used herein without definition shall have
the meanings set forth in the Credit Agreement).
This Note is a "Revolving Note" as defined in the Credit Agreement and is
issued pursuant to, and entitled to the benefits of, the Credit Agreement to
which reference is hereby made for a more complete statement of the terms and
conditions under which the Revolving Loan evidenced hereby is made and is to be
repaid. This Note is executed to evidence the indebtedness incurred under the
Revolving Loans made pursuant to the Credit Agreement.
All payments of principal and interest due in respect of this Note shall be
made without deduction, defense, set-off or counterclaim, in lawful money of the
United States of America, and in same day funds and delivered to Heller by wire
transfer to Heller's Account, ABA No. 0710-0001-3, Account No. 5500540 at First
National Bank of Chicago, One First National Plaza, Chicago, Illinois 60670,
Reference: Heller Corporate Finance Group for the benefit of Central Products
Acquisition Corp. or at such other place as shall be designated by notice for
such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
Payee and any subsequent holder of this Note agree that before disposing of
this Note or any part hereof, it will make a notation hereon of all principal
payments previously made hereunder and of the date to which interest hereon has
been paid; PROVIDED, HOWEVER, that the failure to make a notation of any payment
made on this Note shall not limit, enlarge or otherwise affect the obligation of
Borrower hereunder with respect to payments of principal or interest on this
Note.
This Note is subject to mandatory and voluntary prepayment by Borrower as
provided in Section 2.4 of the Credit Agreement; PROVIDED, that any principal
amounts of the Revolving Loan evidenced by this Note which are repaid may be
reborrowed at any time prior to the Expiry Date in accordance with Section
2.1(C).
REVOLVING NOTE - Page 1
<PAGE>
THIS NOTE SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
No reference herein to the Credit Agreement and no provisions of this Note
or the Credit Agreement shall alter or impair the obligation of Borrower, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
Borrower promises to pay pursuant and subject to Section 10.1(C) of the
Credit Agreement all costs and expenses, including reasonable attorneys' fees,
incurred in the collection and enforcement of this Note. Borrower hereby waives
diligence, presentment, protest, demand, notice of intent to accelerate, notice
of acceleration and any other notice of every kind (except such notices as may
be required under the Credit Agreement) and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first written
above.
CENTRAL PRODUCTS ACQUISITION CORP.
Signature: /s/ Ned N. Fleming, III
------------------------------
Ned N. Fleming, III, President
GW02/176049.03
<PAGE>
EXHIBIT 7.6
The payment of principal and interest on this Note is
subject to certain subordination provisions set forth in
paragraph 3 herein. This Note was originally issued on
September 29, 1995 and has not been registered under the
Securities Act of 1933, as amended, or any comparable state
securities law. The transfer of this Note is subject to
certain restrictions set forth in paragraph 7 herein.
SUBORDINATED PROMISSORY NOTE.
September 29, 1995 $25,000,000.00
Spinnaker Industries, Inc., a Delaware corporation (the "Company"), hereby
promises to pay to Alco Standard Corporation ("Alco"), or its permitted assigns
(Alco and each of its permitted assigns is a "Holder") the principal amount of
Twenty-five Million and No/100 Dollars, together with interest thereon
calculated from the date hereof in accordance with the provisions of this Note.
1. PAYMENT OF INTEREST.
(a) With respect to $15,000,000 of the original amount advanced by
Alco to the Company hereunder (the "$15,000,000 Portion"), interest shall accrue
from September 29, 1995 at the rate of eight percent (8%) per annum, on the
unpaid principal amount of the $15,000,000 Portion outstanding from time to
time. Subject to the provisions of paragraph 3 hereof, the Company shall pay to
the Holder, in arrears, all accrued interest on each March 31 and September 30
during the term of this Note, beginning on March 31, 1996. Any accrued interest
which for any reason has not theretofore been paid with respect to the
$15,000,000 Portion shall be paid in full on the date on which the remaining
principal amount of the $15,000,000 Portion is paid.
(b) With respect to the remaining $10,000,000 of the original amount
advanced by Alco to the Company hereunder (the "$10,000,000 Portion"), interest
shall accrue from September 29, 1995 at the rate of eleven percent (11%) per
annum, on the unpaid principal amount of the $10,000,000 Portion outstanding
from time to time. Subject to the provisions of paragraph 3 hereof, the Company
shall pay to the Holder, in arrears, all accrued interest on each December 31,
March 31, June 30 and September 30 during the term of this Note, beginning on
December 31, 1995. Any accrued interest which for any reason has not
theretofore been paid with respect to the $10,000,000 Portion shall be paid in
full on the date on which the remaining principal amount of the $10,000,000
Portion is paid.
