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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 23, 1996
SPINNAKER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE _______________ 06-0544125
(State of (Commission File (IRS Employer
incorporation) Number) Identification No.)
600 N. PEARL STREET, SUITE 2160
DALLAS, TEXAS 75201
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 972-855-0322
Exhibit index on page 7
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ITEM 5. OTHER EVENTS.
On October 23, 1996, Spinnaker Industries, Inc. (the "Company") completed
the private placement of $115,000,000 aggregate principal amount of its 10 3/4%
Senior Secured Notes due 2006 (the "Notes"), and entered into a new
revolving credit facility (the "New Credit Facility"), as a guarantor, with
Brown-Bridge Industries, Inc. ("Brown-Bridge"), Central Products, Inc. and
Entoleter, Inc., as borrowers, BT Commercial Corporation, as agent, and
Transamerica Business Credit Corporation, as collateral agent, which
contemplates separate revolving credit facilities for each of the borrowers
thereunder in a maximum aggregate amount of up to $40 million.
The issuance of the Notes and the New Credit Facility are part of a
recapitalization plan (the "Recapitalization Plan") by the Company, which is
intended to enhance the Company's operating and financial flexibility. The main
elements of the Recapitalization Plan are the sale of the Notes, the
establishment of the New Credit Facility, the repayment of substantially all of
the existing indebtedness of the Company with the proceeds of the sale of the
Notes, and the purchase of all of the common stock of Brown-Bridge held by a
group of minority stockholders of Brown-Bridge (the "Minority Stockholders").
The $115 million gross proceeds of the sale of the Notes were used to repay
existing debts and credit facilities of the Company, to pay fees owed to the
Company's parent, Lynch Corporation, to repurchase the Minority Stockholders'
common stock in Brown-Bridge and to pay transaction fees related to the
placement of the Notes.
THE NOTES
The Notes were issued under an indenture (the "Indenture") dated October 23,
1996, by and between the Company, the Guarantors and The Chase Manhattan
Bank, N.A., as Trustee (the "Trustee"). The Indenture imposes certain
limitations on the ability of the Company and its "Restricted Subsidiaries"
(as defined in the Indenture) to, among other things, incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions
with affiliates, issue preferred stock, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries.
The Notes mature on October 15, 2006, and will bear interest from the
Issuance Date at the rate of 10 3/4% per annum payable semi-annually on April 15
and October 15 of each year, commencing on April 15, 1997, to the persons who
are registered holders thereof at the close of business on April 1 or October 1
immediately preceding the applicable interest payment date. The interest rate
on the Notes is subject to increase, in certain circumstances, including if the
Notes (or other securities similar to the Notes) are not registered with the
Securities and Exchange Commission (the "Commission") within prescribed time
periods. Interest on the Notes will be computed on the basis of a 360-day year,
comprised of twelve 30-day months. The Notes are not entitled to the benefit of
any mandatory sinking fund.
The Notes are not redeemable at the Company's option prior to October 15,
2001. Thereafter, the Notes will be redeemable at the option of the Company, in
whole or in part, at the following redemption
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prices (expressed as percentages of the principal amount of the Notes) if
redeemed during the twelve- month period commencing on October 15 of the year
set forth below, plus, in each case, accrued and unpaid interest to the date
of redemption:
Year Percentage
---- ----------
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.031
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.688
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.344
2005 and thereafter. . . . . . . . . . . . . . . . . . . . . . . . 100.000
At any time, or from time to time, on or prior to October 15, 1999, the
Company may, at its option, use the net cash proceeds of one or more "Public
Equity Offerings" (as defined in the Indenture) to redeem up to 33 1/3% of the
aggregate principal amount of Notes originally issued at a redemption price
equal to 110.75% of the principal amount thereof, plus, in each case, accrued
and unpaid interest to the date of redemption; PROVIDED that at least 66 2/3% of
the aggregate principal amount of Notes originally issued remains outstanding
after any such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Company shall make such redemption
not more than 120 days after the consummation of any such Public Equity
Offering.
Upon a "Change of Control" (as defined in the Indenture), each holder of
the Notes will have the right to require the Company to repurchase all or any
part of such holder's Notes at a repurchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase. In
addition, under certain circumstances the Company will be obligated to make an
offer to repurchase the Notes at 100% of the principal amount, plus accrued and
unpaid interest to the date of repurchase, with the net cash proceeds of certain
sales or other dispositions of assets.
In connection with the issuance of the Notes, the Company agreed to file a
registration statement with respect to a registered offer to exchange the Notes
(the "Exchange Offer") for notes issued by the Company, which will have terms
substantially identical to those of the Notes and be guaranteed by the
Guarantors, within 90 days after the date of original issuance of the Notes (the
"Issue Date"), to use its best efforts to cause such registration statement to
become effective under the Securities Act within 180 days after the Issue Date,
and to use its best efforts to consummate the Exchange Offer within 225 days
after the Issue Date. In the event that applicable law or interpretations of
the staff of the Commission do not permit the Company and the Guarantors to
effect the Exchange Offer, or if certain holders of the Notes are not permitted
to participate in, or do not receive the benefit of, the Exchange Offer, the
Company will use its best efforts to cause to become effective a shelf
registration statement with respect to the resale of the Notes and to keep such
shelf registration statement effective until three years after the Issue Date or
such shorter period ending when all the Notes have been sold thereunder.
THE NEW CREDIT FACILITY
The New Credit Facility creates separate revolving credit facilities for
each of the Guarantors, which will be unconditionally guaranteed by the Company
and each other Guarantor. The proceeds of the loans will be used for general
corporate purposes. Total borrowings under the New Credit Facility (subject to
the borrowing base limitations set forth below), will be in the maximum amount
of up to $40 million, of which up to $5 million is designated for letters of
credit. The amount from time to time available under each revolving credit
facility (for revolving loans and letters of credit) will not be permitted to
exceed an amount equal to the sum of (x) up to 85% of the respective "eligible
accounts receivable" (as defined in the New Credit Facility) and (y) up to
65% of Guarantors "eligible inventory" (as defined in the New Credit Facility).
The maturity of the revolving credit facilities will be five years from the
closing date; however, mandatory prepayments of the revolving credit facilities
are required in the event of certain events (which may include public equity
offerings and sales of assets). The New Credit Facility also contains various
covenants that restrict the Company from taking various actions and that require
that the Company achieve and maintain certain financial covenants, such as
covenants relating to minimum net worth, minimum current ratio, minimum
interest coverage ratio, and limitations on capital expenditures, investments,
indebtedness, liens, dividends, acquisitions and sales of assets. The New
Credit Facility also prohibits the Company from prepaying the Notes and
prohibits certain changes in control of the Company.
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Interest will accrue on amounts borrowed under the New Credit Facility at
an annual rate of prime or LIBOR plus a margin (ranging from 0.75% to 1.75% over
prime and from 1.75% to 2.75% over LIBOR). The interest margin will initially
be 1.75% for prime rate loans and 2.75% for LIBOR rate loans.
SECURITY FOR THE NOTES AND THE NEW CREDIT FACILITY
The Notes constitute senior obligations of the Company and are secured by a
first priority pledge of the capital stock of each of the Company's existing
subsidiaries and any future direct and indirect Restricted Subsidiaries, which
become guarantors in accordance with the terms of the Indenture, and will rank
PARI PASSU in right of payment with all other existing and future senior
indebtedness of the Company and senior in right of payment to all existing and
future subordinated indebtedness of the Company. The Notes are unconditionally
guaranteed (the "Guarantees"), jointly and severally, by each of the Guarantors.
The Guarantees are senior unsecured obligations of the Guarantors, and rank PARI
PASSU in right of payment with all other existing and future senior indebtedness
of the respective Guarantors and senior in right of payment to all existing and
future subordinated indebtedness of the respective Guarantors and may be
released upon the occurrence of certain events. The Notes will rank PARI PASSU
in right of payment with all obligations under the New Credit Facility, except
that the obligations under the New Credit Facility, but not the Notes or the
Guarantees, will be secured by a first priority lien on all of the Company's and
the Guarantors' accounts receivable, inventory and general intangibles (and
certain related assets) and all proceeds thereof. The Notes and the Guarantees
are effectively subordinated to the obligations under the New Credit Facility
and to any other secured debt of the Company and the Guarantors, to the extent
of the assets serving as security therefor.
THE MERGER OF BROWN-BRIDGE INDUSTRIES, INC. INTO BB MERGER CORP.
In connection with the placement of the Notes, the Company entered into an
Agreement and Plan of Merger with Brown-Bridge, BB Merger Corp., a Delaware
corporation and wholly owned subsidiary of the Company ("New Brown-Bridge"), the
Company, and the Minority Stockholders, which provided for the merger (the
"Merger") of Brown-Bridge with and into New Brown-Bridge, with New Brown-Bridge
being the surviving corporation. Pursuant to the Merger, the shares of common
stock of Brown-Bridge previously held by the Minority Stockholders were
converted into approximately $2.3 million and approximately 9,606 shares of
common stock, no par value, of the Company ("Common Stock"), together with the
right for a contingent payment to each Minority Stockholder, which is
exercisable at any time during the period beginning October 1, 1988 and ending
September 30, 2000. The value of the contingent payment shall be equal to the
percentage of the capital stock of Brown-Bridge owned by such Minority
Stockholder at the time of the Merger multiplied by 75% of the fair market value
of the capital stock of New Brown-Bridge, as determined in accordance with
certain economic assumptions, as of the date such right is exercised, less the
consideration already received by such Minority Stockholder pursuant to the
Merger. The contingent purchase price is payable through the issuance of Common
Stock, unless the Company elects to pay the contingent price in cash. If such
payments are made in cash, they could give rise to a default under the
Indenture, unless there is sufficient availability under provisions regarding
"Restricted Payments" contained in the Indenture.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
4.1 Purchase Agreement dated October 18, 1996 (the "Purchase Agreement"),
among Spinnaker Industries, Inc., a Delaware corporation (the
"Company"), Brown-Bridge Industries, Inc., a Delaware corporation
("Brown-Bridge"), Central Products Company, a Delaware corporation
("Central Products"), and Entoleter, Inc., a Delaware corporation
("Entoleter," and together with Brown-Bridge and Central Products, the
"Guarantors") and BT Securities Corporation (the "Initial Purchaser").
4.2 Registration Rights Agreement dated October 18, 1996, among the
Company, the Guarantors and the Initial Purchaser.
4.3 Indenture dated October 23, 1996, among the Company, the Guarantors
and The Chase Manhattan Bank, as Trustee.
99.1 Credit Agreement among Central Products, Brown-Bridge and Entoleter,
as Borrowers, the Company, as Guarantor, each of the financial
institutions listed on Schedule 1 thereto, BT Commercial Corporation,
as Agent, Transamerica Business Credit Corporation, as Collateral
Agent, and Bankers Trust Company, as Issuing Bank.
99.2 Agreement and Plan of Merger (Brown-Bridge Minority Interest), by and
among the Company, BB Merger Corp., Brown-Bridge Industries, Inc., and
the stockholders of Brown-Bridge Industries, Inc. listed on Exhibit A
thereto.
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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: November 7, 1996 By: /s/ NED N. FLEMING, III
--------------------------------
Ned N. Fleming, III
President
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INDEX TO EXHIBITS
4.1 Purchase Agreement dated October 18, 1996 (the "Purchase Agreement"),
among Spinnaker Industries, Inc., a Delaware corporation (the
"Company"), Brown-Bridge Industries, Inc., a Delaware corporation
("Brown-Bridge"), Central Products Company, a Delaware corporation
("Central Products"), and Entoleter, Inc., a Delaware corporation
("Entoleter," and together with Brown-Bridge and Central Products, the
"Guarantors") and BT Securities Corporation (the "Initial Purchaser").
4.2 Registration Rights Agreement dated October 18, 1996, among the
Company, the Guarantors and the Initial Purchaser.
4.3 Indenture dated October 23, 1996, among the Company, the Guarantors
and The Chase Manhattan Bank, as Trustee.
99.1 Credit Agreement among Central Products, Brown-Bridge and Entoleter,
as Borrowers, the Company, as Guarantor, each of the financial
institutions listed on Schedule 1 thereto, BT Commercial Corporation,
as Agent, Transamerica Business Credit Corporation, as Collateral
Agent, and Bankers Trust Company, as Issuing Bank.
99.2 Agreement and Plan of Merger (Brown-Bridge Minority Interest), by and
among the Company, BB Merger Corp., Brown-Bridge, and the stockholders
of Brown-Bridge listed on Exhibit A thereto.
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SPINNAKER INDUSTRIES, INC.
$115,000,000
10 3/4% Senior Secured Notes due 2006
PURCHASE AGREEMENT
October 18, 1996
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Dear Sirs:
Spinnaker Industries, Inc., a Delaware corporation (the "Company"),
and the subsidiary guarantors listed in Schedule 2 attached hereto (the
"Guarantors") each hereby confirm its agreement with you (the "Initial
Purchaser"), as set forth below.
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
$115,000,000 aggregate principal amount of its 10 3/4% Senior Secured Notes due
2006 (collectively, with the Guarantees defined below, the "Notes"). The Notes
will be guaranteed (the "Guarantees") by the Guarantors on a senior basis. The
notes are to be issued under an indenture (the "Indenture") to be dated as of
October 23, 1996 by and among the Company and the Guarantors and The Chase
Manhattan Bank, as trustee (the "Trustee").
The Notes will be offered and sold to the Initial Purchaser without
being registered under the Securities Act
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of 1933, as amended (the "Act"), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated September 27, 1996 (the "Preliminary
Memorandum") and will prepare a final offering memorandum dated October 21, 1996
(the "Final Memorandum"; the Preliminary Memorandum and the Final Memorandum
each herein being referred to as a "Memorandum") setting forth or including a
description of the terms of the Notes, the terms of the offering of the Notes, a
description of the Company and the Guarantors and any material developments
relating to the Company and the Guarantors occurring after the date of the most
recent historical financial statements included therein.
The Initial Purchaser of the Notes and its direct and indirect
transferees will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company and the Guarant-
ors have agreed, among other things, to file a registration statement (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") registering the Notes or the Exchange Notes (as defined in the
Registration Rights Agreement) under the Act.
2. REPRESENTATIONS AND WARRANTIES. The Company and the Guarantors,
jointly and severally, represent and warrant to, and agree with the Initial
Purchaser that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as
defined in Section 3 below) contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except
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that the representations and warranties set forth in this Section 2(a)
do not apply to statements or omissions made in reliance upon and in
conformity with information relating to the Initial Purchaser furnished
to the Company in writing by the Initial Purchaser expressly for use in
the Preliminary Memorandum, the Final Memorandum or any amendment or
supplement thereto.
(b) As of the Closing Date, the Company will have the capitalization
set forth in the Final Memorandum; the Guarantors constitute all of the
subsidiaries of the Company; the Company will own one hundred percent of
the issued and outstanding stock of each Guarantor; all of the outstanding
shares of capital stock of the Company and the Guarantors have been, and as
of the Closing Date will be, duly authorized and validly issued, are fully
paid and nonassessable and were not issued in violation of any preemptive
or similar rights; except for the pledge by the Company of capital stock of
each Guarantor pursuant to the Indenture, all of the outstanding shares of
capital stock of each of the Guarantors will be free and clear of all
liens, encumbrances, equities and claims or restrictions on transferability
(other than those imposed by the Act and the securities or "Blue Sky" laws
of certain jurisdictions) or voting; except as set forth in the Final
Memorandum, there are no (i) options, warrants or other rights to purchase
from the Company or the Guarantors, (ii) agreements or other obligations of
the Company or the Guarantors to issue or (iii) other rights to convert any
obligation into, or exchange any securities for, shares of capital stock of
or ownership interests in the Company or any of the Guarantors outstanding.
Except for the Guarantors or as disclosed in the Final Memorandum, the
Company does not own, directly or indirectly, any material amount of
capital stock or any other equity or long-term debt securities or have any
equity
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interest in any firm, partnership, joint venture or other entity.
(c) Each of the Company and the Guarantors has been duly
incorporated, is validly existing and is in good standing as a corporation
under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority to own its properties and conduct its
business as now conducted, and as described in the Final Memorandum; each
of the Company and the Guarantors is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect
on the general affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Company and the
Guarantors, taken as a whole (any such event, a "Material Adverse Effect").
(d) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform each of its
obligations under the Notes, the Exchange Notes, including the Guarantees,
(the Exchange Notes and the Guarantees are collectively referred to herein
as the "Exchange Securities") and the Private Exchange Notes (as defined in
the Registration Rights Agreement), (the Private Exchange Notes and the
Guarantees are collectively referred to herein as the "Private Exchange
Securities"). The Notes, the Exchange Securities and the Private Exchange
Securities have each been duly and validly authorized by each of the
Company and the Guarantors and, when executed by each of the Company and
the Guarantors and authenticated by the Trustee in accordance with the
provisions of the Indenture and, in the case of the Notes, when
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delivered to and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of
the Company and each of the Guarantors, entitled to the benefits of the
Indenture and enforceable against the Company and each of the
Guarantors in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization or
other similar laws now or hereafter in effect relating to creditors'
rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(e) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its obliga-
tions under the Indenture. The Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"TIA"). The Indenture has been duly and validly authorized by the Company
and each of the Guarantors and, when executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Trustee),
will constitute a valid and legally binding agreement of the Company and
each of the Guarantors, enforceable against the Company and each of the
Guarantors in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(f) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The Registration
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Rights Agreement has been duly and validly authorized by the Company and
each of the Guarantors and, when executed and delivered by the Company and
each of the Guarantors, will constitute a valid and legally binding
agreement of the Company and each of the Guarantors enforceable against the
Company and each of the Guarantors in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought and (B) any rights to indemnity or contribution thereunder
may be limited by federal and state securities laws and public policy
considerations.
(g) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Company and each of the Guarantors.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the performance
of this Agreement by the Company or any of the Guarantors or the
consummation by the Company or any of the Guarantors of the transactions
contemplated hereby that are to be completed on or before the Closing Date,
except such as have been obtained and such as may be required under state
securities or "Blue Sky" laws in connection with the purchase and resale of
the Notes by the Initial Purchaser. None of the Company or the Guarantors
is (i) in violation of its certificate of incorporation or bylaws (or
similar organizational document), (ii) in breach or violation of any
statute,
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judgment, decree, order, rule or regulation applicable to any of them
or any of their respective properties or assets, except for any such
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect, or (iii) in breach of or in default
under (nor has any event occurred which, with notice or passage of time
or both, would constitute a default under) or in violation of any of
the terms or provisions of any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument to which any of
them is a party or to which any of them or their respective properties
or assets is subject (collectively, "Contracts").
(i) The execution, delivery and performance by the Company and the
Guarantors of this Agreement, the Indenture, the Guarantees and the
Registration Rights Agreement and the consummation by the Company and each
of the Guarantors of the transactions contemplated hereby and thereby, and
the fulfillment of the terms hereof and thereof, and the retention by the
Company of BT Securities Corporation ("BTSC") pursuant to those certain
letter agreements (including the engagement and indemnity letter
agreements) dated as of April 3, 1996 (collectively, the "BTSC Engagement
Letter") and BTSC's acting as contemplated hereby and thereby, will not
conflict with or constitute or result in a breach of or a default under (or
an event which with notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or provisions of any
Contract, (ii) the certificate of incorporation or by-laws (or similar
organizational document) of the Company or any of the Guarantors, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 8
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hereof) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Guarantors or any of their
respective properties or assets.
(j) The audited consolidated financial statements of the Company and
the Guarantors included in the Final Memorandum present fairly in all
material respects the financial position, results of operations and cash
flows of the Company and the Guarantors at the dates and for the periods to
which they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein. The summary and selected financial and
statistical data in the Final Memorandum present fairly in all material
respects the information shown therein and have been prepared and compiled
on a basis consistent with the audited financial statements included
therein, except as otherwise stated therein. Ernst & Young LLP and
Deloitte & Touche LLP (the "Independent Accountants") are each an
independent public accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(k) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final
Memorandum (i) comply (except as expressly noted in footnote 12 to the
Notes to the Unaudited Pro Forma Statement of operations with respect to
Adjusted EBITDA) as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (ii) have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements (except as expressly noted in footnote 12 to the
Notes to the Unaudited Pro Forma Statement of operations with
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respect to Adjusted EBITDA), and (iii) have been properly computed on the
bases described therein; the assumptions used in the preparation of the pro
forma financial data and other pro forma financial information included in
the Final Memorandum are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein. The supplemental combined adjusted historical data included in
the Final Memorandum have been correctly computed on the basis described
therein; the assumptions used in the preparation of the supplemental
combined adjusted historical data included in the Final Memorandum are
reasonable and the adjustments used give effect to the transactions or
circumstances referred to therein.
(l) There is not pending or, to the knowledge of the Company or the
Guarantors, threatened any action, suit, proceeding, inquiry or
investigation to which the Company or any of the Guarantors is a party, or
to which the property or assets of the Company or any of the Guarantors are
subject, before or brought by any court, arbitrator or governmental agency
or body which, if determined adversely to the Company or any of the
Guarantors would, individually or in the aggregate, have a Material Adverse
Effect or which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Notes to be sold hereunder
or the consummation of the other transactions described in the Final
Memorandum.
(m) Each of the Company and the Guarantors owns or possesses adequate
licenses or other rights to use all material patents, trademarks, service
marks, trade names, copyrights and know-how necessary to conduct the
businesses now or proposed to be operated by it as described in the Final
Memorandum, and none of the Company or the Guarantors has received any
notice of infringement of or conflict with (or knows of any such
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infringement of or conflict with) asserted rights of others with respect to
any patents, trademarks, service marks, trade names, copyrights or know-how
which, if such assertion of infringement or conflict were sustained, would,
individually or in the aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Guarantors possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations
and all courts and other tribunals, presently required or necessary to own
or lease, as the case may be, and to operate its respective properties and
to carry on its respective businesses as now or proposed to be conducted as
set forth in the Final Memorandum (collectively, the "Permits"), except
where the failure to obtain such Permits would not, individually or in the
aggregate, have a Material Adverse Effect; each of the Company and the
Guarantors has fulfilled and performed all of its obligations with respect
to such Permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such
Permit; and none of the Company or the Guarantors has received any notice
of any proceeding relating to revocation or modification of any such
Permit, except as described in the Final Memorandum and except where such
revocation or modification would not, individually or in the aggregate,
have a Material Adverse Effect.
(o) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein, (i) none of the
Company or the Guarantors has incurred any liabilities or
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obligations, direct or contingent, or entered into or agreed to enter
into any transactions or contracts (written or oral) not in the
ordinary course of business which liabilities, obligations,
transactions or contracts would, individually or in the aggregate, be
material to the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the
Company and the Guarantors, taken as a whole (a "Material Change"),
(ii) none of the Company or the Guarantors has purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock and (iii)
other than as described in any Memorandum, there shall not have been
any change in the capital stock or long-term indebtedness of the
Company or the Guarantors which would, individually or in the
aggregate, constitute a Material Change.
(p) Each of the Company and the Guarantors has filed all necessary
federal, state, local and foreign income and franchise tax returns, and has
paid all taxes shown as due thereon; and other than tax deficiencies which
the Company or any Guarantors is contesting in good faith and for which the
Company or such Guarantors has provided adequate reserves, there is no tax
deficiency that has been asserted against the Company or any of the
Guarantors.
(q) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company and the
Guarantors believe to be reliable and accurate.
(r) None of the Company, the Guarantors or any agent acting on their
behalf has taken or will take any action that might cause this Agreement or
the sale of the Notes to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in
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each case as in effect, or as the same may hereafter be in effect, on the
Closing Date.
(s) Each of the Company and the Guarantors has good and marketable
title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good and
marketable title to a leasehold estate in the real and personal property
described in the Final Memorandum as being leased by it free and clear of
all liens, charges, encumbrances or restrictions, except as described in
the Final Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would not,
individually or in the aggregate, have a Material Adverse Effect. All
leases, contracts and agreements to which the Company or any of the
Guarantors is a party or by which any of them is bound are valid and
enforceable against the Company or such Guarantor, and are valid and
enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not, individually or in
the aggregate, have a Material Adverse Effect.
(t) There are no legal or governmental proceedings involving or
affecting the Company or any Guarantor or any of their respective
properties or assets which would be required to be described in a
prospectus pursuant to the Securities Act that are not described in the
Final Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Securities Act that are not described in the Final Memorandum.
(u) Except as would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect (A) each of the
Company and the Guarantors is in compliance with and not subject to
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liability under applicable Environmental Laws, (B) each of the Company and
the Guarantors has made all filings and provided all notices required under
any applicable Environmental Law, and has and is in compliance with all
Permits required under any applicable Environmental Laws and each of them
is in full force and effect, (C) there is no civil, criminal or administra-
tive action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter or request for
information pending or, to the knowledge of the Company or any of the
Guarantors, threatened against the Company or any of the Guarantors under
any Environmental Law, (D) no lien, charge, encumbrance or restriction has
been recorded under any Environmental Law with respect to any assets,
facility or property owned, operated, leased or controlled by the Company
or any of the Guarantors, (E) none of the Company or the Guarantors has
received notice that it has been identified as a potentially responsible
party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA") or any comparable state law,
(F) no property or facility of the Company or any of the Guarantors is (i)
listed or proposed for listing on the National Priorities List under CERCLA
or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to
CERCLA, or on any comparable list maintained by any state or local govern-
mental authority.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or
employee health and safety or the environment, including, without
limitation, law relating to (i) emissions, discharges, releases or
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threatened releases of hazardous materials, into the environment
(including, without limitation, ambient air, surface water, ground water,
land surface or subsurface strata), (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of hazardous materials, and (iii) underground and above ground
storage tanks, and related piping, and emissions, discharges, releases or
threatened releases therefrom.
(v) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or any of the Guarantors which is pending or,
to the knowledge of the Company or any of the Guarantors, threatened.
(w) Each of the Company and the Guarantors carries insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties.
(x) None of the Company or the Guarantors has any material liability
for any prohibited transaction (within the meaning of Section 4975(c) of
the Code or Part 4 of Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (or an accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA) or
any complete or partial withdrawal liability (within the meaning of Section
4201 of ERISA) with respect to any pension, profit sharing or other plan
which is subject to ERISA, to which the Company or any of the Guarantors
makes or ever has made a contribution and in which any employee of the
Company or of any Guarantor is or has ever been a participant. The
foregoing sentence shall not apply with respect to liabilities which arise
out of the Company's or the Guarantors' obligations to contribute to such
plans prior to the acquisition of Brown Bridge and Central
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Products as described in the Final Memorandum or which arise out of the
Company's or the Guarantor's prior affiliation (within the meaning of Code
Section 414(b), (c) or (m)) with the Kimberly Clark Corporation or the Alco
Standard Corporation. With respect to such plans, the Company and each
Guarantor is in compliance in all material respects with all applicable
provisions of ERISA.
(y) Each of the Company and the Guarantors (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D) the
reported accountability for its assets is compared with existing assets at
reasonable intervals.
(z) None of the Company or the Guarantors will be an "investment
company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder.
(aa) The Notes, the Exchange Securities, the Indenture and the
Registration Rights Agreement will conform in all material respects to the
descriptions thereof in the Final Memorandum.
(bb) Other than as set forth in the Final Memorandum, no holder of
securities of the Company or any Guarantor will be entitled to have such
securities registered under the registration statements required to be
filed by the Company pursuant to the
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Registration Rights Agreement other than as expressly permitted thereby.
(cc) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable
value of the assets of each of the Company and the Guarantors (each on a
consolidated basis) will exceed the sum of its stated liabilities and
identified contingent liabilities; none of the Company or the Guarantors
(each on a consolidated basis) is, nor will any of the Company or the
Guarantors (each on a consolidated basis) be, after giving effect to the
execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, (a) left with unreasonably small
capital with which to carry on its business as it is currently or proposed
to be conducted, (b) unable to pay its debts (contingent or otherwise) as
they mature or otherwise become due or (c) otherwise insolvent.
(dd) None of the Company, the Guarantors or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any "security" (as
defined in the Act) which is or could be integrated with the sale of the
Notes in a manner that would require the registration under the Act of the
Notes or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Notes or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
(ee) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 8 hereof, it is not necessary in
connection
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with the offer, sale and delivery of the Notes to the Initial
Purchaser in the manner contemplated by this Agreement to register any of
the Notes under the Act or to qualify the Indenture under the TIA.
(ff) No securities of the Company or any Guarantor are of the same
class (within the meaning of Rule 144A as promulgated under the Act ("Rule
144A")) as the Notes and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system.
(gg) None of the Company or the Guarantors has taken, nor will any of
them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of
the price of the Notes.
(hh) None of the Company or the Guarantors, or any person acting on
any of their behalf (other than the Initial Purchaser) has engaged in any
directed selling efforts (as that term is defined in Regulation S under the
Act ("Regulation S")) with respect to the Securities; the Issuers and their
respective Affiliates and any person acting on any of their behalf (other
than the Initial Purchaser or any Affiliate of the Initial Purchaser) have
complied with the offering restrictions requirement of Regulation S.
(ii) None of the Company or the Guarantors has engaged or retained
any person, other than BTSC as the Initial Purchaser, to act as a financial
advisor, underwriter or placement agent in connection with the issuance of
the Notes and, except for the fees and expenses payable in connection with
the issuance of the Notes as described in the Final Memorandum, no person
has the right to receive a material amount of
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financial advisory, underwriting, placement, finder's or similar fees in
connection with, or as a result of, the issuance of the Notes and the
purchase of the Notes by the Initial Purchaser or the consummation of the
other transactions contemplated hereby.
Any certificate signed by any officer of the Company or any Guarantor
and delivered to the Initial Purchaser or to counsel for the Initial Purchaser
shall be deemed a joint and several representation and warranty by the Company
and each of the Guarantors to the Initial Purchaser as to the matters covered
thereby.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company the principal amount of Notes set forth opposite its
name on SCHEDULE 1 hereto at 100% of their principal amount. One or more
certificates in definitive form for the Notes that the Initial Purchaser has
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Initial Purchaser requests upon notice
to the Company at least 36 hours prior to the Closing Date, shall be delivered
by or on behalf of the Company to the Initial Purchaser, against payment by or
on behalf of the Initial Purchaser of the purchase price therefor by wire
transfer (same day funds), net of the overnight cost of such funds, to such
account or accounts as the Company shall specify prior to the Closing Date, or
by such means as the parties hereto shall agree prior to the Closing Date. Such
delivery of and payment for the Notes shall be made at the offices of White &
Case, 1155 Avenue of the Americas, New York, New York at 10:00 A.M., New York
time, on October 23, 1996, or at such other place, time or date as the Initial
Purchaser, on the one hand, and the Company, on the other hand, may agree upon,
such time and date of
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delivery against payment being herein referred to as the "Closing Date." The
Company will make such certificate or certificates for the Notes available
for inspection and packaging by the Initial Purchaser at the offices of the
Initial Purchaser in New York, New York, or at such other place as the
Initial Purchaser may designate, at least 24 hours prior to the Closing Date.
4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser proposes
to make an offering of the Notes at the price and upon the terms set forth in
the Final Memorandum, as soon as practicable after this Agreement is entered
into and as in the judgment of the Initial Purchaser is advisable.
5. COVENANTS OF THE COMPANY AND THE GUARANTORS. Each of the Company
and the Guarantors, jointly and severally, covenants and agrees with the Initial
Purchaser that:
(a) The Company and the Guarantors will not amend or supplement the
Final Memorandum or any amendment or supplement thereto of which the
Initial Purchaser shall not previously have been advised and furnished a
copy for a reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchaser shall not have consented.
The Company and the Guarantors will promptly, upon the reasonable request
of the Initial Purchaser or counsel for the Initial Purchaser, make any
amendments or supplements to the Preliminary Memorandum or the Final
Memorandum that may be necessary or advisable in connection with the resale
of the Notes by the Initial Purchaser.
(b) The Company and the Guarantors will cooperate with the Initial
Purchaser in arranging for the qualification of the Notes for offering and
sale under the securities or "Blue Sky" laws of which
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jurisdictions as the Initial Purchaser may designate and will continue
such qualifications in effect for as long as may be necessary to
complete the resale of the Notes; PROVIDED, HOWEVER, that in connection
therewith, none of the Company or any Guarantor shall be required to
qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction where it is
not then so subject.
(c) If, at any time prior to the completion of the distribution by the
Initial Purchaser of the Notes or the Private Exchange Securities, any
event occurs or information becomes known as a result of which the Final
Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary
at any time to amend or supplement the Final Memorandum to comply with
applicable law, the Company and the Guarantors will promptly notify the
Initial Purchaser thereof and will prepare, at the expense of the Company
and the Guarantors, an amendment or supplement to the Final Memorandum that
corrects such statement or omission or effects such compliance.
(d) The Company and the Guarantors will, without charge, provide to
the Initial Purchaser and to counsel for the Initial Purchaser as many
copies of the Preliminary Memorandum and the Final Memorandum or any
amendment or supplement thereto as the Initial Purchaser may reasonably
request.
(e) The Company will apply the net proceeds from the sale of the Notes
as set forth under "Use of Proceeds" in the Final Memorandum.
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<PAGE>
(f) From the Closing Date until the date that no Notes are outstanding
under the Indenture, the Company and the Guarantors will furnish to the
Initial Purchaser copies of all reports and other communications (financial
or otherwise) furnished by the Company or the Guarantors to the Trustee, or
the holders of the Notes and, as soon as available, copies of any reports
or financial statements furnished to or filed by the Company or the
Guarantors with the Commission or any national securities exchange on which
any class of securities of the Company or the Guarantors may be listed.
(g) Prior to the Closing Date, the Company and the Guarantors will
furnish to the Initial Purchaser, as soon as they have been prepared, a
copy of any unaudited interim financial statements of the Company and the
Guarantors for any period subsequent to the period covered by the most
recent financial statements appearing in the Final Memorandum.
(h) None of the Company, the Guarantors or any of their Affiliates
will sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any "security" (as defined in the Act) which could be
integrated with the sale of the Notes in a manner which would require the
registration under the Act of the Notes.
(i) None of the Company or the Guarantors will engage in any form of
"general solicitation" or "general advertising" (as those terms are used in
Regulation D under the Act) in connection with the offering of the Notes or
in any manner involving a public offering of the Notes within the meaning
of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the Company
and the Guarantors will make
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available, upon request, to any seller of such Notes the information
specified in Rule 144A(d)(4) under the Act, unless the Company and the
Guarantors are then subject to Section 13 or 15(d) of the Exchange Act.
(k) Each of the Company and the Guarantors will use its best efforts
to (i) permit the Notes to be designated PORTAL securities in accordance
with the rules and regulations adopted by the NASD relating to trading in
the Private Offerings, Resales and Trading through Automated Linkages
market (the "Portal Market") and (ii) permit the Notes to be eligible for
clearance and settlement through The Depository Trust Company.
6. EXPENSES. The Company and the Guarantors agree, jointly and
severally, to pay all costs and expenses incident to the performance of their
obligations under this Agreement, whether or not the transactions contemplated
herein are consummated or this Agreement is terminated pursuant to Section 11
hereof, including all costs and expenses incident to (i) the printing, word
processing or other production of documents with respect to the transactions
contemplated hereby, including any costs of printing the Preliminary Memorandum
and the Final Memorandum and any amendment or supplement thereto, and any "Blue
Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchaser of copies of the foregoing documents, (iii) the fees and disbursements
of counsel, accountants and any other experts or advisors retained by the
Company and the Guarantors, (iv) preparation (including printing), issuance and
delivery to the Initial Purchaser of the Notes, (v) the qualification of the
Notes under state securities and "Blue Sky" laws, including filing fees and fees
and disbursements of counsel for the Initial Purchaser relating thereto, (vi)
expenses in connection with any meetings with prospective investors in the
Notes, (vii) fees and expenses of the Trustee including fees and expenses of
counsel, (viii) all expenses
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and listing fees incurred in connection with the application for quotation of
the Notes on the PORTAL Market, (ix) any fees charged by investment rating
agencies for the rating of the Notes and (x) 50% of the reasonable fees,
disbursements and charges of White & Case, counsel for the Initial Purchaser
(exclusive of that portion of the fees, disbursements and charges of White &
Case payable pursuant to the preceding clause (v)), and 100% of all other
reasonable out-of-pocket expenses of the Initial Purchaser (including,
without limitation, all road show expenses) incurred by the Initial Purchaser
of any of its affiliates in connection with, or arising out of, the offering
and sale of the Notes. If the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated or because of any failure, refusal or inability on the part of the
Company or the Guarantors to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder (other than
solely by reason of a default by the Initial Purchaser of their obligations
hereunder after all conditions hereunder have been satisfied in accordance
herewith), the Company and the Guarantors jointly and severally agree to
promptly reimburse the Initial Purchaser upon demand for all out-of-pocket
expenses (including all fees, disbursements and charges of White & Case,
counsel for the Initial Purchaser) that shall have been incurred by the
Initial Purchaser in connection with the proposed purchase and sale of the
Notes.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The obligation
of the Initial Purchaser to purchase and pay for the Notes shall, in its sole
discretion, be subject to the satisfaction or waiver of the following condition
on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the
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Closing Date and addressed to the Initial Purchaser, of Crouch & Hallett,
counsel for the Company and the Guarantors, in form and substance
satisfactory to counsel for the Initial Purchaser, to the effect that:
(i) Each of the Company and the Guarantors is duly
incorporated, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation and has all requisite
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Final Memorandum. Each
of the Company and the Guarantors is duly qualified as a foreign
corporation and is in good standing in the jurisdictions set forth
below such Guarantor's name on Schedule A attached to such opinion.
(ii) The Company has the capitalization set forth in the Final
Memorandum; all of the outstanding shares of capital stock of the
Company and the Guarantors have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; the Company owns one
hundred percent of the issued and outstanding capital stock of each
Guarantor; except for the pledge by the Company of capital stock of
each Guarantor pursuant to the Indenture and except as otherwise set
forth in the Final Memorandum, all of the outstanding shares of
capital stock of the Guarantors are owned, directly or indirectly, by
the Company, free and clear of all security interests perfected, or
otherwise, and, to the knowledge of such counsel, free and clear of
all other liens, encumbrances, equities and claims or restrictions on
transferability or voting.
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(iii) Except as set forth in the Final Memorandum, (A) no
options, warrants or other rights to purchase from the Company or any
Guarantor shares of capital stock or ownership interests in the Company
or any Guarantor are outstanding, (B) no agreements or other
obligations of the Company or any Guarantor to issue, or other rights
to cause the Company or any Guarantor to convert, any obligation into,
or exchange any securities for, shares of capital stock or ownership
interests in the Company or any Guarantor are outstanding and (C) no
holder of securities of the Company or any Guarantor is entitled to
have such securities registered under a registration statement filed
by the Company and the Guarantors pursuant to the Registration Rights
Agreement.
(iv) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
respective obligations under the Indenture, the Notes, the Exchange
Securities and the Private Exchange Securities; the Indenture is in
sufficient form for qualification under the TIA; the Indenture has
been duly and validly authorized by the Company and the Guarantors
and, when duly executed and delivered by the Company and each of the
Guarantors (assuming the due authorization, execution and delivery
thereof by the Trustee), will constitute the valid and legally binding
agreement of the Company and each of the Guarantors, enforceable
against the Company and each of the Guarantors in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity
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and the discretion of the court before which any proceeding therefor
may be brought.
(v) The Global Note (as such term is defined in the
Indenture) is in the form contemplated by the Indenture. The Global
Note has been duly and validly authorized by the Company and each of
the Guarantors and when duly executed and delivered by the Company and
each of the Guarantors and paid for by the Initial Purchaser in
accordance with the terms of this Agreement (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Notes by the Trustee in
accordance with the Indenture), will constitute the valid and legally
binding obligations of the Company and each of the Guarantors,
entitled to the benefits of the Indenture, and enforceable against the
Company and each of the Guarantors in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(vi) The Exchange Securities and the Private Exchange
Securities have been duly and validly authorized by the Company and
each of the Guarantors, and when the Exchange Securities and the
Private Exchange Securities have been duly executed and delivered by
the Company and each of the Guarantors in accordance with the terms
of the Registration Rights Agreement and the Indenture (assuming the
due authorization, execution and delivery of the Indenture by the
Trustee and due authentication and delivery of
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the Exchange Securities and the Private Exchange Securities by the
Trustee in accordance with the Indenture), will constitute the valid
and legally binding obligations of the Company and each of the
Guarantors, entitled to the benefits of the Indenture, and enforceable
against the Company and each of the Guarantors in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vii) Each of the Company and the Guarantors have all requisite
corporate power and authority to execute, deliver and perform their
obligations under the Registration Rights Agreement; the Registration
Rights Agreement has been duly and validly authorized by the Company
and each of the Guarantors and, when duly executed and delivered by
the Company and each of the Guarantors (assuming due authorization,
execution and delivery thereof by the Initial Purchaser), will
constitute the valid and legally binding agreement of the Company and
each of the Guarantors, enforceable against the Company and each of
the Guarantors in accordance with their terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and state securities
laws and public policy considerations.
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<PAGE>
(viii) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby; this Agreement and the consummation by the
Company and the Guarantors of the transactions contemplated hereby
have been duly and validly authorized by the Company and the
Guarantors. This Agreement has been duly executed and delivered by
each of the Company and the Guarantors.
(ix) The Indenture, the Notes, the Exchange Securities and the
Registration Rights Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(x) No legal or governmental proceedings are pending or,
to the knowledge of such counsel, threatened to which any of the
Company or the Guarantors is a party or to which the property or
assets of the Company or any Guarantor is subject which, if determined
adversely to the Company or the Guarantors, would result, individually
or in the aggregate, in a Material Adverse Effect, or which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Notes to be sold hereunder or the
consummation of the other transactions described in the Final
Memorandum under the caption "Use of Proceeds."
(xi) None of the Company or the Guarantors is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document) or (ii) to the knowledge of such counsel, in
breach or violation of any judgment, decree or order applicable to
any of
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them or any of their respective properties or assets.
(xii) The execution and delivery of this Agreement, the
Indenture, the Registration Rights Agreement and the consummation of
the transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the Initial
Purchaser) and the retention by the Company of BTSC pursuant to the
BTSC Engagement Letter and BTSC's acting as contemplated hereby and
thereby, will not conflict with or constitute or result in a breach or
a default under (or an event which with notice or passage of time or
both would constitute a default under) or violation of any of (i) the
terms or provisions of any Contract known to such counsel (which
Contracts are listed on Schedule B attached to such opinion), (ii) the
certificate of incorporation or bylaws (or similar organizational
document) of the Company or any of the Guarantors, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 8 hereof) any statute, judgment, decree,
order, rule or regulation which, in such counsel's experience, is
normally applicable both to general business corporations which are
not engaged in regulated business activities and to transactions of
the type contemplated by the Final Memorandum (but without our having
made any special investigation as to other laws).
(xiii) To the knowledge of such counsel, no consent, approval,
authorization or order of any governmental authority is required for
the issuance and sale by the Company of the Notes to
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the Initial Purchaser or the other transactions contemplated hereby,
except such as may be required under Blue Sky laws, as to which such
counsel need express no opinion, and those which have previously been
obtained.
(xiv) To the best of such counsel's knowledge, there are no
legal or governmental proceedings involving or affecting the Company or
the Guarantors or any of their respective properties or assets which
would be required to be described in a prospectus pursuant to the Act
that are not described in the Final Memorandum nor are there any
material contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not described
in the Final Memorandum.
(xv) None of the Company or the Guarantors is, or immediately
after the sale of the Notes to be sold hereunder and the application
of the proceeds from such sale (as described in the Final Memorandum
under the caption "Use of Proceeds") will be, an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended.
(xvi) No registration under the Act of the Notes is required in
connection with the sale of the Notes to the Initial Purchaser as
contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be
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qualified under the TIA, in each case assuming (i) that the purchasers
who buy such Notes in the initial resale thereof are qualified
institutional buyers as defined in Rule 144A promulgated under the Act
("QIBs") or accredited investors as defined in Rule 501(a) (1), (2),
(3) or (7) promulgated under the Act ("Accredited Investors"), (ii)
the accuracy of the Initial Purchaser's representations in Section 8
hereof and those of the Company and the Guarantors contained in this
Agreement regarding the absence of a general solicitation in connection
with the sale of such Notes to the Initial Purchaser and the initial
resale thereof and (iii) the due performance by the Initial Purchaser
of the agreements set forth in Section 8 hereof.
(xvii) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
(xviii) To the knowledge of such counsel, none of the Company or
the Guarantors has engaged or retained any person, other than BTSC as
the Initial Purchaser, to act as a financial advisor, underwriter or
placement agent in connection with the issuance of the Notes and,
except for the fees and expenses payable in connection with the
issuance of the Notes as described in the Final Memorandum no person
has the right to receive a material amount of financial advisory,
underwriting, placement, finder's or similar fees in connection with,
or as a result of, the issuance of the Notes and the purchase of the
Notes by the Initial Purchaser or the consummation of the other
transactions contemplated hereby.
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At the time the foregoing opinion is delivered, Crouch & Hallett shall
additionally state that it has participated in conferences with officers
and other representatives of the Company and the Guarantors,
representatives of the independent public accountants for the Company and
Guarantors, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Final
Memorandum and related matters were discussed, and, although it has not
independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum, no facts have come to its attention
which lead it to believe that the Final Memorandum, on the date thereof or
at the Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
firm need express no opinion with respect to the financial statements and
related notes thereto and the other financial, statistical and accounting
data included in the Final Memorandum). In rendering such opinion, Crouch
& Hallett LLP shall have received and may rely upon such certificates and
other documents and information as it may reasonably request to pass on
such matters. The opinion of Crouch & Hallett described in this Section
shall be rendered to the Initial Purchaser at the request of the Company
and the Guarantors and shall so state therein.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
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(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser,
dated as of the Closing Date and addressed to the Initial Purchaser, of
White & Case, counsel for the Initial Purchaser, with respect to certain
legal matters relating to this Agreement and such other related matters as
the Initial Purchaser may reasonably require. In rendering such opinion,
White & Case shall have received and may rely upon such certificates and
other documents and information as it may reasonably request to pass upon
such matters.
(c) The Initial Purchaser shall have received from the Independent
Accountants comfort letters dated the date hereof and the Closing Date, in
form and substance satisfactory to counsel for the Initial Purchaser.
(d) The representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on and as
of the date hereof and on and as of the Closing Date as if made on and as
of the Closing Date; the statements of the Company's and the Guarantors'
officers made pursuant to any certificate delivered in accordance with the
provisions hereof shall be true and correct on and as of the date made and
on and as of the Closing Date; the Company and the Guarantors shall have
performed all covenants and agreements and satisfied all conditions on
their part to be performed or satisfied hereunder at or prior to the
Closing Date; and, except as described in the Final Memorandum (exclusive
of any amendment or supplement thereto after the date hereof), subsequent
to the date of the most recent financial statements in such Final
Memorandum, there shall have been no event or development that,
individually or in the aggregate, has or would be reasonably likely to have
a Material Adverse Effect.
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(e) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the conduct of the business and operations of the
Company or any of the Guarantors shall not have been interfered with by
strike, fire, flood, hurricane, accident or other calamity (whether or not
insured) or by any court or governmental action, order or decree, and,
except as otherwise stated therein, the properties of the Company or any of
the Guarantors shall not have sustained any loss or damage (whether or not
insured) as a result of any such occurrence, except any such interference,
loss or damage which would not, individually or in the aggregate, have a
Material Adverse Effect.
(g) The Initial Purchaser shall have received certificates of the
Company and each of the Guarantors, dated the Closing Date, signed by their
respective Chairman of the Board, President or any Senior Vice President
and the Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Company and
each of the Guarantors contained in this Agreement are true and
correct as of the date hereof and as of the Closing Date, and the
Company and each of the Guarantors have performed all covenants
and agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent
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financial statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), no event or
events have occurred, no information has become known nor does any
condition exist that, individually or in the aggregate, would have
a Material Adverse Effect;
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently); and
(iv) such other information as the Initial Purchaser may
reasonably request.
(h) On the Closing Date, the Initial Purchaser shall have received
the Registration Rights Agreement executed by the Company and the
Guarantors and such agreement shall be in full force and effect at all
times from and after the Closing Date.
(i) On or before the Closing Date, the Brown-Bridge Merger shall have
been consummated as described in the Final Memorandum and such merger shall
be approved by the Secretary of State of the State of Delaware.
(j) On or before the Closing Date, the Company will use the proceeds
received from the issuance of the Notes to repay: (i) $8.5 million
aggregate principal amount of Senior Secured bank financing from Bankers
Trust Company pursuant to that certain Senior Credit Agreement, dated as of
April 5, 1996; (ii) the entire principal amount outstanding, plus any
accrued and unpaid interest, under the Loan and Security Agreement between
Brown Bridge Industries, Inc. and Transamerica Business Credit Corporation,
dated as of September 16, 1994; (iii) the entire principal amount
outstanding, plus any accrued and unpaid interest,
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under the Credit Agreement, dated as of September 29, 1995, among the
Company, as pledgor, Central Products Company ("Central Products"), as
borrower, various lenders, and Heller Financial, Inc., as Agent; (iv) the
Subordinated Convertible Promissory Note, dated April 5, 1996, in the
principal amount of $20,250,000 issued by the Company to Alco Standard
Corporation ("Alco") and the Subordinated Promissory Note, dated
September 29, 1995, in the principal amount of $5 million initially
issued by Central Products to Alco, and which has been assumed by the
Company and amended as of April 5, 1996 and (v) $1.7 million in
outstanding principal and accrued interest due on its subordinated notes,
due 1997, issued by the Company to Lynch Corporation and Boyle, Fleming
George & Co. and related parties.
(k) The Company shall have delivered to the Initial Purchaser a true,
correct and complete copy of documents evidencing a revolving credit
facility, which facility shall be in an aggregate principal amount of up to
$40 million and with the Guarantors as borrowers, the Company as the
guarantor and BT Commercial Corporation and Transamerica Business Credit
Corporation as the lenders; the Company and the other parties thereto shall
have executed and delivered documents evidencing such revolving credit
facility; and such revolving credit facility shall be in full force and
effect.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Guarantors as they
shall have heretofore reasonably requested from the Company and the Guarantors.
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All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchaser and counsel for the Initial Purchaser. The Company and the
Guarantors shall furnish to the Initial Purchaser such conformed copies of such
documents, opinions, certificates, letters, schedules and instruments in such
quantities as the Initial Purchaser shall reasonably request.
8. OFFERING OF NOTES; RESTRICTIONS ON TRANSFER. The Initial
Purchaser agrees with the Company and the Guarantors that (i) it has not and
will not solicit offers for, or offer or sell, the Notes by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act; and (ii) it has and will solicit offers for the
Notes only from, and will offer the Notes only to (A) in the case of offers
inside the United States, (x) persons whom the Initial Purchaser reasonably
believes to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A or (y) a limited number of other institutional investors reasonably
believed by the Initial Purchaser to be Accredited Investors that, prior to
their purchase of the Notes, deliver to the Initial Purchaser a letter
containing the representations and agreements set forth in Annex A to the Final
Memorandum and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate
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or trust)); PROVIDED, HOWEVER, that, in the case of this clause (B), in
purchasing such Notes such persons are deemed to have represented and agreed
as provided under the caption "Transfer Restrictions" contained in the Final
Memorandum.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the
Guarantors, jointly and severally, agree to indemnify and hold harmless the
Initial Purchaser and its respective affiliates, directors, officers, agents,
representatives and employees of such Initial Purchaser or its affiliates, and
each other person, if any, who controls the Initial Purchaser or its affiliates
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities to which any Initial
Purchaser or such other person may become subject under the Act, the Exchange
Act or otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto or
any application or other document, or any amendment or supplement thereto,
executed by the Company or the Guarantors or based upon written information
furnished by or on behalf of the Company or the Guarantors filed in any
jurisdiction in order to qualify the Notes under the securities or "Blue
Sky" laws thereof or filed with any securities association or securities
exchange (each an "Application");
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading; or
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(iii) any breach of any of the representations and warranties of the
Company and the Guarantors set forth in this Agreement or the Registration
Rights Agreement,
and will reimburse, as incurred, the Initial Purchaser and each such other
person for any legal or other expenses incurred by the Initial Purchaser or such
other person in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage, liability
or action; PROVIDED, HOWEVER, the Company and the Guarantors will not be liable
in any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in any Memorandum or any amendment or
supplement thereto or any Application in reliance upon and in conformity with
written information concerning the Initial Purchaser furnished to the Company or
the Guarantors by an Initial Purchaser specifically for use therein. This
indemnity agreement will be in addition to any liabilities or obligations that
the Company and the Guarantors may otherwise have to the indemnified parties,
including without limitation the indemnification obligations of the Company
pursuant to the BTSC Engagement. The Company and the Guarantors shall not be
liable under this Section 9 for any settlement of any claim or action effected
without its prior written consent, which shall not be unreasonably withheld.
In addition to the indemnity agreements set forth in the paragraph
above and set forth in the BTSC Engagement Letter, the Company and the
Guarantor, jointly and severally, agree to indemnify and hold harmless the
Initial Purchaser and its respective affiliates, directors, officers, agents,
representatives and employees of such Initial Purchaser or its affiliates, and
each other person, if any, who controls the Initial Purchaser or its affiliates
within the meaning of Section 15 of the Act or
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Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Initial Purchaser or such other person may become
subject to in connection with the allegation by any person that the
engagement and retention of the Initial Purchaser pursuant to the BTSC
Engagement Letter or the purchase of the Notes by the Initial Purchaser as
contemplated hereby or the taking of any actions by the Initial Purchaser in
connection herewith or therewith: (i) violates any Contract of the Company
or the Guarantors or (ii) requires the payment of any amount to a third
party, and will reimburse, as incurred, the Initial Purchaser and each such
other person for any legal or other expenses incurred by the Initial
Purchaser or such other person in connection with investigating, defending
against or appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, the Guarantors, their directors, their officers and each person, if
any, who controls the Company or the Guarantors within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which the Company or the Guarantors or any
such director, officer or controlling person may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Memorandum or any amendment or supplement thereto or any Application, or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in any Memorandum or any amendment or supplement thereto
or any Application, or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning the Initial
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Purchaser, furnished to the Company or the Guarantors by the Initial
Purchaser specifically for use therein; and subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses incurred by the Company, the Guarantors or any such
director, officer or controlling person in connection with investigating or
defending against or appearing as a third party witness in connection with
any such loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability that the Initial
Purchaser may otherwise have to the indemnified parties. The Initial
Purchaser shall not be liable under this Section 9 for any settlement of any
claim or action effected without their consent, which shall not be
unreasonably withheld. The Company and the Guarantors shall not, without the
prior written consent of the Initial Purchaser, effect any settlement or
compromise of any pending or threatened proceeding in respect of which the
Initial Purchaser is or could have been a party, or indemnity could have been
sought hereunder by any Initial Purchaser, unless such settlement (A)
includes an unconditional written release of the Initial Purchaser, in form
and substance reasonably satisfactory to the Initial Purchaser, from all
liability on claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party
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of substantial rights and defenses and (ii) will not, in any event, relieve
the indemnifying party from any obligations to any indemnified party other
than the indemnification obligation provided in paragraphs (a) and (b) above.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; PROVIDED, HOWEVER, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after receipt by the indemnifying party of notice of
the institution of such action, then, in each such case, the indemnifying
party shall not have the right to direct the defense of such action on behalf
of such indemnified party or parties and such indemnified party or parties
shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed
to defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel
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in accordance with the proviso to the immediately preceding sentence (it
being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial
Purchaser in the case of paragraph (a) of this Section 9 or either the
Company or any of the Guarantors in the case of paragraph (b) of this Section
9, representing the indemnified parties under such paragraph (a) or paragraph
(b), as the case may be, who are parties to such action or actions) or (ii)
the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party. After
such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
prior written consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in writing its
rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the
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Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof). The relative
benefits received by the Company and the Guarantors on the one hand and the
Initial Purchaser on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (before deducting expenses) received
by the Company and the Guarantors bear to the total discounts and commissions
received by the Initial Purchaser. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Guarantors on the one hand, or the Initial Purchaser on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission, and any other equitable considerations appropriate in
the circumstances. The Company, the Guarantors and the Initial Purchaser
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to in the first sentence of this paragraph (d). Notwithstanding any
other provision of this paragraph (d), the Initial Purchaser shall be
obligated to make contributions hereunder that in the aggregate exceed the
total discounts, commissions and other compensation received by the Initial
Purchaser under this Agreement, less the aggregate amount of any damages that
the Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each
person, if any, who controls the Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchaser, and each director of the
Company and the Guarantors, each officer of the Company and the Guarantors
and each person, if any, who controls the Company or the Guarantors within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall
have the same rights to contribution as the Company and the Guarantors.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company and the
Guarantors, their respective officers and the Initial Purchaser set forth in
this Agreement or made by or on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company and the Guarantors, any of their respective officers or
directors, the Initial Purchaser or any other person referred to in Section 9
hereof and (ii) delivery of and payment for the Notes. The respective
agreements, covenants, indemnities and other statements set forth in Sections 6,
9 and 15 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that the Company or any of the Guarantors shall have
failed, refused or been unable to perform all obligations and satisfy all
conditions on their respective part to be performed or satisfied hereunder at or
prior thereto or, if at or prior to the Closing Date:
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(i) any of the Company or the Guarantors shall have sustained any
loss or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchaser, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchaser, any event or development that, individually or in the aggregate,
has or could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of the Company or the
Guarantors), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities of the Company or in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or minimum or maximum prices
shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the
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public offering or the delivery of the Notes as contemplated by the
Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The statements
set forth in paragraph 6 under the heading "Private Placement" in the Final
Memorandum (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. NOTICES. All communications hereunder shall be in writing and,
if sent to the Initial Purchaser, shall be mailed or delivered to (i) BT
Securities Corporation, 130 Liberty Street, New York, New York 10006,
Attention: Corporate Finance Department; with a copy to White & Case, 1155
Avenue of the Americas, New York, NY 10036, Attention: Eric Berg, Esq.; if sent
to the Company or the Guarantors, shall be mailed or delivered to the Company at
600 N. Pearl Street, Dallas, Texas 75201, Attention: Chief Financial Officer;
with a copy to Crouch & Hallett, 717 N. Harwood Street, Suite 1400, Dallas, TX
75201, Attention: Timothy Vaughan, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
-47-
<PAGE>
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser, the Company and the Guarantors and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company and the Guarantors contained in Section 9 of this
Agreement shall also be for the benefit of any person or persons who control the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 8 of this Agreement shall also be for the benefit of the directors of
the Company and the Guarantors and officers and any person or persons who
control the Company or the Guarantors within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act. No purchaser of Notes from the Initial
Purchaser will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-48-
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company,
the Guarantors and the Initial Purchaser.