2. PAYMENT OF PRINCIPAL.
(a) SCHEDULED PAYMENT. The Company shall repay the entire principal
amount of the $15,000,000 Portion, together with all accrued and unpaid
<PAGE>
interest thereon, on March 31, 2003. The Company shall repay the principal
amount of the $10,000,000 Portion in four payments of $2,500,000 each on
September 30, 2002, September 30, 2003, September 30, 2004 and September 30,
2005. The Company shall repay all accrued and unpaid interest with respect to
the $10,000,000 Portion on September 30, 2005.
(b) PREPAYMENTS. Subject to the provisions of paragraph 3 hereof,
the Company may, at any time and from time to time without premium or penalty,
prepay all or a portion of the outstanding principal amount of this Note.
3. SUBORDINATION; RESTRICTIONS ON PAYMENT.
(a) Notwithstanding anything in this Note to the contrary, the
obligations of the Company in respect of the principal, interest, fees and
charges on this Note shall be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all debt incurred by the
Company except debt that by its terms is not senior in right of payment to this
Note (the "Superior Debt").
(b) Upon the occurrence of any liquidation, dissolution, bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company ("Act of Bankruptcy") or upon any acceleration of the Superior Debt,
then:
(i) the holders of Superior Debt shall be entitled to receive
payment in full of all principal, premium, interest, fees and charges then due
on all Superior Debt (including interest, fees and charges accruing thereon
after the commencement of any such proceedings) before the Holder is entitled to
receive any payment on account of principal, interest or other amounts due (or
past due) upon this Note.
(ii) any payment or distribution of assets of the Company, of any
kind or character, whether in cash, property or securities, to which the Holder
would be entitled except for the provisions of this subparagraph 3(b) shall be
paid or delivered by the Company directly to the holders of all Superior Debt,
for application in payment thereof until all Superior Debt (including interest,
fees and charges accrued thereon after the date of commencement of such
proceedings) shall have been paid in full.
(c) Until all Superior Debt shall have been paid in full, the Company
shall not, directly or indirectly, make any payment of any amount payable with
respect to this Note if there shall have occurred and be continuing or there
would exist as a result of such payment or distribution any default or event of
default under any of the terms of any agreement relating to Superior Debt which
(whether with or without notice, lapse of time or both) would permit the holder
of such Superior Debt to accelerate all or any portion of such Superior Debt
(collectively, the "Blockage
2
<PAGE>
Events"); provided that if, immediately prior to the time a particular payment
is due hereunder, no Blockage Event is continuing, then the Company shall be
permitted to and shall, pay to the Holder the maximum portion of such amount as
would not create a default under any of the terms of any Superior Debt agreement
which would permit the holder of such Superior Debt to accelerate all or any
portion of such Superior Debt. The Company shall use reasonable efforts to
notify the Holder in writing of the occurrence of a Blockage Event; provided
that notwithstanding anything to the contrary in this Note, the failure of the
Company to so notify the Holder of the occurrence of a Blockage Event shall have
no effect on the obligations of the Company or the Holder during the continuance
of such Blockage Event as set forth herein.
(d) The provisions of this paragraph 3 are solely for the purpose of
defining the relative rights of the holders of Superior Debt, on the one hand,
and the Holder on the other, against the Company and its assets, and nothing
herein is intended to or shall impair, as between the Company and the Holder,
the obligations of the Company which are absolute and unconditional, to pay to
the Holder the principal and interest on this Note as and when they become due
and payable in accordance with their terms, or is intended to or will affect the
relative rights of the Holder and creditors of the Company other than the
holders of Superior Debt, nor, except as provided in this paragraph 3, will
anything herein or therein prevent the Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights, if any, under this paragraph 3 of the holders of Superior Debt in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy and subject to this paragraph 3.
4. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "Event of Default"
shall be deemed to have occurred if:
(i) the Company shall default in the payment of interest or
principal of this Note on the date when due, whether at maturity, by
acceleration or otherwise; or
(ii) the Company shall make a Restricted Payment (defined in
paragraph 5); or
(iii) an Act of Bankruptcy occurs.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If an Event of Default of the type described in clause (i)
of subparagraph 4(a) has occurred and is continuing, the Holder may declare all
or any
3
<PAGE>
portion of the outstanding principal amount of this Note due and payable and
demand immediate payment of all or any portion of the outstanding principal
amount of this Note. If the Holder demands immediate payment of all or any
portion of this Note, the Company shall immediately pay to such Holder the
principal amount of this Note requested to be paid together with all accrued and
unpaid interest thereon.
(ii) If an Event of Default of the type described in clause (ii)
of subparagraph 4(a) has occurred, all of the outstanding principal amount of
this Note shall automatically be immediately due and payable without any notice
or other action on the part of the Holder.
(iii) Upon the occurrence of an Event of Default, the Holder
shall also have any other rights which such person may have been afforded by the
Company under any contract or agreement at any time and any other rights which
such person may have pursuant to applicable law.
5. RESTRICTED PAYMENTS. So long as any portion of the principal amount
of this Note (together with all accrued interest thereon) remains outstanding,
without the prior written consent of the Holder, the Company shall not
(a) declare or pay any cash dividends or make any cash distributions upon any of
its Common Stock or (b) redeem, retire, purchase or otherwise acquire any of its
equity securities for cash (other than redemptions, retirements, purchases or
acquisitions of equity securities from employees in connection with the
termination of their employment) each such prohibited declaration, payment,
distribution, purchase, redemption, acquisition or retirement being referred to
as a "Restricted Payment").
6. FINANCIAL STATEMENTS. So long as any portion of the principal amount
of this Note remains outstanding, the Company will deliver to the Alco (a) as
soon as available but in any event within 45 days after the end of each
quarterly accounting period in each fiscal year, unaudited consolidated
statements of income for such quarterly period, and consolidated balance sheets
as of the end of such quarterly period, and all such statements will be prepared
in accordance with United States generally accepted accounting principals,
consistently applied ("GAAP"), and (b) within 90 days after the end of each
fiscal year, audited consolidated statements of income for such fiscal year and
audited consolidated balance sheets as of the end of such fiscal year, all
prepared in accordance with GAAP.
7. TRANSFER RESTRICTIONS. This Note has not been registered under the
Securities Act of 1933, as amended, or any comparable state securities law. If
the Holder desires to transfer this Note, such person first must furnish the
Company with (i) a written opinion reasonably satisfactory to the Company in
form and substance from counsel reasonably satisfactory to the Company to the
effect that the Holder may transfer this Note as desired without registration
under the Securities Act or any relevant state securities law and (ii) a written
undertaking executed by
4
<PAGE>
the desired transferee reasonably satisfactory to the Company in form and
substance agreeing to be bound by all of the provisions of this Note, including,
without limitation, the subordination provisions set forth in paragraph 3
hereof.
8. CANCELLATION. After all principal and accrued interest at any time
owed on this Note has been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be reissued.
9. PLACE OF PAYMENT; NOTICES. Payments of principal and interest and any
notice hereunder are to be delivered to the Holder at the following address:
Alco Standard Corporation
825 Duportail Road
Chesterbrook, Wayne, PA 19087
Attention: Treasurer
Notices to the other parties hereto are to be delivered at the following
addresses:
Spinnaker Industries, Inc. Lynch Corporation
600 North Pearl, Suite 2160 8 Sound Shore Drive, Suite 290
Dallas, TX 75201 Greenwich, Connecticut 06830
Attention: James W. Toman Attention: Robert E. Dolan
Other addresses may be specified in written notice delivered to the other
parties hereto. Notices shall be deemed received when delivered personally or
one day after being sent by Federal Express or other overnight carrier or
five days after being sent by certified or registered mail.
10. GOVERNING LAWS. The validity, construction, and interpretation of
this Note will be governed by the internal laws, and not the laws of conflicts,
of the State of New York.
11. CONVERSION. Alco and the Company shall promptly convert this Note
into the subordinated debt instruments and related documents described in
Appendix 1 and 2 attached hereto.