Very truly yours,
SPINNAKER INDUSTRIES, INC.
By: /s/ NED N. FLEMING, III
------------------------------------
Name: Ned N. Fleming, III
Title: President
GUARANTORS:
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ NED N. FLEMING, III
------------------------------------
Name: Ned N. Fleming, III
Title: Vice President
CENTRAL PRODUCTS COMPANY
By: /s/ NED N. FLEMING, III
------------------------------------
Name: Ned N. Fleming, III
Title: Chief Operating Officer
-49-
<PAGE>
ENTOLETER, INC.
By: /s/ ROBERT WENTZEL
------------------------------------
Name: Robert Wentzel
Title: President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORATION
By: /s/ JAMES A. CLAYTON
------------------------------
Name: James A. Clayton
Title: Managing Director
-50-
<PAGE>
SCHEDULE 1
Principal
Amount of
Initial Purchaser Notes
- ----------------- ------------
BT Securities Corporation $115,000,000
<PAGE>
SCHEDULE 2
GUARANTORS
Jurisdiction of
Name Incorporation
- ---- ---------------
Central Products Company Delaware
Brown-Bridge Industries, Inc. Delaware
Entoleter, Inc. Delaware
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of October 18, 1996
by and among
SPINNAKER INDUSTRIES, INC.
and
THE SUBSIDIARY GUARANTORS,
named herein
and
BT SECURITIES CORPORATION
as Initial Purchaser
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$115,000,000
10 3/4% SENIOR SECURED NOTES DUE 2006
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................................. 1
2. EXCHANGE OFFER.......................................................... 5
3. SHELF REGISTRATION...................................................... 9
4. ADDITIONAL INTEREST..................................................... 10
5. REGISTRATION PROCEDURES................................................. 12
6. REGISTRATION EXPENSES................................................... 22
7. INDEMNIFICATION......................................................... 24
8. RULES 144 AND 144A...................................................... 28
9. UNDERWRITTEN REGISTRATIONS.............................................. 29
10. MISCELLANEOUS. ......................................................... 29
(a) NO INCONSISTENT AGREEMENTS.......................................... 29
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES............................ 29
(c) AMENDMENTS AND WAIVERS............................................. 29
(d) NOTICES............................................................ 30
(e) SUCCESSORS AND ASSIGNS............................................. 31
(f) COUNTERPARTS....................................................... 31
(g) HEADINGS........................................................... 31
(h) GOVERNING LAW...................................................... 31
(i) SEVERABILITY....................................................... 32
(j) NOTES HELD BY THE ISSUERS OR THEIR AFFILIATES...................... 32
(i)
<PAGE>
PAGE
----
(k) THIRD PARTY BENEFICIARIES.......................................... 32
(ii)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
October 18, 1996, by and among Spinnaker Industries, Inc., a Delaware
corporation (the "Company"), Brown-Bridge Industries, Inc., a Delaware
corporation, Central Products Company, a Delaware corporation, and Entoleter,
Inc., a Delaware corporation, each of which is a wholly-owned subsidiary of
the Company (collectively, the "Guarantors"), and BT Securities Corporation
(the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated October 18, 1996, among the Company, the Guarantors and the
Initial Purchaser (the "Purchase Agreement"), which provides for the sale by
the Company to the Initial Purchaser of $115,000,000 aggregate principal
amount of the Company's 10 3/4% Senior Subordinated Notes due 2006 (the
"Notes"), which Notes will be guaranteed by the Guarantors. The Company and
the Guarantors are collectively referred to herein as the "Issuers." In
order to induce the Initial Purchaser to enter into the Purchase Agreement,
the Issuers have agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchaser and its direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the obligation of the Initial Purchaser to purchase the Notes
under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
<PAGE>
ADDITIONAL INTEREST: Has the meaning provided in Section 4(a)
hereof.
ADVICE: Has the meaning provided in the last paragraph of Section 5
hereof.
AGREEMENT: Has the meaning provided in the first introductory
paragraph hereto.
APPLICABLE PERIOD: Has the meaning provided in Section 2(b) hereof.
CLOSING DATE: Has the meaning provided in the Purchase Agreement.
COMPANY: Has the meaning provided in the first introductory
paragraph hereto.
EFFECTIVENESS DATE: The 180th day after the Issue Date.
EFFECTIVENESS PERIOD: Has the meaning provided in Section 3(a)
hereof.
EVENT DATE: Has the meaning provided in Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: Has the meaning provided in Section 2(a) hereof.
EXCHANGE OFFER: Has the meaning provided in Section 2(a) hereof.
EXCHANGE REGISTRATION STATEMENT: Has the meaning provided in
Section 2(a) hereof.
-2-
<PAGE>
FILING DATE: The 90th day after the Issue Date.
GUARANTORS: Has the meaning provided in the first introductory
paragraph hereto.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: Has the meaning provided in Section 7(c) hereof.
INDEMNIFYING PERSON: Has the meaning provided in Section 7(c)
hereof.
INDENTURE: The Indenture, dated as of October 23, 1996 between the
Company, the Guarantors and The Chase Manhattan Bank, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
INITIAL PURCHASER: Has the meaning provided in the first
introductory paragraph hereto.
INSPECTORS: Has the meaning provided in Section 5(o) hereof.
ISSUE DATE: The date on which the original Notes were sold to the
Initial Purchaser pursuant to the Purchase Agreement.
ISSUERS: Has the meaning provided in the second introductory
paragraph hereto.
NASD: Has the meaning provided in Section 5(s) hereof.
NOTES: Has the meaning provided in the second introductory
paragraph hereto.
-3-
<PAGE>
PARTICIPANT: Has the meaning provided in Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: Has the meaning provided in Section
2(b) hereof.
PERSONS: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
PRIVATE EXCHANGE: Has the meaning provided in Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: Has the meaning provided in Section 2(b)
hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: Has the meaning provided in the second
introductory paragraph hereto.
RECORDS: Has the meaning provided in Section 5(o) hereof.
REGISTRABLE NOTES: Each Note upon original issuance of the Notes
and at all times subsequent thereto,
-4-
<PAGE>
each Exchange Note as to which Section 2(c)(v) hereof is applicable upon
original issuance and at all times subsequent thereto and each Private
Exchange Note upon original issuance thereof and at all times subsequent
thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a
Registration Statement (other than, with respect to any Exchange Note as to
which Section 2(c)(v) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such Note (unless
such Note was not tendered for exchange by the Holder thereof), Exchange Note
or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Registration Statement, (ii) such Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, or (iii) such Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding for purposes of
the Indenture.
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that
covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and
sales by subsequent holders that are not affiliates of an issuer of such
securities being free of the registration and prospectus delivery
requirements of the Securities Act.
-5-
<PAGE>
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: Has the meaning provided in Section 2(c) hereof.
SHELF REGISTRATION: Has the meaning provided in Section 3(a) hereof.
SHELF REGISTRATION STATEMENT: shall mean a "shelf" registration
statement of the Company and the Guarantors which covers all of the
Registrable Notes on an appropriate form under Rule 415 under the 1933 Act,
or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE(S): The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
-6-
<PAGE>
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration
in which securities of one or more of the Issuers are sold to an underwriter
for reoffering to the public.
2. EXCHANGE OFFER
(a) Each of the Issuers agrees to file with the SEC no later than
the Filing Date an offer to exchange (the "Exchange Offer") any and all of
the Registrable Notes (other than the Private Exchange Notes, if any) for a
like aggregate principal amount of debt securities of the Company, guaranteed
by the Guarantors, which are identical in all material respects to the Notes
(the "Exchange Notes") (and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC
to effect or maintain the qualification thereof under the TIA) and which, in
either case, has been qualified under the TIA), except that the Exchange
Notes (other than Private Exchange Notes, if any) shall have been registered
pursuant to an effective Registration Statement under the Securities Act and
shall contain no restrictive legend thereon. The Exchange Offer shall be
registered under the Securities Act on the appropriate form (the "Exchange
Registration Statement") and shall comply with all applicable tender offer
rules and regulations under the Exchange Act. The Issuers agree to use their
best efforts to (x) cause the Exchange Registration Statement to be declared
effective under the Securities Act on or before the Effectiveness Date; (y)
keep the Exchange Offer open for at least 20 business days (or longer if
required by applicable law) after the date that notice of the Exchange Offer
is mailed to the Holders; and (z) consummate the Exchange Offer on or prior
to the 225th day following the Issue Date. If after such Exchange
Registration Statement is declared effective by the SEC, the Exchange Offer
or the issuance of the Exchange Notes thereunder is interfered with
-7-
<PAGE>
by any stop order, injunction or other order or requirement of the SEC or any
other governmental agency or court, such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation
of the provisions of the Securities Act, and that such Holder in not an
"affiliate" of any of the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this Section 2,
the Issuers shall have no further obligation to register Registrable Notes
(other than Private Exchange Notes and other than in respect of any Exchange
Notes as to which clause 2(c)(v) hereof applies) pursuant to Section 3
hereof. No securities other than the Exchange Notes shall be included in the
Exchange Registration Statement.
(b) The Issuers shall include within the Prospectus contained in
the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions taken or policies made by the
Staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the Staff of the SEC or such
positions or policies, in the judgment of the Initial Purchaser, represent
the prevailing views of the Staff of the SEC. Such "Plan of Distribution"
section shall also expressly permit the use of the Prospectus by all Persons
subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, and include a statement
describing the
-8-
<PAGE>
means by which Participating Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully
delivered by any Participating Broker-Dealer subject to the prospectus
delivery requirements of the Securities Act for such period of time as is
necessary to comply with applicable law in connection with any resale of the
Exchange Notes; PROVIDED, HOWEVER, that such period shall not exceed 180 days
after the consummation of the Exchange Offer (or such longer period if
extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable
Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Issuers shall, upon the request of
the Initial Purchaser, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer issue and deliver to the Initial Purchaser in exchange
(the "Private Exchange") for such Notes held by the Initial Purchaser a like
principal amount of debt securities of the Company, guaranteed by the
Guarantors, that are identical in all material respects to the Exchange Notes
(the "Private Exchange Notes") (and which are issued pursuant to the same
Indenture as the Exchange Notes) except for the placement of a restrictive
legend on such Private Exchange Notes. The Private Exchange Notes shall bear
the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
-9-
<PAGE>
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the issuers shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
-10-
<PAGE>
The Exchange Notes and the Private Exchange Notes to be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to
the Indenture, which in either event shall provide that (1) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (2) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in the Indenture. The Indenture or such indenture
shall provide that the Exchange Notes, the Private Exchange Notes and the
Notes shall vote and consent together on all matters as one class and that
none of the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Issuers are not permitted to
effect an Exchange Offer, (ii) the Exchange offer is not consummated within
225 days of the Issue Date, (iii) any holder of Private Exchange Notes so
requests at any time after the consummation of the Private Exchange, (iv) the
Holders of not less than a majority in aggregate principal amount of the
Registrable Notes reasonably determine that the interests of the Holders
would be materially adversely affected by consummation of the Exchange Offer
or (v) in the case of any Holder that participates in the Exchange Offer,
such Holder does not receive Exchange Notes on the date of the exchange that
may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of any of
the Issuers within the meaning of the Securities Act), then the Issuers shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") to the Trustee and, in the case of clauses (i), (ii) and (iv)
above, all Holders, in the case of clause (iii) above, the Holders of the
Private Exchange Notes and, in the case of clause (v) above, the affected
Holder, and shall file a Shelf Registration pursuant to Section 3 hereof.
-11-
<PAGE>
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:
(a) SHELF REGISTRATION. The Issuers shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Registrable Notes (the "Shelf Registration"). If the Issuers shall
not have yet filed an Exchange Registration Statement, each of the Issuers
shall use its best efforts to file with the SEC the Shelf Registration on or
prior to the Filing Date. The Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers shall
not permit any securities other than the Registrable Notes to be included in
the Shelf Registration.
Each of the Issuers shall use its best efforts to cause the Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Shelf Registration continuously
effective under the Securities Act until the date which is three years from
the Issue Date, subject to extension pursuant to the last paragraph of
Section 5 hereof (the "Effectiveness Period"), or such shorter period ending
when all Registrable Notes covered by the Shelf Registration have been sold
in the manner set forth and as contemplated in the Shelf Registration.
(b) WITHDRAWAL OF STOP ORDERS. If the Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), each of the Issuers shall use its best efforts to obtain the
-12-
<PAGE>
prompt withdrawal of any order suspending the effectiveness thereof.
(c) SUPPLEMENTS AND AMENDMENTS. The Issuers shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any
underwriter of such Registrable Notes.
4. ADDITIONAL INTEREST
(a) The Issuers and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision.
Accordingly, the Issuers agree to pay, as liquidated damages, additional
interest on the Notes ("Additional Interest") under the circumstances and to
the extent set forth below:
(i) if neither the Exchange Registration Statement nor the Shelf
Registration has been filed on or prior to the Filing Date, then,
commencing on the 91st day after the Issue Date, Additional Interest
shall accrue on the Notes over and above the stated interest at a rate of
0.50% per annum for the first 90 days immediately following the Filing
Date, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor the Shelf
Registration is declared effective by the SEC on or prior to the
Effectiveness Date, then, commencing on the 181st day after the Issue
Date, Additional Interest shall accrue on the Notes included or which
should have been included in such Registration
-13-
<PAGE>
Statement over and above the stated interest at a rate of 0.50% per annum
for the first 90 days immediately following the Effectiveness Date, such
Additional Interest rate increasing by an additional 0.50% per annum at
the beginning of each subsequent 90-day period; and
(iii) if (A) the Issuers have not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 225th day after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the
time that the Exchange Offer is consummated or (C) if applicable, the
Shelf Registration has been declared effective and such Shelf
Registration ceases to be effective at any time during the Effectiveness
Period, then Additional Interest shall accrue (over and above any
interest otherwise payable on such Notes) at a rate of 0.50% per annum
for the first 90 days commencing on (x) the 226th day after the Issue
Date with respect to the Notes validly tendered and not exchanged by the
Company, in the case of (A) above, or (y) the day the Exchange
Registration Statement ceases to be effective in the case of (B) above,
or (z) the day such Shelf Registration ceases to be effective in the case
of (C) above, such Additional Interest rate increasing by an additional
0.50% per annum at the beginning of each such subsequent 90-day period
(it being understood and agreed that, notwithstanding any provision to
the contrary, so long as any Note which is the subject of a Shelf Notice
is then covered by an effective Shelf Registration Statement, no
Additional Interest shall accrue on such Note);
PROVIDED, HOWEVER, that the Additional Interest rate on any affected Note may
not exceed at any one time in the aggregate 2.0% per annum; and PROVIDED,
FURTHER, that (1) upon the filing of the Exchange Registration Statement or a
Shelf Registration (in the case of clause (i) of this Section
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<PAGE>
4(a)), (2) upon the effectiveness of the Exchange Registration Statement or
the Shelf Registration (in the case of clause (ii) of this Section 4(a)), or
(3) upon the exchange of Exchange Notes for all Notes tendered (in the case
of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the
Exchange Registration Statement which had ceased to remain effective (in the
case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the
Shelf Registration which had ceased to remain effective (in the case of
(iii)(C) of this Section 4(a)), Additional Interest on the affected Notes as
a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). The Company
shall pay the Additional Interest due on the transfer restricted Notes by
depositing with the paying agent (which shall not be the Company for these
purposes) for the transfer restricted Notes, in trust, for the benefit of the
holders thereof, prior to 11:00 A.M. on the next interest payment date
specified by the Indenture (or such other indenture), sums sufficient to pay
the Additional Interest then due. Any amounts of Additional Interest due
pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable to the Holders of affected Notes in cash semi-annually on each
interest payment date specified by the Indenture (or such other indenture) to
the record holders entitled to receive the interest payment to be made on
such date. Commencing with the first such date occurring after any such
Additional Interest commences to accrue. The amount of Additional Interest
will be determined by multiplying the applicable Additional Interest rate by
the principal amount of the affected Registrable Notes of such Holders,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised
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<PAGE>
of twelve 30-day months and, in the case of a partial month, the actual
number of days elapsed), and the denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Issuers shall effect such registration(s) to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and
in connection with any Registration Statement filed by the Issuers hereunder,
the Issuers shall:
(a) Prepare and file with the SEC prior to the Filing Date a
Registration Statement or Registration Statements as prescribed by Sections 2
or 3 hereof, and use their best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein;
PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Issuers shall, if
requested, furnish to and afford the Holders of the Registrable Notes covered
by such Registration Statement or each such Participating Broker-Dealer, as
the case may be, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five business
days prior to such filing). The Issuers shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect
of which the Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in
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aggregate principal amount of the Registrable Notes covered by such
Registration Statement, or any such Participating Broker-Dealer, as the case
may be, their counsel, or the managing underwriters, if any, shall reasonably
object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the
Applicable Period or until consummation of the Exchange Offer, as the case
may be; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act applicable to it with respect to the disposition of
all securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent resale
of any securities being sold by a Participating Broker-Dealer covered by any
such Prospectus; the Company shall be deemed not to have used its best
efforts to keep a Registration Statement effective during the Applicable
Period if it voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless such
action is required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of paragraph 5(k)
hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
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Notes during the Applicable Period, notify the selling Holders of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, promptly (but in any event
within two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, at the sole expense of the Issuers, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
Prospectus is required by the Securities Act to be delivered in connection
with sales of the Registrable Notes or resales of Exchange Notes by
Participating Broker-Dealers the representations and warranties of the
Issuers contained in any agreement (including any underwriting agreement),
contemplated by Section 5(n) hereof cease to be true and correct, (iv) of the
receipt by the Issuers of any notification with respect to the suspension of
the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement
or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in
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the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
and that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi) of the
determination by the Issuers that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes for sale in any jurisdiction, and, if any such
order is issued, to use its best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 hereof
and if requested by the managing underwriter or underwriters (if any), or the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters (if any), such
Holders, or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the Issuers have
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an
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Exchange Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
furnish to each selling Holder of Registrable Notes and to each such
Participating Broker-Dealer who so requests and to counsel and each managing
underwriter, if any, at the sole expense of the Issuers, one conformed copy
of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, their respective counsel, and the underwriters, if any, at the sole
expense of the Issuers, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or
supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of
this Section 5, each Issuer hereby consents to the use of such Prospectus and
each amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case-may
be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by, or
the sale by Participating Broker-Dealers of the Exchange Notes pursuant to,
such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the
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Exchange Registration Statement by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, to use its best efforts
to register or qualify such Registrable Notes (and to cooperate with selling
Holders of Registrable Notes or each such Participating Broker-Dealer, as the
case may be, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable Notes)
for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably request
in writing; PROVIDED, HOWEVER, that where Exchange Notes held by
Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do
any and all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that none of the
Issuers shall be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that
would subject it to general service of process in any such jurisdiction where
it is not then so subject or (C) subject itself to taxation in excess of a
nominal dollar amount in any such jurisdiction where it is not then so
subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes
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to be sold, which certificates shall not bear any restrictive legends and
shall be in a form eligible for deposit with The Depository Trust Company;
and enable such Registrable Notes to be in such denominations and registered
in such names as the managing underwriter or underwriters, if any, or Holders
may reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
Holders thereof or the underwriter or underwriters, if any, to dispose of
such Registrable Notes, except as may be required solely as a consequence of
the nature of a selling Holder's business, in which case each of the Issuers
will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly an
practicable prepare and (subject to Section 5(a) hereof) file with the SEC,
at the sole expense of the Issuers, a supplement or post-effective amendment
to the Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by reference,
or file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered by
a Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light
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<PAGE>
of the circumstances under which they were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by
a Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders of
a majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates
for the Registrable Notes or Exchange Notes, as the case may be, in a form
eligible for deposit with The Depositary Trust Company and (ii) provide a
CUSIP number for the Registrable Notes or Exchange Notes, as the case may be.
(n) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting agreement
as is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to facilitate the registration
or the disposition of such Registrable Notes and, in such connection, (i)
make such representations and warranties to, and covenants with, the
underwriters with respect to the business of the Issuers and their respective
subsidiaries and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by Issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and confirm the same in
writing if and when requested; (ii) obtain the written opinion of counsel to
the Issuers and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or
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<PAGE>
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt similar to
the Notes and such other matters as may be reasonably requested by the
managing underwriter or underwriters; (iii) obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Issuers (and, if necessary, any other independent
certified public accountants of any subsidiary of any of the Issuers or of
any business acquired by any of the Issuers for which financial statements
and financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt similar to the Notes and such other matters as
reasonably requested by the managing underwriter or underwriters; and (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 7 hereof (or such other provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable Notes
covered by such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any
selling Holder of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the
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case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating Broker-Dealer,
as the case may be, or underwriter (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business hours, all financial
and other records, pertinent corporate documents and instruments of the
Issuers and their respective subsidiaries (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees
of the Issuers and their respective subsidiaries to make available for
inspection all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records which any of the
Issuers determine, in good faith, to be confidential and any Records which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from
a court of competent jurisdiction, (iii) disclosure of such information is,
in the opinion of counsel (a copy of which shall be delivered to the Issuers)
for any Inspector, necessary or advisable in connection with any action,
claim, suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of, based upon, relating to, or
involving this Agreement, or any transactions contemplated hereby or arising
hereunder, or (iv) the information in such Records has been made generally
available to the public. Each selling Holder of such Registrable Securities
and each such
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Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed confidential
and shall not be used by it as the basis for any market transactions in the
securities of the Issuers unless and until such information is generally
available to the public. Each selling Holder of such Registrable Notes and
each such Participating Broker-Dealer will be required to further agree that
it will, upon learning that disclosure of such Records is sought in a court
of competent jurisdiction, give notice to the Issuers and allow the Issuers
to undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Issuers' sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable Notes;
and in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such changes to
such indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts
to cause such trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Notes are sold to
underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month periods.
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<PAGE>
(r) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Issuers
(or to such other Person as directed by the Issuers) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers
shall mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to which
any Registration Statement is being effected to furnish to the Issuers such
information regarding such seller and the distribution of such Registrable
Notes as the Issuers may, from time to time, reasonably request. The Issuers
may exclude from such Registration Statement the Registrable Notes of any
seller who unreasonably fails to furnish such information within a reasonable
time after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuers all
information required to be disclosed in order to make the information
previously furnished to the Issuers by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such
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Registrable Notes or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, that, upon actual receipt of any notice
from the Issuers of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such
Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or
until it is advised in writing (the "Advice") by the Issuers that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Issuers shall give any
such notice, each of the Effectiveness Period and the Applicable Period shall
be extended by the number of days during such periods from and including the
date of the giving of such notice to and including the date when each seller
of Registrable Notes covered by such Registration Statement or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, shall
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing
fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
White & Case in connection with Blue Sky qualifications of the Registrable
Notes or Exchange Notes and
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determination of the eligibility of the Registrable Notes or Exchange Notes
for investment under the laws of such jurisdictions (x) where the holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form
eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any
Registration Statement or sold by any Participating Broker-Dealer, as the
case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Issuers, (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance by or
incident to such performance), (vi) rating agency fees, if any, and any fees
associated with making the Registrable Notes or Exchange Notes eligible for
trading through The Depository Trust Company, (vii) Securities Act liability
insurance, if the Issuers desire such insurance, (viii) fees and expenses of
all other Persons retained by the Issuers, (ix) internal expenses of the
Issuers (including, without limitation, all salaries and expenses of officers
and employees of the Issuers performing legal or accounting duties), (x) the
expense of any annual audit, (ix) the fees and expenses incurred in
connection with the listing of the securities to be registered on any
securities exchange or any inter-dealer quotation system, if applicable, and
(xii) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales
agreements, indentures and any other documents necessary in order to comply
with this Agreement.
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(b) The Issuers, jointly and severally, shall (i) reimburse the
Holders of the Registrable Notes being registered in a Shelf Registration for
the reasonable fees and disbursements of not more than one counsel (in
addition to appropriate local counsel) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Notes to be included in such
Registration Statement and (ii) reimburse out-of-pocket expenses (other than
legal expenses) of Holders of Registrable Notes incurred in connection with
the registration and sale of the Registrable Notes pursuant to a Shelf
Registration or in connection with the exchange of Registrable Notes pursuant
to the Exchange Offer. In addition, the Issuers, jointly and severally,
shall reimburse the Initial Purchaser for 50% of the reasonable fees and
expenses of one counsel in connection with the Exchange Offer which shall be
White & Case, and shall not be required to pay any other legal expenses of
the Initial Purchaser in connection therewith.
7. INDEMNIFICATION. (a) Each of the Issuers, jointly and
severally, agrees to indemnify and hold harmless each Holder of Registrable
Notes offered pursuant to a Shelf Registration Statement and each
Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the affiliates, directors, officers, agents, representatives and
employees of each such Person or its affiliates, and each other Person, if
any, who controls any such Person or its affiliates within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant") from and against any and all losses, claims, damages
and liabilities (including, without limitation, the reasonable legal fees and
other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement pursuant to which the offering of such Registrable
Notes or Exchange Notes, as the case may be, is registered (or any amendment
thereto) or related Prospectus (or any amendments or supplements thereto)
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or any related preliminary prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that the Issuers will not be required to indemnify a
Participant if (i) such losses, claims, damages or liabilities are caused by
any untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with information relating to any
Participant furnished to the Issuers in writing by or on behalf of such
Participant expressly for use therein or (ii) if such Participant sold to the
person asserting the claim the Registrable Notes or Exchange Notes which are
the subject of such claim and such untrue statement or omission or alleged
untrue statement or omission was contained or made in any preliminary
prospectus and corrected in the Prospectus or any amendment or supplement
thereto and the Prospectus does not contain any other untrue statement or
omission or alleged untrue statement or omission of a material fact that was
the subject matter of the related proceeding and it is established by the
Issuers in the related proceeding that such Participant failed to deliver or
provide a copy of the Prospectus (as amended or supplemented) to such Person
with or prior to the confirmation of the sale of such Registrable Notes or
Exchange Notes sold to such Person if required by applicable laws, unless
such failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) was a result of noncompliance by the Issuers with Section 5 of
this Agreement.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and
officers and each Person who controls the Issuers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Issuers to each Participant,
but only (i) with reference to information relating to such Participant
furnished to the Issuers in
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writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus or (ii) with respect to any untrue statement or
representation made by such Participant in writing to the Issuers. The
liability of any Participant under this paragraph shall in no event exceed
the proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person
and any others the Indemnifying Person may reasonably designate in such
proceeding and shall pay the reasonable fees and expenses actually incurred
by such counsel related to such proceeding; PROVIDED, HOWEVER, that the
failure to so notify the Indemnifying Person shall not relieve it of any
obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure directly results in the loss or
compromise of any material rights or defenses by the Indemnifying Person and
the Indemnifying Person was not otherwise aware of such action or claim). In
any such proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person shall have failed within a reasonable period of
time to retain counsel reasonably satisfactory to the Indemnified Person or
(iii) the named parties in any such proceeding (including any
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<PAGE>
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
It is understood that, unless there exists a conflict among Indemnified
Persons, the Indemnifying Person shall not, in connection with any one such
proceeding or separate but substantially similar related proceeding in the
same jurisdiction arising out of the same general allegations, be liable for
the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any such
separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in
interest of Registrable Notes and Exchange Notes sold by all such
Participants and any such separate firm for the Issuers, their directors,
their officers and such control Persons of the Issuers shall be designated in
writing by the Issuers. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its prior written consent, but
if settled with such consent or if there be a final non-appealable judgment
for the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, the Indemnifying Person agrees to
indemnify and hold harmless each Indemnified Person from and against any loss
or liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested
an Indemnifying Person to reimburse the Indemnified Person for reasonable
fees and expenses actually incurred by counsel as contemplated by the third
sentence of this paragraph, the Indemnifying Person agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; PROVIDED,
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HOWEVER, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is our could
have been a party, and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that
are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Indemnified Person.
(d) If the indemnification provided for in Section 7(a) and 7(b)
hereof is for any reason unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, than each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to
provide for just and equitable contribution, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect (i) the relative benefits received by the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other
from the offering of the Notes or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative fault of the parties shall be
determined by reference to,
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<PAGE>
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand or such
Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purposes) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result
of the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any reasonable legal or other expenses actually incurred by
such Indemnified Person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 7, in
no event shall a Participant be required to contribute any amount in excess
of the amount by which proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes, as the case may be, exceeds the amount
of any damages that such Participant has otherwise been required to pay or
has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any
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liability which the Indemnifying Persons may otherwise have to the
Indemnified Persons referred to above.
8. RULES 144 AND 144A. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner in accordance with the requirements of the Securities Act and
the Exchange Act and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Notes, make
publicly available annual reports and such information, documents and other
reports of the type specified in Sections 13 and 15(d) of the Exchange Act.
The Company further covenants for so long as any Registrable Notes remain
outstanding, to make available to any Holder or beneficial owner of
Registrable Notes in connection with any sale thereof and any prospective
purchaser of such Registrable Notes from such Holder or beneficial owner the
information required by Rule 144(d)(4) under the Securities Act in order to
permit resales of such Registrable Notes pursuant to Rule 144A.
9. UNDERWRITTEN REGISTRATIONS. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Holders of a majority in
aggregate principal amount of such Registrable Notes included in such
offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
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<PAGE>
10. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. None of the
Issuers have entered, as of the date hereof, and none of the Issuers shall,
after the date of this Agreement, enter into any agreement with respect to
any of its securities that is inconsistent with the rights granted to the
Holders of Registrable Notes in this Agreement or otherwise conflicts with
the provisions hereof. Other than as provided in Schedule A attached hereto,
none of the Issuers have entered and none of the Issuers will enter into any
agreement with respect to any of its securities which will grant to any
Person piggy-back registration rights with respect to a Registration
Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. Other than as
provided in Schedule B attached hereto, none of the Issuers shall, directly
or indirectly, take any action with respect to the Registrable Notes as a
class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant
to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with
the prior written consent of the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold by such Holders pursuant
to such Registration Statement; PROVIDED, HOWEVER, that the provisions of
this sentence may not be amended, modified or
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<PAGE>
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) NOTICES. All notices and other communications (including
without limitation any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture, with a copy in like
manner to the Initial Purchaser as follows:
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
Department
with a copy to:
White & Case
1155 Avenue of the Americas
New York, NY 10036
Facsimile No: (212) 354-8113
Attention: Eric Berg, Esq.
2. if to the Initial Purchaser, at the addresses specified in
Section 10(d)(1);
3. if to an Issuer, as follows:
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<PAGE>
Spinnaker Industries, Inc.
600 N. Pearl Street # 2160
Dallas, TX 75201
Facsimile No: (214) 855-0093
Attention: Chief Financial Officer
with a copy to:
Crouch & Hallett
717 N. Harwood Street, Suite 1400
Dallas, TX 75201
Facsimile No.: (214) 953-3154
Attention: Timothy Vaughan, Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto; PROVIDED, HOWEVER, that this Agreement shall not inure to the
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Registerable Notes.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
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<PAGE>
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES
TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) NOTES HELD BY THE ISSUERS OR THEIR AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registerable
Notes is required hereunder, Registerable Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
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<PAGE>
(k) THIRD PARTY BENEFICIARIES. Holders of Registerable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first written above.
Issuer:
SPINNAKER INDUSTRIES, INC.
By: /s/ NED N. FLEMING, III
------------------------------
Name: Ned N. Fleming, III
Title: President
Guarantors:
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ NED N. FLEMING, III
------------------------------
Name: Ned N. Fleming, III
Title: Vice President
CENTRAL PRODUCTS COMPANY
By: /s/ NED N. FLEMING, III
------------------------------
Name: Ned N. Fleming, III
Title: Chief Operating Officer
ENTOLETER, INC.
By: /s/ ROBERT WENTZEL
------------------------------
Name: Robert Wentzel
Title: President
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<PAGE>
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By: /s/ JAMES A. CLAYTON
--------------------------
Name: James A. Clayton
Title: Managing Director
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<PAGE>
SCHEDULE A
PIGGY-BACK REGISTRATION RIGHTS
<PAGE>
SCHEDULE B
ADJUSTMENTS REFLECTING REGISTRABLE NOTES
<PAGE>
===============================================================================
____________________
SPINNAKER INDUSTRIES, INC.
as Issuer,
CENTRAL PRODUCTS COMPANY
BROWN-BRIDGE INDUSTRIES, INC.
and
ENTOLETER, INC.,
as Guarantors
and
THE CHASE MANHATTAN BANK
as Trustee
$115,000,000
10 3/4% SENIOR SECURED NOTES DUE 2006, SERIES A
10 3/4% SENIOR SECURED NOTES DUE 2006, SERIES B
_________________________________
____________________
INDENTURE
Dated as of October 23, 1996
____________________
===============================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;12.02
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03;12.05
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05;7.01
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . N.A.
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
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<PAGE>
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
_______________________
*This Cross-Reference Table is not part of the Indenture.
N.A. means not applicable.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY
REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. OTHER DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 18
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT . . . . . 18
SECTION 1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . 19
ARTICLE 2 THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.01. FORM AND DATING.. . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.02. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . . . . 21
SECTION 2.03. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . . . . . . 21
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . . . . . . 22
SECTION 2.05. SECURITYHOLDER LISTS. . . . . . . . . . . . . . . . . . . . 22
SECTION 2.06. TRANSFER AND EXCHANGE.. . . . . . . . . . . . . . . . . . . 22
SECTION 2.07. REPLACEMENT SECURITIES. . . . . . . . . . . . . . . . . . . 23
SECTION 2.08. OUTSTANDING SECURITIES. . . . . . . . . . . . . . . . . . . 24
SECTION 2.09. TREASURY SECURITIES.. . . . . . . . . . . . . . . . . . . . 24
SECTION 2.10. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . . 24
SECTION 2.11. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12. DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.13. CUSIP NUMBER. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.14. DEPOSIT OF MONEYS . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.15. RESTRICTIVE LEGENDS . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.16. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY . . . . . . . . . 28
SECTION 2.17. SPECIAL TRANSFER PROVISIONS . . . . . . . . . . . . . . . . 29
SECTION 2.18. PERSONS DEEMED OWNERS.. . . . . . . . . . . . . . . . . . . 31
SECTION 2.19. RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3 REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.01. NOTICES TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. . . . . . . . . . . 32
SECTION 3.03. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . . . . 33
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. . . . . . . . . . . . . . . 34
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.. . . . . . . . . . . . . . . . 34
SECTION 3.06. SECURITIES REDEEMED IN PART.. . . . . . . . . . . . . . . . 34
SECTION 3.07. OPTIONAL REDEMPTION.. . . . . . . . . . . . . . . . . . . . 35
SECTION 3.08. MANDATORY REDEMPTION. . . . . . . . . . . . . . . . . . . . 35
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS . . . . 35
ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.01. PAYMENT OF SECURITIES.. . . . . . . . . . . . . . . . . . . 38
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.. . . . . . . . . . . . . . 38
SECTION 4.03. SEC REPORTS.. . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.04. COMPLIANCE CERTIFICATES.. . . . . . . . . . . . . . . . . . 39
SECTION 4.05. TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.06. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . . . . . . 41
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS . . . . . . . . . . . . . 41
SECTION 4.08. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES. . . . . . . . . . . . . . . . . . . 43
SECTION 4.09. LIMITATION ON INCURRENCE OF INDEBTEDNESS. . . . . . . . . . 44
SECTION 4.10. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT . . . 46
SECTION 4.11. LIMITATION ON ASSET SALES . . . . . . . . . . . . . . . . . 46
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES. . . . . . . . . 47
SECTION 4.13. LIMITATION ON LIENS . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.14. CORPORATE EXISTENCE . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.15. CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.16. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES . . . . . . . 50
SECTION 4.17. COMPANY TO CAUSE CERTAIN SUBSIDIARIES TO BECOME GUARANTORS. 50
SECTION 4.18. LIMITATION ON BUSINESS. . . . . . . . . . . . . . . . . . . 50
SECTION 4.19. FURTHER INSTRUMENTS AND ACTS. . . . . . . . . . . . . . . . 51
ARTICLE 5 SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.01. LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF ASSETS. . . 51
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED . . . . . . . . . . . . . 52
ARTICLE 6 DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . 52
SECTION 6.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.02. ACCELERATION. . . . . . . . . . . . . . . . . . . . . . . . 55
ii
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SECTION 6.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.04. WAIVER OF PAST DEFAULTS . . . . . . . . . . . . . . . . . . 56
SECTION 6.05. CONTROL BY MAJORITY . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.07. RIGHTS OF SECURITYHOLDERS TO RECEIVE PAYMENT . . . . . . . 57
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. . . . . . . . . . . . . . . . . 57
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . . 57
SECTION 6.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . . . . . 59
ARTICLE 7 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.01. DUTIES OF TRUSTEE.. . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.02. RIGHTS OF TRUSTEE.. . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . 61
SECTION 7.04. TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . . . . . . 61
SECTION 7.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.06. REPORTS BY TRUSTEE TO SECURITYHOLDERS . . . . . . . . . . . 62
SECTION 7.07. COMPENSATION AND INDEMNITY. . . . . . . . . . . . . . . . . 62
SECTION 7.08. REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . . . . . . 63
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. . . . . . . . . . . . . . 64
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . . . . . 65
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY . . . 65
ARTICLE 8 DISCHARGE OF INDENTURE. . . . . . . . . . . . . . . . . . . 65
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. . . . . . 65
SECTION 8.02. CONDITIONS TO DEFEASANCE. . . . . . . . . . . . . . . . . . 66
SECTION 8.03. APPLICATION OF TRUST MONEY. . . . . . . . . . . . . . . . . 68
SECTION 8.04. REPAYMENT TO THE COMPANY. . . . . . . . . . . . . . . . . . 68
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. . . . . . . . . . . . 69
SECTION 8.06. REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 9 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.01. WITHOUT CONSENT OF SECURITYHOLDERS. . . . . . . . . . . . . 69
SECTION 9.02. WITH CONSENT OF SECURITYHOLDERS . . . . . . . . . . . . . . 71
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT . . . . . . . . . . . . 72
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . . . . . . 72
iii
<PAGE>
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES . . . . . . . . . . . 73
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. . . . . . . . . . . . . . 73
ARTICLE 10 GUARANTEE OF SECURITIES . . . . . . . . . . . . . . . . . . 73
SECTION 10.01. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.02. EXECUTION AND DELIVERY OF GUARANTEE . . . . . . . . . . . . 75
SECTION 10.03. GUARANTEE UNCONDITIONAL, ETC. . . . . . . . . . . . . . . . 75
SECTION 10.04. LIMITATION OF GUARANTOR'S LIABILITY . . . . . . . . . . . . 76
SECTION 10.05. CONTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.06. RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.07. ADDITIONAL GUARANTORS . . . . . . . . . . . . . . . . . . . 77
SECTION 10.08. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. . . . . 78
SECTION 10.09. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . 78
SECTION 10.10. WAIVER OF STAY, EXTENSION OR USURY LAWS . . . . . . . . . . 79
ARTICLE 11 SECURITY AND PLEDGE OF COLLATERAL . . . . . . . . . . . . . 79
SECTION 11.01. GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . 79
SECTION 11.02. DELIVERY OF COLLATERAL. . . . . . . . . . . . . . . . . . . 80
SECTION 11.03. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. . . . . . . . . 80
SECTION 11.04. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . 82
SECTION 11.05. VOTING RIGHTS; DIVIDENDS; ETC. . . . . . . . . . . . . . . 82
SECTION 11.06. TRUSTEE APPOINTED ATTORNEY-IN-FACT. . . . . . . . . . . . . 83
SECTION 11.07. TRUSTEE MAY PERFORM.. . . . . . . . . . . . . . . . . . . . 83
SECTION 11.08. TRUSTEE'S DUTIES. . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.09. REMEDIES UPON EVENT OF DEFAULT. . . . . . . . . . . . . . . 84
SECTION 11.10. APPLICATION OF PROCEEDS . . . . . . . . . . . . . . . . . . 85
SECTION 11.11. PLEDGORS' OBLIGATIONS ABSOLUTE. . . . . . . . . . . . . . . 85
SECTION 11.12. CONTINUING LIEN . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.13. SPECIFIED RELEASES OF COLLATERAL; PLEDGORS. . . . . . . . . 86
SECTION 11.14. CERTIFICATES AND OPINIONS . . . . . . . . . . . . . . . . . 87
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 12.01. TRUST INDENTURE ACT CONTROLS. . . . . . . . . . . . . . . . 87
SECTION 12.02. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 12.03. COMMUNICATION BY SECURITYHOLDERS WITH OTHER
SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . 88
iv
<PAGE>
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . 89
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . . 89
SECTION 12.06. RULES BY TRUSTEE AND AGENTS . . . . . . . . . . . . . . . . 90
SECTION 12.07. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.08. NO RECOURSE AGAINST OTHERS. . . . . . . . . . . . . . . . . 90
SECTION 12.09. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . . 90
SECTION 12.12. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.14. COUNTERPART ORIGINALS . . . . . . . . . . . . . . . . . . . 91
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . . 91
SCHEDULE I - PLEDGED SHARES
EXHIBIT A - FORM OF INITIAL SECURITY WITH GUARANTEE
EXHIBIT B - FORM OF EXCHANGE SECURITY WITH GUARANTEE
EXHIBIT C - FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
EXHIBIT D - FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
</TABLE>
v
<PAGE>
INDENTURE, dated as of October 23, 1996, among Spinnaker Industries,
Inc., a Delaware corporation (the "Company"), Central Products Company, a
Delaware corporation ("Central Products"), Brown-Bridge Industries, Inc., a
Delaware corporation ("Brown Bridge"), and Entoleter, Inc., a Delaware
corporation ("Entoleter"), each of Central Products, Brown-Bridge and
Entoleter as Guarantors (as defined) of the Company's obligations hereunder,
and The Chase Manhattan Bank, a banking corporation organized and existing
under the laws of the State of New York, as Trustee (as defined).
The Company has duly authorized the creation of an issue of 10 3/4%
Senior Secured Notes due 2006, Series A (the "Initial Securities") and 10 3/4%
Senior Secured Notes due 2006, Series B (the "Exchange Securities,") and, to
provide therefor, the Company and the Guarantors have duly authorized the
execution and delivery of this Indenture. All things necessary to make the
Securities (as defined), when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company
and the Guarantors, and to make this Indenture a valid and binding agreement
of the Company and the Guarantors, have been done.
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the Securities:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" of any specified Person means Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Restricted Subsidiary of such specified Person, but
excluding any Indebtedness incurred in connection with, or in contemplation
of, such merger or such other Person becoming a Restricted Subsidiary of such
specified Person.
"ADJUSTED NET ASSETS" of a Guarantor at any date shall mean the lesser
of the amount by which (x) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation, the
probable liability of such Guarantor with respect to its contingent liabilities
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability
<PAGE>
of such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date and after giving
effect to any collection from any Subsidiary by such Guarantor in respect of
the obligations of such Subsidiary under the Guarantee), excluding debt in
respect of the Guarantee, as they become absolute and matured.
"AFFILIATE" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such Person. The
definition of Affiliate as contained in the preceding sentence, and the term
"control" (including the terms "controlling," "controlled by" and "under
common control with") as used therein, shall be construed in a manner
consistent with the definitions of "affiliate" and "control" contained in
Rule 405 promulgated under the Securities Act, as such rule is in effect on
the Issuance Date. Without limiting the foregoing, for purposes of the
Indenture (other than in relation to the definitions of "Change of Control"
and "Permitted Holders"), the ownership of, or control of the votes with
respect to, 10% or more of the voting common equity (on a fully diluted
basis) of a Person will be deemed to be control of such Person.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET ACQUISITION" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or shall be
merged or consolidated with the Company or any Restricted Subsidiary of the
Company or (ii) the acquisition by the Company or any Restricted Subsidiary
of the Company of assets of any Person comprising a division or line of
business of such Person.
"ASSET SALE" means (i) the sale, lease, conveyance, transfer or
other disposition (whether in a single transaction or a series of related
transactions) of property or assets of the Company or any Restricted
Subsidiary thereof (each referred to in this definition as a "disposition")
or (ii) the issuance or sale of Equity Interests of (or by) any Restricted
Subsidiary of the Company, in each case, other than (a) a disposition of
inventory in the ordinary course of business, (b) the disposition of all or
substantially all of the assets of the Company and the Restricted
Subsidiaries thereof in a manner permitted pursuant to the provisions
described in Sections 5.01 or 4.15 hereof and (c) in the case of clause (i)
only, any single disposition, or related series of dispositions, of assets
with an aggregate fair market value of less than $500,000. Notwithstanding
anything to the contrary contained above, a Restricted Payment made in
compliance with Section 4.07 hereof shall not constitute an Asset Sale except
for purposes of determinations of the Fixed Charge Coverage Ratio.
"BANKRUPTCY CODE" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
2
<PAGE>
"BOARD OF DIRECTORS" means, with respect to any Person, the Board
of Directors of such Person or any committee of the Board of Directors of
such Person duly authorized, with respect to any particular matter, to
exercise the power of the Board of Directors of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and
to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"BORROWING BASE" means, as of any date with respect to any Person,
an amount equal to the sum of (a) 85% of the face amount of all accounts
receivable owned by such Person as of such date that are not more than 120
days past due, and (b) 65% of all inventory owned by such Person as of such
date, in each case valued at the lower of cost or market calculated on a
consolidated basis and in accordance with the Company's financial statements.
To the extent that information is not available as to the amount of accounts
receivable or inventory as of a specific date, such Person may utilize the
most recent available information for purposes of calculating the Borrowing
Base.
"BROWN-BRIDGE" has the meaning set forth in the preamble to this
Indenture.
"BROWN-BRIDGE ROLL-UP CONTINGENT PAYMENTS" shall mean all payments
made after the Issuance Date (excluding the cash payments to be made as part
of the Company's recapitalization plan on, or immediately after, the Issuance
Date in an aggregate amount not to exceed $2.5 million) to Persons other than
the Company who were shareholders of Brown-Bridge prior to the Issuance Date,
including without limitation all payments of the Contingent Price under, and
as defined in, that certain Agreement and Plan of Merger (Brown-Bridge
Minority Interest), dated as of October 1, 1996, by and among the Company,
BB Merger Corp. and Brown-Bridge.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is accounted for as a capital lease on the balance
sheet of such Person.
"CAPITAL LEASE OBLIGATION" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations
will be the capitalized amount of such obligations determined in accordance
with GAAP.
3
<PAGE>
"CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) the common or preferred equity of such
Person, including, without limitation, partnership interests.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Services or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Ratings Services or at
least P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit
or bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $500,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with any bank meeting
the qualifications specified in clause (iv) above; and (vi) investments in
money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
"CENTRAL PRODUCTS" has the meaning set forth in the preamble to
this Indenture.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (ii) the sale, lease or transfer, in one or a series of transactions,
of all or substantially all of the assets of the Company or of the Company and
its Subsidiaries taken as a whole, to any Person or group (as such term is used
in Section 13(d)(3) of the Exchange Act), other than to any one or more of the
Permitted Holders, (iii) any Person or group, other than one or more of the
Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that (x) a Person shall be deemed
to have "beneficial ownership" of all shares that any such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time and (y) in the case of a group which is not a Permitted Holder
but includes as members thereof one or more Permitted Holders, such group
(except to the extent provided in preceding clause (x)) shall not be considered
to be the "beneficial owner" of any capital stock of the Company beneficially
owned (other than
4
<PAGE>
as a result of attribution to Permitted Holders by reason of their being
members of such group) by the Permitted Holders, if any, who are members of
such group), directly or indirectly, of shares of Voting Stock of the Company
representing more than 50% of the voting power of all of the Voting Stock of
the Company by way of merger or consolidation or otherwise; PROVIDED,
HOWEVER, that a Person which ceases to be a Permitted Holder by reason of
ceasing to be an Affiliate of, or a member of a group controlled by, a
Permitted Holder shall not be deemed to have acquired beneficial ownership of
any shares of Voting Stock of the Company unless and until a "Change of
Control" (as measured from the Issuance Date) shall have occurred with
respect to such Person (for purposes of determining whether such a "Change of
Control" has occurred, such Person shall be substituted for the Company) or
(iv) the first day within any two-year period on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"COMMISSION" means the U.S. Securities and Exchange Commission or
its successor.
"COMPANY" means Spinnaker Industries, Inc., a Delaware corporation,
until a successor replaces it in accordance with Article 5 hereof and
thereafter means the successor.
"CONSOLIDATED EBITDA" of any Person with respect to any period
means Consolidated Net Income of such Person for such period (x) adjusted to
exclude (to the extent included in Consolidated Net Income for such period)
(i) gains and losses from Asset Sales (without regard to the $500,000
limitation set forth in the definition thereof) or abandonments or reserves
relating thereto and (ii) items classified as extraordinary gains and losses
and (y) increased (to the extent already deducted from Consolidated Net
Income for such period) by the sum (but without duplication), on a
consolidated basis, of (i) all income tax expense for such period, (ii) all
cash and non-cash interest expense (including interest with respect to
Capitalized Lease Obligations and interest rate protection agreements and net
of any interest income) paid or accrued for such period and (iii) all
consolidated depreciation and consolidated amortization and any other
consolidated non-cash charges (including with respect to writedowns or
writeoffs of assets) for such period, in each case determined in accordance
with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum of (a) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued, to the extent
such expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount and original issuance costs, non-cash
interest payments, the interest component of Capital Leases, and net payments
(if any) pursuant to Hedging Obligations), (b) commissions, discounts and other
fees and charges paid or accrued with respect to letters of
5
<PAGE>
credit and bankers' acceptance financing and (c) interest actually paid by
such Person or its Restricted Subsidiaries under a Guarantee of Indebtedness
of any other Person.
"CONSOLIDATED NET INCOME" means with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded therefrom,
without duplication, (a) the net income or loss of any Person acquired in a
pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of such Person or is merged or consolidated with such
Person or any Restricted Subsidiary, (b) the net income of any Person, other
than a consolidated Restricted Subsidiary, in which such first referred to
Person or a consolidated Restricted Subsidiary has an interest shall be
included only to the extent of the lesser of (i) any dividends or
distributions actually paid to such first referred to Person and its
consolidated Restricted Subsidiaries during such period and (ii) the net
income of such Person (but in no event less than zero), and the net loss of
such Person shall be included only to the extent of the aggregate Investment
of the first referred to Person or a consolidated Restricted Subsidiary in
such Person, and (c) the net income or loss of any consolidated Restricted
Subsidiary of such Person shall be excluded to the extent such Restricted
Subsidiary is restricted by contract, operation of law or otherwise from
distributing its net income.
"CONSOLIDATED NET WORTH" with respect to any Person means the
consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries (or, in the case of the Company, the Restricted
Subsidiaries), less, to the extent included in the foregoing, amounts
attributable to Disqualified Stock, each item determined on a consolidated
basis and in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issuance Date or (ii) was nominated for election or
elected to such Board of Directors with, or whose election to such Board of
Directors was approved by, the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time
of such nomination or election or (iii) is a representative of one or more of
the Permitted Holders or was nominated by one or more of the Permitted
Holders or any representative of the Permitted Holders on the Board of
Directors.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 12.02 or such other address as to which the
Trustee may give notice to the Company.
"DEFAULT" means any event that is or with the passing of time or
giving of notice or both would be an Event of Default.
6
<PAGE>
"DEPOSITORY" means The Depository Trust Company, its nominees and
successors.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event other than an event
which would constitute a Change of Control, (i) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior
to the first anniversary of the final stated maturity of the Notes, or (ii)
is convertible into or exchangeable for (whether at the option of the issuer
or the holder thereof) (a) debt securities or (b) any Capital Stock referred
to in (i) above, in each case at any time prior to the first anniversary of
the final stated maturity of the Securities.
"ENTOLETER" has the meaning set forth in the preamble to this
Indenture.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"EXCHANGE OFFER" means the registration by the Company and the
Guarantors under the Securities Act pursuant to a registration statement of
the offer by the Company and the Guarantors to each Securityholder of the
Initial Securities to exchange all the Initial Securities held by such
Securityholder for the Exchange Securities in an aggregate principal amount
equal to the aggregate principal amount of the Initial Securities held by
such Securityholder, all in accordance with the terms and conditions of the
Registration Rights Agreement.
"EXCHANGE SECURITIES" has the meaning set forth in the preamble to
this Indenture.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the New Credit
Facility) in existence on the Issuance Date.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for
any period, the ratio of the Consolidated EBITDA of such Person for such period
to the sum of (i) the Consolidated Interest Expense of such Person for such
period and (ii) dividend
7
<PAGE>
requirements on Disqualified Stock of such Person and Disqualified Stock and
any Preferred Stock of its Restricted Subsidiaries (whether in cash or
otherwise (except dividends payable (x) by the Company in shares of Capital
Stock which is not Disqualified Stock and (y) by any Restricted Subsidiary of
the Company to the Company or a Wholly Owned Restricted Subsidiary of the
Company)) paid, accrued or scheduled to be paid or accrued during such period
(except to the extent accrued in a prior period) and excluding items
eliminated in consolidation; PROVIDED that (a) in the event that the Company
or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems
any Indebtedness or issues Capital Stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the event for which the calculation of the Fixed Charge Coverage
Ratio is made, then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of Capital Stock,
as if the same had occurred at the beginning of the applicable four-quarter
period, (b) in making such computation, the Consolidated Interest Expense of
such Person attributable to interest on any Indebtedness bearing a floating
interest rate shall be computed on a pro forma basis as if the rate in effect
on the date of computation had been the applicable rate for the entire
period, (c) in making such computation, the Consolidated Interest Expense of
such Person attributable to interest on any Indebtedness incurred for working
capital purposes under a revolving credit facility (but not including
Indebtedness incurred in connection with Asset Sales and/or Asset
Acquisitions covered by clause (f) below) which facility was in effect during
the respective period shall be computed on a pro forma basis based upon the
average daily balance of such Indebtedness outstanding during the applicable
period (or, if shorter, the portion of the period during which such revolving
credit facility was in effect), (d) in making such computation, for purposes
of clause (ii) above, dividend requirements will be increased to an amount
representing the pretax earnings that would be required to cover such
dividend requirements; accordingly, the increased amount will be equal to
such dividend requirements multiplied by a fraction, the numerator of which
is one and the denominator of which is one minus the applicable actual
combined Federal, state, local and foreign income tax rate of such Person and
its Restricted Subsidiaries (expressed as a decimal), on a consolidated
basis, for the fiscal year immediately preceding the date of the transaction
giving rise to the need to calculate the Fixed Charge Coverage Ratio, (e) in
making such computation, Consolidated Interest Expense will be increased or
reduced by the net cost (including amortization of discount) or benefit
(after giving effect to amortization of discount) associated with Hedging
Obligations attributable to such period and (f) in the event that the Company
or any of its Restricted Subsidiaries consummates any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the Company or one
of its Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Indebtedness) at any time subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed
Charge Coverage Ratio is made, then the Fixed Charge Coverage
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Ratio shall be calculated giving pro forma effect (calculated on a basis
consistent with Regulation S-X under the Securities Act) to such Asset Sale
and Asset Acquisition as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Indebtedness and also
including (or excluding, as the case may be) any Consolidated EBITDA
associated with such Asset Sale or Asset Acquisition) occurred on the first
day of the applicable four-quarter period. If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession of the United States, which were used by the
Company in the preparation of its audited financial statements as of and for
the period ended December 31, 1995, included in the final Offering Memorandum.
"GLOBAL NOTE" has the meaning provided in Section 2.01.
"GUARANTEE" means each of the guarantees of the respective
Guarantors pursuant to Article 10 hereof, and shall include each guarantee
substantially in the form contained in Exhibits A and B hereto, as such
guarantee may be amended, modified or supplemented from time to time.
"GUARANTOR" means (i) each of Central Products, Brown-Bridge and
Entoleter, and (ii) each of the Company's Restricted Subsidiaries which,
after the Issuance Date, becomes a Guarantor by executing a supplemental
Indenture in which such Subsidiary agrees to be bound by the terms of the
Indenture as a Guarantor and executes a Guarantee; PROVIDED that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the
terms thereof.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements in respect thereof, of all or any part of any
Indebtedness.
"INDEBTEDNESS" means with respect to any Person, without duplication,
(i) all liabilities, contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, drafts accepted or similar instruments
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or letters of credit or representing the balance deferred and unpaid of the
purchase price of any property (other than any such balance that represents
an account payable or any other monetary obligation to a trade creditor
(whether or not an Affiliate)) created, incurred, assumed or guaranteed by
such Person in the ordinary course of business of such Person in connection
with obtaining goods, materials or services and due within 12 months (or such
longer period for payment as is customarily extended by such trade creditor)
of the incurrence thereof, which account is not overdue by more than 90 days,
according to the original terms of sale, unless such account payable is being
contested in good faith, or (c) for the payment of money relating to a
Capital Lease Obligation, (ii) the maximum fixed repurchase price of all
Disqualified Stock of such Person, (iii) reimbursement obligations of such
Person with respect to letters of credit, (iv) obligations of such Person
with respect to Hedging Obligations, (v) all liabilities of others of the
kind described in the preceding clause (i), (ii), (iii) or (iv) that such
Person has guaranteed or that is otherwise its legal liability, and (vi) all
obligations of others secured by a Lien to which any of the properties or
assets (including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are subject, whether
or not the obligations secured thereby will have been assumed by such Person
or will otherwise be such Person's legal liability (PROVIDED, that if the
obligations so secured have not been assumed by such Person or are not
otherwise such Person's legal liability, such obligations will be deemed to
be in an amount equal to the fair market value of such properties or assets,
as determined in good faith by the Board of Directors of such Person, which
determination will be evidenced by a Board Resolution).
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"INITIAL PURCHASER" means BT Securities Corporation.
"INITIAL SECURITIES" has the meaning set forth in the preamble to
this Indenture.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"INTEREST PAYMENT DATE" means the stated maturity of an installment
of interest on the Securities.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of loans,
guarantees, advances or capital contributions (excluding commission, travel
and similar advances to directors, officers and employees made in the
ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
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"ISSUANCE DATE" means the date of original issuance of the
Securities.
"LIEN" means any lien, security interest, charge or encumbrance of
any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any security
interest).
"MATURITY DATE" means October 15, 2006.
"NET PROCEEDS" from an Asset Sale means cash payments received
(including any cash payments received by way of conversion into cash of any
note or other obligation received in connection with such Asset Sale or by
way of deferred payment of principal pursuant to, or liquidation of, any note
or installment receivable or otherwise, but only as and when received
therefrom) in each case net of all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all taxes required to
be accrued as a liability under GAAP, as a consequence of such Asset Sale and
the amount of Indebtedness that is secured by the assets subject to an Asset
Sale and is repaid with the proceeds thereof.
"NEW CREDIT FACILITY" means the credit facility, dated as of
October 23, 1996, among the Company, the Guarantors, BT Commercial
Corporation, as agent, TransAmerica Business Credit Corporation, as
collateral agent, and any other financial institutions from time to time
party thereto, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"NON-U.S. PERSON" means a Person who is not a U.S. person, as
defined in Regulation S of the Securities Act.
"OBLIGATIONS" means any principal, premium, interest, penalties,
fees, indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"OFFERING MEMORANDUM" means the Offering Memorandum dated October
18, 1996, pursuant to which the Initial Securities were offered, and any
supplements thereto.
"OFFICER" means the Chairman of the Board, the President, any
Senior Vice President, any Vice President, the Treasurer or the Secretary of
the Company or, in the case
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of a reference to Officers of any of the Guarantors or to an Officers'
Certificate to be delivered by or on behalf of any of the Guarantors, of such
Guarantor.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
of the Company or a Guarantor, as the case may be, and which complies with
the provisions of Section 12.04 hereof.
"OFFSHORE PHYSICAL SECURITIES" has the meaning provided in Section
2.01.
"OPINION OF COUNSEL" means a written opinion from legal counsel who
is acceptable to the Trustee, and which complies, if applicable, with the
provisions of Section 12.04 hereof. The counsel may be an employee of or
counsel to the Company or the Trustee.
"PERMITTED BUSINESSES" means the businesses within the industries
engaged in by Central Products and Brown-Bridge on the Issuance Date and
reasonable extensions thereof.
"PERMITTED HOLDERS" means and includes (x) Mario Gabelli; Richard
J. Boyle; Ned N. Fleming, III; each Affiliate of any of the foregoing natural
persons (so long as it remains such an Affiliate); each member of the
immediate family of any of the foregoing natural persons and any trust or
similar device created for the benefit of any one or more of the foregoing
and each Person which acquires a direct or indirect beneficial ownership
interest in shares of stock of the Company as an executor or administrator
for or by way of inheritance or bequest from one or more of the natural
persons described in the preceding clause (x) following the death of such
Person; and (y) each group (as such term is used in Section 13(d)(3) of the
Exchange Act) which is controlled by (with the term "controlled by" as used
herein to be determined in a manner consistent with the phrase "controlled
by" as used in the definition of Affiliate contained herein) one or more of
the Permitted Holders described in preceding clause (x), but only so long as
the respective such group is so controlled.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company;
(b) any Investments in Cash Equivalents; (c) Investments by the Company in a
Person, if as a result of, or immediately after, such Investment (i) such
Person is or becomes a Wholly Owned Restricted Subsidiary which is a
Guarantor or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into the Company or a Person which is a Wholly Owned Restricted
Subsidiary and a Guarantor after giving effect thereto; (d) Investments by a
Guarantor in other Guarantors and Investments by Wholly Owned Restricted
Subsidiaries which are not Guarantors in other Wholly Owned Restricted
Subsidiaries which are not Guarantors; (e) Investments received by the
Company or a Restricted Subsidiary as consideration for asset sales,
including Asset
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Sales; PROVIDED, in the case of an Asset Sale, such Asset Sale is effected in
compliance with Section 4.11 hereof; and (f) additional Investments having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (f) that are at that time outstanding, not to exceed
$10 million (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value).
"PERMITTED LIENS" means (a) Liens granted by the Company and the
Guarantors which secure Indebtedness to the extent the Indebtedness is
incurred pursuant to Section 4.09(b)(i); (b) Liens in favor of the Company;
(c) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Restricted Subsidiary thereof;
provided that such Liens were in existence prior to the contemplation of such
acquisition and do not extend to any assets of the Company or its Restricted
Subsidiaries other than those acquired in connection with such merger or
consolidation; (d) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business; (e) Liens existing on the
Issuance Date; (f) Liens in respect of extensions, renewals, refundings or
refinancings of any Indebtedness secured by the Liens referred to in clauses
(a), (b), (c) and (e) above and (h) below; provided that the Liens in
connection with such renewal, extension, refunding or refinancing shall be
limited to all or part of the specific property which was subject to the
original Lien; (g) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefore; (h) any Lien securing
purchase money obligations incurred in connection with the purchase of real
or personal property; provided that (A) at the time such Lien attaches to the
real or personal property of the Company or Guarantor, the Company shall be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
Section 4.09(a) hereof and (B) such Liens do not extend to any property
(other than the property so purchase) owned by the Company or its Restricted
Subsidiaries and is not incurred more than 30 days after the incurrence of
such Indebtedness secured by such Liens; (i) Liens to secure Capitalized
Lease Obligations (except in respect of Sale and Leaseback Transactions) on
real or personal property of the Company to the extent consummated in
compliance with the Indenture; provided that (A) at the time such Lien
attaches to the real or personal property of the Company or Guarantor, the
Company shall be permitted to incur at least $1.00 of additional Indebtedness
pursuant to Section 4.09(a) hereof and (B) such Liens do not extend to or
cover any property of the Company of any of its Subsidiaries other than the
property subject to such Capitalized Lease Obligation; and (j) Liens incurred
in the ordinary course of business of the Company or any Restricted
Subsidiary thereof with respect to obligations that do not exceed $2 million
at any one time outstanding and that (A) are not incurred in connection with
the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (B) do not in the
aggregate
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materially detract from the value of the property or materially impair the
use thereof in the operation of the business by the Company or such
Restricted Subsidiary.
"PERSON" shall mean any individual, partnership, joint venture,
firm, corporation, association, limited liability company, trust or other
enterprise or any government or political subdivisions or any agency,
department or instrumentality thereof.
"PHYSICAL SECURITIES" has the meaning provided in Section 2.01.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PRIVATE PLACEMENT LEGEND" has the meaning provided in Section 2.15.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included on the most recent consolidated balance sheet of such Person in
accordance with GAAP.
"PUBLIC EQUITY OFFERING" means an underwritten primary public
offering of Qualified Capital Stock of the Company pursuant to a registration
statement filed with the Commission in accordance with the Securities Act.
"QUALIFIED CAPITAL STOCK" shall mean any Capital Stock which is not
Disqualified Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"RECORD DATE" means the record dates specified in the Securities,
whether or not a Legal Holiday.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated October 18, 1996 among the Company, the Guarantors and the
Initial Purchaser for the benefit of themselves and the Securityholders, as
the same may be amended or modified from time to time in accordance with the
terms thereof.
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
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"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED PAYMENT" means (i) any dividend or distribution on or
in respect of any shares of Capital Stock of the Company or any Restricted
Subsidiary of the Company or to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or such Restricted
Subsidiary (except dividends or distributions (x) by any Restricted
Subsidiary which is not a Wholly Owned Restricted Subsidiary to its
shareholders generally, so long as the Company and/or its Restricted
Subsidiaries receive at least their proportionate share thereof (based on
their equity interests in the respective Restricted Subsidiary), (y) to the
Company or any Wholly Owned Restricted Subsidiary or (z) payable solely in
Qualified Capital Stock of the Company), (ii) the redemption, repurchase,
retirement or other acquisition for value of any Capital Stock of the Company
or any Restricted Subsidiary of the Company (excluding payments made to the
Company or a Wholly Owned Restricted Subsidiary), (iii) any redemption,
repurchase, prepayment, defeasance (including, but not limited to, in
substance or legal defeasance) or any other acquisition or retirement for
value by either the Company or any Restricted Subsidiary of the Company prior
to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Debt, (iv) any Restricted Investment by the
Company or any Restricted Subsidiary of the Company and (v) any Brown-Bridge
Roll-up Contingent Payments made by the Company or any Restricted Subsidiary
of the Company (except to the extent paid through the issuance of Qualified
Capital Stock of the Company).
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of the Company of any
property, whether owned by the Company or any Subsidiary of the Company at
the Issue Date or later acquired, which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person or to any other
Person from whom funds have been or are to be advanced by such Person on the
security of such property.
"SECURITIES" means the Initial Securities and the Exchange
Securities treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SECURITYHOLDER" or "HOLDER" means a registered holder of one or
more Securities.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the
Company which would be a "Significant Subsidiary" within the meaning ascribed
to such term in Rule 1-02 of Regulation S-X adopted by the Commission.
"SUBORDINATED DEBT" means Indebtedness of the Company that is
subordinate or junior in right of payment to the Securities.
"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 shares of Capital Stock 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 such Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided in Section 9.03 hereof; PROVIDED, HOWEVER,
that, in the event the Trust Indenture Act of 1939 is amended after such
date, "TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"TRUSTEE" means The Chase Manhattan Bank, a banking corporation
organized and existing under the laws of the State of New York, until a
successor replaces it in accordance with Article 5 and thereafter means the
successor serving hereunder.
"UNIFORM COMMERCIAL CODE" means the New York State Uniform
Commercial Code as in effect from time to time.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED that (x) the Company certifies to the Trustee that such
designation complies with Section 4.07 hereof and (y) each Subsidiary
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to be so designated and each of its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets
of the Company or any of its Restricted Subsidiaries. The Board of Directors
of the Company may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation,
the Company is able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.09 hereof and (y)
immediately before and immediately after giving effect to such designation,
no Default or Event of Default shall have occurred and be continuing. Any
such designation by the Board of Directors of the Company shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
that such designation complied with the foregoing provisions.
"U.S. PHYSICAL SECURITIES" has the meaning provided in Section 2.01.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof)
for the payment of which the full faith and credit of the United States of
America is pledged and which are not callable at the issuer's option.
"VOTING STOCK" with respect to any Person means all classes of
Capital Stock of such Person then outstanding and normally entitled to vote
in elections of directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the total of
the product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payments.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding Voting
Stock (other than directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law), are
owned by such Person or any Wholly Owned Restricted Subsidiary of such Person.
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SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"actual knowledge". . . . . . . . . . . . . . . . . . . . . . . . . . .7.02
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . .4.12
"Agent Members" . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.16
"Asset Sale Offer". . . . . . . . . . . . . . . . . . . . . . . . . . .3.09
"Bankruptcy Law". . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
"Collateral". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
"covenant defeasance option". . . . . . . . . . . . . . . . . . . . . .8.01
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
"Declaration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.02
"Default Amount". . . . . . . . . . . . . . . . . . . . . . . . . . . .6.02
"Event of Default". . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . .4.11
"Funding Guarantor" . . . . . . . . . . . . . . . . . . . . . . . . . 10.05
"Guaranteed Obligations". . . . . . . . . . . . . . . . . . . . . . . 10.01
"legal defeasance option" . . . . . . . . . . . . . . . . . . . . . . .8.01
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.07
"Notice of Default" . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
"Offer Amount". . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.09
"Offer Period". . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.09
"Paying Agent". . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.03
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
"Permitted Indebtedness". . . . . . . . . . . . . . . . . . . . . . . .4.09
"Pledged Shares". . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
"Pledgor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.09
"Refinancing Indebtedness". . . . . . . . . . . . . . . . . . . . . . .4.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.03
"Required Premiums" . . . . . . . . . . . . . . . . . . . . . . . . . .4.09
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities and the Guarantees;
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"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company, the Guarantors and
any successor obligor upon the Securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and in the plural
include the singular; and
(v) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Initial Securities, the notation thereon relating to the
Guarantees and the Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit A hereto. The Exchange Securities, the
notation thereon relating to the Guarantees and the Trustee's certificate of
authentication thereon shall be substantially in the form of Exhibit B
hereto. The Securities may have notations, legends or endorsements required
by law, stock exchange rule or Depository rule or usage. The Company, the
Guarantors and the Trustee
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shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the forms of the Securities
and the Guarantees, annexed hereto as Exhibits A and B, shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company, the Guarantors and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions
and to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global notes in registered
form, in substantially the form set forth in Exhibit A (the "Global Note"),
deposited with the Trustee, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities
in registered form in substantially the form set forth in Exhibit A (the
"Offshore Physical Securities"). Securities offered and sold in reliance on
any other exemption from registration under the Securities Act other than as
described in the preceding paragraph shall be issued, and Securities offered
and sold in reliance on Rule 144A may be issued, in the form of permanent
certificated Securities in registered form, in substantially the form set
forth in Exhibit A (the "U.S. Physical Securities"). The Offshore Physical
Securities and the U.S. Physical Securities are sometimes collectively herein
referred to as the "Physical Securities".
SECTION 2.02. EXECUTION AND AUTHENTICATION.
(a) Two Officers of the Company (each of whom shall, in each case,
have been duly authorized by all requisite corporate actions) shall sign the
Securities for the Company by manual or facsimile signature. The Company's
seal shall be reproduced on the Securities. If an Officer whose signature is
on a Security no longer holds that office at the time the Security is
authenticated, the Security shall nevertheless be valid. Each Guarantor
shall execute a Guarantee in the manner set forth in Section 10.02.
(b) A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture.
(c) The Trustee shall authenticate (i) Initial Securities for
original issue in the aggregate principal amount not to exceed $115,000,000, and
(ii) Exchange Securities from
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time to time for issue only in exchange for a like principal amount of
Initial Securities, in each case upon receipt of a written order of the
Company.
(d) The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
(a) The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New
York) where (i) Securities may be presented for registration of transfer or
for exchange ("Registrar"), (ii) Securities may be presented for payment
("Paying Agent") and (iii) notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
The Company may change any Paying Agent, Registrar or co-registrar without
prior notice to any Securityholder. The Company shall notify the Trustee and
the Trustee shall notify the Securityholders of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act
as such. The Company or any Guarantor may act as Paying Agent, Registrar or
co-registrar. The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such, and shall be entitled to appropriate compensation in
accordance with Section 7.07 hereof.
(b) The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the
Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company, the Guarantors or any other obligor on the Securities
shall require each Paying Agent other than the Trustee to agree in writing that
the Paying Agent shall hold in trust for the benefit of the Securityholders or
the Trustee all money held by the Paying Agent for the payment of principal of,
premium, if any, and interest on the Securities, and shall notify the Trustee of
any Default by the Company, any of the Guarantors or any
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other obligor on the Securities in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company, the Guarantors or any other obligor
on the Securities at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying
Agent (if other than the Company) shall have no further liability for the
money delivered to the Trustee. If the Company, the Guarantors or any other
obligor on the Securities acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Securityholders all money
held by it as Paying Agent.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Securityholders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company, the Guarantors or any other
obligor on the Securities shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Securityholders, including the aggregate principal amount of the Securities
held by each thereof, and the Company, the Guarantors or any other obligor on
the Securities shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Where Securities are presented to the Registrar or a
co-registrar with a request to register the transfer thereof or exchange them
for an equal principal amount of Securities of other denominations, the
Registrar shall register the transfer or make the exchange if its
requirements for such transactions are met; PROVIDED, that any Security
presented or surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar and the Trustee duly executed by the
Securityholder thereof or his attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Company shall issue and the
Trustee shall authenticate Securities at the Registrar's request.
(b) The Company shall not be required (i) to issue, to register the
transfer of or to exchange Securities during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection
of Securities for redemption under Section 3.02 hereof and ending at the
close of business on the day of selection, (ii) to register the transfer of
or exchange any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part or (iii)
to register the transfer or exchange of a Security between the Record Date
and the next succeeding Interest Payment Date.
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(c) No service charge shall be made for any registration of a
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment by the Securityholder of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Section 2.10, 3.06 or 9.05 hereof).
(d) Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT SECURITIES.
(a) If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee, upon receipt by it of the written order of the Company signed by two
Officers of the Company, shall authenticate a replacement Security if the
Trustee's requirements for replacements of Securities are met. If required by
the Trustee or the Company, an indemnity bond must be supplied by the Holder
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Guarantors, the Trustee, any Agent or any authenticating agent from
any loss which any of them may suffer if a Security is replaced. The Company
and the Trustee may charge a Securityholder for reasonable out-of-pocket
expenses in replacing a Security.
(b) Every replacement Security is an obligation of the Company and
each of the Guarantors.
SECTION 2.08. OUTSTANDING SECURITIES.
(a) The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by the Company or by the
Trustee, those delivered to the Trustee for cancellation and those described in
this Section as not outstanding.
(b) If a Security is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Security is held by a bona fide purchaser.
(c) If the principal amount of any Security is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
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(d) Subject to Section 2.09 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company or a Guarantor
holds the Security.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, the Guarantors, or any of their respective Affiliates shall be
considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Responsible Officer knows to be so owned
shall be so considered.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company, the Guarantors and the Trustee consider
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee, upon receipt of the written order of the Company
signed by two Officers of the Company, shall authenticate definitive Securities
in exchange for temporary Securities. Until such exchange, temporary Securities
shall be entitled to the same rights, benefits and privileges as definitive
Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities, if not already cancelled,
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy cancelled Securities (subject to the record
retention requirement of the Exchange Act), and deliver certification of their
destruction to the Company, unless by a written order, signed by two Officers of
the Company, the Company shall direct that cancelled Securities be returned to
it. The Company may not issue new Securities to replace Securities that it has
redeemed or paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Securityholders on a subsequent special record
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date, which date shall be at the earliest practicable date but in all events
at least five Business Days prior to the payment date, in each case at the
rate provided in the Securities and in Section 4.01 hereof. The Company
shall, with the consent of the Trustee, fix or cause to be fixed each such
special record date and payment date. At least 15 days before the special
record date, the Company (or the Trustee, in the name of and at the expense
of the Company) shall mail to Securityholders a notice that states the
special record date, the related payment date and the amount of such interest
to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Securityholders; PROVIDED that no representation shall be
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities, and that reliance may be
placed only on the other identification numbers printed on the Securities. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 11:00 a.m. New York City time on each Interest Payment Date
and Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Securityholders on
such Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. RESTRICTIVE LEGENDS.
Each Global Note and Physical Security that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") unless
otherwise agreed by the Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE SECURITYHOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS
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AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
ACCREDITED INVESTOR, THE SECURITYHOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" "UNITED
STATES" AND "U.S. PERSON" HAVE THE
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MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SECTION 2.16. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY.
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
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Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interest of beneficial owners in the Global Note may be transferred
or exchanged for Physical Securities in accordance with the rules and procedures
of the Depository and the provisions of Section 2.17. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in the Global Note if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for the Global
Note and a successor depository is not appointed by the Company within 90 days
of such notice or (ii) an Event of Default has occurred and is continuing and
the Registrar has received a written request from the Depository to issue
Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) above shall, except as otherwise provided by paragraphs (a)(i)(x) and
(c) of Section 2.17, bear the legend regarding transfer restrictions applicable
to the Physical Securities set forth in Section 2.15.
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(f) The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Securityholder is
entitled to take under this Indenture or the Securities.
SECTION 2.17. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to
any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears
the Private Placement Legend, if (x) the requested transfer is after
October 22, 1999 or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding
Non-U.S.Persons), the proposed transferee has delivered to the Registrar
a certificate substantially in the form of Exhibit C hereto or (2) in
the case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and
(y) instructions given in accordance with the Depository's and the
Registrar's procedures, whereupon (a) the Registrar shall reflect on
its books and records the date and (if the transfer does not involve a
transfer of outstanding Physical Securities) a decrease in the
principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Securities of like tenor
and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box
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provided for on the form of Security stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been
effected in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that any such account is a QIB within the
meaning of Rule 144A, and it is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the
Securities to be transferred consist of Physical Securities which
after transfer are to be evidenced by an interest in the Global Note,
upon receipt by the Registrar of instructions given in accordance with
the Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to principal
amount of the Physical Securities to be transferred, and the Trustee
shall cancel the Physical Securities so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the registration of the transfer,
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17 exists or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(d) GENERAL. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
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The Registrar shall retain for at least two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 or this Section 2.17. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
SECTION 2.18. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer
and subject to Section 2.12, the Company, the Trustee, any Paying Agent, any
Registrar and any co-registrar may deem and treat the Person in whose name
any Security shall be registered upon the register of Securities kept by the
Registrar as the absolute owner of such Security (whether or not such
Security shall be overdue and notwithstanding any notation of the ownership
or other writing thereon made by anyone other than the Company, any Registrar
or any co-registrar) for the purpose of receiving payments of principal of or
interest on such Security and for all other purposes; and none of the
Company, the Trustee, any Paying Agent, any Registrar or any co-registrar
shall be affected by any notice to the contrary.
SECTION 2.19. RECORD DATE.
The record date for purposes of determining the identity of
Securityholders entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be the later of (i) 30
days prior to the first solicitation of such consent or (ii) the date of the
most recent list of Holders furnished to the Trustee, if applicable, pursuant
to Section 2.05 hereto.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
(a) If the Company elects to redeem Securities pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 45 days (unless a shorter period is acceptable to the Trustee)
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the Section of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Securities
to be redeemed and (iv) the redemption price.
(b) If the Company is required to make an offer to redeem Securities
pursuant to the provisions of Sections 3.09 or 4.15 hereof, it shall furnish to
the Trustee at least 45
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days (unless a shorter period is acceptable to the Trustee) but not more than
60 days before a redemption date, an Officers' Certificate setting forth (i)
the Section of this Indenture pursuant to which the redemption shall occur,
(ii) the redemption date, (iii) the principal amount of Securities to be
redeemed, (iv) the redemption price and (v) further setting forth a statement
to the effect that (a) the Company or one of its Subsidiaries has effected an
Asset Sale and the conditions set forth in Section 4.11 have been satisfied
or (b) a Change of Control has occurred and the conditions set forth in
Section 4.15 have been satisfied, as applicable.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
(a) If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed among the Securityholders on
a PRO RATA basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate (and in such manner as complies with applicable
legal and stock exchange requirements, if any); PROVIDED, HOWEVER, that if a
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee only on a PRO RATA basis, unless such method is otherwise prohibited.
In the event of partial redemption by lot, the particular Securities to be
redeemed shall be selected, unless otherwise provided herein, not less than 30
nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Securities not previously called for redemption.
(b) The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. Securities may
be redeemed in part in multiples of $1,000 principal amount only. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
(c) In the event the Company is required to make an offer to redeem
Securities pursuant to Sections 3.09 and 4.11 hereof and the amount of the
Excess Proceeds from the Asset Sale are not evenly divisible by $1,000, the
Trustee shall promptly refund to the Company any remaining Excess Proceeds.
SECTION 3.03. NOTICE OF REDEMPTION.
(a) Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
a notice of redemption by first class mail, postage prepaid to each Holder whose
Securities are to be redeemed at the last address for such Holder then shown on
the registry books.
The notice shall identify the Securities to be redeemed and shall
state:
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(i) the redemption date;
(ii) the redemption price;
(iii) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(vi) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date;
(vii) the paragraph of the Securities and/or Section of this
Indenture pursuant to which the Securities called for redemption are being
redeemed; and
(viii) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption.
(b) At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; PROVIDED,
HOWEVER, that the Company shall have delivered to the Trustee at least 45 days
(unless a shorter period is acceptable to the Trustee) prior to the proposed
redemption date an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Securities called for redemption become due and payable on the
redemption date at the redemption price plus accrued and unpaid interest, if
any.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
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(a) Prior to 11:00 a.m., New York City time, on the redemption date,
the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date. The Trustee or the Paying Agent shall promptly
return to the Company any money deposited with the Trustee or the Paying Agent
by the Company in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, all Securities to be redeemed.
(b) On and after the redemption date, interest ceases to accrue on
the Securities or the portions of Securities called for redemption. If a
Security is redeemed on or after an interest Record Date but on or prior to the
related Interest Payment Date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Security was registered at the close of
business on such record date. If any Security called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid and, to the
extent lawful, on any interest not paid on such unpaid principal, in each case
at the rate provided in the Securities and in Section 4.01 hereof.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Securityholder at the
expense of the Company a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as provided in Section 3.07(b), the Company may redeem all
or any portion of the Securities at any time on or after October 15, 2001, at a
redemption price equal to a percentage of the principal amount thereof, as set
forth in the immediately succeeding sentence, plus accrued and unpaid interest
to the redemption date. The redemption price as a percentage of the principal
amount shall be as follows, if the Securities are redeemed during the 12-month
period commencing on October 15 of the year set forth below, plus in each case,
accrued and unpaid interest to the date of redemption:
ANNUAL PERIOD BEGINNING PERCENTAGE
----------------------- ----------
2001 105.375%
2002 104.031
2003 102.688
2004 101.344
2005 and thereafter 100.000
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(b) At any time, or from time to time, on or prior to October 15,
1999, the Company may, at its option, use the net cash proceeds of one or more
Public Equity Offerings to redeem up to 33 1/3% of the aggregate principal
amount of Securities originally issued at a redemption price equal to 110.750%
of the principal amount thereof, plus, in each case, accrued and unpaid interest
to the date of redemption; PROVIDED that at least 66 2/3% of the aggregate
principal amount of Securities originally issued remains outstanding after any
such redemption. In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering.
SECTION 3.08. MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking
fund payments with respect to the Securities.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
(a) In the event that, pursuant to Section 4.11 hereof, the Company
shall commence an offer to all Securityholders to purchase Securities (an "Asset
Sale Offer"), it shall follow the procedures specified below:
(i) The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer
Period"). No later than five Business Days after the termination of the
Offer Period (the "Purchase Date"), the Company shall purchase the
principal amount of Securities required to be purchased pursuant to Section
4.11 hereof (the "Offer Amount") or, if less than the Offer Amount has been
tendered, all Securities tendered in response to the Asset Sale Offer.
(ii) If the Purchase Date is on or after a Record Date and on or
before the related Interest Payment Date, any accrued interest shall be
paid to the Person under whose name a Security is registered at the close
of business on such Record Date, and no additional interest shall be
payable to holders who tender Securities pursuant to the Asset Sale Offer.
(iii) Upon the commencement of any Asset Sale Offer, the Company
shall send, by first class mail, a notice to each Securityholder, with a
copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such holders to tender Securities pursuant to
the Asset Sale Offer. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
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(1) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.11 hereof and the length of time the Asset
Sale Offer shall remain open;
(2) the Offer Amount, the purchase price and the Purchase Date;
(3) that any Security not tendered or accepted for payment shall
continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased pursuant
to any Asset Sale Offer shall be required to surrender the Security,
with the form entitled "Option of Securityholder to Elect Purchase" on
the reverse of the Security completed, to the Company, a depositary,
if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(6) that Holders shall be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have
the Security purchased;
(7) that, if the aggregate principal amount of Securities
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Securities to be purchased on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof,
shall be purchased); and
(8) that Holders whose Securities were purchased only in part
shall be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
(iv) On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary,
the Offer Amount of Securities or portions thereof tendered pursuant to the
Asset Sale Offer or, if less than the Offer Amount has been tendered, all
Securities or portions thereof tendered, and deliver to the Trustee an
Officers' Certificate stating that such
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Securities or portions thereof were accepted for payment by the Company
in accordance with the terms of this Section 3.09. The Company,
depositary or Paying Agent, as the case may be, shall promptly (but in
any case not later than five days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price
of the Security tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new Security, and the
Trustee shall authenticate and mail or deliver such new Security to such
Holder equal in principal amount to any unpurchased portion of the
Security surrendered. Any Security not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Offer on the Purchase
Date.
(b) Other than as specifically provided in this Section 3.09, any
redemption pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
(a) The Company shall pay the principal of, premium, if any, and
interest on the Securities on the dates and in the manner provided in the
Securities and in this Indenture. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other than the
Company or a Guarantor, holds as of 11:00 a.m. New York City Time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. Such Paying Agent shall return to the Company, no later than
five days following the date of payment, any money (including accrued interest
paid by the Company) that exceeds such amount of principal, premium, if any, and
interest paid on the Securities.
(b) The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 2% per annum in excess of the then applicable interest rate on the
Securities to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
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(a) The Company shall maintain in the Borough of Manhattan, in the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company shall give prior written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, in the City of New York for such purposes. The
Company shall give prior written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
(c) The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03. SEC REPORTS.
(a) Upon consummation of the Exchange Offer and the issuance of the
Exchange Securities, each of the Company and each Guarantor (at its own expense)
shall file with the Commission and shall furnish to the Trustee and each
Securityholder within 15 days after it files them with the Commission copies of
the quarterly and annual reports and of the information, documents, and other
reports (or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe) to be filed pursuant to Section 13 or
15(d) of the Exchange Act (without regard to whether the Company is subject to
the requirements of such Section 13 or 15(d) of the Exchange Act); PROVIDED,
that prior to the consummation of the Exchange Offer and the issuance of the
Exchange Securities, the Company (at its own expense), will mail to the Trustee
and the Securityholders in accordance with paragraph (b) of this Section 4.03
substantially the same information that would have been required by the
foregoing documents within 15 days of when any such document would otherwise
have been required to be filed with the Commission. Upon qualification of this
Indenture under the TIA, the Company and each of the Guarantors shall also
comply with the provisions of TIA Section 314(a).
(b) At the Company's expense, the Company and each of the Guarantors,
as applicable, shall cause an annual report if furnished by it to stockholders
generally and each
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quarterly or other financial report if furnished by it to stockholders
generally to be filed with the Trustee and mailed to the Securityholders
at their addresses appearing in the register of Securities maintained by
the Registrar at the time of such mailing or furnishing to stockholders.
(c) The Company and each of the Guarantors shall provide to any
Securityholder any information reasonably requested by such Securityholder
concerning the Company and the Guarantors (including financial statements)
necessary in order to permit such Securityholder to sell or transfer Securities
in compliance with Rule 144A under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATES.
(a) Each of the Company and each Guarantor shall deliver to the
Trustee, within 90 days after the end of each fiscal year, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating that a review of the activities
of the Company and its Subsidiaries or such Guarantor, as the case may be,
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether each has kept, observed,
performed and fulfilled its Obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge each has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto).
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of (x) the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article 4, 5 or 6 of this Indenture insofar as they relate to
accounting matters or, if any such violation has occurred, specifying the nature
and period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation and (y) if any Restricted Subsidiary's or
Guarantor's financial statements are not prepared on a consolidated basis with
the Company's, such Restricted Subsidiary's or Guarantor's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that any of
the Restricted
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Subsidiaries or Guarantors is in Default under this Indenture or, if any such
Default has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company and each of the Guarantors shall, so long as any of
the Securities are outstanding, deliver to the Trustee, forthwith upon any
Officer becoming aware of (i) any Default or Event of Default or (ii) any event
of default under any other mortgage, indenture or instrument as that term is
used in Section 6.01(a)(v) hereof, an Officers' Certificate specifying such
Default, Event of Default or event of default and what action the Company or
such Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
(d) The Company and each of the Guarantors shall also comply with TIA
Section 314(a)(4).
SECTION 4.05. TAXES.
The Company and each of the Guarantors shall pay, and shall cause each
of their respective Subsidiaries to pay, prior to delinquency, all material
taxes, assessments, and governmental levies except as contested in good faith
and by appropriate proceedings.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture (including,
but not limited to, the payment of the principal of or interest on the
Securities); and the Company and each Guarantor (to the extent that they may
lawfully do so) hereby expressly waive all benefit or advantage of any such law,
and covenant that they shall not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly make any Restricted Payment at any time;
PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries may make
Restricted Payments so long as at the time of the making of such Restricted
Payment, and immediately after giving effect thereto:
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(i) no Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence of such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment (on a
pro forma basis as if such Restricted Payment had been made at the
beginning of the four-quarter period immediately preceding such Restricted
Payment), the Company would have been permitted to incur $1.00 of
additional Indebtedness pursuant to Section 4.09(a) hereof; and
(iii) such Restricted Payment, together with the aggregate of all
Restricted Payments made after the Issuance Date (including all Restricted
Payments permitted by Section 4.07(b)(i) and (ii) hereof) is less than the
sum of (w) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter that begins after the Issuance Date to the end of the Company's
most recently ended fiscal quarter (or, in the case such Consolidated Net
Income for such period is a deficit, minus 100% of such deficit), plus (x)
100% of the aggregate net proceeds received by the Company (including the
fair market value of property other than cash) from any Person since the
Issuance Date from the issue or sale of Equity Interests of the Company or
from equity contributions received by the Company from a holder of the
Company's Capital Stock (but in each case excluding (i) proceeds received
from the issuance of Disqualified Stock of the Company, (ii) proceeds
received from Subsidiaries of the Company and (iii) proceeds to the extent
the same have been utilized (A) to redeem, repurchase, defease, retire or
acquire any Indebtedness (including the Securities) of the Company or any
Subsidiary of the Company or (B) in the manner permitted pursuant to clause
(ii) in the next succeeding paragraph), plus (y) 100% of the aggregate net
proceeds (including the fair market value of property other than cash) of
any (i) sale or other disposition of Restricted Investments made by the
Company and its Restricted Subsidiaries or (ii) dividend from, or the sale
of the stock of, an Unrestricted Subsidiary.
(b) The foregoing provisions shall not prevent:
(i) the payment of any dividend within 60 days after the date of
declaration if the dividend would have been permitted on the date of
declaration;
(ii) so long as no Default or Event of Default shall have occurred or
be continuing or shall occur as a consequence thereof, the acquisition of
Subordinated Debt or Preferred Stock in exchange for or out of the proceeds
of a substantially concurrent sale (other than to the Company or any of its
Subsidiaries) of Equity Interests of the Company (other than Disqualified
Stock of the Company); and
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(iii) so long as no Default or Event of Default shall have
occurred or be continuing or shall occur as a consequence thereof, the
exchange, refinancing or refunding of Subordinated Debt through the
substantially concurrent issuance of new Subordinated Debt so long as (x)
the principal amount of the new Subordinated Debt to be issued does not
exceed the principal amount of the Subordinated Debt so exchanged,
refinanced or refunded, (y) the Subordinated Debt to be issued does not (A)
mature prior to the stated maturity of the Subordinated Debt being so
exchanged, refinanced or refunded or (B) contain any sinking fund or
mandatory redemption or prepayment requirements which might have the effect
of requiring payments to be made, in excess of, or earlier than, the
payments required to be made pursuant to the terms of the Subordinated Debt
being so exchanged, refinanced or refunded and (z) the Subordinated Debt to
be issued is subordinated in right of payment to the Securities at least to
the same extent as the Subordinated Debt being so exchanged, refinanced or
refunded.
For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, PROVIDED that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined, subject to the additional requirements of the immediately
succeeding proviso, in good faith by the Company) of the assets so utilized in
making such Restricted Payment PROVIDED FURTHER that (i) in the case of any
Restricted Payment made with capital stock or indebtedness, such Restricted
Payment shall be deemed to be made in an amount equal to the greater of the fair
market value thereof and the liquidation preference (if any) or principal amount
of the capital stock or indebtedness, as the case may be, so utilized, (ii) in
the case of any Restricted Payment in an aggregate amount in excess of $500,000
(as determined above), the fair market value thereof shall be established by a
Board Resolution adopted by a majority of the Board of Directors of the Company
and (iii) in the case of any Restricted Payment involving consideration
determined (as described above) to be in excess of $1 million, a written opinion
as to the fairness of the valuation thereof (as determined by the Board
Resolution as referenced in preceding clause (ii)) for purposes of determining
compliance with Section 4.07 hereof, shall be issued by an investment banking,
appraisal or accounting firm of national standing; and, PROVIDED FURTHER, that
no Restricted Payment shall be made in capital stock of a Subsidiary of the
Company unless, after giving effect thereto, 100% of the Equity Interests of the
Company and its Restricted Subsidiaries in the respective Subsidiary are
distributed to Persons other than the Company and its Restricted Subsidiaries
pursuant to the respective Restricted Payment.
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SECTION 4.08. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
such Restricted Subsidiary to (i) pay dividends or make any other distributions
to the Company or any Restricted Subsidiary (A) on its Capital Stock or (B) with
respect to any other interest or participation in, or measured by, its profits,
(ii) pay any Indebtedness owed to the Company or any Restricted Subsidiary
thereof, (iii) make loans or advances to the Company or any Restricted
Subsidiary thereof or (iv) sell, lease, or transfer any of its properties or
assets to the Company or any Restricted Subsidiary thereof, except (in each
case) for such encumbrances or restrictions existing under or by reason of (A)
Existing Indebtedness as in effect on the Issuance Date, (B) the New Credit
Facility, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof; PROVIDED that the
New Credit Facility and any such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings are
no more restrictive with respect to the restrictions described in clauses (i)
through (iv) above than those contained in the New Credit Facility on the
Issuance Date, (C) this Indenture and the Securities, (D) applicable law, (E)
customary non-assignment provisions in leases or other contracts (providing for
the non-assignability of such contracts) entered into in the ordinary course of
business and consistent with past practices, (F) any instrument governing or
evidencing Indebtedness of a Person acquired by the Company or any Restricted
Subsidiary of the Company at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired; PROVIDED, HOWEVER, that such
Indebtedness is not incurred in connection with or in contemplation of, such
acquisition, (G) any agreements evidencing Permitted Liens which may restrict
the transfer of the assets subject to such Permitted Liens and (H) permitted
Refinancing Indebtedness, PROVIDED that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being extended,
refinanced, renewed, replaced or refunded.
SECTION 4.09. LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries, directly or indirectly to create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to or become
responsible for (collectively, "incur") any Indebtedness; PROVIDED, HOWEVER,
that the Company may incur (and Guarantors may guarantee on substantially the
same terms as their Guarantees of the Securities) Indebtedness if:
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(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(ii) the Fixed Charge Coverage Ratio of the Company for the four
fiscal quarters ending with the fiscal quarter ended immediately preceding
such incurrence would have been at least 2.0 to 1.0, determined on a pro
forma basis (including a pro forma application of the net proceeds
therefrom), as if such incurrence and application of proceeds had occurred
at the beginning of such period.
(b) Notwithstanding the foregoing, the limitations set forth in the
immediately preceding clause (a) will not apply to the incurrence of any of the
following (collectively, the "Permitted Indebtedness"):
(i) the incurrence by the Company and/or the Guarantors of revolving
credit Indebtedness and letters of credit (whether pursuant to the New
Credit Facility or otherwise) in an aggregate consolidated principal amount
at any one time outstanding not to exceed the greater of (x) $40 million
and (y) the Borrowing Base of the Company and the Subsidiary Guarantors at
such time less, in either case, the aggregate amount of proceeds of Asset
Sales applied to permanently reduce outstanding Indebtedness pursuant to
this clause (i);
(ii) Existing Indebtedness, which shall be permitted to remain
outstanding;
(iii) the incurrence by the Company of Indebtedness represented by
the Securities and the Guarantee by any Guarantor of the Securities;
(iv) Acquired Indebtedness to the extent the Company could have
incurred such Indebtedness in accordance with the first paragraph of this
covenant on the date such Indebtedness became Acquired Indebtedness;
(v) the incurrence by the Company of Indebtedness, and the incurrence
by the Company's Subsidiaries of guarantees of such Indebtedness (the
"Refinancing Indebtedness"), issued in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace, or refund Indebtedness
referred to in clause (ii), (iii) or (iv) above or incurred pursuant to the
proviso of Section 4.09(a) (but without regard to the definition of
Permitted Indebtedness); PROVIDED, HOWEVER, that (A) the aggregate
principal amount or liquidation preference of such Refinancing Indebtedness
(or if such Refinancing Indebtedness is issued at a price less than the
principal amount thereof, the original issue price) shall not exceed the
principal amount or liquidation preference of Indebtedness so extended,
refinanced, renewed, replaced, or refunded (plus accrued interest or
premiums required by the instruments governing such existing or future
Indebtedness as in effect at the time of issuance
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thereof ("Required Premiums") and the amount of reasonable expenses
incurred in connection therewith), (B) the Refinancing Indebtedness
shall rank PARI PASSU with or be subordinate in right and priority of
payment at least to the same extent as the Indebtedness so extended,
refinanced, renewed, replaced, substituted or refunded, (C) the
Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, substituted
or refunded, (D) the Refinancing Indebtedness shall have the same
obligor(s) and guarantor(s) (except to the extent that guarantees are
being dropped in connection with the extension of the Refinancing
Indebtedness) as the Indebtedness being refinanced, and (E) immediately
after the incurrence of such Refinancing Indebtedness no Default or
Event of Default shall have occurred and be continuing;
(vi) Indebtedness of the Company or any Restricted Subsidiary of the
Company to the Company or any Wholly Owned Restricted Subsidiary which is a
Guarantor;
(vii) Hedging Obligations incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding; and
(viii) the Company and/or the Guarantors may incur Indebtedness
(and each such Person may guaranty such Indebtedness) not otherwise
permitted under the Indenture in an aggregate principal amount outstanding
under this clause (viii) not to exceed $10 million at any one time less the
aggregate amount of proceeds of Asset Sales applied to repay permanently
Indebtedness outstanding pursuant to this clause (viii) as provided in
Section 4.11 hereof.
SECTION 4.10. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT.
Neither the Company nor any Guarantor shall incur or suffer to exist
any Indebtedness that is expressly subordinate in right of payment to any other
Indebtedness of the Company or the respective Guarantor, unless such
Indebtedness is subordinated on substantially the same terms to the Securities.
SECTION 4.11. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, conduct any Asset Sale unless:
(i) no Default or Event of Default exists or is continuing
immediately prior to and after giving effect to such Asset Sale;
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(ii) in the case of any sale of Equity Interests in, or issuance of
any Equity Interests by, a Guarantor, 100% of the Equity Interests of the
Company and its Restricted Subsidiaries in the respective Guarantor must be
sold pursuant to the respective Asset Sale;
(iii) in each case, the Company or such Restricted Subsidiary, as
the case may be, receives consideration at the time of each such Asset Sale
at least equal to the fair market value of the assets sold or otherwise
disposed of; and
(iv) in each case at least 80% of the consideration therefor received
by the Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents.
(b) Within 270 days after consummation of any Asset Sale, the Company
or such Restricted Subsidiary may apply the Net Proceeds from such Asset Sale:
(i) to an investment in any business, capital expenditure or other
tangible asset in the Permitted Businesses; or
(ii) prepay Indebtedness (other than Subordinated Debt) of the Company
and the Guarantors which results in a permanent reduction thereof (and its
commitments thereunder).
Pending the final application of any such Net Proceeds, the Company or such
Restricted Subsidiary may invest such Net Proceeds in Cash Equivalents or apply
such Net Proceeds to temporarily reduce borrowings outstanding under the New
Credit Facility if, within such 270-day period, the Company or the Restricted
Subsidiary withdraws from the New Credit Facility such Net Proceeds (to the
extent not used to permanently reduce borrowings and commitments available
thereunder) and applies such Net Proceeds in accordance with clause (i) of this
Section 4.11(b). Any Net Proceeds from the Asset Sale that are not applied or
invested as provided in clauses (i) or (ii) will be deemed to constitute "Excess
Proceeds."
(c) (i) In the event the Company or any Restricted Subsidiary shall
receive any Excess Proceeds, the Company shall make an Asset Sale Offer to
purchase the maximum principal amount of Securities, that is in an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the outstanding principal
amount thereof, plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in
Section 3.09 hereof. If the aggregate principal amount of Securities
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Securities to be purchased on a PRO RATA basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
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(ii) Notwithstanding the requirements contained in the preceding
clause (i), in the event that such Excess Proceeds are less than $5 million, the
application of such Excess Proceeds to repurchase Securities may be deferred
until such time as such Excess Proceeds are at least equal to $5 million, at
which time the Company or such Restricted Subsidiary shall apply all Excess
Proceeds to repurchase Securities.
(e) In the event the repurchase of Securities with Excess Proceeds
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at the time it is required, the Company will comply with Rule 14e-1 as then in
effect with respect to such repurchase.
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms that
are fair and reasonable and no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that would have been obtained in a
comparable transaction made on an arms-length basis by the Company or such
Restricted Subsidiary, as the case may be, with an unrelated Person and (b) the
Company shall have delivered to the Trustee (i) with respect to any Affiliate
Transaction involving aggregate payments in excess of $500,000, (x) a Board
Resolution adopted by a majority of the Board of Directors (including a majority
of its disinterested members) approving such Affiliate Transaction and (y) an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above, and (ii) with respect to any Affiliate Transaction involving
aggregate payments in excess of $1 million, a written opinion as to the fairness
of such Affiliate Transaction to the Company from a financial point of view
issued by an investment banking, appraisal or accounting firm of national
standing; PROVIDED, HOWEVER, that (i) any employment agreement entered into by
the Company or any Wholly Owned Restricted Subsidiary in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or any Wholly
Owned Restricted Subsidiary thereof which is a Guarantor, (iii) agreements or
contracts with, or for the benefit of, any Affiliate which exist on the Issuance
Date and which are described in the Offering Memorandum and (iv) transactions
permitted by Section 4.07, in each case, shall not be deemed Affiliate
Transactions.
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SECTION 4.13. LIMITATION ON LIENS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any Liens
except for Permitted Liens.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, and the corporate, partnership or other existence of each Subsidiary,
in accordance with the respective organizational documents (as the same may be
amended from time to time) of each Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company and its Subsidiaries;
PROVIDED, HOWEVER, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors of the Company shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries, taken as a whole, and that the loss thereof
is not adverse in any material respect to the Securityholders.
SECTION 4.15. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Securityholder
shall have the right to require the Company to repurchase all or any part of
such Securityholder's Securities at a repurchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant Interest Payment Date).
(b) Within 30 days following any Change of Control, the Company will
mail a notice to each Securityholder, with a copy to the Trustee, stating:
(i) that a Change of Control has occurred and that such
Securityholder has the right to require the Company to repurchase all or
any part of such Securityholder's Securities at a repurchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant Record Date to receive interest due on
the relevant Interest Payment Date);
(ii) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
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(iii) the repurchase date (which will be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and
(iv) the instructions, determined by the Company consistent with this
Indenture, that a Securityholder must follow in order to have its
Securities repurchased.
(c) Securityholders electing to have a Security repurchased will be
required to surrender the Security, with the form entitled "Option of
Securityholder to Elect Purchase" on the reverse of the Security completed, to
the Company at the address specified in the notice at least 10 Business Days
prior to the repurchase date. Securityholders will be entitled to withdraw
their election if the Trustee or the Company receives not later than three
Business Days prior to the repurchase date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Securityholder, the
principal amount of the Security which was delivered for repurchase by the
Securityholder and a statement that such Securityholder is withdrawing his
election to have such Security purchased.
(d) On the repurchase date, all Securities repurchased by the Company
under this Section 4.15 shall be delivered by the Trustee for cancellation, and
the Company shall pay the repurchase price plus accrued and unpaid interest, if
any, to the Securityholders entitled thereto.
(e) The Company will comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with any offer required to be made by the Company to repurchase the Securities
as a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the Indenture
relative to the Company's obligation to make an offer to repurchase the
Securities as a result of a Change of Control, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under such provisions of the Indenture by virtue
thereof.
SECTION 4.16. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES.
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
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SECTION 4.17. COMPANY TO CAUSE CERTAIN SUBSIDIARIES TO BECOME GUARANTORS.
The Company shall not (i) permit any of its Restricted Subsidiaries to
incur, guarantee or secure through the granting of Liens any Indebtedness
(excluding Acquired Indebtedness to the extent incurred as permitted pursuant to
clause (iv) of Section 4.09(b) hereof and secured, if secured, by Permitted
Liens of the type described in clause (c) of the definition thereof which were
in existence prior to the acquisition of the respective Restricted Subsidiary)
or (ii) pledge any intercompany notes representing obligations of any of its
Restricted Subsidiaries to secure the payment of any Indebtedness, in either
case unless such Restricted Subsidiary is a Wholly Owned Restricted Subsidiary
which is a Guarantor or at such time becomes a Guarantor by executing a
supplemental indenture in which such Restricted Subsidiary agrees to be bound by
the terms of this Indenture as a Guarantor and executes a Guarantee.
SECTION 4.18. LIMITATION ON BUSINESS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage substantially in any business other than the Permitted
Businesses.
SECTION 4.19. FURTHER INSTRUMENTS AND ACTS.
The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of the Company, except as otherwise set forth herein, but the Trustee may
require of the Company full information and advice as to the performance of the
covenants, conditions and agreements contained herein, and upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
ARTICLE 5
SUCCESSORS
SECTION 5.01. LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company may not, in a single transaction or through a series of
related transactions, consolidate or merge with or into or sell, assign,
transfer, lease, convey or otherwise dispose of (or permit any of its Restricted
Subsidiaries to sell, assign, transfer, lease, convey or otherwise dispose of)
all or substantially all of the Company's and its
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Restricted Subsidiaries' assets (determined on a consolidated basis for
the Company and its Restricted Subsidiaries taken as a whole) in one or
more related transactions to another Person unless:
(i) the Company is the surviving corporation, or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized and existing
under the laws of the United States, any State thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made assumes, pursuant to a supplemental indenture, all the obligations of
the Company under the Securities and this Indenture;
(iii) immediately after such transaction (including any
Indebtedness incurred or anticipated to be incurred in connection with such
transaction), (A) no Default or Event of Default exists, (B) the
Consolidated Net Worth of the resulting, surviving or transferee
corporation is not less than that of the Company immediately prior to the
transaction and (C) the Company or any Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable period, shall
be permitted to incur at least $1.00 of additional Indebtedness pursuant to
Section 4.09(a) hereof; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate (attaching calculations demonstrating compliance with clause
(iii) of this Section 5.01) and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, transfer, lease, conveyance
or disposition and such supplemental indenture comply with this Article 5
and that all conditions precedent provided for herein relating to such
transaction have been complied with.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the Company's and its
Subsidiaries' assets (determined on a consolidated basis for the Company and its
Subsidiaries taken as a whole) in accordance with Section 5.01 hereof, the
successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, lease, conveyance or other disposition
is made shall succeed to, and be substituted for, and may
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exercise every right and power of the Company under this Indenture with
the same effect as if such successor Person had been named as the
Company herein; PROVIDED, HOWEVER, that neither the Company nor any of
the Guarantors, as the case may be, shall be released or discharged from
its obligation to pay (or its guarantee of the payment of) the principal
of, premium, if any, on and interest on the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
(a) An "Event of Default" occurs if:
(i) there is a failure to pay any interest on any Security when the
same becomes due and payable and the continuance of any such failure for a
period of 30 days;
(ii) there is a failure to pay any principal of or premium, if any, on
any Security when and as the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(iii) the Company or any Guarantor fails to observe or perform any
covenant or agreement on the part of the Company to be observed or
performed pursuant to Section 4.07, 4.09, 4.11, 4.15 or 5.01 hereof;
(iv) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture, or any
Guarantor fails to comply with any of its other agreements or covenants in,
or provisions of, this Indenture or the Guarantee, and in each case the
failure continues for the period and after the notice specified in clause
(c) below;
(v) the occurrence of a default or event of default by the Company or
any Restricted Subsidiary thereof under any mortgage, indenture or other
instrument under which there is issued or by which there is secured or
evidenced any Indebtedness of the Company or any Restricted Subsidiary
thereof or the payment of which is guaranteed by the Company or any
Subsidiary thereof, whether such Indebtedness or guarantee now exists or is
created after the Issuance Date, which default (A) is caused by a failure
to pay when due principal or interest on such Indebtedness (which failure
continues beyond any applicable grace period) (a "Payment Default") or (B)
results in the acceleration of such Indebtedness prior to
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its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which a Payment Default then exists or with respect
to which the maturity thereof has been so accelerated, aggregates $1
million or more;
(vi) the failure by the Company or any Restricted Subsidiary thereof
to pay final judgments aggregating in excess of $1 million which are
entered by a court or courts of competent jurisdiction against the Company
or such Restricted Subsidiary, which final judgments remain unpaid,
undischarged and unstayed for a period of more than 60 days;
(vii) the provisions of Article 11 hereof shall cease to be in
full force and effect in any respect or shall cease to give the Trustee in
any respect the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security
interest in, and Lien on, all of the Collateral subject thereto, in favor
of the Trustee, subject to no other Liens) or any Collateral required to be
delivered to the Trustee for pledge thereunder shall not have been so
delivered;
(viii) the Company or any of its Significant Subsidiaries pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
(E) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, or
(F) takes any corporate action to authorize or effect any of the
foregoing;
(ix) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case,
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(B) appoints a Custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries, or
(C) orders the liquidation of the Company or any of its
Significant Subsidiaries,
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(x) any of the Guarantees of the Guarantors that are also Significant
Subsidiaries of the Company ceases to be in full force and effect or any of
such Guarantees is declared to be null and void and unenforceable or any of
such Guarantees is found to be invalid or any such Guarantor denies its
liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of this Indenture).
(b) The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
(c) A Default under clause (iv) of Section 6.01(a) hereof is not an
Event of Default until the Trustee notifies the Company or such Guarantor, as
the case may be, in writing, or the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities notify the Company or such
Guarantor, as the case may be, and the Trustee in writing of the Default and the
Company or such Guarantor, as the case may be, does not cure the Default within
30 days after receipt of the notice. The written notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default."
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (viii) or (ix) of Section 6.01(a) with respect to the Company or any
Guarantor) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of not less than 25% in aggregate principal amount of the then
outstanding Securities by written notice to the Company and the Trustee, may
declare (a "Declaration") the unpaid principal of, and any accrued and unpaid
interest on, all the Securities to be due and payable (the "Default Amount").
Upon any such Declaration the Default Amount shall be due and payable
immediately. If an Event of Default specified in clause (viii) or (ix) of
Section 6.01(a) occurs with respect to the Company or any of the Guarantors, the
Default Amount shall IPSO FACTO become and be immediately due and payable
without any Declaration or other act on the part of the Trustee or any
Securityholder. The Holders of a majority in aggregate principal amount of the
then outstanding Securities by written notice to the Trustee may rescind any
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Declaration if all Events of Default then continuing (other than any Events of
Default with respect to the nonpayment of principal of or interest on any
Security which has become due solely as a result of such Declaration) have been
cured, and may waive any Default other than a Default with respect to a covenant
or provision that cannot be modified or amended without the consent of each
Securityholder pursuant to Section 9.02 hereof.
SECTION 6.03. OTHER REMEDIES.
(a) If an Event of Default occurs and is continuing, the Trustee and
the Securityholders may pursue any available remedy to collect the payment of
principal, premium, if any, or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
(b) The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Securityholders of not less than a majority in aggregate principal
amount of the then outstanding Securities by notice to the Trustee may waive an
existing Default or Event of Default and its consequences, except a continuing
Default or Event of Default in the payment of the principal, premium, if any, or
interest on any Security (other than principal, premium (if any) or interest
which has become due solely as a result of a Declaration) or a Default or Event
of Default that cannot be modified or amended without the consent of the Holder
of each outstanding Security affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Securityholders of a majority in principal amount of the Securities
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Securityholders or that may involve
the Trustee in personal liability.
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SECTION 6.06. LIMITATION ON SUITS.