12. PARTIES. Each of Alco, the Company, and Lynch Corporation ("Lynch")
agrees that, in connection with the conversion described in paragraph 11, it
will execute and deliver the documents required to be executed and delivered by
it in Appendix 1 and 2. The Company will be responsible for preparing the
documents described in Appendix 1 and 2. Each party will bear its own legal
fees and expenses
5
<PAGE>
in connection with the conversion. Lynch and Alco are signatories to this Note
solely for the purpose of agreeing to the conversion procedure set forth in
paragraph 11 and agreeing to be bound by the provisions of this paragraph 12.
IN WITNESS WHEREOF, the parties have executed and delivered this Note on
the date first above written.
SPINNAKER INDUSTRIES, INC.
By: /s/ Richard J. Boyle
-----------------------------------------
Title: Chairman of the Board
-------------------------------------
The undersigned agree to be bound by the provisions of paragraphs 11 and
12 only and are not subject to any other provisions or obligations of this
Note.
LYNCH CORPORATION
By: /s/ Robert E. Dolan
-----------------------------------------
Title: Chief Financial Officer
-------------------------------------
ALCO STANDARD CORPORATION
By: /s/ J. Kenneth Croney
-----------------------------------------
Title: Vice President
-------------------------------------
6
<PAGE>
APPENDIX 1
TERM SHEET FOR SPINNAKER OBLIGATIONS
The following outlines the terms of the Spinnaker subordinated debt and the
obligations of Spinnaker with respect to such debt.
1. $15 million convertible subordinated note.
- Spinnaker will issue a $15 million convertible subordinated note to
Alco.
- The note will bear interest at 8%.
- The term of the note will be seven and 1/2 years.
- Interest on the note will be payable semi-annually with a bullet
principal payment on maturity.
- The note will contain a PIK feature for the first three years of its
term.
- The note will be convertible into common stock of Spinnaker at a
price equal to the weighted average of all sales prices for Spinnaker
common stock on NASDAQ for the period from September 18, 1995 through
September 29, 1995 plus 10%; provided, that the conversion price
shall not be less than $50 per share or greater than $60 per share.
- A separate document will contain a put feature which will allow Alco
to put the note to Spinnaker on or after January 1, 1996. Alco shall
give 15 days' advance written notice to Spinnaker and Lynch of its
intent to exercise the put of the note. The closing of the put will
take place on the 30th day after the exercise of the put. The put
price will be equal to the unpaid principal amount of the note plus
accrued interest.
2. $10 million subordinated note.
- Spinnaker will issue a $10 million note to Alco. The original
principal amount of the note may be reduced if and to the extent Alco
receives more than $50 million cash at the closing of the purchase by
Central Products Acquisition Corp. of the common stock of Central
Products Company and certain assets owned by Unisource Worldwide,
Inc.
- The note will bear interest at 11%, and interest will be payable
quarterly.
<PAGE>
- The note will mature in ten years.
- No principal shall be payable during the first six years of the note.
Principal will be amortized equally over the last four years.
- A separate document will contain a put feature which will allow Alco
to put the note to Spinnaker on or after January 1, 1996. Alco shall
give 15 days' advance written notice to Spinnaker and Lynch of its
intent to exercise the put of the note. The closing of the put will
take place on the 30th day after the exercise of the put. The put
price will be equal to the unpaid principal amount of the note plus
accrued interest.
<PAGE>
APPENDIX 2
TERM SHEET FOR LYNCH OBLIGATIONS
The following outlines the obligations of Lynch with respect to Spinnaker's
$15 million convertible subordinated note and its $10 million note, both issued
to Alco.
1. Lynch will guarantee the payment of both notes.
2. In exchange for a demand note from Spinnaker, Lynch will loan funds
to Spinnaker necessary to honor the put options granted to Alco in
connection with the issuance of the notes.
<PAGE>
EXHIBIT 7.7
The payment of principal and interest on this Note is
subject to certain subordination provisions set forth in
paragraph 3 herein. This Note was originally issued on
September 29, 1995 and has not been registered under the
Securities Act of 1933, as amended, or any comparable state
securities law. The transfer of this Note is subject to
certain restrictions set forth in paragraph 7 herein.
SUBORDINATED PROMISSORY NOTE.
September 29, 1995 $5,000,000
Central Products Acquisition Corp., a Delaware corporation (the "Company"),
hereby promises to pay to Alco Standard Corporation (the "Seller"), or its
permitted assigns (the Seller and each of its permitted assigns is a "Holder")
the principal amount of Five Million Dollars, together with interest thereon
calculated from the date hereof in accordance with the provisions of this Note.