(a) A Securityholder may pursue a remedy with respect to this
Indenture or the Securities only if:
(i) the Securityholder has previously given to the Trustee written
notice of a continuing Event of Default;
(ii) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(iii) such Securityholder or Securityholders offer, and, if
requested, provide, to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(v) during such 45-day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.
(b) A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. RIGHTS OF SECURITYHOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Securityholder to receive payment of principal, premium, if any, and
interest on the Security, on or after the respective due dates expressed in the
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
the Securityholder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a)(i) or (ii) or an
acceleration pursuant to Section 6.02 occurs and is continuing, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Company or any Guarantor or any other obligor on the
Securities for the whole amount of principal, premium, if any, and accrued
interest remaining unpaid on the Securities and interest on overdue principal,
premium, if any, and, to the extent lawful, interest on overdue installments of
interest and such further amount as shall be sufficient to cover the costs and
expenses of
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collection, including any advances made by the Trustee and the reasonable
compensation, expenses and disbursements of the Trustee, its agents and
counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company or
any Guarantor (or any other obligor on the Securities), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each
Securityholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
To the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties which the Securityholders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Securityholder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
SECTION 6.10. PRIORITIES.
(a) If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
(i) First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07, including payment of all compensation, expenses and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
(ii) Second: if the Securityholders are forced to proceed against the
Company directly without the Trustee, to the Securityholders for their
collection costs;
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(iii) Third: to the Securityholders for amounts due and unpaid on
the Securities for principal, premium, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, premium, if any, and interest,
respectively; and
(iv) Fourth: to the Company or, to the extent the Trustee collects
any amount pursuant to Article 10 hereof from any Guarantor, to such
Guarantor, or to such party as a court of competent jurisdiction shall
direct.
(b) The Trustee may fix a record date and payment date for any
payment to Securityholders.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Securityholder
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances and in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform only those duties as are
specifically set forth in this Indenture and the duties of the Trustee
shall be determined solely by the express provisions of this Indenture, the
Trustee need perform only those duties that are specifically set forth in
this Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture, but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liabilities for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document unless
the Trustee has reason to believe such fact or matter is not true.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or any Guarantor.
(f) The permissive rights of the Trustee to do certain things
enumerated in this Indenture shall not be construed as a duty and the Trustee
shall not be answerable for other than its negligence or wilful default with
respect to such permissive rights.
(g) Except for (i) an Event of Default under 6.01(a)(i) or (ii)
hereof, or (ii) any other event of which the Trustee has "actual knowledge,"
which event, with the giving of notice or the passage of time or both, would
constitute an Event of Default, the Trustee shall not be deemed to have notice
of any Default or Event of Default unless specifically notified in writing of
such event by the Company or the Securityholders of not less than 25% in
aggregate principal amount of Securities outstanding; as used herein, the term
"actual knowledge" means the actual fact or statement of knowing, without any
duty to make any investigation with regard thereto.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor or any Affiliate of the Company or any Guarantor with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Securities or the
Guarantees, it shall not be accountable for the Company's use of the proceeds
from the Securities or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Securities or the Guarantees or any other document in
connection with the sale of the Securities or pursuant to this Indenture other
than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Securityholder a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default in any payment of principal or interest on any Security, the
Trustee may withhold the notice if a committee of its officers in good faith
determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO SECURITYHOLDERS.
(a) Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall mail to the
Securityholders a brief report dated as of such reporting date that complies
with TIA Section 313(a) (but if no event described in TIA Section 313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA Section 313(b), (c)
and (d).
(b) A copy of each report at the time of its mailing to the
Securityholders shall be filed with the Commission and each stock exchange, if
any, on which the Securities are listed. The Company shall promptly notify the
Trustee if and when the Securities are listed on any stock exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
(a) The Company and the each of the Guarantors, jointly and
severally, shall pay to the Trustee from time to time reasonable compensation
for its acceptance of this Indenture and services hereunder. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company and each of the Guarantors, jointly and severally,
shall reimburse the Trustee upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation for
its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
(b) The Company and each of the Guarantors, jointly and severally,
shall indemnify the Trustee against any and all losses, liabilities or expenses
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except as
set forth below in subparagraph (d). The Trustee shall notify the Company and
each of the Guarantors promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company or any Guarantor shall not
relieve the Company or any of the Guarantors of their Obligations hereunder.
The Trustee may have separate counsel and the Company and each of the
Guarantors, jointly and severally, shall pay the reasonable fees and expenses of
such counsel. Neither the Company nor any Guarantor need pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
(c) The obligations of the Company and each of the Guarantors under
this Section 7.07 shall survive the resignation or removal of the Trustee and
the satisfaction and discharge or termination of this Indenture.
(d) Notwithstanding subparagraphs (a) or (b) above, neither the
Company nor any Guarantor need reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence, bad faith
or willful misconduct.
(e) To secure the Company's and each of the Guarantor's payment
obligations in this Section, the Trustee shall have a Lien prior to the
Securities on all money or property held or collected by the Trustee, except
that held in trust to pay principal, premium, if any, and interest on particular
Securities. Such Lien shall survive the resignation or removal of the Trustee
and the satisfaction and discharge of this Indenture.
(f) When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(viii) or (ix) hereof occurs, the
expenses and the compensation for such services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
(a) A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
(b) The Trustee may resign at any time and be discharged from the
trust hereby created by so notifying the Company. The Securityholders of a
majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a Custodian, receiver or other public officer takes charge
of the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each
Securityholder of such event and promptly appoint a successor Trustee. Within
one year after the successor Trustee takes office, the Holders of a majority in
principal amount of the then outstanding Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
(d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company,
any of the Guarantors or the Securityholders of at least 10% in principal amount
of the then outstanding Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee after written request by any Securityholder who
has been a Securityholder for at least six months fails to comply with Section
7.10, such Securityholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(f) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a
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notice of its succession to each Securityholder. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor
Trustee, provided all sums owing to the Trustee hereunder have been paid and
subject to the Lien provided for in Section 7.07 hereof. Notwithstanding
replacement of the Trustee pursuant to this Section 7.08, the Company's and
each of the Guarantor's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; PROVIDED, that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
(a) There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or any State or Territory thereof or the District of Columbia authorized
under such laws to exercise corporate trustee power, shall be subject to
supervision or examination by Federal, State, Territorial, or District of
Columbia authority and shall have a combined capital and surplus of at least
$100 million as set forth in its most recent published annual report of
condition.
(b) This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee shall comply
with TIA Section 310(b).
The provisions of TIA Section 310 shall also apply to the Company and each of
the Guarantors, as obligor of the Securities.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company and each
of the Guarantors as obligor on the Securities.
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07 hereof)
canceled or for cancellation or (ii) all outstanding Securities have become due
and payable and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity all outstanding Securities, including interest
thereon (other than Securities replaced pursuant to Section 2.07 hereof), and if
in either case the Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Sections 8.01(e) and 8.06 hereof, cease to
be of further effect. The Trustee shall acknowledge satisfaction and discharge
of this Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company.
(b) Subject to Sections 8.01(e), 8.02 and 8.06 hereof, the Company at
any time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) all obligations under Sections
4.04(a), (b) and (c), 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17
or 5.01(iii)(C) and the operation of Sections 6.01(a)(v), 6.01(a)(vi),
6.01(a)(vii), 6.01(a)(viii) hereof (except with respect to the Company or a
Significant Subsidiary which is a Guarantor) or 6.01(a)(ix) hereof (except with
respect to the Company or a Significant Subsidiary which is a Guarantor)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
(c) If the Company exercises its legal defeasance option, payment of
the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section
6.01(a)(v), 6.01(a)(vi), 6.01(a)(viii) (except with respect to the Company or a
Significant Subsidiary which is a Guarantor) or 6.01(a)(ix) hereof (except with
respect to the Company or a Significant Subsidiary which is a Guarantor), or
because of the failure of the Company or the Guarantors to comply with Sections
4.04(a), (b) and (c), 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17
or 5.01(iii)(C) hereof.
(d) Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
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(e) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.01(d), 8.04,
8.05 and 8.06 hereof and the obligations of each Guarantor under Article 10 in
respect thereof shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 hereof and
the obligations of Guarantors under Article 10 in respect thereof shall survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE.
(a) The Company may exercise its legal defeasance option or its
covenant defeasance option only if:
(i) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations in amounts (including interest, but without
consideration of any reinvestment of such interest) and maturities
sufficient, but in the case of the legal defeasance option only, not more
than such amounts (as certified by a nationally recognized firm of
independent public accountants), to pay and discharge at their stated
maturity (or such earlier redemption date as the Company shall have
specified to the Trustee) the principal of, premium, if any, and interest
on all outstanding Securities to maturity or redemption, as the case may
be, and to pay all of the sums payable by it hereunder; PROVIDED, that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of said
principal, premium, if any, and interest with respect to the Securities;
(ii) in the case of the legal defeasance option only, 123 days pass
after the deposit is made and during the 123 day period no Default
specified in Section 6.01(viii) or (ix) hereof with respect to the Company
or any Guarantor occurs which is continuing at the end of the period;
(iii) no Default has occurred and is continuing on the date of
such deposit and after giving effect thereto;
(iv) the deposit does not constitute a default under any other
agreement binding on the Company;
(v) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940, as amended;
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(vi) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
(vii) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(viii) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
(b) In order to have money available on a payment date to pay
principal, premium, if any, or interest on the Securities, the U.S. Government
Obligations deposited pursuant to preceding clause (a) shall be payable as to
principal or interest at least one Business Day before such payment date in such
amounts as shall provide the necessary money. U.S. Government Obligations shall
not be callable at the issuer's option.
(c) Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3 hereof.
SECTION 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal, premium, if
any, and interest on the Securities.
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SECTION 8.04. REPAYMENT TO THE COMPANY.
(a) The Trustee and the Paying Agent shall promptly pay to the
Company upon written request any excess money or securities held by them at any
time; PROVIDED, HOWEVER, that the Trustee shall not pay any such excess to the
Company unless the amount remaining on deposit with the Trustee, after giving
effect to such transfer are sufficient to pay principal, premium, if any, and
interest on the outstanding Securities, which amount shall be certified by
independent public accountants.
(b) The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years after the date upon which
such payment shall have become due; PROVIDED, HOWEVER, that the Company shall
have either caused notice of such payment to be mailed to each Securityholder
entitled thereto no less than 30 days prior to such repayment or within such
period shall have published such notice in a financial newspaper of widespread
circulation published in the City of New York. After payment to the Company,
Securityholders entitled to the money must look to the Company and the
Guarantors for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
The Company and the Guarantors, jointly and severally, shall pay and
shall indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and each of the Guarantor's Obligations under this Indenture and the
Securities and the Guarantees shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that if the
Company or any Guarantor has made any payment of principal of, premium, if any,
or interest on any Securities because of the reinstatement of its Obligations,
the Company or any of the Guarantors, as the case may be, shall be subrogated to
the rights of the Securityholders
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to receive such payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF SECURITYHOLDERS.
(a) Notwithstanding Section 9.02 of this Indenture, the Company and
the Trustee may amend or supplement this Indenture or the Securities without the
consent of any Securityholder:
(i) to cure any ambiguity, omission, defect or inconsistency;
PROVIDED, that such amendment or supplement does not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect the rights of
any Securityholder in any respect;
(ii) to comply with Article 5 hereof;
(iii) to provide for uncertificated Securities in addition to or
in place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as amended, or in a
manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the Internal Revenue Code of 1986, as amended;
(iv) to add guarantees with respect to the Securities;
(v) to add to the covenants of the Company or the Guarantors for the
benefit of the Securityholders or to surrender any right or power herein
conferred upon the Company or the Guarantors;
(vi) to evidence or to provide for a replacement Trustee under Section
7.08 hereof;
(vii) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(viii) to make any change that does not, as evidenced by an Opinion
of Counsel delivered to the Trustee, adversely affect the rights of any
Securityholder in any respect;
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PROVIDED, that the Company has delivered to the Trustee an Opinion of Counsel
stating that any such amendment or supplement complies with the provisions of
this Section 9.01.
(b) Upon the request of the Company and the Guarantors accompanied by
Board Resolutions of their respective Boards of Directors authorizing the
execution of any such supplemental indenture, and upon receipt by the Trustee of
the documents described in Section 9.06 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into such supplemental indenture which
affects its own rights, duties or immunities under this Indenture or otherwise.
(c) After an amendment or supplement under this Section 9.01 becomes
effective, the Company shall mail to all Securityholders a notice briefly
describing such amendment or supplement. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or supplement under this Section.
SECTION 9.02. WITH CONSENT OF SECURITYHOLDERS.
(a) The Company and the Trustee may amend or supplement this
Indenture or the Securities with the written consent of the Securityholders of
not less than a majority in aggregate principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Securities) and any existing Default and its consequences
(including, without limitation, an acceleration of the Securities) or compliance
with any provision of this Indenture or the Securities may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for the Securities). Furthermore, subject to Sections 6.04 and
6.07 hereof, the Holders of a majority in aggregate principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Securities) may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities. However, without the consent of each Securityholder affected, an
amendment, supplement or waiver under this Section 9.02 may not (with respect to
any Securities held by a non-consenting Holder):
(i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for payment of any interest
on any Security;
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(iii) reduce the principal of or extend the fixed maturity of any
Security or alter the redemption provisions (including without limitation
Sections 3.07, 3.09, 4.11 and 4.15 hereof) with respect thereto;
(iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on, or redemption payment with respect to,
any Security (excluding any principal or interest due solely as a result of
the occurrence of a Declaration);
(v) make any Security payable in money other than that stated in the
Security; or
(vi) make any change in Section 6.04 or 6.07 hereof or in this Section
9.02(a).
(b) Upon the request of the Company and the Guarantors accompanied by
Board Resolutions of their respective Boards of Directors authorizing the
execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence satisfactory to the Trustee of the consent of the
Securityholders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
(c) It shall not be necessary for the consent of the Securityholders
under this Section 9.02 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
(d) After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to all Securityholders a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Securities
shall comply with the TIA as then in effect.
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SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment, supplement or waiver becomes effective, a
consent to it by a Securityholder is a continuing consent by the Securityholder
and every subsequent Securityholder or portion of a Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
is not made on any Security. However, any such Securityholder or subsequent
Securityholder may revoke the consent as to its Security if the Trustee receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Securityholder.
(b) The Company may fix a record date for determining which
Securityholders must consent to such amendment, supplement or waiver. If the
Company fixes a record date, the record date shall be fixed at (i) the later of
30 days prior to the first solicitation of such consent or the date of the most
recent list of Securityholders furnished to the Trustee prior to such
solicitation pursuant to Section 2.05 hereof, or (ii) such other date as the
Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
(a) Securities authenticated and delivered after the execution of any
supplemental indenture may bear a notation in form approved by the Trustee as to
any matter provided for in such amendment, supplement or waiver on any Security
thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment,
supplement or waiver.
(b) Failure to make the appropriate notation or issue a new Security
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, waiver or supplemental indenture
authorized pursuant to this Article 9 if the amendment, waiver or supplemental
indenture does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing or refusing to sign such amendment, waiver or supplemental indenture,
the Trustee shall be entitled to receive and, subject to Section 7.01, shall be
fully protected in relying upon, in addition to the documents required by
Section 12.04, an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment, waiver or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company in accordance with its terms.
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ARTICLE 10
GUARANTEE OF SECURITIES
SECTION 10.01. GUARANTEE
(a) Each Guarantor hereby jointly and severally irrevocably and
unconditionally guarantees, as a primary obligor and not a surety, to each
Securityholder of a Security now or hereafter authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of this Indenture, the Securities or the Obligations
of the Company hereunder or thereunder, (i) the due and punctual payment of the
principal, premium, if any, interest (including post-petition interest in any
proceeding under any Bankruptcy Law whether or not an allowed claim in such
proceeding) on overdue principal, premium, if any, and interest, if lawful on
such Security, and (ii) all other monetary Obligations payable by the Company
under this Indenture (including under Section 7.07 hereof) and the Securities
(all of the foregoing being hereinafter collectively called the "Guaranteed
Obligations"), when and as the same shall become due and payable, whether by
acceleration thereof, call for redemption or otherwise (including amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code), in accordance with the terms of any such
Security and of this Indenture, subject, however, in the case of (i) and (ii)
above, to the limitations set forth in Section 10.04 hereof. Each Guarantor
hereby agrees that its Obligations hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any failure to
enforce the provisions of any such Security or this Indenture, any waiver,
modification or indulgence granted to the Company with respect thereto, the
recovery of any judgment against the Company, any action to enforce the same, by
the Securityholders or the Trustee, the recovery of any judgment against the
Company, any action to enforce the same, or any other circumstances which may
otherwise constitute a legal or equitable discharge of a surety or guarantor.
Each Guarantor hereby waives diligence, presentment, filing of claims with a
court in the event of a merger or bankruptcy of the Company, any right to
require a proceeding first against the Company, the benefit of discussion,
protest or notice with respect to any such Security or the Indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
shall not be discharged as to any such Security except by payment in full of the
principal thereof, premium, if any, and all accrued interest thereon.
(b) Each Guarantor further agrees that this Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Securityholder or the Trustee to any Security held for payment of the
Guaranteed Obligations.
(c) Each Guarantor agrees that it shall not be entitled to, and
hereby irrevocably waives, any right of subrogation in relation to the
Securityholders or the Trustee
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in respect of any Guaranteed Obligations. Each Guarantor further agrees
that, as between such Guarantor, on the one hand, and the Securityholders and
the Trustee, on the other hand, (x) the maturity of the Guaranteed
Obligations may be accelerated as provided in Article 6 for the purposes of
such Guarantor's Guarantee herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in the event of any Declaration of acceleration of such
Guaranteed Obligations as provided in Article 6 hereof, such Guaranteed
Obligations (whether or not due and payable) shall forthwith become due and
payable by such Guarantor for the purpose of this Article 10.
(d) Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any
Securityholder in enforcing any rights under this Article 10.
(e) The Guarantee set forth in this Article 10 shall not be valid or
become obligatory for any purpose with respect to a Security until the
certificate of authentication on such Security shall have been signed by or on
behalf of the Trustee.
SECTION 10.02. EXECUTION AND DELIVERY OF GUARANTEE.
(a) To evidence each Guarantor's Guarantee set forth in this Article
10, each Guarantor hereby agrees that a notation of such Guarantee shall be
placed on each Security authenticated and delivered by the Trustee.
(b) This Indenture shall be executed on behalf of each Guarantor, and
an Officer of each Guarantor shall sign the notation of the Guarantee on the
Securities by manual or facsimile signature. If an Officer whose signature is
on this Indenture or the notation of Guarantee no longer holds that office at
the time the Trustee authenticates the Security on which the Guarantee is
endorsed, the Guarantee shall be valid nevertheless. Each Guarantor hereby
agrees that the Guarantee set forth in Section 10.01 hereof shall remain in full
force and effect notwithstanding any failure to endorse on each Security a
notation of the Guarantee.
(c) The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of each Guarantor.
SECTION 10.03. GUARANTEE UNCONDITIONAL, ETC.
Upon failure of payment when due of any Guaranteed Obligation for
whatever reason, each Guarantor will be obligated to pay the same immediately.
Each Guarantor hereby agrees that its obligations hereunder shall be continuing,
absolute and unconditional, irrespective of: the recovery of any judgment
against the Company or any Guarantor; any
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extension, renewal, settlement, compromise, waiver or release in respect of
any obligation of the Company under this Indenture or any Security, by
operation of law or otherwise; any modification or amendment of or supplement
to this Indenture or any Security; any change in the corporate existence,
structure or ownership of the Company, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Company or its
assets or any resulting release or discharge of any obligation of the Company
contained in this Indenture or any Security; the existence of any claim,
set-off or other rights which any Guarantor may have at any time against the
Company, the Trustee, any Securityholder or any other Person, whether in
connection herewith or any unrelated transactions; PROVIDED, that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim; any invalidity or unenforceability relating to or
against the Company for any reason of this Indenture or any Security, or any
provision of applicable law or regulation purporting to prohibit the payment
by the Company of the principal, premium, if any, or interest on any Security
or any other Guaranteed Obligation; or any other act or omission to act or
delay of any kind by the Company, the Trustee, any Securityholder or any
other Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge of
the Guarantors' obligations hereunder. Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demand
whatsoever and covenants that this Guarantee will not be discharged except by
the complete performance of the obligations contained in the Securities, this
Indenture and in this Article 10. Each Guarantor's obligations hereunder
shall remain in full force and effect until the Indenture shall have
terminated and the principal of and interest on the Securities and all other
Guaranteed Obligations shall have been paid in full. If at any time any
payment of the principal of or interest on any Security or any other payment
in respect of any Guaranteed Obligation is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, each Guarantor's obligations hereunder with respect to
such payment shall be reinstated as though such payment had been due but not
made at such time, and this Article 10, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor irrevocably
waives any and all rights to which it may be entitled, by operation of law or
otherwise, upon making any payment hereunder to be subrogated to the rights
of the payee against the Company with respect to such payment or otherwise to
be reimbursed, indemnified or exonerated by the Company in respect thereof.
SECTION 10.04. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Securityholder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, Federal and state fraudulent
conveyance laws or other legal principles.
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To effectuate the foregoing intention, the Securityholders and each Guarantor
hereby irrevocably agree that the obligations of such Guarantor under the
Guarantee shall be limited to the maximum amount as will, after giving effect
to all other contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to Section 10.05 hereof, result in the obligations
of such Guarantor under the Guarantee not constituting such fraudulent
transfer or conveyance under federal or state law.
SECTION 10.05. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to the Guarantee.
SECTION 10.06. RELEASE.
Upon the sale or disposition of all of the Equity Interests of a
Guarantor to an entity which is not the Company or a Subsidiary of the Company,
which is otherwise in compliance with this Indenture, such Guarantor shall be
deemed released from all its obligations under the Indenture without any further
action required on the part of the Trustee or any Securityholder; PROVIDED,
HOWEVER, that any such termination shall occur if and only to the extent that
all Obligations of each Guarantor under all of its guarantees of, and under all
of its pledges of assets or other security interests which secure, Indebtedness
of the Company and the other Guarantors shall also terminate upon such release,
sale or transfer; PROVIDED FURTHER, that without limiting the foregoing, any
proceeds received by the Company or any Subsidiary of the Company from such
transaction shall be applied as provided in Section 4.11 and Section 3.09. The
Trustee shall deliver an appropriate instrument evidencing such release upon
receipt of a request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 10.06. Any Guarantor not so
released remains liable for the full amount of principal, premium, if any, and
interest on the Securities as provided in this Article 10.
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SECTION 10.07. ADDITIONAL GUARANTORS.
Any Person that was not a Guarantor on the date of this Indenture may
become a Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions (including, without limitation, the representations and
warranties in this Article 10 and Article 11) of this Indenture as a Guarantor
and (b) an Opinion of Counsel to the effect that such supplemental indenture has
been duly authorized and executed by such Person and constitutes the legal,
valid, binding and enforceable obligation of such Person (subject to such
customary exceptions concerning creditors' rights and equitable principles as
may be acceptable to the Trustee in its discretion). The Guarantee of each
Person described in this Section 10.07 shall apply to all Securities theretofore
executed and delivered, notwithstanding any failure of such Securities to
contain a notation of such Guarantee thereon.
SECTION 10.08. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of the
Company or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety, to the Company or another
Guarantor that is a Wholly Owned Restricted Subsidiary of the Company. Upon any
such consolidation, merger, sale or conveyance, the Guarantee given by such
Guarantor shall no longer have any force or effect.
(b) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Guarantor with or into a
corporation or corporations other than the Company or another Guarantor (whether
or not affiliated with the Guarantor), or successive consolidations or mergers
in which a Guarantor or its successor or successors shall be a party or parties,
or shall prevent any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety, to a corporation other than the
Company or another Guarantor (whether or not affiliated with the Guarantor);
PROVIDED, HOWEVER, that, subject to Sections 10.06 and 10.08(a), (x) (i)
immediately after such transaction, and giving effect thereto, no Default or
Event of Default shall have occurred as a result of such transaction and be
continuing, or (ii) such transaction does not violate any covenants set forth in
this Indenture, and (y) (i) the respective transaction is treated as an Asset
Sale for purposes of Section 4.11 and Section 3.09 hereof or (ii) if the
surviving corporation is not the Guarantor, each Guarantor hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance, the
Guarantee set forth in this Article 10, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form to the Trustee of the due and punctual
performance of all of the
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covenants and conditions of this Indenture to be performed by the Guarantor,
such successor corporation shall succeed to, and be substituted for, the
Guarantor with the same effect as if it had been named herein as a Guarantor.
SECTION 10.09. SUCCESSORS AND ASSIGNS.
This Article 10 shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Securityholders and, in the event of any transfer
or assignment of rights by any Securityholder or the Trustee, the rights and
privileges conferred upon that party in this Indenture and in the Securities
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 10.10. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each Guarantor covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive each such Guarantor from
performing its Guarantee as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) each such
Guarantor hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE 11
SECURITY AND PLEDGE OF COLLATERAL
SECTION 11.01. GRANT OF SECURITY INTEREST.
To secure the full and punctual payment when due and the full and
punctual performance of the Guaranteed Obligations, the Company and the
Guarantors (in such capacity, each referred to herein as a "Pledgor" and,
collectively, as the "Pledgors") hereby grant to the Trustee, for the benefit of
the Trustee and the Securityholders, a security interest in all of its rights,
title and interest in and to the following (the "Collateral"):
(i) all of the shares of Capital Stock of any Guarantor, now
owned or hereafter acquired by the Company or any Guarantor
(collectively, the "Pledged Shares");
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(ii) all certificates representing any of the Pledged Shares; and
(iii) subject to Section 11.05 hereof, all dividends, cash,
instruments and other property and proceeds from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any of the foregoing.
SECTION 11.02. DELIVERY OF COLLATERAL.
Any and all certificates or instruments representing or evidencing
Collateral (whether now owned or hereafter acquired by the Company or any
current or future Guarantor) shall be delivered to and held by or on behalf of
the Trustee pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Trustee. The
Trustee shall have the right (but not the obligation), at any time in its
discretion and without notice to the Company or any Guarantor, to transfer to or
to register in the name of the Trustee or any of its nominees any or all of the
Collateral. In addition, the Trustee shall have the right at any time to
exchange certificates or instruments representing or evidencing Collateral for
certificates or instruments of different denominations.
SECTION 11.03. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Each Pledgor hereby represents and warrants, and agrees, as follows:
(i) each such Pledgor is, and at the time of delivery of the
Collateral to the Trustee pursuant hereto will be, the record and
beneficial owner of the Pledged Shares owned by such Pledgor, free and
clear of any Liens, except for the Lien created by this Indenture;
(ii) as of the date of this Indenture, Schedule I hereto contains a
true and correct list of all Pledged Shares, and identifies the respective
Pledgor which is the owner thereof;
(iii) each time the Company or any other Pledgor (including without
limitation any new Guarantor) becomes the owner of any additional Pledged
Shares, same shall be promptly delivered to the Trustee for pledge
hereunder and, at such time, a supplement to Schedule I shall be furnished
which accurately describes the Pledged Shares, the issuer thereof and the
respective Pledgor which is the owner thereof;
(iv) each Pledgor has full corporate power, authority and legal right
to pledge all of the Pledged Shares described on Schedule I and any
supplement thereto
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as being owned by such Pledgor and all Collateral pledged by such Pledgor
pursuant to this Indenture;
(v) this Indenture has been duly authorized, executed and delivered
by each Pledgor and constitutes the legal, valid and binding obligation of
each Pledgor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or other similar
laws affecting the rights of creditors generally or by the application of
general equity principles;
(vi) no consent of any other party (including creditors of any
Pledgor), and no authorization, consent, approval, or other action by, and
no notice to or filing with, any governmental authority or agency by any
Pledgor is required either (x) for the pledge by the Pledgors of the
Collateral pursuant to this Indenture or for the execution, delivery or
performance of this Indenture by the Pledgors or (y) for the exercise by
the Trustee of the voting or other rights provided for in this Indenture or
the remedies in respect of the Collateral pursuant to this Indenture,
except as may be required in connection with the disposition of the
Collateral by laws affecting the offering and sale of securities generally;
(vii) the Pledged Shares described on Schedule I and any supplement
thereto as being owned by the Pledgors have been duly authorized and are
validly issued, fully paid and non-assessable;
(viii) the pledge in accordance with the terms of this Indenture of
the Pledged Shares described on Schedule I and any supplement thereto as
being owned by the various Pledgors creates a valid and perfected first
priority Lien on the Collateral, securing payment of the Guaranteed
Obligations;
(ix) Schedule I hereto and any supplement thereto sets forth a
description of all of the Pledged Shares owned by the Pledgors as of the
date hereof and as of the date of each supplement thereto;
(x) the respective Pledgor (as identified on Schedule I hereto or the
respective supplement thereto) is the sole owner of all of the issued and
outstanding shares of Capital Stock of the Guarantors listed on Schedule I
hereto and any supplement thereto, and there are no existing options,
warrants, calls or commitments of any character relating to any authorized
and unissued Capital Stock of the Guarantors; and
(xi) as of the Issuance Date, the shares of Capital Stock of the
Guarantors listed on Schedule I hereto constitute 100% of the issued and
outstanding Capital Stock of the Guarantors.
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SECTION 11.04. FURTHER ASSURANCES.
Each Pledgor agrees that at any time and from time to time, at the
expense of such Pledgor, such Pledgor will promptly execute and deliver all
further instruments and documents and take all further action that may be
necessary or desirable or that the Trustee may reasonably request in order to
perfect and protect any Lien granted or purported to be granted hereby or to
enable the Trustee to exercise and enforce its rights and remedies hereunder
with respect to any Collateral.
SECTION 11.05. VOTING RIGHTS; DIVIDENDS; ETC.
(a) Each Pledgor shall be entitled to receive and retain any and
all cash dividends paid in respect of the Pledged Shares owned by such
Pledgor, so long as no Event of Default shall have occurred and continuing.
Unless the Trustee receives written notice to the contrary from the Company
or the Holders of 25% in aggregate principal amount of the outstanding
Securities, or unless otherwise notified pursuant to Section 4.04, the
Trustee may assume, without investigation, that the Pledgors shall be
entitled to receive and retain any and all cash dividends.
(b) If an Event of Default shall have occurred and be continuing,
the Trustee shall be entitled to receive and retain as Collateral all
dividends paid and distributions made in respect of the Pledged Shares. Any
such dividends shall, if received by any Pledgor, be received in trust for
the benefit of the Trustee, be segregated from the other property or funds of
such Pledgor, and be forthwith delivered to the Trustee as Collateral in the
same form as so received (with any necessary endorsement).
(c) As long as no acceleration of the Default Amount shall have
occurred pursuant to Section 6.02 and until written notice thereof from the
Trustee or such Holders to the Company, the Pledgors shall be entitled to
exercise any and all voting and other consensual rights relating to the
Pledged Shares owned by the Pledgors or any part thereof for any purpose not
inconsistent with the terms of this Indenture. The Trustee shall execute and
deliver (or cause to be executed and delivered) to the Pledgors all such
proxies and other instruments as the Company may reasonably request for the
purpose of enabling the Pledgors to exercise the voting and other rights
which it is entitled to exercise pursuant to the preceding sentence.
(d) Upon the acceleration of the Default Amount pursuant to Section
6.02, all rights of the Pledgors to exercise the voting and other consensual
rights that it would otherwise be entitled to exercise pursuant to Section
11.05(c) hereof shall cease upon notice from the Trustee or the Holders of
not less than 25% of their outstanding Securities to the Company and upon the
giving of such notice all such rights shall thereupon be vested in the
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Trustee who shall thereupon have the sole right to exercise such voting and
other consensual rights.
(e) In order to permit the Trustee to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
11.05(d) hereof, and to receive all dividends and distributions which it may
be entitled to receive under Section 11.05(b) hereof, the Pledgors shall, if
necessary, upon written notice of the Trustee, from time to time execute and
deliver to the Trustee appropriate dividend payment orders and such other
instruments as the Trustee may reasonably request.
(f) If the Holders of a majority in aggregate principal amount of
the then outstanding Securities rescind a Declaration delivered pursuant to
Section 6.02, the Pledgors shall thereafter be entitled to exercise any and
all voting and consensual rights relating to Pledged Shares owned by the
Pledgors as set forth in subparagraph (c) hereof.
SECTION 11.06. TRUSTEE APPOINTED ATTORNEY-IN-FACT.
Each Pledgor hereby appoints the Trustee as its attorney-in-fact,
with full authority in the place and stead of such Pledgor and in the name of
such Pledgor or otherwise, from time to time in the Trustee's discretion, to
take any action and to execute any instrument which the Trustee may deem
necessary or advisable in order to accomplish the purposes of this Indenture,
including to receive, endorse and collect all instruments made payable to
such Pledgor representing any dividend, interest payment or other
distribution in respect of the Collateral or any part thereof and to give
full discharge for the same. This power, being coupled with an interest, is
irrevocable.
SECTION 11.07. TRUSTEE MAY PERFORM.
If any Pledgor fails to perform any agreement contained herein, the
Trustee may itself perform, or cause performance of, such agreement, and the
expenses of the Trustee incurred in connection therewith shall be payable by
the Pledgors under Section 7.07. Whenever in the administration of its
responsibilities with respect to the Collateral the Trustee shall deem it
necessary or desirable that a matter be proved or established by any Pledgor
or any other party in connection with the taking, suffering or omitting any
action by the Trustee, such matter may be conclusively proved or established
by an Officers' Certificate of any Pledgor, and such certificate shall be
full warranty to the Trustee for any action taken suffered or omitted in
reliance thereon.
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SECTION 11.08. TRUSTEE'S DUTIES.
The powers conferred on the Trustee under this Article 11 are solely
to protect the interest of the Trustee and the Securityholders in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Trustee shall
have no duty as to any Collateral or as to the taking of any necessary steps
to preserve rights against prior parties or any other rights pertaining to
any Collateral, including, without limitation, for the attachment, petition,
priority or enforceability of any Lien created or purported to be created
hereunder with respect to the Collateral, or the adequacy, sufficiency or
effectiveness of Section 11.01 hereof, or the value of the Collateral granted
pursuant to that Section.
SECTION 11.09. REMEDIES UPON EVENT OF DEFAULT.
(a) If any Event of Default shall have occurred and be continuing,
the Trustee may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies provided a secured party upon the default of a debtor
under the Uniform Commercial Code at that time, and the Trustee may also,
without notice except as specified below or required by law, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker's board or at any of the Trustee's offices or
elsewhere, for cash, on credit or for future delivery, upon such terms as the
Trustee may determine to be commercially reasonable, and the Trustee or any
Securityholder may be the purchaser of any or all of the Collateral so sold
and thereafter hold the same, absolutely, free from any right or claim of
whatsoever kind. Each Pledgor agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to such Pledgor of the
time and place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification. The Trustee shall not
be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Trustee may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned. The Trustee shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale. Each
Pledgor hereby waives any claims against the Trustee arising by reason of the
fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a
public sale, even if the Trustee accepts the first offer received and does
not offer such Collateral to more than one offeree.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things,
to acquire such securities for their own account, for investment,
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<PAGE>
and not with a view to the distribution or resale thereof. Each Pledgor
acknowledges and agrees that any such sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale
without such restrictions and, notwithstanding such circumstances, agrees
that any such sale shall be deemed to have been made in a commercially
reasonable manner. The Trustee shall be under no obligation to delay the
sale of any of the Pledged Shares for the period of time necessary to permit
the respective Pledgor to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if such
Pledgor would agree to do so.
SECTION 11.10. APPLICATION OF PROCEEDS.
Any cash held by the Trustee as Collateral and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral, shall be applied by the
Trustee in the manner specified in Section 6.10 hereof.
SECTION 11.11. PLEDGORS' OBLIGATIONS ABSOLUTE.
The obligations of each Pledgor under this Indenture shall be
absolute and unconditional and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by:
(i) any renewal, extension, amendment or modification of or addition
or supplement to or deletion from this Indenture;
(ii) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of this Indenture;
(iii) any furnishing of any additional security to the Trustee or
its assignee or any acceptance thereof or any release of any security by
the Trustee or its assignee; or
(iv) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to
any Pledgor or any Subsidiary of any Pledgor, or any action taken with
respect to this Indenture by any trustee or receiver, or by any court, in
any such proceeding, whether or not any Pledgor shall have notice or
knowledge of any of the foregoing.
SECTION 11.12. CONTINUING LIEN.
This Indenture shall create a continuing Lien on the Collateral that
shall (i) remain in full force and effect until payment in full of the
Securities or earlier defeasance
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pursuant to Article 8 hereof, (ii) be binding upon the Pledgor and its
successors and assigns and (iii) inure to the benefit of the Trustee and its
successors, transferees and assigns. Upon satisfaction by the Company of the
conditions set forth in Article 8 hereof to its legal defeasance option or
its covenant defeasance option, the Trustee shall upon request of the Pledgor
return the Collateral to the Pledgor, and, in accordance with the provisions
of Section 11.13, shall acknowledge in writing the discharge of the Lien on
the Collateral created by this Article 11.
SECTION 11.13. SPECIFIED RELEASES OF COLLATERAL; PLEDGORS.
(a) The Company and the Guarantors shall be entitled to obtain a
full release of all of the Collateral from the pledge provided for in Section
11.01 upon compliance with the conditions precedent set forth in Section
8.01(a) for satisfaction and discharge of this Indenture or for legal or
covenant defeasance pursuant to Section 8.01(b). Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel,
each to the effect that such conditions precedent have been complied with
(and which may be the same Officers' Certificate and Opinion of Counsel
required by Article Eight), the Trustee shall forthwith take all necessary
action (at the request of and the expense of the Company) to release and
reconvey to the Company and the Guarantors all of the Collateral, and shall
deliver such Collateral in its possession to the Company and the Guarantors
including, without limitation, the execution and delivery of releases and
satisfactions wherever required.
(b) In the event that all of the capital stock of a Guarantor owned
by the Company and/or any of its Subsidiaries is sold or otherwise
transferred by the Company and/or any of its Subsidiaries to a Person or
Persons other than the Company and/or any of its Subsidiaries in a
transaction which is in compliance with all applicable provisions of this
Indenture (and which results in a release of the respective Guarantor
pursuant to Section 10.06), such Guarantor shall also cease to be a Pledgor
hereunder and the Company shall be entitled to obtain a release of the
capital stock of such Guarantor, and any Collateral at such time held by the
Trustee and owned by such Guarantor, from the pledge provided for in Section
11.01 upon delivery by the Company to the Trustee of (i) an Officers'
Certificate and, in the case of following clause (C) only, an Opinion of
Counsel stating that (A) no Default or Event of Default has occurred and is
continuing, (B) all obligations of such Guarantor under all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, Indebtedness of the Company and the other Guarantors shall also
terminate upon such release and (C) the release of such Equity Interests or
other Collateral complies with the provisions of this Indenture and the TIA
and (ii) all certificates, opinions and other documentation required by the
TIA. If a release pursuant to this Section 11.13(b) is made in connection
with an Asset Sale, the Net Proceeds from such Asset Sale shall be applied as
set forth in, and to the extent required by, Section 4.11.
SECTION 11.14. CERTIFICATES AND OPINIONS.
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The Pledgor shall comply with (a) TIA Section 314(b), relating to
Opinions of Counsel regarding the Lien of this Indenture, and (b) TIA Section
314(d), relating to the release of Collateral from the Lien of this Indenture
and Officers' Certificates or other documents regarding fair value of the
Collateral, to the extent such provisions are applicable. Any certificate or
opinion required by TIA Section 314(d) may be executed and delivered by an
Officer of the Pledgor to the extent permitted by TIA Section 314(d).
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by
the TIA, the required provision shall control.
SECTION 12.02. NOTICES.
(a) Any notice or communication by the Company, any Guarantor or
the Trustee to the other is duly given if in writing and delivered in person
or mailed by first class mail (registered or certified, return receipt
requested), confirmed facsimile transmission or overnight air courier
guaranteeing next day delivery, to the other's address:
If to the Company or any of the Guarantors:
Spinnaker Industries, Inc.
600 N. Pearl St., Suite #2160
Dallas, TX 75201
Attention: Chief Financial Officer
If to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trustee Administration Department
(b) The Company or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications.
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(c) All notices and communications (other than those sent to
Securityholders) shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged,
if by facsimile transmission; and the next Business Day after timely delivery
to the courier, if sent by overnight air courier guaranteeing next day
delivery.
(d) Any notice or communication to a Securityholder shall be mailed
by first class mail, postage prepaid, to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed
to any Person described in TIA Section 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders.
(e) If a notice or communication is mailed to any Person in the
manner provided above within the time prescribed, it is duly given, whether
or not the addressee receives it.
(f) If the Company mails a notice or communication to
Securityholders, it shall mail a copy to the Trustee and each Agent at the
same time.
SECTION 12.03. COMMUNICATION BY SECURITYHOLDERS WITH OTHER
SECURITYHOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Guarantors, the Trustee, the Registrar and
anyone else shall have the protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company and/or any of the
Guarantors to the Trustee to take any action under this Indenture, the
Company and/or any of the Guarantors, as the case may be, shall furnish to
the Trustee:
(i) an Officer's Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied (except with regard to
an authentication order pursuant to Section 2.02(c) hereof, which shall
require a certificate of two Officers); and
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(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall include:
(i) a statement that the person making such certificate or opinion
has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(iv) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Securityholders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York City, or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
88
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SECTION 12.08. NO RECOURSE AGAINST OTHERS.
No past, present or future director, officer, employee, agent,
manager, stockholder or partner of the Company or its predecessors shall have
any liability for any Obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of, or by reason of such
Obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. This waiver and release are part of
the consideration for issuance of the Securities.
SECTION 12.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 12.10. GOVERNING LAW.
This Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.
SECTION 12.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of any of the Guarantors, the Company or their respective
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.12. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture
and the Securities shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 12.13. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
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SECTION 12.14. COUNTERPART ORIGINALS.
This Indenture may be executed in any number of counterparts, each
of which so executed shall be an original, but all of them together represent
the same agreement.
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
SIGNATURES
SPINNAKER INDUSTRIES, INC.
Witness: By /s/ RICHARD J. BOYLE
--------------------------
Name: Richard J. Boyle
Title: Chief Executive Officer and
Chairman of the Board
/s/ TIMOTHY R. VAUGHAN
- --------------------------
Name: Timothy R. Vaughan
Title: Assistant Secretary
CENTRAL PRODUCTS COMPANY
Witness: By /s/ NED N. FLEMING, III
--------------------------
Name: Ned N. Fleming, III
Title: Chief Operating Officer
/s/ TIMOTHY R. VAUGHAN
- --------------------------
Name: Timothy R. Vaughan
Title: Assistant Secretary
BROWN-BRIDGE INDUSTRIES, INC.
Witness: By /s/ NED N. FLEMING, III
--------------------------
Name: Ned N. Fleming, III
Title: Vice President
/s/ TIMOTHY R. VAUGHAN
- --------------------------
Name: Timothy R. Vaughan
Title: Assistant Secretary
91
<PAGE>
ENTOLETER, INC.
Witness: By /s/ MARK R. MATTESON
---------------------------
Name: Mark R. Matteson
Title: Vice President
/s/ JAMES W. TOMAN
- --------------------------
Name: James W. Toman
Title: Assistant Secretary
THE CHASE MANHATTAN BANK,
as Trustee
Witness: By /s/ ANDREW M. DEAK
---------------------------
Name: Andrew M. Deak
Title: Senior Trust Officer
/s/ MICHAEL A. SMITH
- --------------------------
Name: Michael A. Smith
Title: Vice President
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SCHEDULE I
----------
PLEDGED SHARES
Description Registered Owner
of Shares Issuer (and Pledgor)
----------- ------ ----------------
79,000 shares Central Products Company Spinnaker Industries, Inc.
of Common Stock
1,000 shares Brown-Bridge Industries, Inc. Spinnaker Industries, Inc.
of Common Stock
1,000 shares Entoleter, Inc. Spinnaker Industries, Inc.
of Common Stock
<PAGE>
EXHIBIT A
---------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE SECURITYHOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) or (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER FURNISHES (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE
A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3)
<PAGE>
EXHIBIT A
Page 2
AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS
AN ACCREDITED INVESTOR, THE SECURITYHOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION" "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR SECURITIES IN DEFINITIVE FORM, THIS
SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF
SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE &
CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE.
<PAGE>
EXHIBIT A
Page 3
UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE>
EXHIBIT A
Page 4
CUSIP No:
(Front of Security)
No. 1 $___________
SPINNAKER INDUSTRIES, INC.
10 3/4% Senior Secured Note due 2006, Series A
SPINNAKER INDUSTRIES, INC., a Delaware corporation promises to pay to Cede &
Co., as nominee of the Depository Trust Company, or its registered assigns,
the principal sum of $115,000,000 on October 15, 2006.
Interest Payment Dates: April 15 and October 15, commencing April 15, 1997.
Record Dates: April 1 and October 1 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of
this Security.
Dated:
SPINNAKER INDUSTRIES, INC.
By: ________________________
By: ________________________
(SEAL)
This is one of the Securities referred
to in the within-mentioned Indenture
THE CHASE MANHATTAN BANK, as Trustee
By:_________________________________
Authorized Officer
<PAGE>
EXHIBIT A
Page 5
(Reverse of Security)
10 3/4% SENIOR SECURED NOTE DUE 2006, SERIES A
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. INTEREST. Spinnaker Industries, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate and in the manner specified below. The Company shall
pay, in cash, interest on the principal amount of this Security at the rate
per annum of 10 3/4%. The Company will pay interest semiannually in arrears
on April 15 and October 15 of each year (each an "Interest Payment Date"),
commencing April 15, 1997, or if any such day is not a Business Day on the
next succeeding Business Day. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Interest shall accrue from
the most recent Interest Payment Date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of the
Securities. To the extent lawful, the Company shall pay interest on overdue
principal at the rate of 2% per annum in excess of the then applicable
interest rate on the Securities; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at
the same rate to the extent lawful. The rate of interest payable on this
Security shall be subject to the assessment of additional interest (the
"Additional Interest") as follows:
(i) if the Exchange Offer Registration Statement (as defined
below) or Shelf Registration Statement (as defined below) is not filed within
90 days following the Issuance Date, Additional Interest shall accrue on the
Securities over and above the stated interest at a rate of 0.50% per annum
for the first 90 days commencing on the 91st day after the Issuance Date,
such Additional Interest rate increasing by an additional 0.50% per annum at
the beginning of each subsequent 90-day period;
(ii) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within 180 days following
the Issuance Date, Additional Interest shall accrue on the Securities over
and above the stated interest at a rate of 0.50% per annum for the first 90
days commencing on the 181st day after the Issuance Date, such Additional
Interest rate increasing by an additional 0.50% per annum at the beginning of
each subsequent 90-day period; or
(iii) if (A) the Company and the Guarantors have not exchanged all
Securities validly tendered in accordance with the terms of the Exchange
Offer on or prior to 225 days after the Issuance Date or (B) the Exchange
Offer Registration Statement ceases to be effective at any time prior to the
time that the Exchange Offer is consummated or (C) if
<PAGE>
EXHIBIT A
Page 6
applicable, the Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective at any time prior to
the third anniversary of the Issuance Date (unless all the Securities have
been sold thereunder), then Additional Interest shall accrue on the
Securities over and above the stated interest at a rate of 0.50% per annum
for the first 90 days commencing on (x) the 226th day after the Issuance Date
with respect to the Securities validly tendered and not exchanged by the
Company, in the case of (A) above, or (y) the day the Exchange Offer
Registration Statement ceases to be effective or usable for its intended
purpose in the case of (B) above, or (z) the day such Shelf Registration
Statement ceases to be effective in the case of (C) above, such Additional
Interest rate increasing by an additional 0.50% per annum at the beginning of
each subsequent 90-day period; PROVIDED, HOWEVER, that the Additional
Interest rate on the Securities may not exceed in the aggregate 2.0% per
annum; and PROVIDED FURTHER, that (1) upon the filing of the Exchange Offer
Registration Statement or Shelf Registration Statement (in the case of clause
(i) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or Shelf Registration Statement (in the case of (ii) above), or
(3) upon the exchange of Exchange Securities for all Securities tendered (in
the case of clause (iii)(A) above), or upon the effectiveness of the Exchange
Offer Registration Statement which had ceased to remain effective in the case
of clause (iii)(B) above, or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause
(iii)(C) above), Additional Interest on the Securities as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
"EXCHANGE OFFER" shall mean the exchange offer by the Company of
Initial Securities for Exchange Securities pursuant to Section 2(a) of the
Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Offering Memorandum or prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"RECORD DATE" shall have the meaning provided on the front of
this Security.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company and the Guarantors pursuant to the provisions of the
Registration Rights Agreement which covers all of the Initial Securities on
an appropriate form under Rule 415 under the Securities Act, or any similar
rule that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Offering Memorandum contained therein,
all exhibits thereto and all material incorporated by reference therein.
<PAGE>
EXHIBIT A
Page 7
2. METHOD OF PAYMENT. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered
Holders of Securities at the close of business on the Record Date immediately
preceding the Interest Payment Date, even if such Securities are cancelled
after such Record Date and on or before such Interest Payment Date.
Securityholders must surrender Securities to a Paying Agent to collect
principal payments. The Company shall pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal, premium, if any, and interest by its
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Securityholder at the
Securityholder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without prior notice to any Securityholder. The
Company or any Guarantor of the Company may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an
Indenture, dated as of October 23, 1996 (the "Indenture"), among the Company,
the Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the TIA as in effect on the date the Indenture is qualified. The Securities
are subject to all such terms, and Securityholders are referred to the
Indenture and the TIA for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the
Securities. The Securities are senior secured Obligations of the Company
limited to $115,000,000 in aggregate principal amount.
5. (a) OPTIONAL REDEMPTION. Except as indicated in the next
succeeding paragraph, the Securities are not redeemable at the Company's
option prior to October 15, 2001. Thereafter, the Securities will be
redeemable, at the option of the Company, in whole or in part, at the
redemption prices (expressed as percentages of the principal amount of the
Securities) set forth below, plus accrued interest to the redemption date:
ANNUAL PERIOD BEGINNING REDEMPTION PRICE
----------------------- ----------------
2001 . . . . . . . . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . . . . . . . . 104.031
2003 . . . . . . . . . . . . . . . . . . . . 102.688
2004 . . . . . . . . . . . . . . . . . . . . 101.344
2005 and thereafter. . . . . . . . . . . . . 100.000
<PAGE>
EXHIBIT A
Page 8
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any
time, or from time to time, on or prior to October 15, 1999, the Company may,
at its option, use the net cash proceeds of one or more Public Equity
Offerings to redeem up to 33 1/3% of the aggregate principal amount of
Securities originally issued at a redemption price equal to 110.750% of the
principal amount thereof, plus, in each case, accrued and unpaid interest to
the date of redemption; provided that at least 66 2/3% of the aggregate
principal amount of Securities originally issued remains outstanding after
any such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 120 days after the consummation of any such Public
Equity Offering.
6. MANDATORY REDEMPTION. The Securities are not subject to
mandatory redemption or sinking fund payments.
7. REPURCHASE AT OPTION OF SECURITYHOLDER. (a) If there is a
Change of Control, each Holder of Securities will have the right to require
the Company to repurchase all or any part of such Holder's Securities at a
repurchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase (subject to the right
of Holders of record on the relevant record date to receive interest due on
the relevant Interest Payment Date). Within 30 days following any Change of
Control, the Company will mail a notice to each Securityholder stating (i)
that a Change of Control has occurred and that such Securityholder has the
right to require the Company to repurchase all or any part of such
Securityholder's Securities at a repurchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date);
(ii) the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which will be no earlier then 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions, determined
by the Company consistent with the Indenture, that a Securityholder must
follow in order to have its Securities repurchased. Securityholders that are
subject to an offer to repurchase may elect to have such Securities
repurchased by completing the form entitled "Option of Securityholder to
Elect Purchase" appearing below.
(b) If the Company or a Subsidiary consummates any Asset Sale, and
when the aggregate amount of Excess Proceeds from such an Asset Sale exceeds
$5 million, the Company shall be required to offer to purchase the maximum
principal amount of Securities, that is in an integral multiple of $1,000,
that may be purchased out of the Excess Proceeds at 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date fixed
for the closing of such offer in accordance with the procedures set forth in
the
<PAGE>
EXHIBIT A
Page 9
Indenture. If the aggregate principal amount of Securities surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Securities to be
redeemed shall be selected on a PRO RATA basis. Securityholders that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such
Securities purchased by completing the form entitled "Option of
Securityholder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Securities are to be redeemed at its registered address.
Securities may be redeemed in part but only in whole multiples of $1,000,
unless all of the Securities held by a Securityholder are to be redeemed. On
and after the redemption date, interest ceases to accrue on Securities or
portions of them called for redemption.
9. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement, and subject to certain terms and conditions stated therein, the
Company will be obligated to consummate an Exchange Offer pursuant to which
the Holders of the Initial Securities shall have the right to exchange this
Security for Exchange Securities, which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respect to the Initial Security.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Securityholder among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Security or portion of a Security
selected for redemption. Also, it need not exchange or register the transfer
of any Securities during a period beginning at the opening of business on a
Business Day 15 days before the day of any selection of Securities to be
redeemed and ending at the close of business on the day of selection or
during the period between a Record Date and the corresponding Interest
Payment Date.
11. PERSONS DEEMED OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this
Security is registered as its absolute owner for the purpose of receiving
payment of principal of, premium, if any, and interest on this Security and
for all other purposes whatsoever, whether or not this Security is overdue,
and neither the Trustee, any Agent nor the Company shall be affected by
notice to the contrary. The registered Securityholder shall be treated as its
owner for all purposes.
<PAGE>
EXHIBIT A
Page 10
12. AMENDMENTS AND WAIVERS. Subject to certain exceptions provided
in the Indenture, the Indenture or the Securities may be amended with the
consent of the Holders of a majority in principal amount of the then outstanding
Securities, and any existing Default or Event of Default (except a payment
default) may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of any
Securityholder the Indenture or the Securities may be amended to, among other
things, cure any ambiguity, defect or inconsistency, to comply with the
requirements of the Commission in order to effect or maintain qualification of
the Indenture under the TIA or to make any change that does not adversely affect
the rights of any Securityholder.
13. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Securities may declare the unpaid principal of, and any
accrued and unpaid interest on, all the Securities to be due and payable
immediately; PROVIDED, that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company or any
Guarantor, all outstanding Securities shall become due and payable
immediately without further action or notice. Securityholders may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Securities may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Securityholders notice of any continuing default (except a default in
payment of principal or interest) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
14. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee under the
Indenture, in its individual or any other capacity may make loans to, accept
deposits from, and perform services for the Company, the Guarantors or any
Affiliate of the Company or the Guarantors, and may otherwise deal with the
Company, the Guarantors and their respective Affiliates as if it were not
Trustee.
15. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
<PAGE>
EXHIBIT A
Page 11
16. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. GUARANTEE; SECURITY. Each Guarantor has jointly and severally
irrevocably and unconditionally guaranteed the payment of principal, premium, if
any, and interest (including interest on overdue principal and overdue interest,
if lawful) on the Securities; PROVIDED, HOWEVER, each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a PRO RATA amount based on the Adjusted Net Assets
of each Guarantor. Pursuant to the Indenture, the Company will assign and
pledge to the Trustee, for its benefit and the benefit of the Securityholders, a
security interest in 100% of the issued and outstanding Capital Stock of each
Guarantor and certain proceeds from time to time received, receivable or
otherwise distributed in respect thereof (the "Collateral"). The Company and
each Guarantor will also agree to assign and pledge to the Trustee as part of
the Collateral all shares of Capital Stock of each Guarantor at any time
acquired by the Company or any Guarantor. The security interest in the
Collateral will be a first priority security interest. However, absent any
acceleration notice or bankruptcy default, the Company will be able to vote, as
it sees fit in its sole discretion, the Capital Stock of each Guarantor.
18. DEFEASANCE. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
19. GOVERNING LAW. The Laws of the State of New York shall govern
this Security and the Indenture, without regard to principles of conflict of
laws.
20. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
<PAGE>
EXHIBIT A
Page 12
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
Spinnaker Industries, Inc.
600 N. Pearl Street
Suite 2160
Dallas, TX 75201
Attention: Chief Financial Officer
<PAGE>
EXHIBIT A
Page 13
FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE
GUARANTEE
The Guarantors (as defined in the Indenture (the "Indenture") referred
to in the Security upon which this notation is endorsed and each hereinafter
referred to as a "Guarantor," which term includes any successor Person under the
Indenture) (i) have jointly and severally irrevocably and unconditionally
guaranteed as a primary obligor and not a surety (such guarantee by each
Guarantor being referred to herein as the "Guarantee"), (a) the due and punctual
payment of the principal, premium, if any, and interest on the Securities,
whether at stated maturity or interest payment date, by acceleration, call for
redemption or otherwise, (b) the due and punctual payment of interest on the
overdue principal of and interest, if any, on the Securities, to the extent
lawful, (c) the due and punctual performance of all other monetary Obligations
of the Company under the Indenture and the Securities to the Securityholders or
the Trustee, all in accordance with the terms set forth in Article 10 of the
Indenture and (d) in case of any extension of time of payment or renewal of any
Securities or any such Obligations, the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity by acceleration or otherwise and (ii) have agreed to
pay any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Securityholder in enforcing any rights under this
Guarantee.