This Note is the "Subordinated Note" issued pursuant to that certain Stock and
Asset Purchase Agreement, dated as of September 27, 1995 (the "Purchase
Agreement"), by and among the Company, the Seller and the other parties named
therein.
1. PAYMENT OF INTEREST. This Note shall be interest free until its
first anniversary, and thereafter interest shall be payable semi-annually.
Interest shall accrue from October 1, 1996 at the rate of eight percent (8%) per
annum, on the unpaid principal amount of this Note outstanding from time to
time. Subject to the provisions of paragraph 3 hereof, the Company shall pay to
the holder of this Note, in arrears, all accrued interest on each March 31 and
September 30 during the term of this Note, beginning on March 31, 1997. Any
accrued interest which for any reason has not theretofore been paid shall be
paid in full on the date on which the remaining principal amount of this Note is
paid.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) SCHEDULED PAYMENT. Subject to any limitations established in the
documents creating the Senior Debt (as defined in paragraph 3) (the "Senior Debt
Limitations"), the Company shall repay $1,000,000 of the original principal
amount of this Note, together with all accrued and unpaid interest thereon on
December 31, 1998. The Company shall repay the entire remaining principal
amount of this Note, together with all accrued and unpaid interest thereon, on
December 31, 1999 (the "Maturity Date"). If the unpaid principal and accrued
interest are not paid on the Maturity Date because of the Senior Debt
Limitations, the Maturity Date shall be extended to December 31, 2000 (the
"Extended Maturity Date"). If the unpaid principal and interest are not paid on
the Extended Maturity Date because of the Senior Debt Limitations, the Seller
shall have the right to require Spinnaker Industries, Inc. ("Spinnaker") to
purchase this Note for a cash amount
<PAGE>
equal to the unpaid principal of, and accrued and unpaid interest on, this Note
(the "Put"). The Put may be exercised at any time after the Extended Maturity
Date by the Seller's giving written notice to the Company and Spinnaker 15 days
prior to the date the Seller desires to exercise the Put. The closing of the
Put shall be 30 days after the exercise date, unless that date is not a business
day, in which case the closing will be the next business day.
(b) PREPAYMENTS. Subject to the provisions of paragraph 3 hereof,
the Company may, at any time and from time to time without premium or penalty,
prepay all or a portion of the outstanding principal amount of this Note.
3. SUBORDINATION; RESTRICTIONS ON PAYMENT. The indebtedness evidenced by
this instrument, including the principal hereof and the interest hereon, is
expressly subordinated and subject in right of payment to the prior and
indefeasible payment in full of all "Senior Debt" defined and described in the
Seller Subordination Agreement dated September 29, 1995 between Alco Standard
Corporation, an Ohio corporation, and Heller Financial, Inc., a Delaware
corporation (as the same may hereafter be amended, supplemented, modified and/or
restated, the "Subordination Agreement"), to the full extent and in the manner
set forth in the Subordination Agreement, and reference is made to the
Subordination Agreement for a full statement of the terms and conditions of such
subordination. The payee and each subsequent owner and/or holder of this
instrument, by accepting the same, agrees to and shall be bound by the terms and
provisions of the Subordination Agreement.
4. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "Event of Default"
shall be deemed to have occurred if:
(i) the Company shall default in the payment of interest on
principal of this Note on the date when due, whether at maturity, by
acceleration or otherwise: or
(ii) the Company shall make a Restricted Payment; or
(iii) a liquidation, dissolution, bankruptcy, reorganization,
insolvency, receivership or similar proceeding occurs with respect to the
Company.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If an Event of Default of the type described in clause (i)
of subparagraph 4(a) has occurred and is continuing, the Holder may declare all
or any portion of the outstanding principal amount of this Note due and payable
and demand immediate payment of all or any portion of the outstanding principal
amount of this Note. If the Holder demands immediate payment of all or any
portion of this Note, the Company shall immediately pay to such Holder the
- 2 -
<PAGE>
principal amount of this Note requested to be paid together with all accrued and
unpaid interest thereon.
(ii) If an Event of Default of the type described in clause (ii)
of subparagraph 4(a) has occurred, all of the outstanding principal amount of
this Note shall automatically be immediately due and payable without any notice
or other action on the part of the Holder.
(iii) Upon the occurrence of an Event of Default, the Holder
shall also have any other rights which such person may have been afforded by the
Company under any contract or agreement at any time and any other rights which
such person may have pursuant to applicable law.
5. RESTRICTED PAYMENTS. So long as any portion of the principal amount
of this Note (together with all accrued interest thereon) remains outstanding,
without the prior written consent of the Holder, the Company shall not (a)
declare or pay any cash dividends or make any cash distributions upon any of its
Common Stock or (b) redeem, retire, purchase or otherwise acquire any of its
equity securities for cash (other than redemptions, retirements, purchases or
acquisitions of equity securities from employees in connection with the
termination of their employment) each such prohibited declaration, payment,
distribution, purchase redemption, acquisition or retirement being referred to
as a "Restricted Payment").
6. FINANCIAL STATEMENTS. So long as any portion of the principal amount
of this Note remains outstanding, the Company will deliver to the Seller (a) as
soon as available but in any event within 45 days after the end of each
quarterly accounting period in each fiscal year, unaudited consolidated
statements of income for such quarterly period, and consolidated balance sheets
as of the end of such quarterly period, and all such statements will be prepared
in accordance with United States generally accepted accounting principals,
consistently applied ("GAAP"), and (b) within 90 days after the end of each
fiscal year, audited consolidated statements of income for such fiscal year and
audited consolidated balance sheets as of the end of such fiscal year, all
prepared in accordance with GAAP.
7. TRANSFER RESTRICTIONS. This Note has not been registered under the
Securities Act of 1933, as amended or any comparable state securities law. If
the Holder desires to transfer this Note, such person first must furnish the
Company with (i) a written opinion reasonably satisfactory to the Company in
form and substance from counsel reasonably satisfactory to the Company to the
effect that the Holder may transfer this Note as desired without registration
under the Securities Act or any relevant state securities law and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to the
Company in form and substance agreeing to be bound by all of the provisions of
this Note, including, without limitation, the subordination provisions set forth
in paragraph 3 hereof.
- 3 -
<PAGE>
8. CANCELLATION. After all principal and accrued interest at any time
owed on this Note has been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be reissued.
9. PLACE OF PAYMENT; NOTICES. Payments of principal and interest and any
notice hereunder are to be delivered to the Holder at the following address:
Alco Standard Corporation
825 Duportail Road
Chesterbrook, Wayne, PA 19087
Attention: Treasurer
Notice of the exercise of the Put is to be delivered to Spinnaker at the
following address:
Spinnaker Industries, Inc.
600 North Pearl, Suite 2160
Dallas, Texas 75201
Attention: James W. Toman
Other addresses may be specified in written notice delivered to the parties.
Notices shall be deemed received when delivered personally or one (1) day after
being sent by Federal Express or other overnight carrier or five (5) days after
being sent by certified or registered mail.
- 4 -
<PAGE>
10. GOVERNING LAWS. The validity, construction, and interpretation of
this Note will be governed by the internal laws, and not the laws of conflicts,
of the State of Delaware.
IN WITNESS WHEREOF, the Company has executed and delivered this Note on the
date first above written.
CENTRAL PRODUCTS ACQUISITION CORP.
By: /s/ Ned N. Fleming, III
-----------------------------------------
Its: President
-----------------------------------------
Spinnaker agrees to be bound by the provisions of paragraph 2(a) relating
to the exercise of the Put only and is not subject to any other provisions or
obligations of this Note.
SPINNAKER INDUSTRIES, INC.
By: /s/ Richard J. Boyle
-----------------------------------------
Its: Chairman of the Board
-----------------------------------------
<PAGE>
EXHIBIT 7.8
AGREEMENT DATED OCTOBER 3, 1995, BETWEEN SPINNAKER INDUSTRIES, INC., A DELAWARE
CORPORATION ("SPINNAKER"), AND LYNCH CORPORATION, AN INDIANA CORPORATION
("LYNCH").
WHEREAS Spinnaker requires loans from ALCO Standard Corporation ("ALCO")
aggregating approximately $25,000,000 (the Loans"), in order to close the
acquisition of its Central Products business; and
WHEREAS ALCO is only willing to make the Loans if (i) Spinnaker agrees
to repurchase the Loans from ALCO if ALCO, upon at least 15 days prior
notice, exercises on or shortly after January 1, 1996, its right to put the
Loans to Spinnaker (the "Put"), which Put would be payable on or shortly
after January 31, 1996, (ii) if Lynch agrees to provide funds for Spinnaker
to pay for the Put and (iii) Lynch agrees to guarantee the Loans, which
guarantees will terminate if ALCO does not exercise the Put on or shortly
after January 1, 1996.