The Obligations of each Guarantor to the Securityholders of Securities
and to the Trustee pursuant to this Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of any Guarantor shall have any liability under this Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
This is a continuing Guarantee and, except as otherwise expressly
provided for in Section 10.06 of the Indenture, shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of the Company's Obligations under the
Securities and the Indenture and shall inure to the benefit of the successors
and assigns of the Trustee and the Securityholders and, in the event of any
transfer or assignment of rights by any Securityholder or the Trustee, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. This is a Guarantee of payment and not of
collectibility.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
<PAGE>
EXHIBIT A
Page 14
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Guarantors:
CENTRAL PRODUCTS COMPANY
By
----------------------------------
Name:
Title:
BROWN-BRIDGE INDUSTRIES, INC.
By
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Page 15
ENTOLETER, INC.
By
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Page 16
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- ---------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------
<PAGE>
EXHIBIT A
Page 17
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:______________
Your Signature:
---------------------------------------
(Sign exactly as your name appears on the face of this
Security)
Signature Guarantee:
- ---------------------------------------
(Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements will
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Registrar
in addition to, or in substitution
for, STAMP, all in accordance with
the Securities Exchange Act of 1934,
as amended.)
<PAGE>
EXHIBIT A
Page 18
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resales of this Security
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) October 22, 1999, the undersigned confirms that it has
not utilized any general solicitation or general advertising in connection with
the transfer and that this Security is being transferred:
CHECK ONE
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) ___ outside the United States to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act; or
(5) ___ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) ___ pursuant to an effective registration statement under the
Securities Act; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered Securityholder thereof; PROVIDED that if box (3), (4), (5)
or (7) is checked, the Company or the Trustee may require, prior to registering
any such transfer of the Securities, in its sole discretion, such legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. If none of the foregoing boxes is checked, the Trustee or
Registrar shall not be obligated to register this Security in the name of any
person other than the Securityholder hereof unless and until the conditions
<PAGE>
EXHIBIT A
Page 19
to any such transfer of registration set forth herein and in Section 2.17 of
the Indenture shall have been satisfied.
Dated:__________________________ Signed:_________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:_______________________ _____________________________________
NOTICE: To be executed by an
executive officer
<PAGE>
EXHIBIT A
Page 20
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.11 or Section 4.15 of the
Indenture check the appropriate box:
/ / Section 4.11 / / Section 4.15
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.11 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$______________________
Date:_________________
Your Signature: ______________________________________
(Sign exactly as your name appears on the face of this
Security)
Signature Guarantee:
____________________________________
(Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements will
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Registrar
in addition to, or in substitution
for, STAMP, all in accordance with
the Securities Exchange Act of 1934,
as amended.)
<PAGE>
EXHIBIT B
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE.
<PAGE>
EXHIBIT B
Page 2
CUSIP No:
(Front of Security)
No. 1 $___________
SPINNAKER INDUSTRIES, INC.
10 3/4% Senior Secured Note due 2006, Series B
SPINNAKER INDUSTRIES, INC., a Delaware corporation, promises to pay to Cede &
Co., as nominee of the Depository Trust Company, or its registered assigns, the
principal sum of $115,000,000 on October 15, 2006.
Interest Payment Dates: April 15 and October 15, commencing April 15, 1997.
Record Dates: April 1 and October 1 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
SPINNAKER INDUSTRIES, INC.
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
(SEAL)
This is one of the Securities referred
to in the within-mentioned Indenture
THE CHASE MANHATTAN BANK, as Trustee
By:
-------------------------------
Authorized Officer
<PAGE>
EXHIBIT B
Page 3
(Reverse of Security)
10 3/4% SENIOR SECURED NOTE DUE 2006, SERIES B
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. INTEREST. Spinnaker Industries, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate and in the manner specified below. The Company shall
pay, in cash, interest on the principal amount of this Security at the rate
per annum of 10 3/4%. The Company will pay interest semiannually in arrears
on April 15 and October 15 of each year (each an "Interest Payment Date"),
commencing April 15, 1997, or if any such day is not a Business Day on the
next succeeding Business Day. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Interest shall accrue from
the most recent Interest Payment Date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of the
Securities. To the extent lawful, the Company shall pay interest on overdue
principal at the rate of 2% per annum in excess of the then applicable
interest rate on the Securities; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at
the same rate to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered
Securityholders at the close of business on the Record Date immediately
preceding the Interest Payment Date, even if such Securities are cancelled
after such Record Date and on or before such Interest Payment Date.
Securityholders must surrender Securities to a Paying Agent to collect
principal payments. The Company shall pay principal premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by its check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Securityholder at the Securityholder's registered
address.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without prior notice to any Securityholder. The
Company, or any Guarantor of the Company may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an
Indenture, dated as of October 23, 1996 (the "Indenture"), among the Company,
the Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part
<PAGE>
EXHIBIT B
Page 4
of the Indenture by reference to the TIA as in effect on the date the
Indenture is qualified. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms. The terms of the Indenture shall govern any inconsistencies
between the Indenture and the Securities. The Securities are senior secured
Obligations of the Company limited to $115,000,000 in aggregate principal
amount.
5. (a) OPTIONAL REDEMPTION. Except as indicated in the next
succeeding paragraph, the Securities are not redeemable at the Company's
option prior to October 15, 2001. Thereafter, the Securities will be
redeemable, at the option of the Company, in whole or in part, at the
redemption prices (expressed as percentages of the principal amount of the
Securities) set forth below, plus accrued interest to the redemption date:
ANNUAL PERIOD BEGINNING
REDEMPTION PRICE
----------------
2001 105.375%
2002 104.031
2003 102.688
2004 101.344
2005 and thereafter 100.000
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any time,
or from time to time, on or prior to October 15, 1999, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings
to redeem up to 33 1/3% of the aggregate principal amount of Securities
originally issued at a redemption price equal to 110.750% of the principal
amount thereof, plus, in each case, accrued and unpaid interest to the date
of redemption; provided that at least 66 2/3% of the aggregate principal
amount of Securities originally issued remains outstanding after any such
redemption. In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering.
6. MANDATORY REDEMPTION. The Securities are not subject to
mandatory redemption or sinking fund payments.
7. REPURCHASE AT OPTION OF SECURITYHOLDER. (a) If there is a
Change of Control, each Holder of Securities will have the right to require
the Company to repurchase all or any part of such Holder's Securities at a
repurchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase (subject to the right
of Holders of record on the relevant Record Date to receive interest due
<PAGE>
EXHIBIT B
Page 5
on the relevant Interest Payment Date). Within 30 days following any Change
of Control, the Company will mail a notice to each Securityholder stating (i)
that a Change of Control has occurred and that such Securityholder has the
right to require the Company to repurchase all or any part of such
Securityholder's Securities at a repurchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date);
(ii) the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which will be no earlier then 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions, determined
by the Company consistent with the Indenture, that a Securityholder must
follow in order to have its Securities repurchased. Securityholders that are
subject to an offer to repurchase may elect to have such Securities
repurchased by completing the form entitled "Option of Securityholder to
Elect Purchase" appearing below.
(b) If the Company or a Subsidiary consummates any Asset Sale, and
when the aggregate amount of Excess Proceeds from such an Asset Sale exceeds
$5 million, the Company shall be required to offer to purchase the maximum
principal amount of Securities, that is in an integral multiple of $1,000,
that may be purchased out of the Excess Proceeds, at an offer price in cash
in an amount equal to 100% of the outstanding principal amount thereof, plus
accrued and unpaid interest, if any, to the date fixed for the closing of
such offer in accordance with the procedures set forth in the Indenture. If
the aggregate principal amount of Securities surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Securities to be redeemed shall be
selected on a PRO RATA basis. Securityholders that are the subject of an
offer to purchase will receive an Asset Sale Offer from the Company prior to
any related purchase date and may elect to have such Securities purchased by
completing the form entitled "Option of Securityholder to Elect Purchase"
appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Securities are to be redeemed at its registered address.
Securities may be redeemed in part but only in whole multiples of $1,000,
unless all of the Securities held by a Securityholder are to be redeemed. On
and after the redemption date, interest ceases to accrue on Securities or
portions of them called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Securityholder among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
<PAGE>
EXHIBIT B
Page 6
required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Security or portion of a Security
selected for redemption. Also, it need not exchange or register the transfer
of any Securities during a period beginning on the opening of business on a
Business Day 15 days before the day of any selection of Securities to be
redeemed and ending on the close of business on the day of selection or
during the period between a Record Date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee
for registration of the transfer of this Security, the Trustee, any Agent and
the Company may deem and treat the Person in whose name this Security is
registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all
other purposes whatsoever, whether or not this Security is overdue, and
neither the Trustee, any Agent nor the Company shall be affected by notice to
the contrary. The registered Securityholder shall be treated as its owner for
all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions provided
in the Indenture, the Indenture or the Securities may be amended with the
consent of the Holders of a majority in principal amount of the then
outstanding Securities, and any existing default or Event of Default (except
a payment default) may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Securities. Without the
consent of any Securityholder the Indenture or the Securities may be amended
to, among other things, cure any ambiguity, defect or inconsistency, to
comply with the requirements of the Commission in order to effect or maintain
qualification of the Indenture under the TIA Securityholders or to make any
change that does not adversely affect the rights of any Securityholder.
12. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Securities may declare the unpaid principal of, and any
accrued and unpaid interest on, all the Securities to be due and payable
immediately; PROVIDED, that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company or any
Guarantor, all outstanding Securities shall become due and payable
immediately without further action or notice. Securityholders may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Securities may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Securityholders notice of any continuing default (except a default in
payment of principal or interest) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
<PAGE>
EXHIBIT B
Page 7
13. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee under the
Indenture, in its individual or any other capacity may make loans to, accept
deposits from, and perform services for the Company, the Guarantor or any
Affiliate of the Company or the Guarantor, and may otherwise deal with the
Company, the Guarantor and their respective Affiliates as if it were not
Trustee.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect
of its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its assets or adopt a plan of liquidation. Such limitations are subject to a
number of important qualifications and exceptions provided for in the
Indenture. The Company must annually report to the Trustee on compliance
with such limitations.
15. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. GUARANTEE; SECURITY. Each Guarantor has jointly and severally
irrevocably and unconditionally guaranteed the payment of principal, premium,
if any, and interest (including interest on overdue principal and overdue
interest, if lawful) on the Securities; PROVIDED, HOWEVER, each Guarantor
that makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a PRO RATA amount based on the
Adjusted Net Assets of each Guarantor. Pursuant to the Indenture, the
Company will assign and pledge to the Trustee, for its benefit and the
benefit of the Securityholders, a security interest in 100% of the issued and
outstanding Capital Stock of the Guarantor and certain proceeds from time to
time received, receivable or otherwise distributed in respect thereof (the
"Collateral"). The Company and each Guarantor will also agree to assign and
pledge to the Trustee as part of the Collateral all shares of Capital Stock
of each Guarantor at any time acquired by the Company or any Guarantor. The
security interest in the Collateral will be a first priority security
interest. However, absent any acceleration notice or bankruptcy default, the
Company will be able to vote, as it sees fit in its sole discretion, the
Capital Stock of each Guarantor.
17. DEFEASANCE. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its
obligations under the Securities and the Indenture if the Company deposits
with the Trustee money or U.S. Government Obligations for the payment of
principal, premium (if any) and interest on the Securities to redemption or
maturity, as the case may be.
<PAGE>
EXHIBIT B
Page 8
18. GOVERNING LAW. The Laws of the State of New York shall govern
this Security and the Indenture, without regard to principles of conflict of
laws.
19. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of
redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
Spinnaker Industries Inc.
600 N. Pearl Street
Suite 2160
Dallas, TX 75201
Attention: Chief Financial Officer
<PAGE>
EXHIBIT B
Page 9
FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE
GUARANTEE
The Guarantors (as defined in the Indenture (the "Indenture") referred
to in the Security upon which this notation is endorsed and each hereinafter
referred to as a "Guarantor," which term includes any successor person under the
Indenture) (i) have jointly and severally irrevocably and unconditionally
guaranteed as a primary obligor and not a surety, (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (a) the due and punctual
payment of the principal, premium, if any, and interest on the Securities,
whether at stated maturity or interest payment date, by acceleration, call for
redemption or otherwise, (b) the due and punctual payment of interest on the
overdue principal of and interest, if any, on the Securities, to the extent
lawful, (c) the due and punctual performance of all other monetary Obligations
of the Company under the Indenture and the Securities to the Securityholders or
the Trustee, all in accordance with the terms set forth in Article 10 of the
Indenture and (d) in case of any extension of time of payment or renewal of any
Securities or any such Obligations, the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity by acceleration or otherwise and (ii) have agreed to
pay any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Securityholder in enforcing any rights under this
Guarantee.
The Obligations of each Guarantor to the Securityholders of Securities
and to the Trustee pursuant to this Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of any Guarantor shall have any liability under this Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
This is a continuing Guarantee and, except as otherwise expressly
provided for in Section 10.06 of the Indenture, shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of the Company's Obligations under the
Securities and the Indenture and shall inure to the benefit of the successors
and assigns of the Trustee and the Securityholders and, in the event of any
transfer or assignment of rights by any Securityholder or the Trustee, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. This is a Guarantee of payment and not of
collectibility.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
<PAGE>
EXHIBIT B
Page 10
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Guarantors:
CENTRAL PRODUCTS COMPANY
By
-------------------------------------
Name:
Title:
BROWN-BRIDGE INDUSTRIES, INC.
By
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
Page 11
ENTOLETER, INC.
By
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
Page 12
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- -----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-----------------------------------------------------
<PAGE>
EXHIBIT B
Page 13
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:
------------------------------
Your Signature:
--------------------------------------
Sign exactly as your name appears on the face of this
Security)
Signature Guarantee:
- -----------------------------------
(Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements will
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Registrar
in addition to, or in substitution
for, STAMP, all in accordance with
the Securities Exchange Act of 1934,
as amended.)
<PAGE>
EXHIBIT B
Page 14
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.11 or Section 4.15 of the
Indenture check the appropriate box:
/ / Section 4.11 / / Section 4.15
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.11 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
-----------------------
Date:
-------------------
Your Signature:
---------------------------------------
(Sign exactly as your name appears on the face of this
Security)
Signature Guarantee:
- -----------------------------------
(Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements will
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Registrar
in addition to, or in substitution
for, STAMP, all in accordance
<PAGE>
EXHIBIT B
Page 15
with the Securities Exchange Act of 1934,
as amended.)
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trustee Administration Department
Re: Spinnaker Industries, Inc.
10 3/4% SENIOR SECURED NOTES DUE 2006
-------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 10 3/4% Senior Secured
Notes due 2006 (the "Securities") of Spinnaker Industries, Inc. (the
"Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated October 18, 1996 relating to the Securities and
such other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated
on pages (i) - (iii) of the Offering Memorandum and in the section entitled
"Transfer Restrictions" of the Offering Memorandum including the restrictions
on duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell or otherwise transfer any
Securities prior to the date which is three years after the original issuance
of the
<PAGE>
EXHIBIT C
Page 2
Securities, we will do so only (i) to the Company or any of its subsidiaries,
(ii) inside the United States in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act), (iii) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee (as defined in the Indenture relating to the Securities), a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities, (iv) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and
will not transfer the Securities to, any pension or welfare plan (as defined
in Section 3 of the Employee Retirement Income Security Act of 1974), except
as permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee and the
Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Securities
purchased by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
<PAGE>
EXHIBIT C
Page 3
By:
------------------------------
Name:
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
_______________, ____
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trustee Administration Department
Re: Spinnaker Industries, Inc.
(the "Company") 103/4% Senior Secured
Notes due 2006 (the "Securities")
---------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $_____________ aggregate
principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly,
we represent that:
(1) the offer of the Securities was not made to a Person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any
person acting on our behalf reasonably believed that the
transferee was outside the United States, or (b) the transaction
was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged
with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S, as applicable;
<PAGE>
EXHIBIT D
Page 2
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------
Authorized Signature
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
Among
CENTRAL PRODUCTS COMPANY,
BROWN-BRIDGE INDUSTRIES, INC.
and
ENTOLETER, INC.,
as Borrowers,
SPINNAKER INDUSTRIES, INC.,
as Guarantor,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO, TOGETHER WITH
THOSE ASSIGNEES PURSUANT TO SECTION 10.8 HEREOF,
as Lenders,
BT COMMERCIAL CORPORATION,
as Agent,
TRANSAMERICA BUSINESS CREDIT CORPORATION,
as Collateral Agent
and
BANKERS TRUST COMPANY,
<PAGE>
as Issuing Bank
Dated as of October 23, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
-1-
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. General Definitions . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Accounting Terms and Determinations . . . . . . . . . . 32
SECTION 1.3. Other Terms; Headings . . . . . . . . . . . . . . . . . 32
SECTION 1.4. Computation of Time Periods . . . . . . . . . . . . . . 32
ARTICLE II
REVOLVING LOANS
SECTION 2.1. Revolving Credit Commitments. . . . . . . . . . . . . . 33
SECTION 2.2. Borrowing of Revolving Loans. . . . . . . . . . . . . . 34
SECTION 2.3. Disbursement of Revolving Loans . . . . . . . . . . . . 35
SECTION 2.4. Notices of Borrowing. . . . . . . . . . . . . . . . . . 35
SECTION 2.5. Same Day Settlement of Lender Advances. . . . . . . . . 36
SECTION 2.6. Periodic Settlement of Agent Advances and Repayments. . 36
(a) The Settlement Date . . . . . . . . . . . . . . . . 36
(b) Summary Statements; Settlements of Principal. . . . 36
(c) Distribution of Interest and Unused Line Fees . . . 37
SECTION 2.7. Sharing of Payments . . . . . . . . . . . . . . . . . . 37
SECTION 2.8. Defaulting Lenders. . . . . . . . . . . . . . . . . . . 38
SECTION 2.9. Mandatory and Voluntary Payment; Mandatory and
Voluntary Reduction of Commitments. . . . . . . . . . . 39
SECTION 2.10. Maintenance of Loan Account; Statements of Account. . . 39
SECTION 2.11. Payment Procedures. . . . . . . . . . . . . . . . . . . 40
SECTION 2.12. Collections . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 2.13. Application of Payments . . . . . . . . . . . . . . . . 40
ARTICLE III
LETTERS OF CREDIT
SECTION 3.1. Issuance of Letters of Credit . . . . . . . . . . . . . 41
SECTION 3.2. Terms of Letters of Credit. . . . . . . . . . . . . . . 42
SECTION 3.3. Lenders' Participation. . . . . . . . . . . . . . . . . 43
-i-
<PAGE>
SECTION 3.4. Notice of Issuance. . . . . . . . . . . . . . . . . . . 43
SECTION 3.5. Payment of Amount Drawn Under Letters of Credit . . . . 44
SECTION 3.6. Payment by Lenders. . . . . . . . . . . . . . . . . . . 45
SECTION 3.7. Nature of Issuing Bank's Duties . . . . . . . . . . . . 45
SECTION 3.8. Obligations Absolute. . . . . . . . . . . . . . . . . . 46
ARTICLE IV
INTEREST, FEES AND EXPENSES
SECTION 4.1. Interest on Prime Rate Loans. . . . . . . . . . . . . . 47
SECTION 4.2. Interest on Eurodollar Rate Loans . . . . . . . . . . . 47
SECTION 4.3. Interest and Letter of Credit Fees After Event of
Default . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.4. Letter of Credit Fees . . . . . . . . . . . . . . . . . 48
SECTION 4.5. Unused Line Fee; Closing Fee; Collateral Agent Fee;
Agent Fee . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.6. Other Fees and Expenses . . . . . . . . . . . . . . . . 49
SECTION 4.7. Calculations. . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.8. Special Provisions Relating to Eurodollar Rate Loans. . 49
(a) Continuation. . . . . . . . . . . . . . . . . . . . 49
(b) Conversion. . . . . . . . . . . . . . . . . . . . . 49
(c) Certain Limitations on Eurodollar Rate Loans. . . . 50
(d) Compensation. . . . . . . . . . . . . . . . . . . . 51
SECTION 4.9. Indemnification in Certain Events . . . . . . . . . . . 52
SECTION 4.10. Net Payments. . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.11. Affected Lenders. . . . . . . . . . . . . . . . . . . . 57
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Conditions to Initial Loans and Letters of Credit . . . 58
SECTION 5.2. Conditions Precedent to All Loans and Letters of
Credit. . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of the Borrowers . . . . 61
(a) Organization and Qualification. . . . . . . . . . . 61
(b) Authority . . . . . . . . . . . . . . . . . . . . . 61
(c) Enforceability. . . . . . . . . . . . . . . . . . . 62
-ii-
<PAGE>
(d) No Conflict . . . . . . . . . . . . . . . . . . . . 62
(e) Consents and Filings. . . . . . . . . . . . . . . . 62
(f) Government Regulation . . . . . . . . . . . . . . . 62
(g) Solvency. . . . . . . . . . . . . . . . . . . . . . 62
(h) Rights in Collateral; Priority of Liens . . . . . . 63
(i) Financial Data. . . . . . . . . . . . . . . . . . . 63
(j) Cash Flow Statements. . . . . . . . . . . . . . . . 63
(k) Locations of Offices, Records and Inventory . . . . 64
(l) Subsidiaries; Ownership of Stock. . . . . . . . . . 64
(m) No Judgments or Litigation. . . . . . . . . . . . . 65
(n) Licenses and Permits. . . . . . . . . . . . . . . . 65
(o) No Defaults . . . . . . . . . . . . . . . . . . . . 65
(p) Labor Matters . . . . . . . . . . . . . . . . . . . 65
(q) Compliance with Law . . . . . . . . . . . . . . . . 65
(r) ERISA . . . . . . . . . . . . . . . . . . . . . . . 66
(s) Business and Properties . . . . . . . . . . . . . . 67
(t) Investment Company. . . . . . . . . . . . . . . . . 67
(u) Compliance with Environmental Laws. . . . . . . . . 67
(v) Real Property . . . . . . . . . . . . . . . . . . . 68
(w) Material Contracts. . . . . . . . . . . . . . . . . 68
(x) Intellectual Property . . . . . . . . . . . . . . . 68
(y) Taxes and Tax Returns . . . . . . . . . . . . . . . 69
(z) Corporate and Trade Name. . . . . . . . . . . . . . 70
(aa) Title to Property . . . . . . . . . . . . . . . . 70
(bb) Accuracy and Completeness of Information. . . . . 70
(cc) Affiliate Transactions. . . . . . . . . . . . . . 70
(dd) No Other Indebtedness . . . . . . . . . . . . . . 71
(ee) Survival of Representations . . . . . . . . . . . 71
ARTICLE VII
COVENANTS OF THE BORROWERS
SECTION 7.1. Affirmative Covenants . . . . . . . . . . . . . . . . . 71
(a) Financial Reporting . . . . . . . . . . . . . . . . 71
(b) Collateral Reporting. . . . . . . . . . . . . . . . 73
(c) Notification Requirements . . . . . . . . . . . . . 74
(d) Corporate Existence . . . . . . . . . . . . . . . . 77
(e) Books and Records; Inspections. . . . . . . . . . . 77
(f) Insurance . . . . . . . . . . . . . . . . . . . . . 77
(g) Casualty Loss . . . . . . . . . . . . . . . . . . . 78
(h) Taxes . . . . . . . . . . . . . . . . . . . . . . . 78
(i) Compliance With Laws. . . . . . . . . . . . . . . . 78
(j) Use of Proceeds . . . . . . . . . . . . . . . . . . 79
(k) Fiscal Year . . . . . . . . . . . . . . . . . . . . 79
(l) Maintenance of Property . . . . . . . . . . . . . . 79
(m) ERISA Documents . . . . . . . . . . . . . . . . . . 79
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(n) Environmental and Other Matters . . . . . . . . . . 80
(o) Security Interests. . . . . . . . . . . . . . . . . 81
(p) Trademarks. . . . . . . . . . . . . . . . . . . . . 81
(q) Further Assurances. . . . . . . . . . . . . . . . . 81
SECTION 7.2. Negative Covenants. . . . . . . . . . . . . . . . . . . 81
(a) Liens, Etc. . . . . . . . . . . . . . . . . . . . . 82
(b) Indebtedness. . . . . . . . . . . . . . . . . . . . 82
(c) Lease Obligations . . . . . . . . . . . . . . . . . 84
(d) Corporate Changes, Etc. . . . . . . . . . . . . . . 84
(e) Sales, Etc. of Assets . . . . . . . . . . . . . . . 84
(f) Investments in Other Persons. . . . . . . . . . . . 85
(g) Affiliate Transactions. . . . . . . . . . . . . . . 87
(h) Dividends, Exchange, Etc. . . . . . . . . . . . . . 87
(i) Change in Nature of Business. . . . . . . . . . . . 88
(j) Charter Amendments, Etc.. . . . . . . . . . . . . . 88
(k) Accounting Changes. . . . . . . . . . . . . . . . . 88
(l) Prepayments and Material Amendments of Material
Contracts . . . . . . . . . . . . . . . . . . . . . 88
(m) Negative Pledge . . . . . . . . . . . . . . . . . . 89
(n) Limitation on Sales and Leasebacks. . . . . . . . . 89
(o) Partnerships; Restricted Subsidiaries; Joint
Ventures. . . . . . . . . . . . . . . . . . . . . . 90
(p) Additional Bank Accounts. . . . . . . . . . . . . . 90
(q) Excess Cash . . . . . . . . . . . . . . . . . . . . 90
(r) Capital Expenditures. . . . . . . . . . . . . . . . 91
(s) Minimum Consolidated Net Worth. . . . . . . . . . . 91
(t) Minimum Consolidated Current Ratio. . . . . . . . . 92
(u) Minimum Consolidated Interest Coverage Ratio. . . . 92
(v) Contingent Obligations. . . . . . . . . . . . . . . 93
(w) No Prohibited Transactions Under ERISA. . . . . . . 93
(x) Hedging Transactions. . . . . . . . . . . . . . . . 94
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default . . . . . . . . . . . . . . . . . . . 94
SECTION 8.2. Acceleration and Cash Collateralization . . . . . . . . 96
(a) Acceleration. . . . . . . . . . . . . . . . . . . . 96
(b) Termination of Commitments. . . . . . . . . . . . . 96
(c) Cash Collateralization. . . . . . . . . . . . . . . 96
SECTION 8.3. Rescission of Acceleration. . . . . . . . . . . . . . . 96
SECTION 8.4. Remedies. . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 8.5. Right of Set-off. . . . . . . . . . . . . . . . . . . . 97
SECTION 8.6. License for Use of Software and Other Intellectual
Property. . . . . . . . . . . . . . . . . . . . . . . . 98
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SECTION 8.7. No Marshaling; Deficiencies; Remedies Cumulative. . . . 98
ARTICLE IX
CROSS GUARANTIES
SECTION 9.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 9.2. Obligations Unconditional . . . . . . . . . . . . . . . 99
SECTION 9.3. Reinstatement . . . . . . . . . . . . . . . . . . . . . 100
ARTICLE X
THE AGENT AND THE COLLATERAL AGENT
SECTION 10.1. Appointment of Agent. . . . . . . . . . . . . . . . . . 100
SECTION 10.2. Nature of Duties of Agent and Collateral Agent. . . . . 101
SECTION 10.3. Lack of Reliance on Agent . . . . . . . . . . . . . . . 101
SECTION 10.4. Certain Rights of the Agent . . . . . . . . . . . . . . 102
SECTION 10.5. Reliance by Agent . . . . . . . . . . . . . . . . . . . 102
SECTION 10.6. Indemnification of Agent. . . . . . . . . . . . . . . . 102
SECTION 10.7. The Agent in Its Individual Capacity. . . . . . . . . . 102
SECTION 10.8. Holders of Revolving Notes. . . . . . . . . . . . . . . 103
SECTION 10.9. Successor Agent . . . . . . . . . . . . . . . . . . . . 103
SECTION 10.10. Collateral Matters. . . . . . . . . . . . . . . . . . . 103
SECTION 10.11. Actions with Respect to Defaults. . . . . . . . . . . . 104
SECTION 10.12. Delivery of Information . . . . . . . . . . . . . . . . 105
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Governing Law . . . . . . . . . . . . . . . . . . . . . 105
SECTION 11.2. Submission to Jurisdiction. . . . . . . . . . . . . . . 105
SECTION 11.3. Service of Process. . . . . . . . . . . . . . . . . . . 106
SECTION 11.4. Jury Trial. . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.5. Limitation of Liability . . . . . . . . . . . . . . . . 106
SECTION 11.6. Delays; Partial Exercise of Remedies. . . . . . . . . . 106
SECTION 11.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.8. Assignments and Participations. . . . . . . . . . . . . 107
(a) Borrower Assignment . . . . . . . . . . . . . . . . 107
(b) Lender Assignments. . . . . . . . . . . . . . . . . 107
(c) Agent's Register. . . . . . . . . . . . . . . . . . 108
(d) Lender Participations . . . . . . . . . . . . . . . 109
(e) Confidentiality . . . . . . . . . . . . . . . . . . 110
SECTION 11.9. Confidentiality . . . . . . . . . . . . . . . . . . . . 110
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SECTION 11.10. Indemnification; Reimbursement of Expenses of
Collection. . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.11. Amendments and Waivers. . . . . . . . . . . . . . . . . 111
SECTION 11.12. Nonliability of Agent and Lenders . . . . . . . . . . . 113
SECTION 11.13. Independent Nature of Lenders' Rights . . . . . . . . . 113
SECTION 11.14. Counterparts. . . . . . . . . . . . . . . . . . . . . . 113
SECTION 11.15. Effectiveness . . . . . . . . . . . . . . . . . . . . . 113
SECTION 11.16. Severability. . . . . . . . . . . . . . . . . . . . . . 114
SECTION 11.17. Maximum Rate. . . . . . . . . . . . . . . . . . . . . . 114
SECTION 11.18. Entire Agreement; Successors and Assigns. . . . . . . . 114
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SCHEDULES
Schedule 1 - List of Lenders, Lending Offices and Commitments
Schedule 2 - Existing Indebtedness
Schedule 5.1(c) - List of Closing Documents
Schedule 6.1(a) - Jurisdictions in which the Credit Parties and the
Subsidiaries are Qualified to do Business
Schedule 6.1(k) - Location of Offices, Records and Inventory
Schedule 6.1(l)(i) - List of Subsidiaries
Schedule 6.1(l)(ii) - 100% owned Subsidiaries
Schedule 6.1(l)(iii) - Proxies with respect to Stock of Subsidiaries
Schedule 6.1(m) - Pending Litigation, etc.
Schedule 6.1(p) - Labor Contracts
Schedule 6.1(r) - Pension Plans
Schedule 6.1(u) - Environmental Actions
Schedule 6.1(v) - Real Property
Schedule 6.1(w) - Material Contracts
Schedule 6.1(x) - Intellectual Property
Schedule 6.1(cc) - Affiliate Transactions
Schedule 7.2(a) - Permitted Liens
Schedule 7.2(f) - Investments
Schedule 7.2(p) - Bank Accounts
Exhibits
Exhibit A - Revolving Note
Exhibit B - Borrowing Base Certificate
Exhibit C - Notice of Borrowing
Exhibit D - Notice of Continuation
Exhibit E - Notice of Conversion
Exhibit F - Letter of Credit Request
Exhibit G - Security Agreement
Exhibit H - Guaranty
Exhibit I - Lockbox Agreement
Exhibit J - Collateral Access Agreement
Exhibit K - Contribution Agreement
Exhibit L - Intercompany Subordinated Note
Exhibit M - Compliance Certificate
Exhibit N - Assignment and Assumption Agreement
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THIS CREDIT AGREEMENT is entered into as of October 23, 1996,
among Central Products Company, a Delaware corporation with its chief
executive office and principal place of business at 748 Fourth Street,
Menasha, Wisconsin 54952-0330 ("CENTRAL"), Brown-Bridge Industries, Inc., a
Delaware corporation with its chief executive office and principal place of
business at 518 East Water Street, Troy, Ohio 45373-0370 ("BROWN"),
Entoleter, Inc., a Delaware corporation with its chief executive office and
principal place of business at 251 Welton Street, Hamden, Connecticut 06517
("ENTOLETER" and, together with Central and Brown, the "BORROWERS"),
Spinnaker Industries Inc., a Delaware corporation with its chief executive
office and principal place of business at 600 N. Pearl Street, Dallas, Texas
75201 (the "GUARANTOR"), each of the financial institutions identified as
Lenders on Schedule 1 hereto (together with each of their respective
successors and assigns, each a "LENDER", and collectively, the "LENDERS"), BT
Commercial Corporation, acting in the manner and to the extent described in
Article X (in such capacity, the "AGENT"), Transamerica Business Credit
Corporation, as collateral agent (in such capacity, the "Collateral Agent"),
and Bankers Trust Company, as issuer of letters of credit (in such capacity,
the "ISSUING BANK").
W I T N E S S E T H :
WHEREAS, the Borrowers wish to obtain revolving credit facilities
for general corporate purposes; and
WHEREAS, the Borrowers wish to obtain letter of credit facilities
for their ongoing letter of credit requirements; and
WHEREAS, upon the terms and subject to the conditions set forth
herein, the Lenders are willing to (i) make loans and advances to the
Borrowers and (ii) purchase participations in letters of credit issued by the
Issuing Bank for the account of the Borrowers, and the Issuing Bank is
willing to issue letters of credit for the account of the Borrowers;
NOW, THEREFORE, the Borrowers, the Lenders, the Issuing Bank, the
Collateral Agent and the Agent hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. GENERAL DEFINITIONS. As used herein, the following
terms shall have the meanings herein specified (to be equally applicable to
both the singular and plural forms of the terms defined):
"ACCEPTANCE DATE" is defined in Section 11.8(b).
"ACCOUNTS" is defined in the Security Agreement.
"ACQUISITION" means the acquisition of stock, Indebtedness of a
Person, all or substantially all of the assets of a Person or any
business or line of business of a Person, excluding purchases of
inventory, equipment or real estate in the ordinary course of business.
"ACQUISITION BASKET" means the sum of (i) $15,000,000 (the
"Acquisition Base Amount"), (ii) if positive, Excess Cash Flow and (iii)
the Equity Proceeds Amount as of the date of determination PROVIDED that
reductions for Capital Expenditures and Investments shall be without
duplication and the Acquisition Basket shall not be reduced by any
Investments (x) to the extent paid for with the issuance of capital
stock of the Guarantor or (y) made in connection with the Tape
Acquisition and PROVIDED FURTHER that if the Tape Acquisition is not
consummated the Acquisition Base Amount shall be $20,000,000, or with
the approval of the Majority Lenders, $25,000,000.
"ADJUSTED EBITDA" means, as of the last day of the most recently
ended fiscal quarter for which the Agent has received Financial
Statements for the Guarantor and its Restricted Subsidiaries
("Qualifying Fiscal Quarter"), (a) with respect to the Qualifying Fiscal
Quarter ended September 30, 1996, $20,000,000, (b) with respect to the
Qualifying Fiscal Quarter ended December 31, 1996, $15,200,000 plus
EBITDA for the fiscal quarter ended December 31, 1996, (c) with respect
to the Qualifying Fiscal Quarter ended March 31, 1997, $10,500,000 plus
EBITDA for the two fiscal quarters ended March 31, 1997, (d) with
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respect to the Qualifying Fiscal Quarter ended June 30, 1997, $6,000,000
plus EBITDA for the three fiscal quarters ended June 30, 1997 and (e)
with respect to each Qualifying Fiscal Quarter thereafter, EBITDA for
the four fiscal quarters ended on the last day of such Qualifying Fiscal
Quarter.
"ADJUSTED EURODOLLAR RATE" means, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate obtained by dividing (i)
the Eurodollar Rate for such Interest Period by (ii) a percentage equal
to 1 minus the stated maximum rate (stated as a decimal) of all
reserves, if any, required to be maintained against "Eurocurrency
liabilities" as specified in Regulation D of the Board of Governors
Federal Reserve System (or against any other category of liabilities
which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined or any category of extensions of credit
or other assets which includes loans by a non-United States office of
any Lender to United States residents).
"ADJUSTED NET INCOME" means, in any fiscal period, Net Income of
a Person plus or minus (as the case may be) losses or gains from
extraordinary items and from sales of assets, other than sales of
Inventory in the ordinary course of business to the extent added or
subtracted in determining such Person's Net Income.
"AFFILIATE" of a Person means another Person who directly or
indirectly controls, is controlled by, is under common control with or
is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of
the power to vote ten percent (10%) or more of the Voting Stock of such
Person or the direct or indirect power to direct the management and
policies of a business.
"AGENT" means BTCC as provided in the Preamble to this Credit
Agreement or any successor to BTCC.
"AGENT ADVANCES" is defined in Section 2.2.
"AGENT FEE" is defined in Section 4.5(d).
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"APPLICABLE LENDING OFFICE" means, with respect to each Lender,
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Loan, and such Lender's Domestic Lending Office in the case of a Prime
Rate Loan.
"APPLICABLE MARGIN" means (a) from the date hereof until the
first anniversary of the Closing Date, 1.75% per annum for Prime Rate
Loans, 2.75% per annum for Eurodollar Rate Loans and 2.50% per annum for
Letters of Credit and (b) thereafter, a percentage per annum determined
by reference to the Debt to EBITDA Ratio as set forth below:
Prime Eurodollar Letters
Debt to EBITDA Ratio Rate Loans Rate Loans of Credit
- -------------------- ---------- ---------- ---------
Level I
- -------
less than 3.0 to 1.0 .75% 1.75% 1.50%
Level II
- --------
3.0 to 1.0 or
greater, but less
than 3.5 to 1.0 1.00% 2.00% 1.75%
Level III
- ---------
3.5 to 1.0 or
greater, but less
than 4.0 to 1.0 1.25% 2.25% 2.00%
Level IV
- --------
4.0 to 1.0 or
greater, but less
than 4.5 to 1.0 1.50% 2.50% 2.25%
Level V
- -------
4.5 to 1.0 or
greater 1.75% 2.75% 2.50%
The Applicable Margin for each Prime Rate Loan shall be determined by
reference to the Debt to EBITDA Ratio in effect from time to time and the
Applicable Margin for each Eurodollar Rate Loan shall be determined by
reference to the ratio in effect on the first day of each Interest Period
for such Loan; PROVIDED, HOWEVER, that (i) no change in the Applicable
Margin shall be effective until three (3) Business Days after the date on
which the Agent receives the
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relevant Financial Statements and a duly executed Compliance Certificate
demonstrating such ratio and (ii) the Applicable Margin shall be at
Level V for so long as the Agent has not received the information
described in clause (i) of this proviso as and when required under
Section 7.1(a)(i) or (iii), as the case may be.
"ASSET SALE" means, for any Person, any sale, lease, transfer or
other disposition or series of sales, transfers, leases or other
dispositions (including, without limitation, by merger or consolidation
or by exchange of assets and whether by casualty, loss, operation of law
or otherwise) or the grant of any option or other right to purchase,
lease or otherwise acquire any assets made by such Person or any of its
Restricted Subsidiaries to any Person.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" is defined in Section
11.8(b).
"AUDITORS" means a nationally recognized firm of independent
public accountants selected by a Borrower or Guarantor satisfactory to
the Agent in its sole discretion. For purposes of this Credit
Agreement, the Guarantor's and Borrowers' current firm of independent
public accountants, Ernst & Young L.L.P. shall be deemed to be
satisfactory to the Agent.
"AUTHORIZED OFFICERS" means the Chief Executive Officer, the
President, the Chief Financial Officer, the Vice President-Treasurer,
the Vice President-Finance, Controller or the Assistant Treasurer of a
Credit Party.
"BASE AMOUNT" is defined in Section 7.2(r).
"BENEFIT PLAN" means a "defined benefit plan" as defined in
Section 3(35) of ERISA for which any Credit Party, any Subsidiary of a
Credit Party or any ERISA Affiliate has been an "employer" as defined in
Section 3(5) of ERISA within the past six years.
"BORROWERS" is defined in the Preamble to this Agreement.
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"BORROWING" means a borrowing consisting of a Revolving Loan of
the same Type made on the same day by the Lenders.
"BORROWING BASE" means the sum of the Brown Borrowing Base, the
Central Borrowing Base and the Entoleter Borrowing Base.
"BORROWING BASE CERTIFICATE" is defined in Section 7.1(b)(i).
"BOYLE/FLEMING" means Boyle, Fleming & Co. Inc., a Delaware
corporation.
"BROWN" is defined in the Preamble to this Credit Agreement.
"BROWN ACCOUNTS BORROWING BASE" means, on any day, an amount up
to 85% of the outstanding Eligible Accounts Receivable of Brown on such
day.
"BROWN BORROWING BASE" means, on any day, an amount equal
to the sum of (a) the Brown Accounts Borrowing Base on such day and (b) the
Brown Inventory Borrowing Base on such day.
"BROWN INVENTORY BORROWING BASE" means, on any day, an amount up
to 65% of the Eligible Inventory of Brown on such day.
"BROWN LETTER OF CREDIT OBLIGATIONS" means the sum of the
aggregate undrawn amount of all Letters of Credit outstanding for
Brown's account, plus the aggregate amount of all drawings under Letters
of Credit issued for Brown's account for which the Borrowers have not
reimbursed the Issuing Bank, plus the aggregate amount of all payments
made by the Lenders to the Issuing Bank for participations in Letters of
Credit issued for Brown's account for which the Borrowers have not
reimbursed the Lenders.
"BROWN LINE OF CREDIT" means the aggregate revolving line of
credit extended by the Lenders to Brown for Revolving Loans and Letters
of Credit pursuant to and in accordance with the terms of this Credit
Agreement, in the
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amount of $20,000,000 as such revolving line of credit may be reduced from
time to time in accordance with this Credit Agreement.
"BT ACCOUNT" is defined in Section 2.12.
"BTCC" means BT Commercial Corporation, in its individual
capacity.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a
day on which commercial banks in New York, New York are required or
permitted by law to close. When used in connection with Eurodollar Rate
Loans, this definition will also exclude any day on which commercial
banks are not open for dealing in Dollar deposits in the London
(England, U.K.) interbank market.
"CAPITAL EXPENDITURES" means, for any period, the sum of all
expenditures capitalized for financial statement purposes in accordance
with GAAP (whether payable in cash or other property or accrued as
liability), including the capitalized portion of capital leases.
Capital Expenditures shall exclude (i) proceeds of a Casualty Loss
applied to the repair or replacement of the property affected by the
Casualty Loss, and (ii) an amount equal to the proceeds (including the
value received in any exchange or trade) of a sale or other disposition
of an asset permitted under the terms of this Credit Agreement and
applied to the replacement or purchase of property, plant or equipment.
"CAPITAL STOCK" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations, or other
equivalent of or interests in (however designated) the common or preferred
equity of such Person, including, without limitation, partnership
interests.
"CASH EQUIVALENTS" means (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of
not more than one year from the date acquired; (ii) certificates of
deposit with maturities of not more than one year from the date
acquired, issued by a U.S. federal or state chartered commercial bank of
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recognized standing, which has capital and unimpaired surplus in excess
of $200,000,000 and which bank or its holding company has a short-term
commercial paper rating of at least A-1 or the equivalent by Standard &
Poor's Corporation or at least P-1 or the equivalent by Moody's
Investors Service, Inc.; (iii) repurchase agreements and reverse
repurchase agreements with terms of not more than seven days from the
date acquired, for securities of the type described in (i) above and
entered into only with commercial banks having the qualifications
described in (ii) above; (iv) commercial paper, other than commercial
paper issued by the Guarantor or a Borrower or any of their Affiliates,
issued by any Person incorporated under the laws of the United States or
any state thereof and rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent thereof
by Moody's Investors Service, Inc., in each case with maturities of not
more than one year from the date acquired; (v) investments in money
market funds registered under the Investment Company Act of 1940, which
have net assets of at least $200,000,000 and at least eighty-five
percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above; and
(vi) other instruments, commercial paper or investments acceptable to
the Agent in its sole discretion.
"CASUALTY LOSS" is defined in Section 7.1(g).
"CENTRAL" is defined in the Preamble to this Credit Agreement.
"CENTRAL ACCOUNTS BORROWING BASE" means, on any day, an amount up
to 85% of the outstanding Eligible Accounts Receivable of Central on
such day.
"CENTRAL BORROWING BASE" means, on any day, an amount equal to
the sum of (a) the Central Accounts Borrowing Base on such day, and (b)
the Central Inventory Borrowing Base on such day.
"CENTRAL INVENTORY BORROWING BASE" means, on any day, an amount
up to 65% of the Eligible Inventory of Central on such day.
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"CENTRAL LETTER OF CREDIT OBLIGATIONS" means the sum of the
aggregate undrawn amount of all Letters of Credit outstanding for Central's
account, plus the aggregate amount of all drawings under Letters of Credit
issued for Central's account for which the Borrowers have not reimbursed
the Issuing Bank, plus the aggregate amount of all payments made by the
Lenders to the Issuing Bank for participations in Letters of Credit issued
for Central's account for which the Borrowers have not reimbursed the
Lenders.
"CENTRAL LINE OF CREDIT" means the aggregate revolving line
of credit extended by the Lenders to Central for Revolving Loans and
Letters of Credit pursuant to and in accordance with the terms of this
Credit Agreement, in the amount of $20,000,000 as such revolving line of
credit may be reduced from time to time in accordance with this Credit
Agreement.
"CHANGE OF CONTROL" means one or more of the following
events:
(a) less than a majority of the members of the
Guarantor's or (if Lynch Corporation owns, directly or indirectly, more
than a 50% interest in the Voting Stock of the Guarantor) Lynch
Corporation's Board of Directors shall be persons who either (i) were
serving as directors on the Closing Date or (ii) were nominated as
directors and approved by the vote of the majority of the directors who are
directors referred to in clause (i) above or this clause (ii); or
(b) the sale, lease or transfer, in one or a series of
transactions, of all or substantially all of the assets of a Credit Party
or of the Guarantor and its Subsidiaries taken as a whole, to any Person or
group (as such term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) other than to any one or more of the Permitted
Holders or their Related Parties; or
(c) the stockholders of a Credit Party shall approve any
plan or proposal for the liquidation or dissolution of such Credit Party;
or
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(d) the Guarantor shall fail to own, beneficially and of
record, one hundred percent (100%) of the capital stock of any Borrower; or
(e) So long as Richard J. Boyle and Ned N. Fleming, III
are employees of the Guarantor, Boyle/Fleming shall cease to beneficially
own and control or have the right to own and control at least fifty percent
(50%) of the aggregate number of shares of common stock of the Guarantor
which Boyle/Fleming either owned or had the right to purchase on the
Closing Date or if either Richard J. Boyle or Ned N. Fleming, III is no
longer employed by the Guarantor then the one which is still employed by
the Guarantor shall cease to beneficially own or control or have the right
to own and control at least fifty percent (50%) of the aggregate number of
shares of common stock of the Guarantor that he owned or had the right to
purchase on the Closing Date; or
(f) any Person or group of Persons (other than one or
more of the Permitted Holders is or becomes, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, the direct or indirect beneficial owner (as defined below of
securities of the Guarantor representing more than fifty percent (50%) of
the combined Voting Stock of the Guarantor, PROVIDED, HOWEVER, that the
Permitted Holders "beneficially own" (as so defined), a direct or indirect
interest in a lesser percentage of the total voting power of all the Voting
Stock of the Guarantor than such other Person or group and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors (for purposes
of this clause, any Person shall be deemed to beneficially own any Voting
Stock of a corporation (the "specified corporation") held by any other
corporation (the "parent corporation"), if such Person or group
"beneficially owns" (as so defined), a direct or indirect interest in more
than fifty percent (50%) of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders and their Related Parties
"beneficially own" (as so defined), a direct or indirect interest in a
lesser percentage of the voting power of the Voting Stock of such parent
corporation and do not have the
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right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation). For purposes of this clause (f), "beneficial owner" shall
have the meaning given to it by Rules 13(d)-(3) and 13(d)-(5) of the
Securities Exchange Act of 1934, as amended from time to time except that
(x) a Person shall be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time and (y) in the
case of a group which is not a Permitted Holder but includes as members
thereof one or more Permitted Holders, such group (except to the extent
provided in preceding clause (x) shall not be considered to be the
"beneficial owner" of any capital stock of the Company beneficially owned
(other than as a result of attribution to Permitted Holders by reason of
their being members of such group).
"CLOSING DATE" means the date of execution and delivery of
this Credit Agreement.
"CLOSING FEE" is defined in Section 4.5(b).
"CODE" is defined in Section 1.3.
"COLLATERAL" means the Accounts, Inventory and other
property identified as security for the Obligations under the Collateral
Documents.
"COLLATERAL ACCESS AGREEMENTS" means any landlord waiver,
mortgagee waiver, bailee letter or any similar acknowledgment agreement of
any warehouseman or processor in possession of Inventory, in each case
substantially in the form of Exhibit J.
"COLLATERAL AGENT" means Transamerica Business Credit
Corporation as provided in the Preamble to this Credit Agreement.
"COLLATERAL AGENT FEE" is defined in Section 4.5(c).
"COLLATERAL DOCUMENTS" means all contracts, instruments and
other documents now or hereafter executed and delivered
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in connection with this Credit Agreement, pursuant to which liens and
security interests are granted to the Agent in the Collateral for the
benefit of the Lenders, including without limitation, the Security
Agreement and any amendments, supplements or modifications thereto.
"COLLECTION ACCOUNT" is defined in Section 2.12.
"COLLECTIONS" means all cash, funds, checks, notes,
instruments and any other form of remittance tendered by account debtors in
payment of Accounts.
"COMMITMENT" means, with respect to a Lender, its
commitment to make Revolving Loans and to participate in Letters of Credit
up to the amount set forth opposite its name on Schedule 1, as such amount
may be reduced from time to time in accordance with the terms of this
Credit Agreement.
"COMPLIANCE CERTIFICATE" is defined in Section 7.1(a)(i).
"CONSOLIDATED CURRENT RATIO" means, as of the date of
determination, the ratio of current assets of the Guarantor and its
Restricted Subsidiaries at such date to current liabilities of the
Guarantor and its Restricted Subsidiaries at such date, in each case
determined on a consolidated basis in conformity with GAAP. For purposes
of determining the Consolidated Current Ratio, the outstanding principal
amount of the Loans shall be deemed to be current liabilities of the
Guarantor and its Restricted Subsidiaries.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect
to the Guarantor and its Restricted Subsidiaries, as of the date of
determination thereof for any applicable period, the ratio of (a) EBITDA
for such period to (b) cash Interest Expense for such period.
"CONSOLIDATED NET WORTH" means the consolidated assets of
the Guarantor and its Restricted Subsidiaries minus their consolidated
liabilities, all as reflected on the Financial Statements.
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"CONTINGENT OBLIGATION" means any direct, indirect,
contingent or non-contingent guaranty or obligation for the Indebtedness of
another, except endorsements in the ordinary course of business.
"CONTINGENT RIGHTS" means the rights of certain former
minority stockholders of Brown to receive payment for their shares of capital
stock of Brown which were converted to common stock of Spinnaker,
cash and the right to a contingent payment.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement,
substantially in the form of Exhibit K, among the Borrowers and the Agent,
as amended, supplemented or otherwise modified from time to time.
"COVERED TAXES" is defined in Section 4.10(a).
"CREDIT AGREEMENT" means this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"CREDIT DOCUMENTS" means this Credit Agreement, the
Revolving Notes, the Guaranty, the Security Agreement, the Intercompany
Subordinated Notes, the Contribution Agreement, the Lockbox Agreements, the
Letter of Credit Related Documents, each Borrowing Base Certificate and
each other document, agreement and instrument from time to time executed by
any Credit Party and delivered to the Agent, the Collateral Agent, the
Issuing Bank or a Lender in connection herewith or in connection with any
amendment hereto, as each may be amended, supplemented or otherwise
modified from time to time.
"CREDIT PARTIES" means the Borrowers and the Guarantor and
any other Person which becomes a Borrower or guarantor of the Obligations.
"DEBT" means, as of the date of determination, the sum of
the Indebtedness described in subsection (a) and (b) of the definition of
Indebtedness of the Guarantor and its Restricted Subsidiaries at such date,
as would appear on a balance sheet determined in accordance with GAAP.
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"DEBT TO ADJUSTED EBITDA RATIO" means at any date of
determination, the ratio of Debt as of the last day of the most recently
ended fiscal quarter for which the Agent has received Financial Statements
for the Guarantor and its Restricted Subsidiaries to Adjusted EBITDA with
respect to such fiscal quarter.
"DEBT TO EBITDA RATIO" means at any date of determination,
the ratio of Debt as of the last day of the most recently ended fiscal
quarter to EBITDA for the most recently ended four fiscal quarters.
"DEFAULT" means an event, condition or default which with
the giving of notice, the passage of time or both would be an Event of
Default.
"DEFAULTING LENDER" is defined in Section 2.8(a).
"DISBURSEMENT ACCOUNT BANK" means BT Delaware.
"DISBURSEMENT ACCOUNTS" means the collective reference to
the operating accounts of each Borrower maintained with the Disbursement
Account Bank.
"DOLLARS" and the sign "$" mean freely transferable lawful
money of the United States.
"DOMESTIC LENDING OFFICE" means, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending
Office" opposite its name on Schedule 1, as such Schedule may be amended
from time to time.
"EBITDA" means, in any fiscal period, Adjusted Net Income
plus the amount of all Interest Expense, income tax expense, expenses
related to the issuance of the Senior Notes, depreciation and amortization,
including amortization of any goodwill or other intangibles, in all cases
as may have been subtracted or added, as the case may be, in calculating
Adjusted Net Income of the Guarantor and its Restricted Subsidiaries, on a
consolidated basis, for such period all determined in accordance with GAAP.
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"ELIGIBLE ACCOUNTS RECEIVABLE" means Accounts of a Borrower
evidenced by an invoice and deemed by the Agent in its Permitted Discretion
(after consultation with the Collateral Agent) to be eligible for inclusion
in the calculation of such Borrower's Borrowing Base provided that no
Accounts acquired by a Borrower pursuant to a Permitted Acquisition shall
be included in such Borrower's Borrowing Base until the Agent and
Collateral Agent have completed their review of and due diligence with
respect to such Accounts and have agreed to the inclusion of such Accounts
in the Borrower's Borrowing Base. In determining the amount to be so
included, the face amount of such Accounts shall be reduced by the amount
of all returns, discounts, claims, credits, charges, or other allowances
and by the aggregate amount of all reserves, limits and deductions provided
for in this definition and elsewhere in this Credit Agreement. If any
Account is denominated in a currency other than Dollars, then the face
amount of such Account shall be converted into Dollars at the Rate of
Exchange on the date that the Accounts are calculated. Unless otherwise
approved in writing by the Agent after consultation with the Collateral
Agent, no Account shall be deemed to be an Eligible Account Receivable if:
(a) it arises out of a sale made by a Borrower to an
Affiliate to the extent such Account or all Accounts arising out of sales
made by a Borrower to any Affiliate exceed in the aggregate $250,000; or
(b) its payment terms are forty two (42) days or less from
the date of invoice and it remains unpaid ninety (90) days from the date of
invoice; or
(c) its payment terms are greater than forty two (42) days
from the date of invoice and it remains unpaid for more than ninety (90)
but less than one hundred twenty (120) days from the date of invoice to the
extent the amount of such Account or the total of all similar Accounts
exceeds $1,000,000 to the extent of such excess; or
(d) it is from the same account debtor (or any Affiliate
thereof) and fifty percent (50%) or more of all
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Accounts from such account debtor (or any Affiliate thereof) are ineligible
under clause (b) or (c) above; or
(e) the Account, when aggregated with all other Accounts of
such account debtor, exceeds twenty five percent (25%) in face value of all
Accounts of a Borrower then outstanding, to the extent of such excess;
PROVIDED, HOWEVER, that Accounts supported or secured by an irrevocable
letter of credit in form and substance satisfactory to the Agent, issued by
a financial institution satisfactory to the Agent, and duly pledged to the
Agent (together with sufficient documentation to permit direct draws by the
Agent) shall be excluded for purposes of such calculation; or
(f) the account debtor for the Account is a creditor of a
Borrower, has or has asserted a right of setoff, has disputed its liability
or made any claim with respect to the Account or any other Account which
has not been resolved, to the extent of the amount owed by such Borrower to
the account debtor, the amount of such actual or asserted right of setoff,
or the amount of such dispute or claim, as the case may be; or
(g) the account debtor is (or its assets are) the subject
of an Insolvency Event or, in the reasonable judgment of the Agent, likely
to become subject to an Insolvency Event; or
(h) the sale is to an account debtor outside of the United
States, unless (i) the Account is supported by an irrevocable letter of
credit issued or confirmed by a United States bank satisfactory to the
Agent in form and substance satisfactory to the Agent and assigned to and
directly drawable by the Agent or (ii) the Account is supported by an
irrevocable letter of credit in form and substance satisfactory to the
Agent which provides for payment directly into a bank account controlled by
the Agent and is issued by a financial institution satisfactory to the
Agent, does not exceed $250,000 and when combined with all other such
Accounts does not exceed $1,000,000 in the aggregate or (iii) the Account
is denominated in Dollars, payable in the United States and the sale giving
rise to the Account is to
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an account debtor in Canada and the amount of such Account or the total of
all similar Accounts does not exceed $3,000,000; or
(i) the sale to the account debtor is on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis or
made pursuant to any other written agreement providing for repurchase or
return; or
(j) the Agent determines in its Permitted Discretion that
collection of such Account is uncertain or the Account may not be paid; or
(k) the goods giving rise to such Account have not been
shipped and delivered to and accepted by the account debtor, the services
giving rise to such Account have not been performed and accepted by the
account debtor or the Account otherwise does not represent a final sale; or
(l) the Account does not comply with all Requirements of
Law, including, without limitation, the Federal Consumer Credit Protection
Act, the Federal Truth in Lending Act and Regulation Z of the Board of
Governors of the Federal Reserve System; or
(m) the Agent for the ratable benefit of the Lenders does
not have a valid and perfected first priority Lien (other than Liens
permitted under the Credit Documents) on such Account or the Account does
not otherwise conform to the representations and warranties contained in
this Credit Agreement or the other Credit Documents; or
(n) the account debtor is the United States of America or
any department, body, agency, authority or instrumentality thereof, unless
a Borrower duly assigns its right to payment of such Account to the Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sections 3727 et seq.), in form and substance satisfactory to the Agent,
and otherwise complies with such Act; or
(o) the Account is subject to any adverse security deposit,
progress payment or payments in excess of $250,000 in the aggregate at any
point in time or other similar
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advance made by or for the benefit of the applicable account debtor; or
(p) the account debtor with respect to the Account is
located in New Jersey, Minnesota or any other state imposing conditions on
the right of a creditor to collect accounts receivable, unless the
applicable 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 other appropriate report with the taxing or
other designated authorities of such state for the then current year.
"ELIGIBLE INVENTORY" means the aggregate amount of
Inventory of a Borrower deemed by the Agent in the exercise of its
Permitted Discretion (after consultation with the Collateral Agent) to be
eligible for inclusion in the calculation of such Borrower's Borrowing Base
provided that no Inventory acquired by a Borrower pursuant to a Permitted
Acquisition shall be included in such Borrower's Borrowing Base until the
Agent and Collateral Agent have completed their review of and due diligence
with respect to such Inventory and agreed to the inclusion of such
Inventory in the Borrower's Borrowing Base. In determining the amount of
Inventory to be included in a Borrower's Borrowing Base, Inventory shall be
valued at the lower of cost or market on a FIFO or a specific
identification method basis. Unless otherwise approved in writing by the
Agent (after consultation with the Collateral Agent), an item of Inventory
shall not be included in Eligible Inventory if:
(a) it is not owned solely by a Borrower or a Borrower does
not have good, valid and marketable title thereto; or
(b) it is not located in the United States; or
(c) it is not located on property owned or leased by a
Borrower or in a contract warehouse, subject to a Collateral Access
Agreement executed by the mortgagee, lessor or the contract warehouseman,
as the case may be, and segregated or otherwise separately identifiable
from goods of others, if any, stored on the premises; or
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(d) it is not subject to a valid and perfected first
priority Lien (other than Liens permitted under the Credit Documents) in
favor of the Agent except, with respect to Inventory stored at sites
described in clause (c) above, for Liens for unpaid rent or normal and
customary warehousing charges; or
(e) it consists of goods returned or rejected by a
Borrower's customers (other than first quality, unimpaired, merchandisable
and not special ordered goods) or goods in transit to third parties (other
than to warehouse sites covered by a Collateral Access Agreement); or
(f) it is not first-quality finished goods, work in process
or raw materials, is obsolete or slow moving, or does not otherwise conform
to the representations and warranties contained in the Credit Documents; or
(g) it was purchased by a Borrower in or as part of a
"bulk" transfer or sale of assets unless the seller thereof and Borrower
have complied with all applicable bulk sales or bulk transfer laws or such
Borrower has provided an indemnity agreement satisfactory to the Agent; or
(h) it consists of supplies, catalysts or off-size
Inventory (if and to the extent that such inventory has not been written
down to the lower of its cost or market value); or
(i) it is consigned Inventory.
"ENTOLETER" is defined in the Preamble to this Credit
Agreement.
"ENTOLETER ACCOUNTS BORROWING BASE" means, on any day, an
amount up to 85% of the outstanding Eligible Accounts Receivable of
Entoleter on such day.
"ENTOLETER BORROWING BASE" means, on any day, an amount
equal to the sum of (a) the Entoleter Accounts Borrowing Base on such day
and (b) the Entoleter Inventory Borrowing Base on such day.
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"ENTOLETER INVENTORY BORROWING BASE" means, on any day, an
amount up to (a) the sum of (i) 60% of the Eligible Inventory of Entoleter
consisting of uncut rolled steel, PLUS (ii) 50% of the Eligible Inventory
of Entoleter consisting of raw materials other than rolled steel (cut or
uncut) and spare parts, PLUS (iii) 30% of the Eligible Inventory of
Entoleter consisting of spare parts.
"ENTOLETER LETTER OF CREDIT OBLIGATIONS" means the sum of
the aggregate undrawn amount of all Letters of Credit outstanding for
Entoleter's account, plus the aggregate amount of all drawings under
Letters of Credit issued for Entoleter's account for which the Borrowers
have not reimbursed the Issuing Bank, plus the aggregate amount of all
payments made by the Lenders to the Issuing Bank for participations in
Letters of Credit issued for Entoleter's account for which the Borrowers
have not reimbursed the Lenders.
"ENTOLETER LINE OF CREDIT" means the aggregate revolving
line of credit extended by the Lenders to Entoleter for Revolving Loans and
Letters of Credit pursuant to and in accordance with the terms of this
Credit Agreement, in the amount of $5,000,000 as such revolving line of
credit may be reduced from time to time in accordance with this Credit
Agreement.
"ENVIRONMENTAL LAWS" means all federal, state and local
statutes, laws (including common or case law), rulings, regulations or
governmental, administrative or judicial orders or interpretations
applicable to the business or property of the Credit Parties or any of
their Subsidiaries relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without
limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Materials.
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"ERISA" means the Employee Retirement Income Security Act
of 1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means any entity required to be
aggregated with a Credit Party or any of its Subsidiaries under Sections
414(b), (c), (m) or (o) of the Internal Revenue Code.
"EQUITY PROCEEDS AMOUNT" shall initially be zero, which
amount shall be (a) INCREASED at the time of receipt by any Credit Party of
Net Cash Proceeds from the issuance of any equity securities after the
Closing Date by the amount of such Net Cash Proceeds, (b) REDUCED at the
time any Capital Expenditure is made pursuant to Section 7.2(r)(ii) by the
amount of such Capital Expenditure and (c) REDUCED at the time any
Investment is made pursuant to Section 7.2(f) with such Net Cash Proceeds
by the amount of such Investment.
"EURODOLLAR LENDING OFFICE" means, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending
Office" opposite its name on Schedule 1, as such Schedule may be amended
from time to time (or, if no such office is specified, its Domestic Lending
Office), or such other office or Affiliate of such Lender as such Lender
may from time to time specify in writing to the Borrowers and the Agent.
"EURODOLLAR RATE" means, with respect to the Interest
Period for each Eurodollar Rate Loan comprising part of the same Borrowing,
an interest rate per annum equal to the rate (rounded upward to the nearest
whole multiple of one-sixteenth (1/16) of one percent (1%) per annum, if
such rate is not such a multiple) of the offered quotation, if any, to
first class banks in the Eurodollar market by Bankers Trust Company for
Dollar deposits of amounts in immediately available funds comparable to the
principal amount of the Eurodollar Rate Loan for which the Eurodollar Rate
is being determined with maturities comparable to the Interest Period for
which such Eurodollar Rate will apply as of approximately 10:00 a.m. (New
York City time) two (2)
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Business Days prior to the commencement of such Interest Period.
"EURODOLLAR RATE LOAN" means a Loan that bears interest as
provided in Section 4.2.
"EVENT OF DEFAULT" is defined in Section 8.1.
"EXCESS CASH FLOW" means with respect to any period ending
on the last day of a fiscal quarter of the Guarantor, and measured on a
cumulative basis for the period (the "Measurement Period") from October 1,
1996 through the last day of such fiscal quarter, EBITDA for the
Measurement Period MINUS the sum without duplication of (i) cash Interest
Expense of the Guarantor and its Restricted Subsidiaries for the
Measurement Period, (ii) cash income taxes of the Guarantor and its
Restricted Subsidiaries for the Measurement Period, (iii) all Capital
Expenditures of the Guarantor and its Restricted Subsidiaries made during
the Measurement Period, (iv) all cash dividends declared by the Guarantor
during the Measurement Period, regardless of when such dividends are
actually paid, (v) all principal payments on Indebtedness of the Guarantor
or its Restricted Subsidiaries other than payments on the Line of Credit
which do not permanently reduce the Commitments and (vi) all Investments
made by the Guarantor and its Restricted Subsidiaries from the Closing Date
through the date of determination.
"EXISTING INDEBTEDNESS" means the Indebtedness of the
Guarantor and its Restricted Subsidiaries existing on the date of the
initial Loan hereunder as set forth on Schedule 2.
"EXISTING LOAN FACILITIES" means the collective reference
to the Credit Agreement between Spinnaker and Bankers Trust Company dated
as of April 5, 1996; the Credit Agreement among Central Products
Acquisition Corp., Spinnaker and Heller Financial Inc., as agent dated as
of September 29, 1995, as heretofore amended; the Loan and Security
Agreement between Brown and Transamerica Business Credit Corporation dated
as of September 16, 1994, as heretofore amended; and the Loan and Security
Agreement
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between Entoleter and Transamerica Business Credit Corporation dated as
of February 21, 1995, as heretofore amended; and all other agreements,
documents and instruments executed and delivered by the Guarantor or any
of its Subsidiaries in connection therewith, each as heretofore amended,
supplemented or otherwise modified.
"EXPENSES" means all costs and expenses of the Agent and
the Collateral Agent incurred in connection with the Credit Documents and
the transactions contemplated therein, including, without limitation,
(i) the costs of conducting record searches, examining collateral, opening
bank accounts and lockboxes, depositing checks, receiving and transferring
funds (including charges for checks for which there are insufficient
funds), and other costs of administration and enforcement of the rights of
the Lenders under the Credit Documents, (ii) the reasonable fees and
expenses of legal counsel and paralegals (including the allocated cost of
internal counsel and paralegals so long as not duplicative of outside
counsel), accountants, appraisers and other consultants, experts or
advisors retained by the Agent, (iii) fees and taxes in connection with the
filing of financing statements, and (iv) the costs of preparing and
recording Collateral Documents, releases of Collateral, and waivers,
amendments, and terminations of any of the Credit Documents.
"EXPIRATION DATE" means the earlier of the date occurring
five (5) years from the Closing Date and the date of termination of the
Commitments pursuant to the terms hereof.
"FACING FEE" is defined in Section 4.4(a).
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of
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the quotations for such day on such transactions received by the Agent from
three Federal Funds brokers of recognized standing selected by it.
"FEES" means, collectively, the Unused Line Fee, the
Collateral Agent Fee, the Agent Fee, the Closing Fee, Letter of Credit
Fees, the Issuing Bank Fees and the Facing Fee.
"FINANCIAL STATEMENTS" means the consolidated (and if
requested by the Agent, consolidating) balance sheets, statements of
operations, statements of cash flows and statements of changes in
shareholder's equity of a Person for the period specified, prepared in
accordance with GAAP and consistent with prior practices.
"FOREIGN LENDER" means any Lender organized under the laws
of a jurisdiction outside of the United States.
"FUNDING BANK" is defined in Section 4.9.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect from time to time.
"GOVERNING DOCUMENTS" means, as to any Person, the
certificate or articles of incorporation and by-laws or other
organizational or governing documents of such Person.
"GOVERNMENTAL AUTHORITY" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"GUARANTOR" is defined in the Preamble to this Agreement.
"GUARANTOR ACCOUNT" is defined in Section 7.2(p).
"GUARANTY" means the Guaranty, substantially in the form of
Exhibit H, made by the Guarantor in favor of the Agent for the benefit of
the Lenders, as amended, supplemented or otherwise modified from time to
time.
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"HAZARDOUS MATERIALS" means any and all pollutants and
contaminants and any and all toxic, caustic, radioactive or hazardous
materials, substances or wastes that are regulated under any Environmental
Laws, including without limitation, petroleum, its derivatives and by-
products and any other hydrocarbons.
"HIGHEST LAWFUL RATE" means, at any given time during which
any Obligations shall be outstanding hereunder, the maximum non-usurious
interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Obligations,
under the laws of the State of New York (or the law of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Credit Agreement and the other Credit Documents), or
under applicable federal laws which may presently or hereafter be in effect
and which allow a higher maximum nonusurious interest rate than under New
York (or such other jurisdiction's) law, in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Credit Agreement and any other Credit
Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions.
"INDEBTEDNESS" of any Person means (a) indebtedness for
borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business
and payable in accordance with customary practices), whether on open
account or evidenced by a note, bond, debenture or similar instrument,
(b) obligations under capital leases computed in accordance with GAAP,
(c) reimbursement obligations for letters of credit, banker's acceptances
or other credit accommodations, (d) liabilities under any Interest Rate
Agreement, (e) Contingent Obligations and (f) obligations secured by any
Lien on that Person's property, even if that Person has not assumed such
obligations.
"INDEMNIFIED PARTY" is defined in Section 11.10(a).
"INSOLVENCY EVENT" means, with respect to any Person, the
occurrence of any of the following: (a) such Person
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shall be adjudicated insolvent or bankrupt, or shall generally fail to
pay or admit in writing its inability to pay its debts as they become
due, (b) such Person shall seek dissolution or reorganization or the
appointment of a receiver, trustee, custodian or liquidator for it or a
substantial portion of its property, assets or business or to effect a
plan or other arrangement with its creditors, (c) such Person shall make
a general assignment for the benefit of its creditors, or consent to or
acquiesce in the appointment of a receiver, trustee, custodian or
liquidator for a substantial portion of its property, assets or
business, (d) such Person shall file a voluntary petition under any
bankruptcy, insolvency or similar law, or (e) such Person, or a
substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for its dissolution,
reorganization, or the appointment of a receiver, trustee, custodian or
liquidator or shall become subject to any writ, judgment, warrant of
attachment, execution or similar process.
"INTERCOMPANY SUBORDINATED NOTE" means an Intercompany
Subordinated Note, substantially in the form of Exhibit L and which
incorporates the terms set forth on Annex A thereto, made by one Credit
Party in favor of another Credit Party, as amended, supplemented or
otherwise modified from time to time.
"INTEREST EXPENSE" means the consolidated expense of a
Person for interest on Indebtedness, computed in accordance with GAAP.
"INTEREST PERIOD" means for any Eurodollar Rate Loan the
period commencing on the date of such Borrowing and ending on the last day
of the period selected by a Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months, in each case as a Borrower may, in an appropriate Notice of
Borrowing, Notice of Continuation or Notice of Conversion, select;
PROVIDED, HOWEVER, that a Borrower may not select any Interest Period that
ends after the Expiration Date. Whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the next
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succeeding Business Day, PROVIDED that if such extension would cause the
last day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on the next
preceding Business Day.
"INTEREST RATE AGREEMENT" means any interest rate
protection or hedge agreement, including, without limitation, any interest
rate future, option, swap and cap agreement approved by the Majority
Lenders.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, any amendments thereto, and any successor statute thereto and
regulations and guidance promulgated thereunder.
"INTERNAL REVENUE SERVICE" or "IRS" means the United States
Internal Revenue Service and any successor agency.
"INVENTORY" is defined in the Security Agreement.
"INVESTMENT" means all expenditures made and all
liabilities incurred and assumed (including Contingent Obligations) for or
in connection with Acquisitions, loans, advances, capital contributions or
transfers of property to a Person. In determining the aggregate amount of
Investments outstanding at any particular time, (a) a guaranty shall be
valued at not less than the principal amount outstanding of the obligation
guaranteed, or if less, the maximum stated amount of such guaranty;
(b) returns of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution) shall be
deducted; (c) earnings, whether as dividends, interest or otherwise, shall
not be deducted; and (d) decreases in the market value of such Investments
shall not be deducted unless such decreases are computed in accordance with
GAAP.
"ISSUING BANK" means Bankers Trust Company as provided in
the Preamble to this Credit Agreement or any Lender, Affiliate of any
Lender or other financial institution acceptable to the Agent and the
Borrowers which may at any time issue or be requested to issue a Letter of
Credit under this Credit Agreement.
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"ISSUING BANK FEES" is defined in Section 4.4(b).
"LENDER" is defined in the Preamble to this Credit Agreement.
"LENDER ADVANCES" is defined in Section 2.2.
"LETTER OF CREDIT AGREEMENT" is defined in Section 3.4.
"LETTER OF CREDIT FEE" is defined in Section 4.4(a).
"LETTER OF CREDIT OBLIGATIONS" means, without duplication, the total of
the Brown Letter of Credit Obligations, the Central Letter of Credit
Obligations and the Entoleter Letter of Credit Obligations.
"LETTER OF CREDIT RELATED DOCUMENTS" is defined in Section 3.8.
"LETTER OF CREDIT REQUEST" is defined in Section 3.4.
"LETTERS OF CREDIT" means all letters of credit issued for the account of
a Borrower pursuant to Article III of this Credit Agreement and all
amendments, renewals, extensions or replacements thereof.
"LIEN" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially
the same economic effect as any of the foregoing, whether voluntary or
imposed by law.
"LINE OF CREDIT" means the aggregate revolving line of credit extended by
the Lenders to the Borrowers for Revolving Loans and Letters of Credit
pursuant to and in accordance with the terms of this Credit Agreement, in the
amount of $40,000,000, as such revolving line of credit may be reduced from
time to time in accordance with this Credit Agreement.
"LOAN ACCOUNT" is defined in Section 2.10.
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"LOANS" means the Revolving Loans made from time to time hereunder.
"LOCKBOX AGREEMENTS" is defined in Section 2.12.
"LOCKBOX BANKS" is defined in Section 2.12.
"LOCKBOXES" is defined in Section 2.12.
"MAJORITY LENDERS" means both Lenders or if there are more than two
Lenders, those Lenders owed or holding in the aggregate 51% or more of the
total Commitments or if the Commitments are terminated, 51% or more of the
Revolving Loans or Letter of Credit Obligations then outstanding.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the
business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of the Guarantor and its Restricted
Subsidiaries, taken as a whole, (ii) the impairment of any Credit Party's
ability to perform its obligations under the Credit Documents to which it is
a party or the material impairment of the ability of the Agent or the Lenders
to enforce the Obligations or realize upon the Collateral, or (iii) a
material adverse effect on the value of the Collateral or the amount which
the Agent or the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral.
"MATERIAL CONTRACT" means any contract or other arrangement to which a
Credit Party or any of its Subsidiaries is a party (other than the Credit
Documents) for which breach, nonperformance, cancellation or failure to renew
could have a Material Adverse Effect. Material Contract shall include the
Tax Sharing Agreement and the Overhead Allocation Agreement.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Credit Party, any of its Subsidiaries or
any ERISA Affiliate has contributed within the past six years or with respect
to which any Credit Party or any of its Subsidiaries may incur any liability.
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"NET CASH PROCEEDS" means, with respect to any Asset Sale or issuance of
any equity securities by a Credit Party, the aggregate amount of cash
received from time to time by or on behalf of such Credit Party in connection
with such transaction after deducting therefrom only (a) reasonable and
customary brokerage commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar fees and commissions, (b) the amount of taxes
payable in connection with or as a result of such transaction, and (c) in the
case of any Asset Sale, the amount of any Indebtedness secured by a Lien on
such asset that, by the terms of such transaction, is required to be repaid
upon such disposition.
"NET INCOME" means, for any period, the net income of a Person, as
reflected on the Financial Statements of such Person for such period.
"NOTICE OF BORROWING" is defined in Section 2.2(a).
NOTICE OF CONTINUATION" is defined in Section 4.8(a).
"NOTICE OF CONVERSION" is defined in Section 4.8(b).
"OBLIGATIONS" means the unpaid principal and interest hereunder
(including interest accruing on or after the occurrence of an Insolvency
Event, whether or not an allowed claim), reimbursement obligations under
Letters of Credit, Fees, Expenses and all other obligations and liabilities
of the Guarantor or any of the Borrowers to the Agent, the Collateral Agent,
the Issuing Bank or to the Lenders under this Credit Agreement, the
Revolving Notes or any other Credit Document.
"OFFERING MEMORANDUM" means the Offering Memorandum dated October 23, 1996
with respect to the Senior Notes.
"OTHER TAXES" is defined in Section 4.10(b).
"OVERHEAD ALLOCATION AGREEMENT" means the Overhead Allocation Agreement
among the Guarantor and its Restricted Subsidiaries ated October 23, 1996.
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"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"PENDING BORROWINGS" means, with respect to a Borrower, prospective
Borrowings by such Borrower for which a Notice of Borrowing has been
delivered but for which Revolving Loans have not been advanced.
"PERMITTED ACQUISITIONS" means an Acquisition which
(i) would not contravene the provisions of Sections 7.2(f)
and (i);
(ii) is not an Acquisition of capital stock or assets (unless
such assets are principally located in the United States)
of a corporation incorporated outside of the United States
or an Acquisition which is principally of assets located
outside of the United States; and
(iii) involves an Investment by or through the Guarantor or a
Borrower or, with the consent of the Agent which shall not
be unreasonably withheld, a Restricted Subsidiary of the
Guarantor (other than a Borrower) or a Borrower;
PROVIDED that (A) if the Investment is by a Restricted Subsidiary of the
Guarantor or of a Borrower, such Restricted Subsidiary, to the extent it has
not previously done so, promptly guarantees the Obligations and grants the
Agent liens and security interests in all of its Accounts, Inventory and
related intangibles to secure such guaranty, (B) if capital stock of a Person
is issued or otherwise acquired by a Borrower or a Subsidiary in connection
with such Investment, such Person promptly guarantees the Obligations and
grants the Agent liens and security interests on all of its Accounts,
Inventory and related intangibles, (C) if assets (other than capital stock)
are acquired in connection with such Acquisition, the Agent is granted liens
and security interests on all of such assets consisting of Accounts,
Inventory and related intangibles, (D) all documentation granting the Agent a
guaranty or a security interest shall be in form and substance
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satisfactory to the Agent and (E) the Credit Parties shall take, and shall
cause such Subsidiary to take, all such further actions and execute all such
further documents and instruments as the Agent reasonably determines in its
sole discretion to be necessary or desirable to cause the execution, delivery
and performance of such documentation to be duly authorized and to perfect,
protect or enforce the security interests and Liens (and the priority status
thereof) granted to the Agent.
"PERMITTED DISCRETION" means the Agent's good faith judgment based upon
any factor which the Agent believes in good faith: (i) will or could
reasonably be expected to materially adversely affect the value of any
Collateral, the enforceability or priority of the Agent's Liens thereon or
the amount which the Agent and the Lenders would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral; (ii) suggests that any collateral report or
financial information delivered to the Agent by any Person on behalf of a
Credit Party is incomplete, inaccurate or misleading in any material respect;
(iii) materially increases the likelihood of a bankruptcy, reorganization or
other insolvency proceeding involving the Guarantor or any of its
Subsidiaries or any of the Collateral; or (iv) creates or reasonably could be
expected to create a Default or Event of Default. In exercising such
judgment, the Agent may consider such factors already included in or tested
by the definition of Eligible Accounts Receivable or Eligible Inventory, as
well as any of the following factors: (i) changes in collection history and
dilution with respect to the Accounts, (ii) changes in demand for, and
pricing of, Inventory, (iii) changes in any concentration of risk with
respect to Accounts or Inventory, and (iv) any other factors that change the
credit risk of lending to the Borrowers on the security of the Accounts or
Inventory. The burden of establishing lack of good faith shall be on the
Borrowers.
"PERMITTED HOLDERS" means and includes (a) Mario Gabelli; each Affiliate
of Mario Gabelli (or which was such preceding the death of Mario Gabelli);
Richard J. Boyle; each Affiliate of Richard J. Boyle; Ned N. Fleming, III;
each Affiliate of Ned N. Fleming, III; each member of the
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immediate family of each of the foregoing natural persons and any trust or
similar device created for the benefit of any one or more of the foregoing
and each Person which acquires a direct or indirect beneficial ownership
interest in shares of stock of the Guarantor as an executor or administrator
for or by way of inheritance or bequest from one or more of the natural
persons described in the preceding clause (a) following the death of such
Person; and (b) each group (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) which is controlled by (with the term
"controlled by" as used herein to be determined in a manner consistent with
the phrase "controlled by" as used in the definition of Affiliate contained
herein) one or more of the Permitted Holders described in the preceding
clause (a), but only so long as the respective such group to so controlled.
"PERMITTED LIENS" means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been
commenced and be continuing: (a) Liens for taxes, assessments and
governmental charges not yet due and payable or which are being diligently
contested in good faith by a Credit Party or one of its Subsidiaries by
appropriate proceedings, provided that in any such case an adequate reserve
is being maintained by the Credit Party or one of its Subsidiaries for the
payment of the same; (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other similar
Liens arising in the ordinary course of business securing obligations that
are not overdue and, in any case, where the property subject thereto is not
material to the operations of the Person whose assets are subject to such
Lien or which are being diligently contested in good faith and by appropriate
proceedings and as to which appropriate reserves are being maintained; (c)
pledges or deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations, not to
exceed an aggregate of $200,000; and (d) easements, rights of way and other
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially detract
from the value of the property subject thereto or materially interfere with
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the ordinary conduct of the business of the Person whose property is subject
to such easement, right of way or encumbrance.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and, as applicable, the successors, heirs and assigns of
each.
"PLAN" means any employee benefit plan, program or arrangement maintained
or contributed to by a Credit Party, any of its Subsidiaries or any ERISA
Affiliate or with respect to which any of them may incur liability.
"PRIME LENDING RATE" means the rate which Bankers Trust Company announces
as its prime lending rate from time to time. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company and each of the
Lenders may make commercial loans or other loans at rates of interest at,
above or below the Prime Lending Rate.
"PRIME RATE LOAN" means a Loan that bears interest as provided in
Section 4.1.
"PROHIBITED TRANSACTION" is defined in Section 6.1(r)(v).
"PROPORTIONATE SHARE" of a Lender means a fraction, expressed as a
decimal, obtained by dividing its Commitment by the total Commitments of all
the Lenders or, if the Commitments are terminated, by dividing its then
outstanding Revolving Loans and/or Letter of Credit Obligations by the
aggregate Revolving Loans and/or Letter of Credit Obligations then
outstanding.
"PURCHASE MONEY LIENS" is defined in Section 7.2(b)(v).
"RATE OF EXCHANGE" means the rate at which the Agent is able on the
relevant date to purchase Dollars with other currency and shall include any
premiums and costs of
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exchange payable in connection with the purchase of or conversion into
Dollars.
"REDUCED RATE" is defined in Section 4.10(e), relating to backup
withholding tax.
"REGISTER" is defined in Section 11.8(c).
"REPORTABLE EVENT" means any of the events described in Section 4043 of
ERISA and the regulations thereunder, other than a reportable event for which
the 30-day notice requirement to the PBGC has been waived.
"REQUIREMENT OF LAW" means (a) the Governing Documents of a Person, (b)
any law, treaty, rule or regulation or determination of an arbitrator, court
or other Governmental Authority, or (c) any franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way,
right or approval binding on a Person or any of its property.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
"REVOLVING LOANS" is defined in Section 2.1(a).
"REVOLVING NOTE" means a promissory note of each Borrower
payable to the order of each Lender, substantially in the form of
Exhibit A, as the same may be amended, supplemented or otherwise modified
from time to time.
"SECURITY AGREEMENT" means the Security Agreement, substantially in the
form of Exhibit G, made by the Credit Parties in favor of the Agent for the
benefit of the Lenders, as amended, supplemented or otherwise modified from
time to time.
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"SENIOR NOTE DOCUMENTS" is defined in Section 5.1(g).
"SENIOR NOTE GUARANTY" means the Guaranty, dated
October 23, 1996, made by the Borrowers in favor of the Chase Manhattan
Bank, as Trustee, as amended, supplemented or otherwise modified in
accordance with the terms of this Agreement and any Guaranty of the Senior
Notes by any Credit Party as permitted by the terms of this Agreement.
"SENIOR NOTES" means $115,000,000 aggregate principal
amount of the Guarantor's 10.75% Senior Secured Notes due 2006 offered
pursuant to the Offering Memorandum.
"SETTLEMENT DATE" is defined in Section 2.6(a).
"SUBSIDIARY" means as to any Person, a corporation or other
entity in which that Person directly or indirectly owns or controls the
shares of stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or appoint other managers of
such corporation or other entity. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Credit Agreement
shall refer to a Subsidiary or Subsidiaries of the Guarantor.
"TAPE INC." means Tape Inc., a Delaware corporation.
"TAPE ACQUISITION" means the acquisition by a Credit Party
of all of the issued and outstanding capital stock of Tape Inc.
"TAXES" is defined in Section 4.10(a).
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement
among the Guarantor and its Restricted Subsidiaries to be delivered
pursuant to Section 7.1(r), which shall be in form and substance
satisfactory to the Agent.
"TAX TRANSFEREE" is defined in Section 4.10(a).
"TERMINATION EVENT" means (i) a Reportable Event with
respect to any Benefit Plan or Multiemployer Plan; (ii) the withdrawal of a
Credit Party, any of its Subsidiaries or any
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ERISA Affiliate from a Benefit Plan during a plan year in which it was
a "substantial employer" (as defined in Section 4001(a)(2) of ERISA);
(iii) the providing of notice of intent to terminate a Benefit Plan in
a distress termination (as described in Section 4041(c) of ERISA); (iv)
the institution by the PBGC of proceedings to terminate a Benefit Plan
or Multiemployer Plan; (v) any event or condition (a) which is
reasonably likely to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Benefit Plan or Multiemployer Plan, or (b) that is reasonably likely to
result in termination of a Multiemployer Plan pursuant to Section 4041A
of ERISA; or (vi) the partial or complete withdrawal within the meaning
of Sections 4203 and 4205 of ERISA, of a Credit Party, any of its
Subsidiaries or any ERISA Affiliate from a Multiemployer Plan.
"TYPE" means, with respect to any Loan, whether such Loan
is a Eurodollar Rate Loan or a Prime Rate Loan.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of the
Guarantor that is designated an Unrestricted Subsidiary by the Board of
Directors of the Guarantor in the manner provided below and any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Guarantor may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary but excluding the Borrowers) to be an Unrestricted Subsidiary
unless such Subsidiary owns any capital stock of, or owns or holds any Lien
on, any property of the Guarantor or any of its Subsidiaries (other than a
Subsidiary of the Subsidiary to be designated as an Unrestricted
Subsidiary) PROVIDED that the Guarantor certifies to the Agent that such
designation complies with 7.2(f)(x) and each Subsidiary to be so designated
and each of its Subsidiaries has not at the time of designation, and does
not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to
which the lender has recourse to any of the assets of the Guarantor or any
of its Restricted Subsidiaries. The Board of Directors of the Guarantor
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary
only if immediately before and immediately after giving effect to such
designation, no
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Default or Event of Default shall have occurred and be continuing
and the Majority Lenders approve such designation in writing.
Any such designation by the Board of Directors shall be evidenced to the
Agent by promptly sending to the Agent a copy of the resolution giving
effect to such designation and an officers' certificate that such
designation complied with the foregoing provisions.
"UNUSED AVAILABILITY" means, at any time of determination,
the excess of (x) the lesser of the Borrowing Base or the Line of Credit
over (y) the sum of the unpaid principal amount of the Loans outstanding,
Pending Borrowings and the Letter of Credit Obligations.
"UNUSED LINE FEE" is defined in Section 4.5(a).
"VOTING STOCK" with respect to any Person means all classes
of Capital Stock of such Person then outstanding and normally entitled to
vote in elections of directors of such Person.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise defined or specified herein, all accounting terms used in this Credit
Agreement shall be construed in accordance with GAAP, applied on a basis
consistent in all material respects with the audited Financial Statements of the
Guarantor and its Restricted Subsidiaries delivered to the Agent on or before
the Closing Date. All accounting determinations for purposes of determining
compliance with Section 7.2(r) through (u) shall be made in accordance with GAAP
as in effect on the Closing Date and applied on a basis consistent in all
material respects with the audited Financial Statements of the Guarantor and its
Restricted Subsidiaries delivered to the Agent on or before the Closing Date.
The Financial Statements required to be delivered hereunder from and after the
Closing Date, and all financial records, shall be maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
Financial Statements of the Guarantor and its Restricted Subsidiaries delivered
to the Agent on or before the Closing Date, the certificates required to be
delivered pursuant to Section 7.1 demonstrating compliance with the covenants
contained herein shall include calculations setting forth the adjustments
necessary to demonstrate how the Guarantor and its Restricted
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Subsidiaries are in compliance with the financial covenants based upon
GAAP as in effect on the Closing Date.
SECTION 1.3. OTHER TERMS; HEADINGS. Terms used herein
that are defined in the Uniform Commercial Code, in effect from time to time, in
the State of New York (the "CODE") shall have the meanings given in the Code.
Each of the words "hereof," "herein," and "hereunder" refer to this Credit
Agreement as a whole. An Event of Default shall "continue" or be "continuing"
until such Event of Default has been cured or waived in accordance with
Section 11.11 hereof. References to Articles, Sections, Annexes, Schedules, and
Exhibits are internal references to this Credit Agreement, and to its
attachments, unless otherwise specified. The headings and the Table of Contents
are for convenience only and shall not affect the meaning or construction of any
provision of this Credit Agreement.
SECTION 1.4. COMPUTATION OF TIME PERIODS. In this Credit
Agreement, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."
ARTICLE II
REVOLVING LOANS
SECTION 2.1. REVOLVING CREDIT COMMITMENTS.
(a) Subject to the terms and conditions set forth in this
Credit Agreement, on and after the Closing Date and to and excluding the
Expiration Date, each Lender severally agrees to make loans and advances
("REVOLVING LOANS") to the following Borrowers in an amount not to exceed at any
time its Proportionate Share of the following:
(i) TO BROWN: an aggregate amount equal to the lesser
of (x) the Brown Line of Credit and (y) the Brown Borrowing Base, minus in
each case, the then outstanding Brown Letter of Credit Obligations and the
Pending Borrowings of Brown provided that no Revolving Loan or
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Letter of Credit may be incurred if after giving effect thereto an
amount equal to fifty percent (50%) of the sum of the Revolving Loans
extended by the Lenders to Brown and Brown Letter of Credit Obligations
exceeds the Brown Accounts Borrowing Base;
(ii) TO CENTRAL: an aggregate amount equal to the
lesser of (x) the Central Line of Credit and (y) the Central Borrowing
Base, minus, in each case, the then outstanding Central Letter of Credit
Obligations and the Pending Borrowings of Central provided that no
Revolving Loan or Letter of Credit may be incurred if after giving effect
thereto an amount equal to fifty percent (50%) of the sum of the Revolving
Loans extended by the Lenders to Central and Central Letter of Credit
Obligations exceeds the Central Accounts Borrowing Base;
(iii) TO ENTOLETER: an aggregate amount equal to the
lesser of (x) the Entoleter Line of Credit and (y) the Entoleter Borrowing
Base, minus, in each case, the then outstanding Entoleter Letter of Credit
Obligations and the Pending Borrowings of Entoleter provided that no
Revolving Loan or Letter of Credit may be incurred if after giving effect
thereto an amount equal to forty-five percent (45%) of the sum of the
Revolving Loans extended by the Lenders to Entoleter and Entoleter Letter
of Credit Obligations exceeds the Entoleter Accounts Borrowing Base.
(b) The Agent, at any time in the exercise of its Permitted
Discretion after consultation with the Collateral Agent, on not less than ten
(10) days' prior written notice to the applicable Borrower, may (i) establish
and increase or decrease reserves against Eligible Accounts Receivable and
Eligible Inventory for any of the Borrowers, and (ii) impose additional
restrictions (or eliminate the same) to the standards of eligibility set forth
in the definitions of Eligible Accounts Receivable and Eligible Inventory. The
ten (10) day notice in this section shall not apply to a determination by the
Agent with respect to whether a specific Account, all Accounts of an account
debtor or any Inventory should be deemed ineligible. Such determination may be
made at any time by the Agent without notice in the exercise of its Permitted
Discretion. The Agent may, but shall not be obligated to, rely on each
Borrowing Base
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Certificate and any other schedules or reports in determining the
eligibility of Accounts and Inventory.
(c) Notwithstanding anything in this Credit Agreement to
the contrary, the Lenders shall not be obligated to make any Revolving Loans
to any Borrower if such requested Revolving Loan, when added to the aggregate
amount of Revolving Loans and all Letter of Credit Obligations then
outstanding, would cause the sum of the Revolving Credit Loans and the Letter
of Credit Obligations to exceed the lesser of (i) the Line of Credit and (ii)
the Borrowing Base then in effect.
SECTION 2.2. BORROWING OF REVOLVING LOANS. It is
contemplated that Revolving Loans will be made available to the Borrowers
directly by the Lenders ("LENDER ADVANCES") and, in the circumstances described
in Section 2.2(b), from the Agent acting on behalf of the Lenders ("AGENT
ADVANCES"). The Revolving Loans made by any Lender to any Borrower shall be
evidenced by a Revolving Note made by such Borrower payable to the order of
such Lender, with appropriate insertions as to the date and principal amount.
(a) LENDER ADVANCES OF REVOLVING LOANS. Subject to the
determination by the Agent and the Lenders that the conditions for borrowing
contained in Section 5.2 are satisfied, upon notice from a Borrower to the
Agent, substantially in the form of Exhibit C ("NOTICE OF BORROWING") received
by the Agent before 2:00 p.m. (New York City time) on a Business Day, Lender
Advances of Revolving Loans shall be made to such Borrower to the extent of each
Lender's Proportionate Share of the requested Borrowing. The Notice of
Borrowing shall specify whether the requested Borrowing is of Prime Rate Loans
or Eurodollar Rate Loans.
(b) AGENT ADVANCES OF REVOLVING LOANS. The Agent is
authorized by the Lenders, but is not obligated, to make Agent Advances (i) upon
a Notice of Borrowing received by the Agent before 3:00 p.m. (New York City
time) on a Business Day, or (ii) upon advice received by the Agent on a Business
Day from the Disbursement Account Bank of the face amount of checks drawn on a
Disbursement Account, which have been or will be presented for payment on that
day, minus the amount of funds then available in such Disbursement Account. All
Agent Advances shall be Prime
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Rate Loans. Agent Advances will not at any time exceed the applicable amount
available for borrowing under Section 2.1(a). Agent Advances will be subject
to periodic settlement with the Lenders under Section 2.6. Agent Advances
may be made only in the following circumstances:
(i) For administrative convenience, the Agent may, but is not
obligated to, make Agent Advances in reliance upon a Borrower's actual or
deemed representations under Section 5.2 that the conditions for borrowing
are satisfied.
(ii) If the conditions for borrowing under Section 5.2 cannot be
fulfilled, a Borrower shall in its Notice of Borrowing or otherwise give
immediate notice thereof to the Agent, with a copy to each of the Lenders,
and the Agent may, but is not obligated to, continue to make Agent Advances
for twenty (20) Business Days from the date the Agent first receives such
notice, or until sooner instructed by the Majority Lenders to cease.
SECTION 2.3. DISBURSEMENT OF REVOLVING LOANS. The proceeds of
Revolving Loans shall be transmitted by the Agent (x) upon advice received by
the Agent from the Disbursement Account Bank, as described in Section 2.2(b),
directly to the applicable Disbursement Account, (y) in the circumstances
described in Section 3.5, directly to the Issuing Bank and (z) in all other
circumstances, as requested by a Borrower in its Notice of Borrowing.
SECTION 2.4. NOTICES OF BORROWING. Notices of Borrowing may be given
under this Section by telephone or facsimile transmission, and, if by telephone,
promptly confirmed by a writing. A Borrower shall specify in each Notice of
Borrowing whether the conditions for the requested borrowing are satisfied. A
Borrower may request one or more borrowings of Prime Rate Loans by Notice of
Borrowing given not later than 2:00 p.m. (New York City time) on the same
Business Day as the proposed Borrowing. Notice of Borrowing for Eurodollar Rate
Loans shall be given not later than 2:00 p.m. (New York City time) on the third
Business Day prior to the proposed Borrowing. Each Notice of Borrowing shall,
unless otherwise specifically provided herein, consist entirely of Revolving
Loans of the same Type and, if such Borrowing is to consist of Eurodollar Rate
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Loans, shall be in an aggregate amount for all Lenders of not less than
$1,000,000 or an integral multiple of $100,000 in excess thereof. The right of
a Borrower to choose Eurodollar Rate Loans is subject to the provisions of
Section 4.8. Once given, a Notice of Borrowing is irrevocable by and binding on
the Borrower delivering such notice. Each Borrower shall provide to the Agent a
list, with specimen signatures, of officers authorized to request Revolving
Loans and Letters of Credit. The Agent is entitled to rely upon each such list
until it is replaced by the applicable Borrower.
SECTION 2.5. SAME DAY SETTLEMENT OF LENDER ADVANCES. The Agent shall
give each Lender prompt notice by telephone or facsimile transmission of a
Notice of Borrowing that requests Lender Advances of Revolving Loans. No later
than 3:00 p.m. (New York City time) on the date of receipt of the Notice of
Borrowing, each Lender shall make available to the Agent at the Agent's address
such Lender's Proportionate Share of such borrowing in immediately available
funds. Unless the Agent receives contrary written notice prior to the date of
any such borrowing of Revolving Loans, it is entitled to assume that each Lender
will make available its Proportionate Share of the borrowing and in reliance
upon that assumption, but without any obligation to do so, may advance such
Proportionate Share on behalf of such Lender.
SECTION 2.6. PERIODIC SETTLEMENT OF AGENT ADVANCES AND REPAYMENTS.
(a) THE SETTLEMENT DATE. The amount of each Lender's Proportionate
Share of Revolving Loans shall be computed weekly (or more frequently in the
Agent's discretion) and shall be adjusted upward or downward based on all
Revolving Loans (including Agent Advances) and repayments received by the Agent
as of 5:00 p.m. (New York City time) on the last Business Day of the period
specified by the Agent (such date, the "SETTLEMENT DATE").
(b) SUMMARY STATEMENTS; SETTLEMENTS OF PRINCIPAL. The Agent shall
deliver to each of the Lenders promptly after the Settlement Date a summary
statement of the amount of outstanding Revolving Loans (including Agent
Advances) to each of the Borrowers. As reflected on the summary statement:
(i) the Agent
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shall transfer to each Lender its Proportionate Share of repayments; and (ii)
each Lender shall transfer to the Agent, or the Agent shall transfer to each
Lender, such amounts as are necessary to insure that, after giving effect to
all such transfers, the amount of Revolving Loans made by each Lender shall
be equal to such Lender's Proportionate Share of the aggregate amount of
Revolving Loans outstanding as of such Settlement Date. If the summary
statement requires transfers to be made to the Agent by the Lenders and is
received by the Lenders prior to 12:00 Noon (New York City time) on a
Business Day, such transfers shall be made in immediately available funds no
later than 3:00 p.m. (New York City time) that day; and, if received after
12:00 Noon (New York City time), then no later than 3:00 p.m. (New York City
time) on the next Business Day. The obligation of each Lender to transfer
such funds is irrevocable, unconditional and without recourse to or warranty
by the Agent.
(c) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES. Interest on the
Revolving Loans (including Agent Advances), shall be allocated by the Agent to
each Lender in accordance with the proportionate share of Revolving Loans
actually advanced by and repaid to each Lender, and shall accrue from and
including the date such Revolving Loans are so advanced and to but excluding the
date such Revolving Loans are either repaid or actually settled under this
Section. The amount of the Unused Line Fee shall be allocated by the Agent to
each Lender in accordance with that Lender's Proportionate Share. After the end
of each month, the Agent shall promptly, upon receipt from a Borrower,
distribute to each Lender its share of the interest and Unused Line Fee accrued
during such month. The Agent shall, upon receipt from a Borrower, distribute
interest on Eurodollar Rate Loans promptly after it is received from a Borrower.
SECTION 2.7. SHARING OF PAYMENTS. If any Lender shall obtain any
payment pursuant to the terms of this Credit Agreement (whether voluntary,
involuntary, through the exercise of any right of set-off or otherwise) on
account of the Loans made by it or its participation in Letters of
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Credit in excess of its Proportionate Share of payments on account of the
Loans or Letters of Credit obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participations in the Loans
made by them or in their participation in Letters of Credit as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; PROVIDED, HOWEVER, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and each such Lender shall repay
to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to
the proportion of (i) the amount of such Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect to the total
amount so recovered, and PROVIDED, FURTHER that this Section shall not apply
with respect to any fees which are intended to be for the benefit of less
than all of the Lenders. Each Borrower agrees that any Lender so purchasing
a participation from another Lender pursuant to this Section may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrowers in the amount of
such participation. Notwithstanding anything contained herein to the
contrary, the sharing provisions of this Section shall not apply to any
payments received by any Lender from or on behalf of the Borrowers or the
Agent that is not made pursuant to the express terms and provisions of this
Credit Agreement.
SECTION 2.8. DEFAULTING LENDERS.
(a) A Lender who fails to pay the Agent its Proportionate Share of
any Revolving Loans (including Agent Advances) made available by the Agent on
such Lender's behalf, or who fails to pay any other amount owing by it to the
Agent, is a defaulting lender ("DEFAULTING LENDER"). The Agent may recover all
such amounts owing by a Defaulting Lender on demand. If the Defaulting Lender
does not pay such amounts on the Agent's demand, the Agent shall promptly notify
the Borrowers and the Borrowers shall, jointly and severally, pay such amounts
within five (5) Business Days. In addition, the Defaulting Lender or the
Borrowers, jointly and severally, shall pay the Agent interest on such amount
for each day from the date it was made available by the Agent to the Borrowers
to the date it is recovered by the Agent at a rate PER ANNUM equal to (x) the
overnight Federal Funds Rate, if paid by the Defaulting Lender,
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or (y) the then applicable rate of interest calculated under Section 4.1, if
paid by the Borrowers; plus, in each case, the Expenses and losses, if any,
incurred as a result of the Defaulting Lender's failure to perform its
obligations.
(b) The failure of any Lender to fund its Proportionate Share of any
Revolving Loan (including Agent Advances) shall not relieve any other Lender of
its obligation to fund its Proportionate Share of such Revolving Loan.
Conversely, no Lender shall be responsible for the failure of another Lender to
fund such other Lender's Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by a Borrower to the Agent for the Defaulting Lender's
benefit; nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by the Agent. The Agent may hold and, in its discretion,
re-lend to the Borrowers the amount of all such payments received or retained by
it for the account of such Defaulting Lender. For purposes of voting or
consenting to matters with respect to the Credit Documents and determining
Proportionate Shares, such Defaulting Lender shall be deemed not to be a
"Lender" and such Lender's Commitment shall be deemed to be zero (-0-). This
Section shall remain effective with respect to such Lender until (x) the
Defaulting Lender has paid all amounts required to be paid to the Agent
hereunder or (y) the Majority Lenders, the Agent and the Borrowers shall have
waived such Lender's default in writing. The operation of this Section shall
not be construed to increase or otherwise affect the Commitment of any Lender,
or relieve or excuse the performance by the Borrowers of their duties and
obligations hereunder.
SECTION 2.9. MANDATORY AND VOLUNTARY PAYMENT; MANDATORY AND VOLUNTARY
REDUCTION OF COMMITMENTS.
(a) In no event shall the sum of the aggregate outstanding principal
balance of the Revolving Loans and all Letter of Credit Obligations outstanding
exceed the lesser of the Borrowing Base and the Line of Credit at any time.
Immediately upon the discovery by a Borrower that any of the lending limits set
forth in Sections 2.1(a) or this Section 2.9(a) has been exceeded, an
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amount sufficient to reduce the outstanding balances to the applicable
maximum allowed amount shall become immediately due and payable.
(b) On the Expiration Date, the Commitment of each Lender and the
Line of Credit shall automatically reduce to zero and may not be reinstated.
(c) The Borrowers may reduce or terminate the Commitments on a PRO
RATA basis as among the Lenders at any time and from time to time in whole or in
part; PROVIDED, HOWEVER, that each such reduction must be in an aggregate amount
for all Lenders of not less than $1,000,000 (and in increments of $1,000,000
thereafter). Any reduction in the Commitments shall reduce the Line of Credit
on a dollar-for-dollar basis. If the Borrowers seek to reduce the Commitments
to an aggregate amount of less than $5,000,000, then the Commitments shall be
reduced to zero and this Credit Agreement shall be terminated. Once reduced, no
portion of the Commitments or the Line of Credit may be reinstated.
(d) If any Credit Party shall receive any Net Cash Proceeds from the
consummation of any Asset Sales or from the issuance of any equity securities,
100% of such Net Cash Proceeds shall be immediately paid to the Agent to be
applied to repay the outstanding Revolving Loans, which amounts may be
reborrowed, subject to the terms and conditions contained herein.
SECTION 2.10. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT.
The Agent shall maintain an account on its books in the name of each Borrower
(each, a "LOAN ACCOUNT") in which a Borrower will be charged with all loans and
advances made by the Lenders to such Borrower or for such Borrower's account,
including the Revolving Loans, the Letter of Credit Obligations, the Fees, the
Expenses and any other Obligations. Each Borrower's Loan Account will be
credited with all amounts received by the Agent from such Borrower or for such
Borrower's account, including, as set forth below, all amounts received in the
applicable Collection Account from any Lockbox Bank. The Agent shall send each
Borrower a monthly statement reflecting the activity in its Loan Account.
Absent manifest error, each monthly statement shall be an account stated and
shall be final, conclusive and binding on the Borrowers.
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SECTION 2.11. PAYMENT PROCEDURES. The Borrowers hereby authorize
the Agent to charge the Loan Accounts with the amount of all interest, Fees
and Expenses and other payments to be made hereunder and under the other
Credit Documents. The Borrowers' obligations to the Agent and the Lenders
with respect to such payments shall be discharged by the Agent's charging the
Loan Accounts as provided herein.
SECTION 2.12. COLLECTIONS. The Borrowers shall at all times
maintain separate lockboxes (the "LOCKBOXES") and shall instruct all account
debtors on their Accounts to remit all Collections to their respective
Lockboxes. The Borrowers shall enter into agreements with the Agent and
financial institutions selected by the Borrowers and acceptable to the Agent
(the "LOCKBOX BANKS") substantially in the form of Exhibit I (the "LOCKBOX
AGREEMENTS"), which among other things shall provide for the opening of an
account with such Lockbox Bank for the deposit of Collections (each, a
"COLLECTION ACCOUNT") and shall require the Agent's consent to its
termination. All Collections and other amounts received by a Borrower from
any account debtor, in addition to all other cash received from any other
source, shall upon receipt be deposited into a Collection Account maintained
by such Borrower. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all available amounts held in each Collection Account
maintained by a Borrower shall be wired each Business Day into an account
maintained by the Agent with respect to such Borrowers at Bankers Trust
Company (each, a "BT ACCOUNT"). Termination of such arrangements shall also
be subject to approval by the Agent. All amounts, other than Collections,
received by the Borrowers from any source shall upon receipt be deposited
into a second Collection Account maintained by the Agent at a Lockbox Bank.
SECTION 2.13. APPLICATION OF PAYMENTS. All available amounts held
in the BT Account with respect to a Borrower shall be distributed and applied
on a daily basis in the following order: FIRST, to the payment of any Fees,
Expenses or other Obligations then due and payable by such Borrower to the
Agent under any of the Credit Documents, including amounts advanced by the
Agent on behalf of the Lenders pursuant to Section 2.4 or 2.5; SECOND, to the
payment of any Fees, Expenses or other Obligations then due and payable by
such Borrower to the Collateral Agent under any of the Credit Documents;
THIRD, to the
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payment of any Fees, Expenses or other Obligations then due and payable by
such Borrower to any Issuing Bank under any of the Credit Documents; FOURTH,
to the ratable payment of fees, Expenses or other Obligations then due and
payable by such Borrower to the Lenders under any of the Credit Documents
other than those Obligations specifically referred to in this Section 2.13;
FIFTH, to the ratable payment of any interest then due and payable on the
Loans to such Borrower; SIXTH; to the ratable payment of principal of any
Loans to such Borrower which is then due and payable; and SEVENTH, to cash
collateralize Letters of Credit in accordance with the provisions of Section
8.2(c). On any date after giving effect to the payment of all amounts
required to be paid pursuant to the immediately preceding sentence by all
Borrowers, to the extent there remain available funds in the BT Account with
respect to a Borrower, such funds may be accessed by such Borrower and
utilized by it for general corporate purposes pursuant to the terms of this
Agreement. Any payment received hereunder as a distribution in any
proceeding referred to in Section 8.1(g) shall, unless paid with respect to
amounts specifically owing to the Agent, the Collateral Agent or the Issuing
Bank, be distributed and applied by the Agent to the payment of the amounts
due hereunder and under the Notes ratably in accordance with such amounts
(or, if a court of competent jurisdiction shall otherwise specify, as
specified by such court).
ARTICLE III
LETTERS OF CREDIT
SECTION 3.1. ISSUANCE OF LETTERS OF CREDIT. Subject to the terms
and conditions of this Credit Agreement and in reliance upon the
representations and warranties of the Borrowers set forth herein, the Issuing
Bank shall issue Letters of Credit hereunder at the request of a Borrower and
for its account, as more specifically described below. The Issuing Bank
shall not be obligated to issue any Letter of Credit for the account of the
Borrowers on or after the Expiration Date or if at the time of such requested
issuance:
(a) The face amount of such Letter of Credit requested by Brown,
(i) when added to the Brown Letter of Credit
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Obligations then outstanding, would cause the Brown Letter of Credit
Obligations to exceed $5,000,000 or (ii) when added to the aggregate amount
of Revolving Loans to Brown and all Brown Letter of Credit Obligations then
outstanding would cause the sum of the Revolving Loans to Brown and the Brown
Letter of Credit Obligations to exceed the lesser of (x) the Brown Line of
Credit and (y) the Brown Borrowing Base then in effect; or
(b) The face amount of such Letter of Credit requested by
Central, (i) when added to the Central Letter of Credit Obligations then
outstanding, would cause the Central Letter of Credit Obligations to exceed
$5,000,000 or (ii) when added to the aggregate amount of Revolving Loans to
Central and all Central Letter of Credit Obligations then outstanding, would
cause the sum of Revolving Loans to Central and the Central Letter of Credit
Obligations to exceed the lesser of (x) the Central Line of Credit and (y)
the Central Borrowing Base then in effect; or
(c) The face amount of such Letter of Credit requested by
Entoleter, (i) when added to the Entoleter Letter of Credit Obligations then
outstanding, would cause the Entoleter Letter of Credit Obligations to exceed
$1,000,000 or (ii) when added to the aggregate amount of Revolving Loans to
Entoleter and all Entoleter Letter of Credit Obligations then outstanding,
would cause the sum of Revolving Loans to Entoleter and the Entoleter Letter
of Credit Obligations to exceed the lesser of (x) the Entoleter Line of
Credit and (y) the Entoleter Borrowing Base in effect; or
(d) The face amount of such Letter of Credit, when added to the
aggregate amount of Revolving Loans and all Letter of Credit Obligations then
outstanding would cause the sum of the Revolving Loans and the Letter of
Credit Obligations to exceed the lesser of (i) the Line of Credit and (ii)
the Borrowing Base then in effect; or
(e) Any order, judgment or decree of any Governmental Authority
or arbitrator shall purport by its terms to enjoin or restrain the Issuing
Bank from issuing such Letter of Credit or any Requirement of Law applicable
to the Issuing Bank or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over the
Issuing Bank shall prohibit, or request the Issuing Bank refrain
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from, the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Bank with respect to such Letter
of Credit any restriction or reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated) not in effect as of the Closing
Date, or any unreimbursed loss, cost or expense which was not applicable, in
effect or known to the Issuing Bank as of the Closing Date and which the
Issuing Bank deems in good faith to be material to it; or
(f) A default of any Lender's obligations to fund under Section
3.6 exists, or such Lender is a Defaulting Lender, unless the Agent and the
Issuing Bank have entered into satisfactory arrangements with the Borrower to
eliminate the Issuing Bank's risk with respect to such Lender, including cash
collateralization of such Lender's Proportionate Share of the Letter of
Credit Obligations.
SECTION 3.2. TERMS OF LETTERS OF CREDIT. The Letters of Credit
shall be in a form customarily used by the Issuing Bank or in such other form
as has been approved by the Issuing Bank. At the time of issuance, the
amount and the terms and conditions of each Letter of Credit, and of any
drafts or acceptances thereunder, shall be subject to approval by the Agent
and the Borrowers. In no event may the term of any Letter of Credit issued
hereunder exceed 365/366 days (except that such Letters of Credit may provide
for annual renewal) and all Letters of Credit issued hereunder shall expire
no later than the date that is five (5) Business Days prior to the Expiration
Date. Any Letter of Credit containing an automatic renewal provision shall
also contain a provision pursuant to which, notwithstanding any other
provisions thereof, it shall not be renewable on or after the Expiration Date
and it shall expire no later than the date that is five (5) Business Days
prior to the Expiration Date. Notwithstanding the foregoing, a Letter of
Credit may have an expiry date subsequent to the Expiration Date if such
Letter of Credit is cash collateralized in a manner satisfactory to the Agent
and in an amount equal to 105% of the aggregate face amount thereof or is
supported by another letter of credit which is issued by a financial
institution reasonably acceptable to the Agent and is in a form and contains
terms and conditions reasonably satisfactory to the Agent.
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SECTION 3.3. LENDERS' PARTICIPATION. Immediately upon issuance or
amendment by the Issuing Bank of any Letter of Credit in accordance with the
procedures set forth in Sections 3.1 and 3.2, each Lender shall be deemed to
have irrevocably and unconditionally purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation
to the extent of such Lender's Proportionate Share (based upon its
Commitment) of the liability with respect to such Letter of Credit
(including, without limitation, all obligations of the Borrower with respect
thereto, other than amounts owing to the Issuing Bank consisting of Issuing
Bank Fees) and any security therefor or guaranty pertaining thereto.
SECTION 3.4. NOTICE OF ISSUANCE. (i) Whenever a Borrower desires
the issuance of a Letter of Credit, such Borrower shall deliver to the Agent
a written notice no later than 1:00 p.m. New York City time at least ten (10)
Business Days (or such shorter period as may be agreed to by the Issuing
Bank) in advance of the proposed date of issuance of a letter of credit
request in substantially the form attached as Exhibit F (a "LETTER OF CREDIT
REQUEST") accompanied by such application and agreement for letter of credit
(a "LETTER OF CREDIT AGREEMENT") as the Issuing Bank may specify to such
Borrower in connection with such requested Letter of Credit. The transmittal
by a Borrower of each Letter of Credit Request shall be deemed to be a
representation and warranty by such Borrower that the Letter of Credit may be
issued in accordance with and will not violate any of the requirements of
Sections 3.1 and 3.2. Prior to the date of issuance of each Letter of Credit,
the requesting Borrower shall provide to the Agent a precise description of
the documents and the text of any certificate to be presented by the
beneficiary of such Letter of Credit which if presented by such beneficiary
on or prior to the expiration date of the Letter of Credit would require the
Issuing Bank to make payment under the Letter of Credit. The Issuing Bank,
in its reasonable judgment, may require changes in any such documents and
certificates. No Letter of Credit shall require payment against a conforming
draft to be made thereunder prior to the second Business Day (under the laws
of the jurisdiction of the Issuing Bank) after the date on which such draft
is presented. A Letter of Credit Request may be given in writing or
electronically and, if requested by the Agent, with prompt confirmation in
writing. Any electronic Letter of Credit Request shall be deemed to have
been prepared
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by, or under the supervision of the chief financial officer or other
Authorized Officer of the requesting Borrower. The Agent shall promptly
provide the aforementioned Letter of Credit Request, document description and
proposed text of certification to the Issuing Bank.
SECTION 3.5. PAYMENT OF AMOUNT DRAWN UNDER LETTERS OF CREDIT. In
the event of any request for drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Bank shall notify the Agent, which shall
notify the Borrower on whose behalf the Letter of Credit was issued of such
request, not later than 11:00 a.m. (New York City time) on the Business Day
immediately prior to the date on which the Issuing Bank intends to honor such
drawing. The Borrower on whose behalf the Letter of Credit was issued shall
give notice to be received by the Agent and the Issuing Bank not later than
2:00 p.m. (New York City time) on such Business Day if it intends to
reimburse the Issuing Bank for the amount of such drawing with funds other
than the proceeds of Loans. Such notice from the Borrower shall be
irrevocable and, if given, the Borrowers shall, jointly and severally,
reimburse the Issuing Bank not later than the close of business (New York
City time) on the day on which such drawing is honored in an amount in same
day funds equal to the amount of such drawing. If the Agent shall not have
timely received such notice (i) the Borrower on whose behalf the Letter of
Credit was issued shall be deemed to have timely given a Notice of Borrowing
to the Agent to make Loans on the date on which such drawing is honored in an
amount equal to the amount of such drawing and (ii) subject to satisfaction
or waiver of the applicable conditions specified in Article V and the other
terms and conditions of Borrowings contained herein, the Lenders shall, on
the date of such drawing, make Loans in the amount of such drawing, the
proceeds of which shall be applied directly by the Agent to reimburse the
Issuing Bank for the amount of such drawing or payment. If for any reason,
proceeds of Loans are not received by the Issuing Bank on such date in an
amount equal to the amount of such drawing, the Borrowers shall, jointly and
severally, be obligated to and shall reimburse the Issuing Bank, on the
Business Day (under the laws of the jurisdiction of the Issuing Bank)
immediately following the date of such drawing, in an amount in same day
funds equal to the excess of the amount of such drawing over the amount of
such Loans, if any, which are so received, plus accrued interest on such
amount at the rate set forth in Section 4.1.
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SECTION 3.6. PAYMENT BY LENDERS. In the event that the Borrowers
do not reimburse the Issuing Bank for the amount of any drawing pursuant to
Section 3.5, the Agent shall promptly notify each Lender of the unreimbursed
amount of such drawing and of such Lender's respective participation therein.
Each Lender shall make available to the Issuing Bank an amount equal to its
respective participation in same day funds, at the office of the Issuing Bank
specified in such notice, not later than 1:00 p.m. (New York City time) on
the first Business Day (under the laws of the jurisdiction of the Issuing
Bank) after the date notified by the Agent. In the event that any Lender
fails to make available to the Issuing Bank the amount of such Lender's
participation in such Letter of Credit as provided in this Section 3.6, the
Issuing Bank shall be entitled to recover such amount on demand from such
Lender together with interest at the Federal Funds Rate for three (3)
Business Days and thereafter at the Prime Lending Rate. The Agent or the
Issuing Bank shall distribute to each other Lender which has paid all amounts
payable by it under this Section 3.6 with respect to any Letter of Credit
issued by the Issuing Bank such other Lender's Proportionate Share of all
payments subsequently received by the Agent or the Issuing Bank from the
Borrowers in reimbursement of drawings honored by the Issuing Bank under such
Letter of Credit when such payments are received.
SECTION 3.7. NATURE OF ISSUING BANK'S DUTIES. In determining
whether to pay under any Letter of Credit, the Issuing Bank shall be
responsible only to determine that the documents and certificates required to
be delivered under that Letter of Credit have been delivered and that they
comply on their face with the requirements of that Letter of Credit. As
among the Borrowers, the Issuing Bank and each other Lender, the Borrowers
assume all risks of the acts and omissions of the Issuing Bank, or misuse of
the Letters of Credit issued by the Issuing Bank by the respective
beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, neither the Issuing Bank nor any of the Lenders
shall be responsible (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of or any drawing honored
under such Letters of Credit even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged, (ii)
for the
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validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit, or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason, (iii) for failure of the
beneficiary of any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit, (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telecopy 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 drawing under any such Letter of Credit, or of
the proceeds thereof, (vii) for the misapplication by the beneficiary of any
such Letter of Credit, of the proceeds of any drawing honored under such
Letter of Credit, and (viii) for any consequences arising from causes beyond
the control of the Issuing Bank or the other Lenders. None of the above
shall affect, impair, or prevent the vesting of any of the Issuing Bank's
rights or powers hereunder. Any action taken or omitted to be taken by the
Issuing Bank under or in connection with any Letter of Credit, if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create any liability of the Issuing Bank to the Borrowers or any Lender.
SECTION 3.8. OBLIGATIONS ABSOLUTE. The joint and several
obligations of the Borrowers to reimburse the Issuing Bank for drawings
honored under the Letters of Credit and the obligations of the Lenders under
Section 3.6 shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Credit Agreement under all circumstances
including, without limitation, the following circumstances: (i) any lack of
validity or enforceability of this Credit Agreement, any Letter of Credit,
any Letter of Credit Agreement or any other agreement or instrument relating
thereto (the "LETTER OF CREDIT RELATED DOCUMENTS"); (ii) the existence of any
claim, set-off, defense or other right which the Borrowers or any Affiliate
of the Borrowers may have at any time against a beneficiary or any transferee
of any Letter of Credit (or any Persons or entities for whom any such
beneficiary or transferee may be acting), the Issuing Bank, any Lender or any
other Person, whether in connection with this Credit Agreement, the other
Credit Documents, the transactions contemplated herein or therein
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or any unrelated transaction; (iii) any draft, demand, certificate or any
other documents presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; (iv) the surrender or impairment
of any security for the performance or observance of any of the terms of any
of the Credit Documents; (v) payment by the Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit; (vi)
failure of any drawing under a Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of any drawing; or (vii)
the fact that a Default or Event of Default shall have occurred and be
continuing; PROVIDED, HOWEVER, that the Borrowers shall have no obligation to
reimburse the Issuing Bank and the Lenders shall have no obligation under
Section 3.6 in the event of the Issuing Bank's willful misconduct or gross
negligence in determining whether documents presented under the Letter of
Credit comply with the terms of such Letter of Credit.
ARTICLE IV
INTEREST, FEES AND EXPENSES
SECTION 4.1. INTEREST ON PRIME RATE LOANS. The Borrowers shall,
jointly and severally, pay to the Agent for the benefit of the Lenders
interest on Prime Rate Loans two (2) Business Days after the last Business
Day of each month, calculated monthly in arrears at an interest rate per
annum equal to the Prime Lending Rate plus the Applicable Margin on the
average net balances owing to the Agent and the Lenders at the close of
business each day during such month. The rate under this Section 4.1 shall
change each day as the Prime Lending Rate changes.
SECTION 4.2. INTEREST ON EURODOLLAR RATE LOANS. The Borrowers
shall, jointly and severally, pay to the Agent for the benefit of the Lenders
interest on Eurodollar Rate Loans on the last day of each Interest Period
with respect to such Eurodollar Rate Loan and, in the case of an Interest
Period longer than three months, on the date occurring every three months
from the first day of such Interest Period, at the date of conversion of
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such Eurodollar Rate Loan (or a portion thereof) to a Prime Rate Loan, and at
maturity of such Eurodollar Rate Loan, in each case at a per annum interest
rate equal during the Interest Period for such Eurodollar Loan to the
Adjusted Eurodollar Rate for the Interest Period in effect for such
Eurodollar Rate Loan plus the Applicable Margin. After maturity of such
Eurodollar Rate Loan (whether by acceleration or otherwise), interest shall
be payable upon demand. The Agent, upon determining the Adjusted Eurodollar
Rate for any Interest Period, shall promptly notify the Borrowers and the
Lenders by telephone (confirmed promptly in writing) or in writing thereof.
Each determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 4.3. INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF
DEFAULT. From the date of occurrence of any Event of Default until the
earlier of the date upon which (i) all Obligations shall have been paid and
satisfied in full or (ii) such Event of Default shall have been waived or
cured, interest on the Loans, and Letter of Credit Fees on Letter of Credit
Obligations, shall each be payable on demand at a rate per annum equal to,
with respect to the Loans, the Prime Lending Rate or the Adjusted Eurodollar
Rate, as the case may be, plus two percent (2%) above the Applicable Margin
at Level V, and with respect to the Letter of Credit Obligations, the rate in
effect under the first sentence of Section 4.4(a), plus two percent (2%).
SECTION 4.4. LETTER OF CREDIT FEES.
(a) The Borrowers shall, jointly and severally, pay to the Agent
for the ratable benefit of the Lenders two (2) Business Days after the last
Business Day of each month a fee (the "LETTER OF CREDIT FEE"), in an amount
per annum equal to the Applicable Margin with respect to Letters of Credit of
the daily average amount of Letter of Credit Obligations outstanding during
the immediately preceding month. In addition, the Borrowers shall, jointly
and severally, pay the Agent, for its own benefit, two (2) Business Days
after the last Business Day of each month a letter of credit facing fee (the
"FACING FEE") in an amount equal to .25% per annum on the undrawn amount of
each Letter of Credit.
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(b) The Borrowers shall, jointly and severally, pay on demand the
customary charges, fees and expenses of the Issuing Bank (without duplication
of the Letter of Credit Fee) for the issuance, administration and negotiation
of each Letter of Credit (the "ISSUING BANK FEES"). Each determination by
the Agent of Letter of Credit Fees and other fees, charges and expenses under
this Section shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 4.5. UNUSED LINE FEE; CLOSING FEE; COLLATERAL AGENT FEE;
AGENT FEE.
(a) Each Borrower shall, jointly and severally, pay to the Agent
for the ratable benefit of the Lenders two (2) Business Days after the last
Business Day of each month and on the Expiration Date a fee equal to 0.375%
per annum calculated monthly in arrears on the average unused portion of the
total Line of Credit at the close of business each day during such month or
such period prior to the Expiration Date (the "UNUSED LINE FEE").
(b) The Borrowers shall, jointly and severally, pay to the Agent
for the ratable benefit of the Lenders, on the Closing Date, a fee (the
"CLOSING FEE") in an amount equal to 2.375% of the Line of Credit.
(c) The Borrowers shall, jointly and severally, pay to the
Collateral Agent solely for the account of the Collateral Agent, in advance
on the first Business Day of each month, a fee (the "COLLATERAL AGENT FEE")
in an amount equal to $5,000.
(d) The Borrowers shall, jointly and severally, pay to the Agent
solely for the account of the Agent, in advance on the first Business Day of
each month, a fee (the "AGENT FEE") in an amount equal to $5,000.
SECTION 4.6. OTHER FEES AND EXPENSES. The Borrowers agree,
jointly and severally, to pay fees to the Agent on behalf of the Lenders in
the amounts and at the times set forth herein and shall be obligated to
reimburse the Agent's Expenses and the Collateral Agent's Expenses promptly
upon demand.
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SECTION 4.7. CALCULATIONS. All calculations of (i) interest
hereunder and (ii) Fees, including, without limitation, Unused Line Fees and
Letter of Credit Fees, shall be made by the Agent, on the basis of a year of 360
days for the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which such interest or Fees
are payable. Each determination by the Agent of an interest rate, Fee or other
payment hereunder shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 4.8. SPECIAL PROVISIONS RELATING TO EURODOLLAR RATE LOANS.
(a) CONTINUATION. With respect to any Borrowing consisting of
Eurodollar Rate Loans, the Borrowers may (so long as no Default or Event of
Default has occurred and is continuing), subject to the provisions of
Section 4.8(c), elect to maintain such Borrowing or any portion thereof as
consisting of Eurodollar Rate Loans by selecting a new Interest Period for such
Borrowing, which new Interest Period shall commence on the last day of the
immediately preceding Interest Period. Each selection of a new Interest Period
shall be made by notice given not later than 2:00 p.m. (New York City time) on
the third Business Day prior to the date of any such continuation relating to
Eurodollar Rate Loans, by the applicable Borrower to the Agent. Such notice by
a Borrower of a continuation (a "NOTICE OF CONTINUATION") shall be by telephone
or facsimile transmission, and if by telephone, promptly confirmed in writing
substantially in the form of Exhibit D, in each case specifying (i) the date of
such continuation, (ii) the Type of Loans subject to such continuation,
(iii) the aggregate amount of Loans subject to such continuation and (iv) the
duration of the selected Interest Period. The Borrowers may elect to maintain
more than one Borrowing consisting of Eurodollar Rate Loans by combining such
Borrowings into one Borrowing and selecting a new Interest Period pursuant to
this Section 4.8(a). If the Borrowers shall fail to select a new Interest
Period for any Borrowing consisting of Eurodollar Rate Loans in accordance with
this Section, such Revolving Loans will automatically, on the last day of the
then existing Interest Period therefor, convert into Prime Rate Loans. The
Agent shall give each Lender prompt notice by telephone or facsimile
transmission of each Notice of Continuation.
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(b) CONVERSION. The Borrowers may on any Business Day (so long as no
Default or Event of Default has occurred and is continuing), upon notice
substantially in the form of Exhibit E (each such notice, a "NOTICE OF
CONVERSION") given to the Agent, and subject to the provisions of
Section 4.8(c), convert the entire amount of or a portion of all Loans of one
Type comprising the same Borrowing into Loans of another Type; PROVIDED,
HOWEVER, that any conversion of any Eurodollar Rate Loans into Loans of another
Type shall be made on, and only on, the last day of an Interest Period for such
Eurodollar Rate Loans and, upon conversion of any Prime Rate Loans into Loans of
another Type, the Borrowers shall pay accrued interest to the date of conversion
on the principal amount converted. Each such Notice of Conversion shall be
given not later than 10:00 a.m. (New York City time) on the Business Day prior
to the date of any proposed conversion into Prime Rate Loans and on the third
Business Day prior to the date of any proposed conversion into Eurodollar Rate
Loans. Subject to the restrictions specified above, each Notice of Conversion
shall be by telephone or facsimile transmission, and if by telephone, promptly
confirmed by a writing, in each case specifying (i) the requested date of such
conversion, (ii) the Type of Loans to be converted, (iii) the portion of such
Type of Loan to be converted, (iv) the Type of Loan such Loans are to be
converted into and (v) if such conversion is into Eurodollar Rate Loans, the
duration of the Interest Period of such Loan. Each conversion shall be in an
aggregate amount for the Loans of all Lenders of not less than $1,000,000 or an
integral multiple of $100,000 in excess thereof. The Borrowers may elect to
convert the entire amount of or a portion of all Loans of one Type comprising
more than one Borrowing into Loans of another Type by combining such Borrowings
into one Borrowing; PROVIDED, HOWEVER, that if the Borrowings so combined
consist of Eurodollar Rate Loans, such Loans shall have Interest Periods ending
on the same date.
(c) CERTAIN LIMITATIONS ON EURODOLLAR RATE LOANS. The right of the
Borrowers to maintain, select, continue or convert Eurodollar Rate Loans shall
be limited as follows:
(i) If the Agent is advised by Bankers Trust Company that it is not
offering U.S. dollar deposits (in the applicable amounts) in the London
interbank market, or the Agent determines that adequate and fair means do
not
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otherwise exist for ascertaining the Eurodollar Rate for Eurodollar
Rate Loans comprising any requested Borrowing, continuation or conversion,
the right of the Borrowers to select or maintain Eurodollar Rate Loans for
such Borrowing or any subsequent Borrowing shall be suspended until the
Agent shall notify the Borrowers and the Lenders that the circumstances
causing such suspension no longer exist, and each Loan comprising such
Borrowing shall be made as a Prime Rate Loan.
(ii) If the Majority Lenders shall, at least one (1) Business Day
before the date of any requested Borrowing, continuation or conversion,
notify the Agent that the Eurodollar Rate for Loans comprising such
Borrowing will not adequately reflect the cost to such Lenders of making or
funding their respective Loans for such Borrowing, the right of the
Borrowers to select Eurodollar Rate Loans for such Borrowing shall be
suspended until the Agent shall notify the Borrowers and the Lenders that
the circumstances causing such suspension no longer exist, and each Loan
comprising such Borrowing shall be made as a Prime Rate Loan.
(iii) If at any time any Lender determines (which determination shall,
absent manifest error, be conclusive and binding on all parties) that the
making, continuation or conversion of any Loan as a Eurodollar Rate Loan
has become unlawful or impermissible by reason of compliance by that Lender
with any law, governmental rule, regulation or order of any Governmental
Authority (whether or not having the force of law or resulting in costs or
penalties), then, and in any such event, such Lender may give notice of
that determination in writing, to the Borrowers and the Agent and the Agent
shall promptly transmit the notice to each other Lender. Until such Lender
gives notice otherwise, the right of the Borrowers to select Eurodollar
Rate Loans from that Lender shall be suspended and each Eurodollar Rate
Loan outstanding from that Lender shall automatically and immediately
convert to a Prime Rate Loan.
(iv) There shall not be outstanding at any one time more than an
aggregate of three (3) Borrowings of Loans which consist of Eurodollar Rate
Loans for any one Borrower
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or an aggregate of six (6) Borrowings of Loans which consist of
Eurodollar Rate Loans for all of the Borrowers.
(v) No Agent Advance shall be made as a Eurodollar Rate Loan.
(d) COMPENSATION. (i) Each Notice of Continuation and Notice of
Conversion shall be irrevocable by and binding on the Borrower delivering such
notice. In the case of any Borrowing, continuation or conversion that the
related Notice of Borrowing, Notice of Continuation or Notice of Conversion
specifies is to be comprised of Eurodollar Rate Loans, the Borrowers shall,
jointly and severally, indemnify each Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill, on or before the
date for such Borrowing, continuation or conversion specified in such Notice of
Borrowing, Notice of Continuation or Notice of Conversion, the applicable
conditions set forth in Article V, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds acquired by such
Lender to fund the Loan to be made by such Lender as part of such Borrowing,
continuation or conversion.
(ii) If any payment of principal of, or conversion or continuation of,
any Eurodollar Rate Loan is made other than on the last day of the Interest
Period for such Loan as a result of a payment, prepayment, conversion or
continuation of such Loan or acceleration of the maturity of the Revolving Notes
pursuant to Article VIII or for any other reason, the Borrowers shall, upon
demand by any Lender (with a copy of such demand to the Agent), jointly and
severally, pay to the Agent for the account of such Lender any amounts required
to compensate such Lender for any additional losses, costs or expenses which it
may reasonably incur as a result of such payment, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
any Lender to fund or maintain such Loan.
(iii) Calculation of all amounts payable to a Lender under this Section
4.8(d) shall be made as though such Lender elected to fund all Eurodollar Rate
Loans by purchasing U.S.
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dollar deposits in its Eurodollar Lending Office's interbank eurodollar
market.
SECTION 4.9. INDEMNIFICATION IN CERTAIN EVENTS. If after the
Closing Date, either (i) any change in or in the interpretation of any law or
regulation is introduced, including, without limitation, with respect to reserve
requirements, applicable to the Agent, to any of the Lenders, or to Bankers
Trust Company, or any other banking or financial institution from whom any of
the Lenders borrows funds or obtains credit (a "FUNDING BANK"), or (ii) the
Agent, a Funding Bank or any of the Lenders complies with any future guideline
or request from any central bank or other Governmental Authority or (iii) the
Agent, a Funding Bank or any of the Lenders determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or the Agent, a Funding Bank or any of the Lenders complies with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, and in the
case of any event set forth in this clause (iii), such adoption, change or
compliance has or would have the direct or indirect effect of reducing the rate
of return on any of the Lenders' capital as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, change or compliance (taking into consideration the Agent's or
such Funding Bank's or Lender's policies as the case may be with respect to
capital adequacy) by an amount deemed by such Lender to be material, and any of
the foregoing events described in clauses (i), (ii) or (iii) increases the cost
to the Agent, the Issuing Bank or any of the Lenders of (A) funding or
maintaining the total Commitments or (B) issuing, making or maintaining any
Letter of Credit or of purchasing or maintaining any participation therein, or
reduces the amount receivable in respect thereof by the Agent, the Issuing Bank
or any Lender, then the Borrowers shall upon demand by the Agent, jointly and
severally, pay to the Agent, for the account of each applicable Lender or, as
applicable, the Issuing Bank or a Funding Bank, additional amounts sufficient to
indemnify the Lenders against such increase in cost or reduction in amount
receivable. A
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certificate as to the amount of such increased cost and setting forth in
reasonable detail the calculation thereof shall be submitted to the Borrowers
by the Agent, or the applicable Lender, Issuing Bank or Funding Bank, not
later than the earlier of (a) 180 days after the event giving rise to such
increased costs and (b) 45 days after the Person submitting such certificate
has knowledge of such event, and shall be conclusive absent manifest error.
Prior to making any such demand, each of the Lenders, the Agent, Funding Bank
or other such party shall use reasonable efforts to designate a different
Lending Office if such a designation could reduce or eliminate any such
payment.
SECTION 4.10. NET PAYMENTS. (a) Any and all payments by the
Borrowers hereunder, under the Revolving Loans or under the Letters of Credit to
or for the benefit of any Lender, the Issuing Bank, the Collateral Agent or the
Agent shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and penalties, interests and all other liabilities with respect thereto
("TAXES"), including any Taxes imposed under Section 7701(l) of the Internal
Revenue Code, excluding, (i) in the case of each such Lender, the Issuing Bank,
the Collateral Agent or the Agent, taxes imposed on its net income (including,
without limitation, any taxes imposed on branch profits) and franchise taxes
imposed on it by the jurisdiction under the laws of which such Lender, the
Issuing Bank, the Collateral Agent or the Agent (as the case may be) is
organized or any political subdivision thereof, (ii) in the case of each Lender,
taxes imposed on its net income (including, without limitation, any taxes
imposed on branch profits), and franchise taxes imposed on it, by the
jurisdiction of such Lender's applicable Lending Office or any political
subdivision thereof, (iii) in the case of each such Lender, the Issuing Bank,
the Collateral Agent and the Agent, any Taxes that are in effect and that would
apply to a payment to such Lender, the Issuing Bank, the Collateral Agent or
Agent, as applicable, as of the Closing Date (other than any Taxes imposed under
Section 7701(l) of the Internal Revenue Code), and (iv) if any Person acquires
any interest in this Credit Agreement, any Revolving Loan or Letter of Credit
pursuant to the provisions hereof, or a Foreign Lender or the Agent changes the
office in which the Borrowing is made, accounted for or booked (any such person,
or such Foreign Lender or the Agent in that event, being referred to as a "TAX
TRANSFEREE"), any
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Taxes (other than Taxes imposed under Section 7701(l) of the Internal Revenue
Code) to the extent that they are in effect and would apply to a payment to
such Tax Transferee as of the date of the acquisition of such interest or
change in office, as the case may be (all such nonexcluded Taxes being
hereinafter referred to as "COVERED TAXES"). If the Borrowers shall be
required by law to deduct any Covered Taxes from or in respect of any sum
payable hereunder, under any Revolving Loan or under any Letter of Credit to
or for the benefit of any Lender, the Issuing Bank, the Collateral Agent or
the Agent or any Tax Transferee, (A) the sum payable shall be increased as
may be necessary so that after making all required deductions of Covered
Taxes (including deductions of Covered Taxes applicable to additional sums
payable under this Section 4.10) such Lender, the Issuing Bank, the
Collateral Agent, the Agent or such Tax Transferee, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made, (B) the Borrowers shall make such deductions and (C)
the Borrowers shall, jointly and severally, pay the full amount so deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Borrowers agree, jointly and severally, to pay
any present or future stamp, documentary, excise, privilege, intangible or
similar levies that arise at any time or from time to time (i) from any payment
made under any and all Credit Documents, (ii) from the transfer of the rights of
the Lender under any Credit Documents to any transferee, or (iii) from the
execution or delivery by the Borrowers of, or from the filing or recording or
maintenance of, or otherwise with respect to the exercise by the Agent or the
Lenders of their rights under, any and all Credit Documents (hereinafter
referred to as "OTHER TAXES").
(c) The Borrowers, jointly and severally, indemnify each Lender, the
Issuing Bank, the Collateral Agent, the Agent, and any Tax Transferee for the
full amount of (i) Covered Taxes imposed on or with respect to amounts payable
hereunder, (ii) Other Taxes, and (iii) any Taxes (other than Covered Taxes
imposed by any jurisdiction on amounts payable under this Section 4.10) paid by
such Lender, the Issuing Bank, the Collateral Agent, or the Agent or such Tax
Transferee, as the case may be, and any liability (including penalties, interest
and expenses)
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arising solely therefrom or with respect thereto. Payment of this
indemnification shall be made within 30 days from the date such Lender, the
Issuing Bank, the Collateral Agent, or the Agent or Tax Transferee certifies
and sets forth in reasonable detail the calculation thereof as to the amount
and type of such Taxes. Any such certificate submitted by the Lender, the
Issuing Bank, the Collateral Agent or Agent or Tax Transferee in good faith
to the Borrowers shall, absent manifest error, be final, conclusive and
binding on all parties.
(d) Within 30 days after having received a receipt of Covered Taxes
or Other Taxes, the Borrowers will furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof.
(e) On or before the Closing Date, each Foreign Lender shall deliver
to the Agent and the Borrowers (i) two valid, duly completed copies of IRS Form
1001 or 4224 or successor applicable form, as the case may be, and any other
required form, certifying in each case that such Foreign Lender is entitled to
receive payments under this Credit Agreement or the Revolving Loans payable to
it without deduction or withholding of any United States federal income taxes or
with such withholding imposed at a reduced rate (the "REDUCED RATE"), and (ii) a
valid, duly completed IRS Form W-8 or W-9 or successor applicable form, as the
case may be, to establish an exemption from United States backup withholding
tax. Each such Foreign Lender shall also deliver to the Agent and the Borrowers
two further copies of said Form 1001 or 4224 and W-8 or W-9, or successor
applicable forms, or other manner of required certification, as the case may be,
on or before the date that any such form expires or becomes obsolete or
otherwise is required to be resubmitted as a condition to obtaining an exemption
from a required withholding of United States federal income tax or entitlement
to having such withholding imposed at the Reduced Rate or after the occurrence
of any event requiring a change in the most recent form previously delivered by
it to the Borrowers and the Agent, and such extensions or renewals thereof as
may reasonably be requested by the Borrowers and the Agent, certifying (i) in
the case of a Form 1001 or 4224 that such Foreign Lender is entitled to receive
payments under this Credit Agreement or the Revolving Notes payable to it
without deduction or withholding of any United States federal income taxes,
unless in any such case any
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change in a tax treaty to which the United States is a party, or any change
in law or regulation of the United States or official interpretation thereof
has occurred after the Closing Date and prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable
or that would prevent such Foreign Lender from duly completing and delivering
any such form with respect to it, and such Foreign Lender advises the
Borrowers and the Agent that it is not capable of receiving payments without
any deduction or withholding at the Reduced Rate, or (ii) in the case of a
Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(f) If a Tax Transferee that is organized under the laws of a
jurisdiction outside of the United States acquires an interest in this Credit
Agreement or any Revolving Loan or a Foreign Lender changes the office
through which Loans are made, accounted for or booked, the transferor, or the
applicable Foreign Lender, in the case of a change of office, shall cause
such Tax Transferee to agree that, on or prior to the effective date of such
acquisition or change, as the case may be, it will deliver to the Borrowers
and the Agent (i) two valid, duly completed copies of IRS Form 1001 or 4224
or successor applicable form, as the case may be, and any other required
form, certifying in each case that such Tax Transferee is entitled to receive
payments under this Credit Agreement and the Revolving Notes payable to it
without deduction or withholding of United States federal income tax or with
such withholding imposed at a Reduced Rate; and (ii) a valid, duly completed
IRS Form W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax. Each Tax
Transferee that delivers to the Borrowers and the Agent a Form 1001 or 4224,
and Form W-8 or W-9 and any other required form, pursuant to the next
preceding sentence, further undertakes to deliver two further copies of the
said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of required certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or otherwise is required
to be resubmitted as a condition to obtaining an exemption from a required
withholding of United States federal income tax or entitlement to having such
withholding imposed at the Reduced Rate or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrowers and the Agent, and such extensions or renewals thereof
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as may reasonably be requested by the Borrowers and the Agent, certifying (i)
in the case of a Form 1001 or 4224 that such Tax Transferee is entitled to
receive payments under this Restated Agreement without deduction or
withholding of any United States federal income taxes or with such
withholding imposed at the Reduced Rate, unless any change in treaty, law or
regulation or official interpretation thereof has occurred after the
effective date of such acquisition or change and prior to the date on which
any such delivery would otherwise be required that renders all such forms
inapplicable or that would prevent such Tax Transferee from duly completing
and delivering any such form with respect to it, and such Tax Transferee
advises the Borrowers and the Agent that it is not capable of receiving
payments (a) without any deduction or withholding of United States federal
income tax or (b) with such withholding at the Reduced Rate, as the case may
be, or (ii) in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax.
(g) If any Taxes for which the Borrowers would be required to make
payment under this Section 4.10 are imposed, the Lender, the Issuing Bank, the
Collateral Agent or the Agent, as the case may be, shall use its reasonable best
efforts to avoid or reduce such Taxes by taking any appropriate action
(including, without limitation, assigning its rights hereunder to a related
entity or a different office) which would not in the sole opinion of such
Lender, the Issuing Bank, the Collateral Agent or Agent be otherwise
disadvantageous to such Lender, the Issuing Bank, the Collateral Agent or Agent,
as the case may be.
(h) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 4.10 shall survive the payment in full of the Obligations.
SECTION 4.11. AFFECTED LENDERS. If the Borrowers are obligated to
pay to any Lender any amount under Sections 4.9 or 4.10 materially in excess of
any such amounts payable to the other Lenders, the Borrowers may, if no Default
or Event of Default then exists, replace such Lender with another lender
acceptable to the Agent, and such Lender hereby agrees to be so replaced subject
to the following:
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(a) The obligations of the Borrowers hereunder to the Lender to be
replaced (including such increased or additional costs incurred from the
date of notice to the Borrowers of such increase or additional costs
through the date such Lender is replaced hereunder) shall be paid in full
to the Agent for the account of such Lender concurrently with such
replacement;
(b) The replacement Lender shall be a bank or other financial
institution that is not subject to the increased costs arising under
Section 4.9 which may have effectuated the Borrowers' election to replace
any Lender hereunder, and each such replacement Lender shall execute and
deliver to the Agent such documentation satisfactory to the Agent pursuant
to which such replacement Lender is to become a party hereto, conforming to
the provisions of Section 11.8, with a Commitment equal to that of the
Lender being replaced (before giving effect to Section 2.8) and shall make
a Loan or Loans in the aggregate principal amount equal to the aggregate
outstanding principal amount of the Loan or Loans of the Lender being
replaced (or Loans that should have been made but for a Defaulting Lender's
failure to lend);
(c) Upon such execution of such documents referred to in clause (b)
and repayment of the amounts referred to in clause (a), the replacement
lender shall be a "Lender" with a Commitment as specified hereinabove and
the Lender being replaced shall cease to be a "Lender" hereunder, except
with respect to indemnification provisions under this Credit Agreement,
which shall survive as to such replaced Lender;
(d) The Agent shall reasonably cooperate in effectuating the
replacement of any Lender under this Section 4.11, but at no time shall the
Agent be obligated to initiate any such replacement; and
(e) Any Lender replaced under this Section 4.11 shall be replaced at
the Borrowers' sole cost and expense and at no cost or expense to the Agent
or any of the Lenders (other than a Defaulting Lender).
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. CONDITIONS TO INITIAL LOANS AND LETTERS OF CREDIT. The
obligation of each Lender to fund its Proportionate Share of the initial Loan
and the obligation of the Issuing Bank to issue the initial Letter of Credit is
subject to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the best knowledge of the
Credit Parties, litigation threatened in writing, proceeding, inquiry or
other action seeking an injunction or other restraining order, damages or
other relief with respect to the transactions contemplated by this Credit
Agreement, the other Credit Documents, the Registration Statement or the
Credit Parties' other business activities, except where such litigation,
proceeding, inquiry or other action could not have a Material Adverse
Effect.
(b) The Borrowers shall have paid all accrued fees and expenses of
the Agent, the Collateral Agent and the Lenders in connection with the
negotiation, preparation, execution and delivery of the Credit Documents
(including, without limitation, the reasonable accrued fees and expenses of
counsel to the Agent).
(c) The Agent and the Lenders shall have received each of the
agreements, opinions, reports, approvals, consents, certificates and other
documents set forth on the Closing Document List attached hereto as
Schedule 5.1(c), in each case, in form and substance satisfactory to the
Lenders, except those agreements and certificates which are permitted to be
delivered post-Closing pursuant to Section 7.1(s), (t) and (u)
(d) All documentation relating to the transactions contemplated
hereby (including, without limitation, the Intercompany Subordinated Notes,
the Senior Note Guaranty and the Credit Documents) shall be in form and
substance satisfactory to the Agent and the Lenders.
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(e) All Existing Indebtedness shall be on terms and conditions
(including, without limitation, amount, pricing, amortization,
intercreditor arrangements and extent of subordination) satisfactory to the
Agent and the Collateral Agent.
(f) The Credit Parties shall have been released from all obligations
under the Existing Loan Facilities and all related documents and agreements
pursuant to a release in form and substance satisfactory to the Agent and
the Collateral Agent and all liens and security interests related thereto
shall be released or terminated.
(g) Except for (i) the filing of U.C.C. financing statements under
the Code, (ii) consents or authorizations which have been obtained or
filings which have been made, and which in either case are in full force
and effect or (iii) consents or authorizations the failure to obtain or
filings the failure to make could not have a Material Adverse Effect, no
consent or authorization of, filing with or other act by or in respect of,
any Governmental Authority or any other Person is required in connection
with the Borrowings hereunder, the grant of the Liens pursuant to the
Credit Documents, the consummation of the transactions contemplated by the
Offering Memorandum or the continuing operations of the Guarantor and its
Subsidiaries following such consummation or with the execution, delivery,
performance, validity or enforceability of this Credit Agreement, the
Revolving Notes, the Letters of Credit, the other Credit Documents, the
Senior Notes or other documents executed in connection with the Senior
Notes to which a Credit Party is a party (the Senior Notes and such other
documents, the "Senior Note Documents").
(h) (i) No change, occurrence, event or development or event
involving a prospective change that could have a Material Adverse Effect
shall have occurred and be continuing since December 31, 1995, or
(ii) there shall not have occurred a substantial impairment of the
financial markets generally that is reasonably likely to materially and
adversely affect the transactions contemplated hereby, in each case as
determined by the Agent and each Lender in its sole discretion.
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(i) There shall be established cash management systems for the
Borrowers on terms and conditions satisfactory to the Agent and the
Collateral Agent including, without limitation, establishment of the
Borrowers' principal bank accounts with the Agent, establishment of the
Disbursement Account, and establishment of the Lockboxes with the Lockbox
Banks, and the Agent shall have received separate Lockbox Agreements, duly
executed by Entoleter and Brown and a Lockbox Bank.
(j) Counsel to the Agent shall have performed a legal review
satisfactory to the Agent of all of each Credit Party's material contracts
and tax, litigation, environmental and other potential contingent
liabilities, and of the corporate and capital structure of the Guarantor
and its Subsidiaries.
(k) Each Credit Party shall be in compliance with all material
indentures or agreements to which it is a party.
(l) The Borrowing Base shall be appropriate, in the Agent's and the
Collateral Agent's sole discretion, for the Borrowers' overall business and
working capital requirements, and the Agent and the Collateral Agent shall
have performed an examination satisfactory to it of the working capital
assets of the Credit Parties.
(m) The Liens and all other security interests in favor of the
Agent, for the benefit of the Lenders, shall have been duly perfected and
shall constitute first and prior Liens, except as otherwise permitted in
the Credit Documents.
(n) The Agent and the Collateral Agent shall have received evidence
satisfactory to it that there will be Unused Availability in an amount
satisfactory to it after giving effect to the Revolving Loans to be
borrowed and the Letters of Credit to be issued on the Closing Date.
(o) The Agent shall have received evidence satisfactory to it that
the Guarantor owns one hundred percent of the outstanding capital stock of
Brown and shall be satisfied with respect to all material terms of the
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acquisition of such stock including the terms of any contingent rights
granted to the transferors of such stock.
(p) The Agent shall have received evidence satisfactory to it that
the Guarantor has received not less than $115,000,000 less customary
deductions from the issuance of the Senior Notes on terms and conditions
satisfactory to the Lenders and that the proceeds of the Senior Notes have
been used to repay the Existing Loan Facilities and certain other
Indebtedness of the Guarantor and the Borrowers.
(q) The Agent shall have received such other approvals, opinions or
documents as any Lender or the Issuing Bank through the Agent may
reasonably request.
SECTION 5.2. CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF
CREDIT. The obligation of each Lender to fund its Proportionate Share of any
requested Loan or of the Agent to cause the Issuing Bank to issue any
requested Letter of Credit is subject to the conditions precedent set forth
below. Each Notice of Borrowing and each Letter of Credit Request, and each
issuance by the Borrowers of a check drawn against, or request for transfer
from, the Disbursement Account shall constitute a representation and warranty
that such conditions are satisfied.
(a) All representations and warranties contained in this Credit
Agreement and the other Credit Documents shall be true and correct on and as
of the date of such Notice of Borrowing or Letter of Credit Request or
issuance of a check drawn against or request for transfer from the
Disbursement Account, as if then made, other than representations and
warranties that relate solely to an earlier date;
(b) No Default or Event of Default shall have occurred, or would
result from the making of the requested Revolving Loan or the issuance of the
requested Letter of Credit, which has not been waived or cured; and
(c) No event has occurred since December 31, 1995 which has had
or could have a Material Adverse Effect.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.
Each Credit Party represents and warrants as follows:
(a) ORGANIZATION AND QUALIFICATION. Such Credit Party and each of
its Subsidiaries (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, (ii) has
the power and authority to own its properties and assets and to transact
the businesses in which it presently is, or proposes to be, engaged and
(iii) is duly qualified and is authorized to do business and is in good
standing in each jurisdiction where it presently is, or proposes to be,
engaged in business. Schedule 6.1(a) lists all jurisdictions in which such
Credit Party and each of its Subsidiaries are qualified to do business as
foreign corporations as of the Closing Date.
(b) AUTHORITY. Such Credit Party has the requisite corporate power
and authority to execute, deliver and perform each of the Credit Documents
to which it is a party. All corporate action necessary for the execution,
delivery and performance of any of the Credit Documents has been taken.
(c) ENFORCEABILITY. This Credit Agreement is and, when executed and
delivered and each other Credit Document is and, when executed, and
delivered, will be the legal, valid and binding obligation of such Credit
Party which is a party thereto, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency
or similar laws affecting creditors' rights generally, and (ii) general
principles of equity.
(d) NO CONFLICT. The execution, delivery and performance of each
Credit Document by such Credit Party does not contravene (i) the Governing
Documents of such Credit Party, or (ii) any Requirement of Law or (iii) any
franchise, license, permit, indenture, contract,
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lease, agreement, instrument or other commitment to which it is a party
or by which it or any of its properties are bound, and will not, except
as contemplated herein, result in the imposition of any material Liens
upon any of its properties.
(e) CONSENTS AND FILINGS. No consent, authorization, approval or
filing is required in connection with the execution, delivery and
performance of this Credit Agreement or any Credit Document, or the
continuing operations of such Credit Party except: (i) those that have
been obtained or made; (ii) filings necessary to create, perfect or retain
the perfection of Liens against the Collateral; and (iii) in the case of
the continuing operations of such Credit Party, those the failure to obtain
could not have a Material Adverse Effect.
(f) GOVERNMENT REGULATION. Such Credit Party is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, the Investment Company Act
of 1940, or any other Requirement of Law that limits its ability to incur
indebtedness or its ability to consummate the transactions contemplated in
the Registration Statement, this Credit Agreement and the other Credit
Documents.
(g) SOLVENCY. The fair saleable value of the assets of the
Guarantor and its Subsidiaries (including contribution rights) on a
consolidated basis and of such Credit Party on an individual basis exceeds
all its probable liabilities, including those to be incurred pursuant to
the Senior Note Documents, this Credit Agreement and the other Credit
Documents. No such Person (i) has unreasonably small capital in relation
to the business in which it is or proposes to be engaged and (ii) has
incurred, or believes that it will incur, after giving effect to the
transactions contemplated by the Senior Note Documents, this Credit
Agreement and the other Credit Documents, debts beyond its ability to pay
as such debts become due.
(h) RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All property
consisting of Collateral is owned or leased by such Credit Party, free
and clear of any and all Liens in favor
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of third parties, other than Permitted Liens. Upon the proper filing of the
UCC financing statements, the security interests granted pursuant to the
Credit Documents constitute valid and enforceable first (except for
Permitted Liens and other liens permitted hereunder), prior and perfected
Liens on the Collateral to the extent such Liens can be perfected by the
filing of such financing statements.
(i) FINANCIAL DATA. The Guarantor and its Restricted Subsidiaries
have provided to the Agent and each of the Lenders complete and accurate
copies of its annual audited Financial Statements for the fiscal year ended
December 31, 1995, reported on by Ernst & Young L.L.P. and its unaudited
Financial Statements for the fiscal period ended August 31, 1996. Such
Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved and fairly present the
respective financial positions, results of operations and cash flows of the
Guarantor and its Restricted Subsidiaries for each of the periods covered.
Neither the Guarantor nor any of its Subsidiaries has any Contingent
Obligation, or liability for taxes or long-term leases, which is not
reflected in such Financial Statements or the footnotes thereto. During
the period from December 31, 1995 to and including the Closing Date there
has been no sale, transfer or other disposition by the Guarantor or any of
its Restricted Subsidiaries of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to
the consolidated financial condition of the Guarantor and its Subsidiaries
at December 31, 1995 except for the Tape Acquisition. Since December 31,
1995 (a) there has been no change, occurrence, development or event which
has had or could have a Material Adverse Effect and (b) no dividends or
other returns of capital or other distributions have been declared, paid or
made upon the capital stock of any Credit Party, except in connection with
the Guarantor's acquisition of stock of Brown, nor has any of the capital
stock of such Credit Party been redeemed, retired, purchased or otherwise
acquired for value by such Credit Party or any of its Subsidiaries.
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(j) CASH FLOW STATEMENTS. The forecasted cash flow statements and
other financial statements of each Borrower individually and the Guarantor
and its Subsidiaries on a consolidated basis delivered to the Lenders were
prepared in good faith on the basis of assumptions which were fair in light
of the conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, such Credit Party's best estimate of
its and its Restricted Subsidiaries' future financial performance.
(k) LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The address of the
principal place of business and chief executive office of each Credit Party
is set forth on Schedule 6.1(k). The books and records of each Credit
Party, and all of its chattel paper and records of Accounts, are (or will
be) maintained exclusively at the locations for such Credit Party set forth
on such Schedule. There is no jurisdiction in which any Credit Party has
any Collateral (except for vehicles and Inventory in transit for
processing) other than those jurisdictions with respect to such Credit
Party identified on Schedule 6.1(k). A complete list of the legal name and
address of each premises at which any Credit Party's Inventory is located
is set forth on Schedule 6.1(k). Schedule 6.1(k) indicates whether each
premises listed thereon is leased or owned by such Credit Party. None of
the receipts received and to be received by any Credit Party from any
warehouseman state that any Credit Party's Inventory covered thereby is to
be delivered to bearer or to the order of a named person or to a named
person and such named person's assigns.
(l) SUBSIDIARIES; OWNERSHIP OF STOCK. The only direct or indirect
Subsidiaries of such Credit Party are those listed on Schedule 6.1(l)(i) as
amended from time to time by the Guarantor to reflect Permitted
Acquisitions. Such Credit Party is the record and beneficial owner of all
of the shares of capital stock of each of the Subsidiaries listed on
Schedule 6.1(l)(ii). Except as set forth on Schedule 6.1(l)(iii), there
are no proxies, irrevocable or otherwise, with respect to the shares of
capital stock of the Borrowers or any of their Subsidiaries, and no equity
securities of any of the Borrowers or any of their Subsidiaries are or may
become required to be issued by
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reason of any options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any capital stock
of any Borrower or any of their Subsidiaries and there are no contracts,
commitments, understandings or arrangements by which any Borrower or any
of its Subsidiaries is or may become bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for
such shares. All of such shares so owned by such Credit Party are owned
by such Credit Party free and clear of any Liens, except for the Liens
permitted by Section 7.2(a)(vii). As of the Closing Date there are no
Unrestricted Subsidiaries.
(m) NO JUDGMENTS OR LITIGATION. Except as set forth on
Schedule 6.1(m), no judgments, orders, writs or decrees are outstanding
against the Credit Parties or any of their Subsidiaries nor is there now
pending or, to the best of such Credit Party's knowledge after diligent
inquiry, threatened any litigation, contested claim, investigation,
arbitration, or governmental proceeding by or against any of the Credit
Parties or any of their Subsidiaries that (i) could individually or in the
aggregate, have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of the Senior Note Documents, this
Agreement, any Note or any other Loan Document or the consummation of the
transactions contemplated hereby or thereby.
(n) LICENSES AND PERMITS. Such Credit Party has obtained and holds
in full force and effect, all franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights of way and
other rights and approvals which are necessary or advisable for the
operation of its business as presently conducted and as proposed to be
conducted.
(o) NO DEFAULTS. None of the Credit Parties nor any of their
Subsidiaries is in default under any term of any indenture, contract,
lease, agreement, instrument or other commitment to which any of them is a
party or by which any of them is bound which could, individually or in the
aggregate, have a Material Adverse Effect. Such Credit
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Party knows of no dispute regarding any such indenture, contract,
lease, agreement, instrument or other commitment which could,
individually or in the aggregate, have a Material Adverse Effect.
(p) LABOR MATTERS. Schedule 6.1(p) accurately sets forth all labor
contracts, collective bargaining agreements or other agreements with labor
organizations to which a Credit Party or any of its Subsidiaries is a party
as of the Closing Date, and their dates of expiration. There are no
existing or threatened strikes, lockouts or other disputes relating to any
collective bargaining or similar agreement to which a Credit Party or any
of its Subsidiaries is a party which could, individually or in the
aggregate, have a Material Adverse Effect.
(q) COMPLIANCE WITH LAW. None of the Credit Parties nor any of its
Subsidiaries has violated or failed to comply with any Requirement of Law,
which violation or failure to comply could, individually or in the
aggregate, have a Material Adverse Effect. The transactions contemplated
by the Senior Note Documents have been consummated in accordance with all
applicable laws.
(r) ERISA.
(i) None of the Credit Parties or any of its Subsidiaries or
any ERISA Affiliate maintains or contributes to any Plan, other
than those listed on Schedule 6.1(r).
(ii) The Credit Parties, each of their Subsidiaries and each
ERISA Affiliate have fulfilled all contribution obligations for each
Plan (including obligations related to the minimum funding standards
of ERISA and the Internal Revenue Code).
(iii) No Termination Event has occurred nor has any other event
occurred that is likely to result in a Termination Event.
(iv) None of the Credit Parties or any of their Subsidiaries or
any ERISA Affiliate is required to or
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reasonably expects to be required to provide security to any Plan
under Section 401(a)(29) of the Internal Revenue Code.
(v) The Credit Parties, each of their Subsidiaries and each
ERISA Affiliate are in compliance in all respects with any
applicable provisions of ERISA with respect to all Plans. There
has been no prohibited transaction as defined in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code (a "PROHIBITED
TRANSACTION") with respect to any Plan or, to the best knowledge of
such Credit Party, with respect to any Multiemployer Plan, which
could result in any material liability to such Credit Party, its
Subsidiaries or any other ERISA Affiliates. The Credit Parties,
each of their Subsidiaries and each ERISA Affiliate have made when
due any and all payments required to be made under any agreement
relating to a Multiemployer Plan or any Requirement of Law
pertaining thereto. With respect to each Plan and Multiemployer
Plan, each Credit Party, each of their Subsidiaries and each ERISA
Affiliate have not incurred nor do they expect to incur any
liability to the PBGC and have not had asserted against them any
penalty for failure to fulfill the minimum funding requirements of
ERISA.
(vi) To such Credit Party's best knowledge, any Multiemployer
Plan to which a Credit Party, any of its Subsidiaries or any ERISA
Affiliate contributes is able to pay benefits under each
Multiemployer Plan when due.
(vii) None of the Credit Parties, any of their Subsidiaries or
any ERISA Affiliate has instituted or intends to institute
proceedings to terminate any Plan.
(viii) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in, and as of January 1, 1996,
the most recent actuarial report for such Plan, does not exceed the
aggregate fair market value of the assets of such Plan by an amount
greater than $1,500,000.
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(ix) None of the Credit Parties, any of their Subsidiaries or any
ERISA Affiliate has incurred or reasonably expects to incur any
material withdrawal liability under ERISA to any Multiemployer Plan.
(x) To the extent that any Plan is insured, the Credit Parties,
their Subsidiaries and all ERISA Affiliates have paid when due all
premiums required to be paid for all periods through and including the
Closing Date. To the extent that any Plan is funded other than with
insurance, the Credit Parties, their Subsidiaries and all ERISA
Affiliates have made when due all contributions required to be paid
for all periods through and including the Closing Date.
(s) BUSINESS AND PROPERTIES. Neither the business nor the properties
of the Credit Parties or any of their Subsidiaries is affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance) that could have a
Material Adverse Effect.
(t) INVESTMENT COMPANY. No Credit Party is an "investment company,"
or an "affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of any Loans, nor the
issuance of any Letters of Credit, nor the application of the proceeds or
repayment thereof by such Borrower, nor the consummation of the other
transactions contemplated by this Credit Agreement, the other Credit
Documents or the Senior Note Documents, will violate any provision of such
Act or any rule, regulation or order of the Securities and Exchange
Commission thereunder.
(u) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on
Schedule 6.1(u), (i) none of the Credit Parties or any of their
Subsidiaries is the subject of a judicial or administrative proceeding or
investigation relating to the violation of any Environmental Laws, or
asserting potential liability arising from the release or disposal by any
Person of any Hazardous Materials which individually or in the
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aggregate could have a Material Adverse Effect, (ii) none of the Credit
Parties or any of their Subsidiaries has filed or received any notice
under any Environmental Laws concerning the treatment, storage,
disposal, spill or release or threatened release of any Hazardous
Materials at, on, beneath or adjacent to property owned or leased by a
Credit Party or any of its Subsidiaries, or the release or threatened
release at any other location of any Hazardous Material generated,
used, stored, treated, transported or released by or on behalf of a
Credit Party or any of its Subsidiaries which individually or in the
aggregate could have a Material Adverse Effect; and (iii) none of the
Credit Parties or any of their Subsidiaries has knowledge of any
contingent liability for any release of any Hazardous Materials, in
each case which individually or in the aggregate could have a Material
Adverse Effect.
(v) REAL PROPERTY. Except as set forth on Schedule 6.1(v), no Credit
Party either owns or leases any real property.
(w) MATERIAL CONTRACTS. Set forth on Schedule 6.1(w) is a complete
and accurate list of all Material Contracts, showing as of the date hereof
the parties, subject matter and term thereof. Each such contract has been
duly authorized, executed and delivered by each Credit Party that is a
party thereto, and, to such Credit Party's best knowledge, each other party
thereto. Except as described on Schedule 6.1(w), none of the Material
Contracts contains any burdensome restrictions on a Credit Party or any of
its Restricted Subsidiaries or any of their respective properties, and each
Material Contract is in full force and effect and is binding upon and
enforceable against each Credit Party thereto in accordance with its terms,
and there exists no default under such contract by any party thereto.
(x) INTELLECTUAL PROPERTY. Set forth on Schedule 6.1(x) hereto is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and licenses thereof,
of each Credit Party that are material to the financial condition or
operation of its business, showing as of the date hereof the jurisdiction
in which registered, the
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registration number, the date of registration and the expiration date.
Each Credit Party owns or licenses all material patents, trademarks,
service-marks, logos, tradenames, trade secrets, know-how, copyrights,
or licenses and other rights with respect to any of foregoing, which
are necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted. To the best of such
Credit Party's knowledge, no Credit Party has infringed any patent,
trademark, service-mark, tradename, copyright, license or other right
owned by any other Person by the sale or employment of any product,
process, method, substance, part or other material presently
contemplated to be sold or employed, where such sale or employment
could have a Material Adverse Effect on such Credit Party and no claim
or litigation is pending, or to the best of such Credit Party's
knowledge, threatened against or affecting any Credit Party that
contests its right to sell or use any such product, process, method,
substance, part or other material.
(y) TAXES AND TAX RETURNS.
(i) The Credit Parties and each of their Subsidiaries has
properly completed and timely filed, without request for extension,
all income tax returns they are required to file. The information
filed is complete and accurate in all material respects. All
deductions taken in such income tax returns are appropriate and in
accordance with applicable laws and regulations, except deductions
that may have been disallowed but are being challenged in good faith
and for which adequate reserves have been made in accordance with
GAAP.
(ii) All taxes, assessments, fees and other governmental charges
for periods beginning prior to the date hereof have been timely paid
(or, if not yet due, adequate reserves therefor have been established)
and none of the Credit Parties or any of their Subsidiaries has any
material liability for taxes in excess of the amounts so paid or
reserves so established.
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(iii) No deficiencies for taxes have been claimed, proposed or
assessed by any taxing or other Governmental Authority against any
Credit Party or any of its Subsidiaries and no tax liens have been
filed. There are no pending or threatened audits, investigations or
claims for or relating to any liability for taxes and there are no
matters under discussion with any Governmental Authority which could
result in a material additional liability for taxes. Either the
federal income tax returns of such Credit Party have been audited by
the Internal Revenue Service and such audits have been closed, or the
period during which any assessments may be made by the Internal
Revenue Service has expired without waiver or extension for all years
up to and including the fiscal year of such Credit Party ended
December 31, 1991. No extension of a statute of limitations relating
to taxes, assessments, fees or other governmental charges is in effect
with respect to any of the Credit Parties or any of their
Subsidiaries.
(iv) None of the Credit Parties or any of their Subsidiaries is a
party to or has any obligation under any written tax sharing agreement
or agreement regarding payments in lieu of taxes except as described
on Schedule 6.1(w).
(z) CORPORATE AND TRADE NAME. During the past five years, no Credit
Party has been known by or used any other corporate or fictitious name.
(aa) TITLE TO PROPERTY. Each Credit Party and its Restricted
Subsidiaries has (i) good and indefeasible fee simple title to or valid
leasehold interests in all of its real property and (ii) good and
marketable title to all of its other property (including, without
limitation, all real and other property in each case as reflected in the
Financial Statements of the Guarantor and its Restricted Subsidiaries
delivered to the Agent hereunder), other than, with respect to properties
described in clause (ii) above, properties disposed of in the ordinary
course of business or in any manner otherwise permitted under this Credit
Agreement since the date of the most recent audited
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consolidated balance sheet of the Guarantor and its Subsidiaries, and
in each case subject to no Liens other than those Liens that are
permitted by Section 7.2(a).
(bb) ACCURACY AND COMPLETENESS OF INFORMATION. All factual
information heretofore, contemporaneously or hereafter furnished by or on
behalf of a Credit Party or any of its Subsidiaries in writing to the
Agent, any Lender, or the Auditors for purposes of or in connection with
this Credit Agreement or any Credit Documents, or any transaction
contemplated hereby or thereby is or will be true and accurate in all
material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact
necessary to make such information not misleading at such time. There are
no facts now known to any officer of such Credit Party which individually
or in the aggregate could have a Material Adverse Effect and which have not
been set forth herein, in the Financial Statements of the Guarantor and its
Restricted Subsidiaries, or any certificate, opinion or other written
statement made or furnished by such Credit Party to the Agent.
(cc) AFFILIATE TRANSACTIONS. Except as set forth on Schedule
6.1(cc), none of the Credit Parties or any of their Subsidiaries is a party
to or bound by any agreement or arrangement (whether oral or written) to
which any Affiliate of any of the Credit Parties or any of its Subsidiaries
is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of such Credit Party's or such Subsidiary's
business and (ii) upon fair and reasonable terms no less favorable to the
Credit Party or such Subsidiary than it could obtain in a comparable arm's-
length transaction with an unaffiliated Person.
(dd) NO OTHER INDEBTEDNESS. After giving effect to the closing of
this Credit Agreement and the transactions contemplated hereby, none of the
Credit Parties or any of their Restricted Subsidiaries has any Indebtedness
other than Indebtedness that is permitted under Section 7.2(b).
(ee) SURVIVAL OF REPRESENTATIONS. All representations made by such
Credit Party in this Credit Agreement and in
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any other Credit Document executed and delivered in connection herewith
shall survive the execution and delivery hereof and thereof and the closing
of the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF THE BORROWERS
SECTION 7.1. AFFIRMATIVE COVENANTS. Until termination of this Credit
Agreement and payment and satisfaction of all Obligations due hereunder:
(a) FINANCIAL REPORTING. The Credit Parties shall timely deliver to
each Lender the following information:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not later
than 90 days after each fiscal year end, beginning with the fiscal year
ending December 31, 1996 (or, in the case of clause (B) only, December 31,
1997): (A) an annual audited consolidated Financial Statement of the
Guarantor and its Restricted Subsidiaries and the annual unaudited
consolidating statements of the Guarantor's Restricted Subsidiaries; (B) a
comparison in reasonable detail to the prior year audited consolidated
Financial Statements of the Guarantor and the consolidating statements of
its Restricted Subsidiaries; (C) the Auditors' unqualified opinion,
"Management Letter" and a statement indicating that the Auditors have not
obtained knowledge of the existence of any Default or Event of Default
during their audit; (D) a narrative discussion of the Guarantor's
consolidated and consolidating financial condition and results of
operations and the consolidated liquidity and capital resources for such
fiscal year, prepared by an Authorized Officer of the Guarantor; and (E) a
compliance certificate signed by an Authorized Officer, substantially in
the form of Exhibit M (a "Compliance Certificate"), with an attached
schedule of calculations demonstrating compliance with the financial
covenants in Section 7.2. To the extent that the Guarantor's annual report
on Form 10-K contains any of the foregoing items, the Agent will accept the
Agent's Form 10-K in lieu of such items.
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(ii) PROJECTIONS. Not later than 45 days after each fiscal year end,
beginning with the fiscal year ended December 31, 1996, projections
of the Credit Parties' and Restricted Subsidiaries' financial condition and
results of operations (on a consolidated and consolidating basis) for the
next five (5) years prepared in good faith and based upon reasonable
assumptions, containing projected consolidating balance sheets, statements
of operations, a consolidated statement of cash flows and a calculation of
EBITDA for the Guarantor and its Restricted Subsidiaries reconciled to Net
Income and statements of changes in shareholders equity on a monthly basis
for the first year and annually thereafter. The projections provided
pursuant to this Section will not be construed by the Agent or the Lenders
as a guaranty of results or performance in the future.
(iii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but not
later than 45 days after the end of each of the first three fiscal
quarters, beginning with the fiscal quarter ending June 30, 1996 (or, in
the case of clause (B) only, March 31, 1997): (A) the Financial Statements
of the Guarantor and its Restricted Subsidiaries as of the fiscal quarter
then ended, and for the fiscal year to date; (B) a comparison in reasonable
detail to the Financial Statements of the Guarantor and its Restricted
Subsidiaries for the corresponding periods of the prior fiscal year;
(C) the certification of an Authorized Officer of the Guarantor that such
Financial Statements have been prepared in accordance with GAAP (subject to
year-end audit adjustments); (D) a narrative discussion of the Guarantor's
consolidated and consolidating financial condition and results of
operations and the consolidated and consolidating liquidity and capital
resources for such fiscal quarter and fiscal year to date, prepared by an
Authorized Officer of the Guarantor; and (E) a Compliance Certificate
signed by an Authorized Officer of the Guarantor with an attached schedule
of calculations demonstrating compliance with the financial covenants in
Section 7.2. To the extent that the Guarantor's quarterly report on Form
10-Q contains any of the foregoing items, the Agent will accept the
Guarantor's Form 10-Q in lieu of such items.
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(iv) MONTHLY FINANCIAL STATEMENTS. As soon as available, but not
later than thirty (30) days after the end of each month other than
December, commencing with the month of August 1996 (or, in the case of
clause (B) only, January 1997), and 45 days after the end of each fiscal
year of the Guarantor: (A) a consolidated and consolidating balance sheet
for the Guarantor and its Restricted Subsidiaries as at the end of such
month and for the fiscal year to date, consolidated and consolidating
statements of operations for such month and for the fiscal year to date and
a calculation of EBITDA and Capital Expenditures for the Guarantor and its
Restricted Subsidiaries for such month and for the fiscal year to date;
(B) a comparison to the balance sheet, statement of operations , EBITDA and
Capital Expenditures for the same periods in the prior year; (C) a
certification by an Authorized Officer of the Guarantor that such balance
sheets, statements of operations and statement of cash flows have been
prepared in accordance with GAAP (subject to year-end audit adjustments);
and (D) a Compliance Certificate signed by an Authorized Officer of the
Guarantor with an attached schedule of calculations demonstrating
compliance with the financial covenants in Section 7.2.
(v) MONTHLY COMPARISON TO PRIOR PROJECTIONS. As soon as available,
but not later than 30 days after the end of each month other than December,
commencing with the month of August 1996, and 45 days after the end of each
fiscal year of the Guarantor, a comparison of actual results of operations
and capital expenditures for the Guarantor and its Restricted Subsidiaries
for such month and for the period from the beginning of the current fiscal
year through the end of such month with amounts previously projected for
those periods and with actual results for corresponding periods in the
previous fiscal year.
(vi) PUBLIC FILINGS. As soon as available, copies of all 10-Ks,
10-Qs, 8-Ks, proxy statements, annual reports, quarterly reports,
registration statements and any other filings or other communications made
by the Credit Parties to their stockholders or the Securities Exchange
Commission from time to time pursuant to the Exchange Act or the Securities
Act of 1933, as amended.
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(b) COLLATERAL REPORTING. The Credit Parties shall timely deliver to
the Agent and Collateral Agent the following certificates and reports:
WEEKLY AND MONTHLY BORROWING BASE CERTIFICATES. Weekly, before
12:00 noon on the second Business Day of each week (except the last week of
each month); monthly, within two (2) Business Days after the last Business
day of each month, and at any other time requested by the Agent or the
Collateral Agent in either's reasonable discretion, a borrowing base
certificate (the "BORROWING BASE CERTIFICATE"), which shall be:
(A) completed substantially in the form of Exhibit B, detailing each
Borrower's Eligible Accounts Receivable and each Borrower's Eligible
Inventory as of each Friday of the immediately preceding week and as of the
last day of each month, as applicable (or as of such other date as the
Agent or the Collateral Agent may request); (B) prepared by or under the
supervision of each Borrower's Authorized Officer and certified by such
officer subject only to adjustment upon completion of the normal year-end
audit of physical inventory; and (C) attached to such additional schedules
and other information as the Agent or the Collateral Agent may reasonably
request.
(ii) APPRAISALS. When requested by the Agent or the Collateral Agent,
but no more than once in any fiscal year (unless a Default or an Event of
Default has occurred and is continuing), a report of Inventory, based upon
a physical count, which shall describe each Credit Party's Inventory by
category and by item (in reasonable detail) and report the then appraised
value (at lower of cost or market) of such Inventory. (The right to an
appraisal set forth in this subsection shall be in addition to and not in
lieu of the Agent's and Collateral Agent's rights under Section 7.1(e).
(iii) FURTHER ASSURANCES. When requested by the Agent or the
Collateral Agent, any further information regarding the Collateral,
business affairs and financial condition of the Credit Parties or any of
their Subsidiaries.
(c) NOTIFICATION REQUIREMENTS. The Borrowers shall timely give the
Agent and each of the Lenders the following notices:
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(i) NOTICE OF DEFAULTS. Promptly, and in any event within three (3)
Business Days after becoming aware of the occurrence of a Default or Event
of Default, a certificate of an Authorized Officer of the Guarantor or a
Borrower specifying the nature thereof and the Guarantor's and Borrowers'
proposed response thereto, each in reasonable detail.
(ii) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in any event
within five (5) Business Days after a Credit Party becomes aware of (A) any
proceeding being instituted or threatened to be instituted by or against a
Credit Party or any of its Restricted Subsidiaries in any federal, state,
local or foreign court or before any commission or other regulatory body
(federal, state, local or foreign) involving a sum in excess of $1,000,000,
(B) any order, judgment or decree in excess of $1,000,000 being entered
against a Credit Party or any of its Restricted Subsidiaries or any of
their respective properties or assets or (C) any actual or prospective
change, development or event which has had or could have a Material Adverse
Effect, a written statement describing such proceeding, order, judgment,
decree, change, development or event and any action being taken with
respect thereto by a Credit Party or any such Subsidiary.
(iii) ERISA NOTICES.
(A) Promptly, and in any event within ten (10) Business Days
after a Credit Party, any of its Subsidiaries or any ERISA Affiliate
knows or has reason to know that a Termination Event has occurred, a
written statement of an Authorized Officer of a Credit Party
describing such Termination Event and any action that is being taken
with respect thereto by a Credit Party, any such Subsidiary or ERISA
Affiliate, and any action taken or threatened by the Internal Revenue
Service, Department of Labor or PBGC. The Credit Parties, their
Subsidiaries and the ERISA Affiliate shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan
sponsor;
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(B) promptly, and in any event within three (3) Business Days
after a Credit Party, any of its Subsidiaries of any ERISA Affiliate
knows or has reason to know of the filing thereof with the Internal
Revenue Service, a copy of each funding waiver request filed with
respect to any Benefit Plan and all communications received by any
Credit Party, any of its Subsidiaries or any ERISA Affiliate with
respect to such request;
(C) promptly, and in any event within three (3) Business Days
after receipt by any Credit Party, any of its Subsidiaries or any
ERISA Affiliate, of the PBGC's intention to terminate a Benefit Plan
or to have a trustee appointed to administer a Benefit Plan, copies of
each such notice;
(D) promptly, and in any event within three (3) Business Days
after receipt by any Credit Party, any of its Subsidiaries or any
ERISA Affiliate, notice (including the nature of the event and, when
known, any action taken or threatened by the Internal Revenue Service
or the PBGC with respect thereto) of:
(1) any Prohibited Transaction which could subject a Credit
Party, any of its Subsidiaries or any ERISA Affiliate to a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code in
connection with any Plan, or any trust created thereunder,
(2) any cessation of operations by a Credit Party, any of
its Subsidiaries or any ERISA Affiliate at a facility in the
circumstances described in Section 4063(e) of ERISA,
(3) a failure by a Credit Party, any of its Subsidiaries or
any ERISA Affiliate to make a payment to a Plan required to avoid
imposition of a lien under Section 302(f) of ERISA,
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(4) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of
ERISA, or
(5) any change in the actuarial assumptions or funding
methods used for any Benefit Plan, where the effect of such
change is to materially increase or materially reduce the
unfunded benefit liability or obligation to make periodic
contributions;
(E) promptly upon the request of the Agent or any Lender, each
annual report (IRS Form 5500 series) and all accompanying schedules,
the most recent actuarial reports, the most recent financial
information concerning the financial status of each Plan administered
or maintained by a Credit Party, any of its Subsidiaries or any ERISA
Affiliate, and schedules showing the amounts contributed to each such
Plan by or on behalf of such Credit Party, Subsidiary or ERISA
Affiliate in which any of their personnel participate or from which
such personnel may derive a benefit, and each Schedule B (Actuarial
Information) to the annual report filed by such Credit Party,
Subsidiary or ERISA Affiliate with the Internal Revenue Service with
respect to each such Plan; and
(F) Promptly upon the filing thereof, copies of any Form 5310,
or any successor or equivalent form to Form 5310, filed with the PBGC
in connection with the termination of any Benefit Plan.
(iv) MATERIAL CONTRACTS. Promptly, and in any event within ten (10)
Business Days after any Material Contract of a Credit Party or any of its
Restricted Subsidiaries is terminated prior to its scheduled termination or
a material modification, amendment or waiver of such Material Contract is
entered into or any new Material Contract is entered into, a written
statement describing such event, with copies of amendments or new
contracts, and an explanation of any actions being taken with respect
thereto.
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(v) COLLATERAL MATTERS. At least twenty (20) Business Days prior
written notice to the Agent of any change in the location of any Collateral
or in the location of the chief executive office or place of business of
any Credit Party from the locations specified in Schedule 6.1(k). At least
ten (10) Business Days prior to any such change, the Credit Parties shall
cause to be executed and delivered to the Agent any financing statements,
Collateral Access Agreements or other documents reasonably required by the
Agent, all in form and substance reasonably satisfactory to the Agent.
(d) CORPORATE EXISTENCE. Except as permitted by Section 7.2(d), the
Credit Parties shall, and shall cause each of their Restricted Subsidiaries to,
(i) maintain its corporate existence, (ii) maintain in full force and effect all
material licenses, bonds, franchises, leases, trademarks and qualifications to
do business, and all material patents, contracts and other rights necessary or
advisable to the profitable conduct of their businesses, and (iii) continue in,
and limit their operations to, the same general lines of business as presently
conducted by them.
(e) BOOKS AND RECORDS; INSPECTIONS. The Credit Parties agree to
maintain, and to cause each of their Restricted Subsidiaries to maintain, books
and records pertaining to the Collateral in such detail, form and scope as is
consistent with good business practice. The Credit Parties agree that the
Agent, the Collateral Agent and their respective agents may enter upon the
premises of the Credit Parties or any of their Restricted Subsidiaries at any
time and from time to time, during normal business hours and upon reasonable
notice under the circumstances, and at any time at all on and after the
occurrence of a Default which continues beyond the expiration of any grace or
cure period applicable thereto, and which has not otherwise been waived by the
Agent in accordance with Section 11.11 or cured, for the purposes of
(i) inspecting and verifying the Collateral, (ii) inspecting and/or copying (at
the Credit Parties' expense) any and all records pertaining thereto, and
(iii) discussing the affairs, finances and business of the Credit Parties with
any officers, employees and directors of the Credit Parties or with the
Auditors.
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(f) INSURANCE. The Credit Parties agree to maintain, and to cause
each of their Restricted Subsidiaries to maintain, public liability insurance,
business interruption insurance, third party property damage insurance and
replacement value insurance on their assets (including the Collateral) under
such policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. All policies covering the Collateral are to
name the Agent for the benefit of the Lenders as an additional insured and the
loss payee in case of loss, and are to contain such other provisions as the
Agent may reasonably require to fully protect the interest of the Agent for the
benefit of the Lenders in the Collateral and to any payments to be made under
such policies.
(g) CASUALTY LOSS. The Credit Parties shall provide written notice
to the Agent and the Lenders of the occurrence of any of the following events
within five (5) Business Days after the occurrence of such event: any asset or
property owned or used by any Credit Party is (i) damaged or destroyed, or
suffers any material loss, or (ii) condemned, confiscated or otherwise taken, in
whole or in part, or the use thereof is otherwise diminished so as to render
impracticable or unreasonable the use of such asset or property for the purposes
to which such asset or property were used immediately prior to such
condemnation, confiscation or taking, by exercise of the powers of condemnation
or eminent domain or otherwise, and in either case the amount of the damage,
destruction, loss or diminution in value is in excess of $1,000,000
(collectively, a "CASUALTY LOSS"). The Credit Parties shall diligently file and
prosecute their claim or claims for any award or payment in connection with a
Casualty Loss.
(h) TAXES. The Credit Parties agree, jointly and severally, to pay,
when due, and to cause each of their Subsidiaries to pay when due, all taxes
lawfully levied or assessed against the Credit Parties, any of their
Subsidiaries or any of the Collateral before any penalty or interest accrues
thereon; PROVIDED, HOWEVER, that, unless such taxes have become a federal tax or
ERISA Lien on any of the assets of the Credit Parties or any of their
Subsidiaries, no such tax need be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have
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been made therefor as required in order to be in conformity with GAAP.
(i) COMPLIANCE WITH LAWS. The Credit Parties agree to comply, and to
cause each of their Subsidiaries to comply, with all Requirements of Law
applicable to the Collateral or any part thereof, or to the operation of their
businesses or their assets generally, unless the Credit Parties or their
Subsidiaries contest any such Requirements of Law in a reasonable manner and in
good faith. other than those Requirements of Law the non-compliance with which
would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
(j) USE OF PROCEEDS. The Revolving Loans and Letters of Credit made
to the Borrowers hereunder shall be used by the Borrowers (i), together with all
or a portion of the proceeds of the Senior Notes, to refinance the Existing
Indebtedness owed by the Credit Parties under the Existing Loan Facilities and
(ii) for the Borrowers' general corporate purposes. The Borrowers shall not use
any portion of the proceeds of any Revolving Loans for the purpose of purchasing
or carrying any "margin stock" (as defined in Regulation G of the Board of
Governors of the Federal Reserve System) in any manner which violates the
provisions of Regulation G or X of said Board of Governors or for any other
purpose in violation of any applicable statute or regulation, or of the terms
and conditions of this Credit Agreement.
(k) FISCAL YEAR. Each Credit Party agrees to maintain, and to cause
each of its Subsidiaries to maintain, its fiscal year as a year ending
December 31.
(l) MAINTENANCE OF PROPERTY. Except as permitted by Section 7.2(e),
the Credit Parties agree to keep, and to cause each of their Restricted
Subsidiaries to keep, all property useful and necessary to their respective
businesses in good working order and condition (ordinary wear and tear excepted)
in accordance with their past operating practices and not to commit or suffer
any material waste with respect to any of their properties.
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(m) ERISA DOCUMENTS. The Credit Parties will cause to be
delivered to the Agent, upon the Agent's request, each of the following: (i)
a copy of each Plan (or, where any such plan is not in writing, complete
description thereof) (and if applicable, related trust agreements or other
funding instruments) and all amendments thereto, all written interpretations
thereof and written descriptions thereof that have been distributed to
employees or former employees of the Credit Parties or their Subsidiaries;
(ii) the most recent determination letter issued by the Internal Revenue
Service with respect to each Plan; (iii) for the three most recent plan
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Plan; (iv) all actuarial reports prepared for
the last three plan years for each Plan; (v) a listing of all each Plan, with
the aggregate amount of the most recent annual contributions required to be
made by the Credit Parties, any of their Subsidiaries or any ERISA Affiliate
to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to
the Credit Parties, any of their Subsidiaries or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan; and (vii)
information relating to the aggregate amount of the most recent annual
payments made to former employees of the Credit Parties, any of their
Subsidiaries or any ERISA Affiliate under any Retiree Health Plan.
(n) ENVIRONMENTAL AND OTHER MATTERS. (i) The Credit Parties and
their Subsidiaries will conduct their businesses so as to comply in all
material respects with all applicable Environmental Laws, in all
jurisdictions in which any of them is doing business, including, without
limitation, compliance in all material respects with the terms and conditions
of all permits and governmental authorizations, except to the extent that the
Credit Parties or any of their Subsidiaries are contesting, in good faith by
appropriate legal proceedings, any such Environmental Law or interpretation
thereof or application thereof; PROVIDED, FURTHER, that the Credit Parties
and each of their Subsidiaries shall comply in all material respects with the
applicable order of any court or other governmental agency relating to such
Environmental Laws unless a Credit Party or any Subsidiary shall currently be
prosecuting an appeal or proceedings for review and shall have secured a stay
of enforcement or execution or other arrangement postponing
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enforcement or execution pending such appeal or proceedings for review. If a
Credit Party or any of its Subsidiaries shall (A) receive written notice that
any material violation of any federal, state or local Environmental Law may
have been committed or is about to be committed by such Credit Party or any
of its Subsidiaries, (B) receive written notice that any administrative or
judicial complaint or order has been filed or is about to be filed against
such Credit Party or any of its Subsidiaries alleging material violations of
any federal, state or local Environmental Law, or requiring such Credit Party
or any of its Subsidiaries to take any action in connection with the release
of toxic or hazardous substances into the environment or (C) receive any
written notice from a federal, state, or local governmental agency or private
party alleging that such Credit Party or any of its Subsidiaries may be
liable or responsible for material costs associated with a response to or
cleanup of a release of a toxic or hazardous substance into the environment
or any damages caused thereby, such Credit Party shall provide the Agent and
the Lenders with a copy of such notice within ten (10) days after the receipt
thereof by such Credit Party or any of its Subsidiaries. Within ten (10)
days after a Credit Party learns of the enactment or promulgation of any
federal, state or local Environmental Law, which could have a Material
Adverse Effect, such Credit Party shall provide the Agent and the Lenders
with notice thereof. Each Credit Party shall promptly take all reasonable
actions necessary to prevent the imposition of any Liens on any of its
properties arising out of or related to any environmental matters. At the
request of the Agent, the Credit Party shall provide the Agent with any
additional information relating to environmental matters and any potential
related liability resulting therefrom as the Agent may reasonably request.
(ii) For purposes of this Section 7.1(n), "material" means any
noncompliance or basis of liability that would reasonably be expected to
subject the Credit Parties or any of their Subsidiaries to liability in
excess of $500,000.
(o) SECURITY INTERESTS. The Credit Parties will defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein, other than claims relating to Liens
permitted by the Credit Documents. The Credit Parties agree to comply with
the requirements of all state and federal laws in order to grant to
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the Lenders valid and perfected first priority security interests in the
Collateral, except as otherwise permitted by the Credit Documents. The Agent
is hereby authorized by the Credit Parties to file any financing statements
covering the Collateral whether or not the Credit Parties' signatures appear
thereon. The Credit Parties agree to do whatever the Agent may reasonably
request, from time to time, by way of: filing notices of liens, financing
statements, and amendments, renewals and continuations thereof; cooperating
with the Agent's representatives; keeping stock records; paying claims which
could, if unpaid, become a Lien on the Collateral; and performing such
further acts as the Agent may reasonably require in order to effect the
purposes of this Credit Agreement and the other Credit Documents. Any and
all fees, costs and expenses incurred in connection with the actions
contemplated by this Section 7.1(o) shall be jointly and severally borne and
paid by the Credit Parties. If same are not promptly paid by the Credit
Parties, the Agent may pay same on the Credit Parties' behalf, and the amount
thereof shall be an Obligation secured hereby and due to the Agent on demand.
(p) TRADEMARKS. The Credit Parties shall do and cause to be done
all things necessary to preserve and keep in full force and effect all of
their and their Restricted Subsidiaries' material registrations of
trademarks, service marks and other marks, trade names or other trade rights.
(q) FURTHER ASSURANCES. The Credit Parties shall take, and shall
cause each of their Subsidiaries to take, all such further actions and
execute all such further documents and instruments as the Agent or the
Collateral Agent may at any time reasonably determine in its sole discretion
to be necessary or desirable to further carry out and consummate the
transactions contemplated by the Credit Documents, to cause the execution,
delivery and performance of the Credit Documents to be duly authorized and to
perfect or protect the Liens (and the priority status thereof) of the Agent
for the benefit of the Lenders on the Collateral.
(r) TAX SHARING AGREEMENT. Within thirty (30) days following the
Closing Date, the Credit Parties shall deliver to the Agent the Tax Sharing
Agreement, duly executed by the Credit Parties.
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(s) CENTRAL LOCKBOX AGREEMENT. Within thirty (30) days following
the Closing Date, Central shall deliver to the Agent a Lockbox Agreement duly
executed by Central and a Lockbox Bank.
(t) COLLATERAL ACCESS AGREEMENTS. Within thirty (30) days
following the Closing Date, the Borrowers shall deliver to the Agent
Collateral Access Agreements executed by A&M Slitting with respect to Brown's
location in Los Angeles, California, Mathias Paper Corp. with respect to
Brown's location in High Point, North Carolina and Lake Bluff Associates with
respect to Central's location in Brighton, Colorado.
(u) GOOD STANDING CERTIFICATES. Within thirty (30) days
following the Closing Date, Brown shall deliver to the Agent certificates
from each jurisdiction in which it is qualified to do business as a foreign
corporation as of the Closing Date stating that it is duly qualified and is
authorized to do business and is in good standing in such jurisdiction.
SECTION 7.2. NEGATIVE COVENANTS. Until termination of this
Credit Agreement and payment and satisfaction of all Obligations due
hereunder:
(a) LIENS, ETC. The Credit Parties will not, nor will they permit
any of their Restricted Subsidiaries to, directly or indirectly at any time
create, incur, assume or suffer to exist any Lien on or with respect to any
of their properties of any character (including, without limitation,
Accounts) whether now owned or hereafter acquired, except:
(i) Liens created by the Collateral Documents;
(ii) Permitted Liens;
(iii) the Liens existing on the date hereof and described on
Schedule 7.2(a);
(iv) Purchase Money Liens or Liens securing capital leases
permitted under Section 7.2(b)(xii);
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(v) cash deposits for bids and other performance obligations
under contracts entered into in the ordinary course of business;
(vi) the replacement, extension or renewal of any Lien
permitted by clauses (iii), (iv) or (v) above upon or in the same
property theretofore subject thereto or the replacement, extension
or renewal (without increase in the amount or change in any direct
or contingent obligor) of the Indebtedness secured thereby;
(vii) Liens granted by the Guarantor on the shares of stock of
the Borrowers, any of their Restricted Subsidiaries or any other
Restricted Subsidiary of the Guarantor and the proceeds thereof to
secure the Senior Notes;
(viii) leases or subleases of real estate granted by a Credit
Party to other Persons in the ordinary course of business and not
materially interfering with the conduct of the business of such
Credit Party and cash security deposits made pursuant to real estate
leases in customary amounts; and
(ix) if the Tape Acquisition is consummated in accordance with
Section 7.2(f)(ix), Liens on assets of Tape Inc. securing Indebtedness
permitted under Section 7.2(b)(xi).
(b) INDEBTEDNESS. The Credit Parties will not, nor will they permit
any of their Restricted Subsidiaries to, directly or indirectly, at any
time create, incur, assume or suffer to exist, any Indebtedness other than:
(i) Indebtedness under the Credit Documents;
(ii) Indebtedness secured by Liens permitted by Section
7.2(a)(iii);
(iii) the Existing Indebtedness;
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(iv) indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(v) Indebtedness of a Borrower or its Restricted Subsidiaries
secured by purchase money liens on equipment acquired after the date
of this Credit Agreement not to exceed $1,250,000 in the aggregate
outstanding at any one time ("PURCHASE MONEY LIENS") so long as such
Indebtedness shall be from parties and on terms and conditions
satisfactory to the Agent. Each Purchase Money Lien shall attach only
to the property to be acquired, a description shall have been
furnished to the Agent for any item of equipment for which the
purchase price is greater than $250,000, and the debt incurred shall
not exceed one hundred percent (100%) of the purchase price of the
item or items of equipment purchased;
(vi) Indebtedness constituting Contingent Obligations otherwise
permitted by Section 7.2(v);
(vii) Indebtedness evidenced by the Intercompany Subordinated
Notes owing by one Borrower or the Guarantor to another Borrower or
the Guarantor; PROVIDED that (A) such Indebtedness is used only for
general corporate purposes, (B) such Indebtedness is evidenced by one
or more promissory notes subordinated to the payment of the
Obligations and otherwise in form and substance satisfactory to the
Agent, (C) such promissory notes are pledged to the Agent for the
ratable benefit of the Lenders pursuant to documentation in form and
substance satisfactory to the Agent and (D) such notes are delivered
to the Agent with note powers executed in blank;
(viii) the Senior Notes;
(ix) Indebtedness under the Senior Note Guaranty;
(x) Indebtedness constituting Investments otherwise permitted
by Sections 7.2(f)(vii), (ix), (x) and (xi) provided that such
Indebtedness is on terms
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and conditions including, without limitation, amount, pricing,
amortization, intercreditor arrangements and extent of subordination
reasonably satisfactory to the Majority Lenders;
(xi) if the Tape Acquisition is consummated in accordance with
Section 7.2(f)(ix), Indebtedness of Tape Inc.; and
(xii) Indebtedness for capital leases not to exceed $5,000,000.
(c) LEASE OBLIGATIONS. The Credit Parties will not, nor will they
permit any of their Restricted Subsidiaries to, at any time create, incur
or assume any obligations as lessee for the rental or hire of other real or
personal property of any kind under leases or agreements to lease other
than operating leases existing on the Closing Date, leases entered into by
any of the Credit Parties or their Restricted Subsidiaries in the ordinary
course of their business and capital leases permitted under this Agreement.
(d) CORPORATE CHANGES, ETC. The Credit Parties will not, nor will
they permit any of their Restricted Subsidiaries to, directly or
indirectly, at any time merge or consolidate or otherwise alter or modify
the Credit Parties' or any such Restricted Subsidiary's Governing
Documents, corporate names, mailing addresses, principal places of
business, structure, status or existence, or liquidate or dissolve itself
(or suffer any liquidation or dissolution), except, provided the Agent
receives five (5) Business Days' prior written notice thereof, for the
merger of any Borrower with and into another Borrower or the merger of a
Borrower's Restricted Subsidiary with another Restricted Subsidiary or with
a Borrower.
(e) SALES, ETC. OF ASSETS. The Credit Parties will not, nor will
they permit any of their Restricted Subsidiaries to, directly or
indirectly, at any time make any Asset Sale other than, subject to Section
2.9(d):
(i) sales of Inventory and obsolete equipment in the ordinary
course of its business;
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(ii) the sale of any other assets that do not constitute
Collateral (other than the capital stock of the Borrowers), PROVIDED
that (A) such sales are for fair value, (B) at least eighty percent
(80%) of the aggregate consideration is paid in full in cash at the
time of sale and (C) the aggregate amount of all such sales does not
exceed $1,000,000 in the aggregate for any fiscal year;
(iii) so long as no Event of Default shall occur and be
continuing, the grant of any option or other right to purchase any
asset in a transaction which would be permitted under the provisions
of the immediately preceding clause (ii); and
(iv) Asset Sales by a Credit Party or one of its Subsidiaries
to another Credit Party to the extent permitted by Section 7.2(g).
(f) INVESTMENTS IN OTHER PERSONS. The Credit Parties will not, nor
will they permit any of their Restricted Subsidiaries to, directly or
indirectly, at any time make or hold any Investment in any Person (whether
in cash, securities or other property of any kind) other than:
(i) Investments in Cash Equivalents;
(ii) Advances or loans made in the ordinary course of business
not to exceed $250,000 outstanding at any one time to any one Person
and $1,000,000 in the aggregate outstanding at any one time;
(iii) Investments between the Credit Parties and their
Restricted Subsidiaries in existence as of the date hereof and
described on Schedule 7.2(f);
(iv) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(v) stock or obligations issued to a Credit Party by any
Person (or the representative of such Person) in respect of
Indebtedness of such Person owing to such Credit Party in connection
with the insolvency,
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bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of the debts of such Person; PROVIDED,
THAT, the original of any such stock or instrument evidencing such
obligations and issued to a Credit Party or any of its Restricted
Subsidiaries shall be promptly delivered to the Agent, upon the
Agent's request, together with such stock power, assignment or
endorsement by such Credit Party or Subsidiary as the Agent may
request;
(vi) Investments in existence on the date hereof and described
on Schedule 7.2(f);
(vii) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom, the Consolidated Interest
Coverage Ratio is at least 1.60:1.00 and the Unused Availability is at
least $10,000,000 after giving effect thereto, upon prior written
notice to the Agent and the Lenders, Permitted Acquisitions in an
aggregate amount during the term of this Credit Agreement not to
exceed the Acquisition Basket; PROVIDED HOWEVER that (A) prior to any
such Permitted Acquisition the Credit Parties shall deliver to the
Agent and the Lenders good faith projections in form and substance
acceptable to the Agent and the Lenders which demonstrate that the
Credit Parties will remain in compliance with the covenants in this
Credit Agreement after giving effect to such Acquisition and (B) with
respect to any Permitted Acquisition other than one made with the Net
Proceeds from the issuance of capital stock of the Guarantor, the Debt
to Adjusted EBITDA Ratio calculated on a pro forma basis satisfactory
to the Majority Lenders after giving effect to such Permitted
Acquisition is not greater than the ratio set forth below opposite
such period:
PERIOD RATIO
------ -----
Closing Date through
September 30, 1998 5.50:1.00
October 1, 1998 through
December 31, 1998 5.25:1.00
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January 1, 1999 through
September 30, 1999 5.00:1.00
October 1, 1999 and
thereafter 4.75:1.00;
(viii) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom and the Consolidated Interest
Coverage Ratio is at least 1.6:1.00, upon prior written notice to the
Agent and the Lenders, (A) Acquisitions, in an Unrestricted Subsidiary
with Capital Stock of the Guarantor or the Net Cash Proceeds from the
issuance of capital stock of the Guarantor and (B) in addition to the
Acquisitions permitted by clause (A) above, investments in
Unrestricted Subsidiaries in an aggregate outstanding amount not to
exceed $2,000,000 plus up to fifty percent (50%) of Excess Cash Flow
at any time;
(ix) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom, upon prior written notice to
the Agent and the Lenders, the Tape Acquisition PROVIDED that (A) the
purchase price shall be no more than $12,000,000 including the
assumption of Indebtedness permitted under Section 7.2(b)(xi), (B) all
Indebtedness of Tape Inc. which remains outstanding after the closing
of such Acquisition shall be on terms and conditions reasonably
acceptable to the Agent and Majority Lenders, (C) any Liens on Tape
Inc.'s assets which remain after such Acquisition shall be permitted
under Section 7.2(a)(ix) and shall be on terms and conditions
reasonably acceptable to the Agent and the Majority Lenders, (D) the
purchase agreement and other documentation relating to the Tape
Acquisition shall be executed and delivered in form and substance
reasonably satisfactory to the Agent and the Majority Lenders, (E) the
proviso in the definition of Permitted Acquisitions shall be satisfied
and (F) the Agent and the Majority Lenders shall be satisfied with the
results of its review of Tape Inc.'s business, operations, assets,
material contracts and liabilities
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including any tax, environmental or other potential or contingent
liabilities; and
(x) such other Investments as the Agent and the Majority
Lenders may approve in writing in their sole discretion.
(g) AFFILIATE TRANSACTIONS. The Credit Parties will not, nor will
they permit any of their Restricted Subsidiaries to, at any time enter
into, directly or indirectly, any transaction with (including, without
limitation, the purchase, sale or exchange of property or the rendering of
any service to) any Affiliate of the Credit Parties without the consent of
the Majority Lenders unless such transaction is in the ordinary course of
and pursuant to the reasonable requirements of such Credit Party's or such
Restricted Subsidiary's business, as the case may be, and upon fair and
reasonable terms no less favorable to such Credit Party or such Restricted
Subsidiary than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person and such transaction or series of transactions
does not involve aggregate payments in excess of $250,000; PROVIDED HOWEVER
that (i) any employment agreement entered into by a Credit Party in the
ordinary course of business and consistent with the past practices of the
Credit Party, (ii) transactions between or among a Credit Party (other than
the Guarantor) and another Credit Party (other than the Guarantor),
(iii) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, payments pursuant to agreements or
contracts with, or for the benefit of, any Affiliate, which exists on the
date of this Agreement and which are listed on Schedule 6.1(cc),
(iv) transactions permitted by, and complying with, Section 7.2(h) shall
not be prohibited by the terms of this Section 7.2(g) and (v) the payment
by the Guarantor to Lynch Corporation of management fees of up to $100,000
per year.
(h) DIVIDENDS, EXCHANGE, ETC. The Credit Parties will not, nor will
they permit any of their Restricted Subsidiaries to, directly or
indirectly, declare or pay any dividends (other than solely in shares of
stock) on, or make any payment on account of, or set apart assets for a
sinking
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or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of its capital
stock or any warrants, options or rights to purchase any such capital
stock, whether now or hereafter outstanding, or make any other distribution
in respect thereof (including, without limitation, any payment on account
of the Contingent Rights), either directly or indirectly, whether in cash
or property or in obligations of the Credit Parties or any of their
Restricted Subsidiaries, except that (A) Subsidiaries of the Borrowers may
pay dividends to the Borrowers, (B) so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, the
Borrowers may pay dividends to the Guarantor to the extent (and only to the
extent) required to enable the Guarantor to pay accrued and unpaid interest
on the Senior Notes, to pay taxes pursuant to the Tax Sharing Agreement, to
make payments in the ordinary course of business pursuant to the Overhead
Allocation Agreement and to make Permitted Acquisitions all to the extent
such payments are actually made by the Guarantor, and (C) with the prior
written consent of the Majority Lenders, the Guarantor may make cash
payments on account of the Contingent Rights.
(i) CHANGE IN NATURE OF BUSINESS. The Credit Parties will not, nor
will they permit any of their Restricted Subsidiaries to, at any time make
any material change in the lines of their business as carried on at the
date hereof.
(j) CHARTER AMENDMENTS, ETC. The Credit Parties will not, nor will
they permit any of their Restricted Subsidiaries to, at any time amend
their certificates of incorporation.
(k) ACCOUNTING CHANGES. The Credit Parties will not, nor will they
permit any of their Restricted Subsidiaries to, at any time make or permit
any change in accounting policies or reporting practices, except as
required by GAAP.
(l) PREPAYMENTS AND MATERIAL AMENDMENTS OF MATERIAL CONTRACTS. The
Credit Parties will not, nor will they permit any of their Restricted
Subsidiaries to, at any time (i) prepay, redeem, purchase, defease or
otherwise satisfy
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prior to the scheduled maturity thereof in any manner, or make any
payment in violation of any subordination terms of, any Indebtedness,
other than the prepayment of the Loans in accordance with the terms of
this Credit Agreement, (ii) amend, modify, cancel or terminate or permit
the amendment, modification, cancellation or termination of, any of the
Material Contracts, except in the event that such amendments or
modifications could not have a Material Adverse Effect or (iii) amend,
modify, cancel or terminate or permit the amendment, modification,
cancellation or termination of the Tax Sharing Agreement or the Overhead
Allocation Agreement. Without limiting the generality of the foregoing,
the Credit Parties shall not, and shall not permit any of their
Restricted Subsidiaries to, amend, modify or change, or consent or agree
to any amendment, modification or change, to any of the terms of the
Intercompany Subordinated Notes and any other Indebtedness subordinated
to the payment of the Obligations (A) if the effect of such amendment,
modification or change is to (directly or indirectly) (i) increase the
amount of any payment of principal thereof, (ii) increase the interest
rate or premium payable thereon, (iii) increase the amount of fees or
any other amounts payable with respect thereto, (iv) shorten the
scheduled amortization or average weighted life thereof, (v) shorten the
date for payment of interest or principal thereon, (vi) shorten the
final maturity thereof or (vii) change any covenant or any event of
default or condition to an event of default thereunder, or (B) if such
amendment, modification or change would, together with all other
amendments, modifications or changes made, increase materially the
obligations of such Credit Party or any such Restricted Subsidiary or
confer additional material rights on the holder of the Intercompany
Subordinated Notes or such other Indebtedness subordinated to the
payment of the Obligations.
(m) NEGATIVE PLEDGE. The Credit Parties will not, nor will they
permit any of their Restricted Subsidiaries to, at any time enter into or
suffer to exist, any agreement prohibiting or conditioning the creation or
assumption of any Lien upon any of their property or assets other than
(i) in favor of the Agent and the Lenders, (ii) in connection with Liens
described in Section 7.2(a)(iv), but
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solely with respect to the property so acquired, or (iii) in favor of the
trustee for the benefit of the holders of the Senior Notes so long as there
is no restriction on the liens granted under this Agreement.
(n) LIMITATION ON SALES AND LEASEBACKS. The Credit Parties will not,
nor will they permit any of their Restricted Subsidiaries to, at any time
enter into any arrangement with any Person providing for the leasing by
such Credit Party or such Subsidiary of real or personal property which has
been or is to be sold or transferred by such Credit Party or such
Subsidiary to such Person or to any other Person to whom funds have been or
are to be advanced by such Person on the security of such property or
rental obligations of such Credit Party or such Subsidiary.
(o) PARTNERSHIPS; RESTRICTED SUBSIDIARIES; JOINT VENTURES. The
Credit Parties will not, nor will they permit any of their Restricted
Subsidiaries to, at any time create any direct or indirect subsidiary,
enter into any joint venture or similar arrangement or become a partner in
any general or limited partnership except as otherwise permitted by Section
7.2(f); provided that a Credit Party may subject to Section 7.2(f), create
or acquire a Restricted Subsidiary if the following conditions are met:
(i) such new Subsidiary shall promptly guarantee the Obligations and grant
the Agent liens and security interests in all of its Accounts and Inventory
and related intangibles for the benefit of the Lenders pursuant to
documentation in form and substance satisfactory to the Agent; and (ii) the
Credit Parties shall take and shall cause such Subsidiary to take, all such
further actions and execute all such further documents and instruments as
the Agent or the Collateral Agent reasonably determines in its sole
discretion to be necessary or desirable to cause the execution, delivery
and performance of such documentation to be duly authorized and to perfect,
protect or enforce the security interests and Liens (and the priority
status thereof) granted to the Agent.
(p) ADDITIONAL BANK ACCOUNTS. The Borrowers and the Guarantor will
not at any time open, maintain or otherwise have or permit their Restricted
Subsidiaries to enter into
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or otherwise have any checking, savings or other accounts at any bank or
other financial institution, or any other account where money is or may
be deposited or maintained with any Person, other than the Collection
Accounts, the Disbursement Accounts, an Account of the Guarantor at a
financial institution acceptable to the Agent which shall enter into an
agency agreement acceptable to the Agent (the "GUARANTOR ACCOUNT") or as
otherwise agreed to in writing by the Agent except those accounts listed
on Schedule 7.2(p).
(q) EXCESS CASH. Each Borrower and Restricted Subsidiary will not,
and will not permit any of their Restricted Subsidiaries to, directly or
indirectly, maintain in the aggregate in all deposit accounts of the
Borrowers, and their Restricted Subsidiaries (other than the Disbursement
Accounts and payroll accounts) total cash balances and Investments
permitted by Section 7.2(f)(i) in excess of $25,000 at any time during
which any Revolving Loans are outstanding and the Guarantor will not
maintain in excess of $500,000 in the Guarantor Account.
(r) CAPITAL EXPENDITURES. The Credit Parties and their Restricted
Subsidiaries will not at any time make or commit to make any payments for
Capital Expenditures other than (A) the Capital Expenditures by Brown of up
to $2,000,000 to acquire coating equipment prior to December 31, 1996 and
(B) Capital Expenditures which are directly related to the business
conducted by the Borrowers and their Restricted Subsidiaries on the Closing
Date
(i) in the aggregate not exceeding the amount (the "Base
Amount") per six month period (or portion thereof) set forth below:
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PERIOD AMOUNT
------ ------
from the Closing Date through
December 31, 1996 $2,000,000
January 1, 1997 through June 30, 1997 $4,000,000
July 1, 1997 through December 31, 1997 $4,000,000
for each six month period thereafter $5,000,000
PROVIDED, HOWEVER, that for any six month period commencing with the six
month period ending June 30, 1997, the Base Amount set forth above may be
increased by carrying over to any such six month period any portion of the
Base Amount not spent in the immediately preceding six month period (but
not in any period prior thereto); and
(ii) at any time in an aggregate amount equal to the Equity
Proceeds Amount at such time (which Capital Expenditures will not be
included in any determination under clause (i) above).
(s) MINIMUM CONSOLIDATED NET WORTH. The Credit Parties will not, on
the last day of each fiscal quarter, permit Consolidated Net Worth to be
less than the sum of (i) $8,750,000 plus (ii) 50% of Net Income of the
Credit Parties and their Restricted Subsidiaries to the extent such Net
Income is positive from the Closing Date through the last day of such
fiscal quarter (treating such period as a single accounting period), plus
(iii) 100% of the aggregate Net Cash Proceeds received by a Credit Party
from any Person (other than a Subsidiary of a Credit Party) from the
issuance and sale from the Closing Date through the last day of such fiscal
quarter of capital stock of any Credit Party.
(t) MINIMUM CONSOLIDATED CURRENT RATIO. The Credit Parties will not
permit the Consolidated Current Ratio, at any time during each period set
forth below, to be less than the ratio set forth below opposite such
period:
PERIOD RATIO
------ -----
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Closing Date through 1.20:1.00
December 31, 1998
January 1, 1999 and thereafter 1.25:1.00
(u) MINIMUM CONSOLIDATED INTEREST COVERAGE RATIO. The Credit Parties
will not permit Consolidated Interest Coverage Ratio, for each fiscal
period set forth below, to be less than the ratio set forth below opposite
such period:
PERIOD RATIO
------ -----
October 1, 1996 through 1.40:1.00
December 31, 1996
January 1, 1997 through 1.40:1.00
March 31, 1997
April 1, 1997 through 1.50:1.00
June 30, 1997
July 1, 1997 through 1.55:1.00
September 30, 1997
October 1, 1997 through 1.60:1.00
December 31, 1997
January 1, 1998 through 1.65:1.00
March 31, 1998
April 1, 1998 through 1.70:1.00
June 30, 1998
July 1, 1998 through 1.80:1.00
September 30, 1998
October 1, 1998 through 1.80:1.00
December 31, 1998
January 1, 1999 through 1.90:1.00
March 31, 1999
April 1, 1999 through 1.90:1.00
June 30, 1999
Each fiscal quarter thereafter 2.00:1.00
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(v) CONTINGENT OBLIGATIONS. The Credit Parties shall not, and shall
not permit any of their Restricted Subsidiaries to, directly or indirectly
incur, assume, or suffer to exist any Contingent Obligation, excluding
(i) indemnities given in connection with the sale of Inventory or other
asset dispositions permitted hereunder and (ii) Contingent Obligations for
Indebtedness permitted to be incurred under Section 7.2(b).
(w) NO PROHIBITED TRANSACTIONS UNDER ERISA. The Credit Parties shall
not, and shall not permit any of the Subsidiaries to, directly or
indirectly:
(i) engage in any prohibited transaction which could reasonably be
expected to result in a civil penalty or excise tax described in
Sections 406 of ERISA or 4975 of the Internal Revenue Code for
which a statutory or class exemption is not available or a
private exemption has not been previously obtained from the
Department of Labor;
(ii) permit to exist with respect to any Plan any accumulated funding
deficiency (as defined in Sections 302 of ERISA and 412 of the
Internal Revenue Code), whether or not waived;
(iii) fail to pay timely required contributions or annual installments
due with respect to any waived funding deficiency to any Benefit
Plan;
(iv) terminate any Benefit Plan where such event would result in any
liability of a Credit Party, any of its Subsidiaries or any ERISA
Affiliate under Title IV of ERISA;
(v) fail to make any required contribution or payment to any
Multiemployer Plan;
(vi) fail to pay any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or
before the due date for such installment or other payment;
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(vii) amend a Plan resulting in an increase in current liability for
the plan year such that either of a Credit Party, any of its
Subsidiaries or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the Internal
Revenue Code; or
(viii) withdraw from any Multiemployer Plan where such withdrawal is
reasonably likely to result in any liability of any such entity
under Title IV of ERISA.
(x) HEDGING TRANSACTIONS. The Credit Parties shall not, and shall
not permit any of their Restricted Subsidiaries to, engage in any
speculative hedging or similar transactions.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "EVENT OF DEFAULT":
(a) the Borrowers shall fail to pay (i) any interest, Fees, Expenses
or other Obligations (other than principal) when due or within three (3)
Business Days of when due, whether at stated maturity, by acceleration, or
otherwise or (ii) any principal when due, whether at stated maturity, by
acceleration or otherwise; or
(b) any representation or warranty made by any Credit Party under or
in connection with any Credit Document shall prove to have been incorrect
in any material respect when made or deemed made; or
(c) a Credit Party shall fail to perform or observe any term,
covenant or agreement contained in Section 7.1(b), (c), (e) and (f) and 7.2
of this Credit Agreement or Section 4(b), (d) or (e) of the Security
Agreement; or
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(d) any Credit Party shall fail to perform or observe any term,
covenant or agreement contained in any Credit Document (other than as set
forth in Sections 8.1(a) and (c)) on its part to be performed or observed
or a Credit Party or any of its Restricted Subsidiaries shall fail to
comply with any provisions contained in any Material Contract to which it
is a party if such failure shall remain unremedied for the lesser of
thirty (30) days after its occurrence or ten (10) days after notice from
the Agent to such Credit Party; or
(e) a Credit Party or any of its Restricted Subsidiaries (i) shall
fail to pay any Indebtedness or any interest or premium thereon, when due
(whether at scheduled maturity or by required prepayment, acceleration,
demand or otherwise), or (ii) shall otherwise be in breach or default in
any of its obligations under any agreement with respect to any such
Indebtedness, if the effect of such failure to pay, breach or default is to
cause such Indebtedness to become due or redeemed or permit the holder or
holders of Indebtedness in an amount in excess of $1,000,000 (or a trustee
or agent on behalf of such holder or holders) to declare such Indebtedness
due or require such Indebtedness to be redeemed prior to its stated
maturity; or
(f) any Credit Party shall dissolve, wind up or otherwise cease its
business; or
(g) a Credit Party or any of its Restricted Subsidiaries shall become
the subject of (i) an Insolvency Event as set forth in clause (e) of the
definition of Insolvency Event that is not resolved or dismissed within
sixty (60) days or (ii) any Insolvency Event except as set forth in clause
(e) of the definition of Insolvency Event; or
(h) any judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against any Credit Party or any of its
Restricted Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of ten (10) consecutive days during which a stay
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of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) any non-monetary judgment or order shall be rendered against a
Credit Party or any of its Restricted Subsidiaries that could have a
Material Adverse Effect, and there shall be any period of thirty (30)
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(j) any covenant, agreement or obligation of any Credit Party
contained in or evidenced by any of the Credit Documents or any of the
subordination provisions in any Intercompany Subordinated Note shall cease
to be enforceable, or shall be determined to be unenforceable, in
accordance with its terms; any Credit Party shall deny or disaffirm its
obligations under any of the Credit Documents or any Liens granted in
connection therewith; or any Liens granted in any of the Collateral shall
be determined to be void, voidable or invalid, are subordinated or are not
given the priority contemplated by this Credit Agreement; or
(k) a Collateral Document shall for any reason (other than pursuant
to the terms thereof) cease to create a valid and, except as otherwise
permitted under Section 7.2(a), perfected first priority Lien on the
Collateral purported to be covered thereby; or
(l) a Change in Control shall have occurred; or
(m) the President or Chief Executive Officer of the Guarantor shall
at any time for any reason cease to be employed by the Guarantor and shall
not be replaced to the satisfaction of the Agent within 90 days thereof and
such event, in the reasonable determination of the Majority Lenders, has a
Material Adverse Effect.
SECTION 8.2. ACCELERATION AND CASH COLLATERALIZATION. Upon the
occurrence and during the continuance of an Event of Default, the Agent may take
any or all of the following actions, without prejudice to the rights of the
Agent or any Lender to enforce its claims against the Credit Parties:
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(a) ACCELERATION. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrowers from the Agent,
all Obligations shall be declared to be immediately due and payable (except
with respect to any Event of Default with respect to a Credit Party set forth
in Section 8.1(g) hereof, in which case all Obligations shall automatically
become immediately due and payable without the necessity of any request of
the Majority Lenders or notice or other demand to the Borrowers) without
presentment, demand, protest or any other action or obligation of the Agent
or any Lender.
(b) TERMINATION OF COMMITMENTS. Upon the written request of the
Majority Lenders, and by delivery of written notice to the Borrowers from the
Agent, the Commitments and the Line of Credit shall be immediately terminated
and, at all times thereafter, all Revolving Loans made by any Lender pursuant
to this Credit Agreement shall be at such Lender's sole discretion, unless
such Event of Default is cured or waived in accordance with Section 11.11.
(c) CASH COLLATERALIZATION. On demand of the Agent or the
Majority Lenders the Borrowers shall immediately deposit with the Agent for
each Letter of Credit then outstanding, cash or Cash Equivalents in an amount
equal to 105% of the greatest amount drawable thereunder.
SECTION 8.3. RESCISSION OF ACCELERATION. After acceleration of
the maturity of the Revolving Loans, if the Borrowers pay all accrued
interest and all principal due (other than by reason of the acceleration) and
all Defaults and Events of Default are otherwise remedied or waived in
accordance with Section 11.11, the Majority Lenders may elect in their sole
discretion, to rescind the acceleration and return any cash collateral.
(This Section is intended only to bind all of the Lenders to a decision of
the Majority Lenders and not to confer any right on the Borrowers, even if
the described conditions for the Majority Lenders' election may be met.)
SECTION 8.4. REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, the Agent and the Lenders shall have all
rights and remedies with respect to the Obligations under the Credit
Documents and the Collateral
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available to it as creditors under applicable law and the Credit Documents
and the Agent may do any or all of the following:
(a) remove for copying all documents, instruments, files and records
(including the copying of any computer records) relating to the Accounts or
use (at the joint and several expense of the Borrowers) such supplies or
space of any Credit Party at such Credit Party's place of business
necessary to properly administer and collect the Accounts thereon;
(b) accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Accounts (in the name of the Borrowers or the
Lenders) and otherwise administer and collect the Accounts;
(c) sell, assign and deliver the Accounts and any returned, reclaimed
or repossessed merchandise, with or without advertisement, at public or
private sale, for cash, on credit or otherwise, subject to applicable law;
and
(d) foreclose the security interests created pursuant to the Credit
Documents by any available procedure, or take possession of any or all of
the Collateral without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or
removing the same.
Any Lender may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by the Credit Parties. If notice of
intended disposition of any Collateral is required by law, it is agreed that ten
(10) Business Days notice shall constitute reasonable notification. The Credit
Parties will assemble the Collateral and make it available to the Agent at such
locations as the Agent may specify, whether at the premises of such Credit Party
or elsewhere, and will make available to the Agent the premises and facilities
of such Credit Party for the purpose of the Agent's taking possession of,
removing or putting the Collateral in saleable form.
SECTION 8.5. RIGHT OF SET-OFF. In addition to and not in limitation
of all rights of offset that any Lender or the
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Issuing Bank may have under applicable law, upon the occurrence of any Event
of Default, and whether or not any Lender or the Issuing Bank has made any
demand or the Obligations of any Credit Party have matured, each Lender and
the Issuing Bank shall have the right to appropriate and apply to the payment
of the Obligations of a Credit Party all deposits and other obligations then
or thereafter owing by such Lender or the Issuing Bank to such Credit Party.
Each Lender or the Issuing Bank exercising such rights shall notify the Agent
thereof (and the Agent shall promptly notify the Borrowers thereof) and any
amount received as a result of the exercise of such rights shall be shared in
accordance with Section 2.7.
SECTION 8.6. LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL
PROPERTY. Unless expressly prohibited by the licensor thereof, if any, the
Agent is hereby granted a license to use all computer software programs, data
bases, processes and materials used by the Credit Parties and their Subsidiaries
in connection with their businesses or in connection with the Collateral. The
Agent agrees not to use any such license prior to the occurrence of an Event of
Default without giving the Borrowers prior notice.
SECTION 8.7. NO MARSHALING; DEFICIENCIES; REMEDIES CUMULATIVE. The
net cash proceeds resulting from the Agent's exercise of any of the foregoing
rights to liquidate all or substantially all of the Collateral (after deducting
all of the Agent's and Collateral Agent's Expenses related thereto) shall be
applied by the Agent to the payment of the Obligations to the Agent and the
Lenders, whether due or to become due, in such order as the Agent may elect.
The Credit Parties shall remain jointly and severally liable to the Agent and
the Lenders for any deficiencies, and the Agent and the Lenders in turn agree to
remit to the Credit Parties or their respective successors or assigns, any
surplus resulting therefrom. The foregoing remedies are not intended to be
exhaustive and the full or partial exercise of any of them shall not preclude
the full or partial exercise of any other available remedy under this Credit
Agreement, under any other Credit Document, at equity or at law.
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ARTICLE IX
CROSS GUARANTIES
SECTION 9.1. GUARANTEE. Each of the Borrowers, jointly and
severally, unconditionally and irrevocably guarantees to the Agent, for the
benefit of the Lenders and the Issuing Bank, the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations.
Each of the