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and to induce Lynch to agree (i) to provide funds on or shortly
after January 31, 1996, for Spinnaker to pay for the Put and (ii) to guarantee
the Loans, which guarantees will terminate if ALCO does not exercise the Put on
or shortly after January 1, 1996, the parties agree as follows:
<PAGE>
1. As compensation for Lynch agreeing to guarantee the Loans, Spinnaker
will pay Lynch a fee of 1/2 of 1% per month of the principal amount to be
guaranteed, commencing October 3, 1995, and with a minimum payment of $150,000.
2. The Lynch loan to Spinnaker, if made, shall be represented by a demand
note with interest of 1 1/3 % per month for the first month (with a minimum
payment of $375,000), 2% per month for the second month and 2 1/2% per month
thereafter. The Lynch guarantees and loan to Spinnaker (including the demand
note) will be secured by (i) second security interests in the stock of Brown-
Bridge Industries, Inc. ("B-B"), and Central Products Acquisition Corp. ("CPC"),
owned by Spinnaker (to the extent permitted by the holders of the first security
interests) and (ii) first liens on any indebtedness of B-B (or its subsidiaries)
and CPC (or its subsidiaries) to Spinnaker or its other subsidiaries. Spinnaker
will provide Lynch with prompt notice of the 15 days prior notice of exercise
received by Spinnaker from ALCO (or its assignee) and all other related notices
received by Spinnaker. Spinnaker has represented to Lynch that the holder of
the first security interest on the B-B stock has signed off orally that it would
consent to the granting of a second security interest to Lynch, and Lynch has
relied on that representation. Spinnaker will use its best efforts to obtain
the consent of the holder of the first security interest on the CPC stock. If
notwithstanding its best efforts Spinnaker cannot obtain the necessary consents
to the second liens on B-B and/or CPC stock, or the terms of the second liens
are not
<PAGE>
reasonably satisfactory to Lynch, Spinnaker will, so long as Lynch is committed
to loan funds to Spinnaker or the demand note has not been paid in full, (i) not
give a security interest therein to any other person, (ii) give Lynch the right
on behalf of Spinnaker to refinance on such terms as may be required the debt of
the holder of the first security interest in order to have Spinnaker pay it off,
(iii) give Lynch's conditional (a) second security interest in the stock in the
event the holder of the first security interest subsequently permits it and (b)
first security interest in the stock in the event the holder of the first
security interest is paid off, (iv) give Lynch a power of attorney to instruct
the holder of the first security interest to deliver the stock as collateral to
Lynch in the event such holder is paid off and (v) give Lynch such other
collateral, security, and support as Lynch may deem reasonably appropriate in
order to borrow the funds necessary to make the loan to Spinnaker or to get
another person to fund Spinnaker's obligation to honor the Put. Spinnaker
further represents to Lynch that the Heller Finance loan may be prepaid at any
time without penalty. Lynch shall have the right to assign the demand note, the
security interest and/or the related rights set forth in this Section 2.
3. To further document the parties' agreement, appropriate documents
reflecting the above, including without limitation, (i) an agreement by Lynch to
loan funds to Spinnaker, (ii) the demand promissory note, and (iii) any security
agreements and related agreements and documents, shall be prepared and executed
as soon as
<PAGE>
possible; provided, however, that notwithstanding the fact that such agreements
have not been executed, Section 1 and 2 (and all other provisions of this
Agreement) are binding upon execution of this document.
4. Spinnaker shall pay all of Lynch's reasonable out-of-pocket expenses,
including without limitation reasonable attorneys fees and any fees and expenses
paid by Lynch to obtain commitments for the funds necessary to loan to Spinnaker
whether or not such commitments are used by Lynch or Spinnaker.
5. This Agreement shall be governed by the internal law of the State of
Delaware.
IN WITNESS WHEREOF, the parites have executed this Agreement as of the date
first above written.
SPINNAKER INDUSTRIES, INC. LYNCH CORPORATION
By: /s/ Richard J. Boyle By: /s/ Robert E. Dolan
---------------------- -----------------------
Richard J. Boyle Chief Financial Officer
Chairman
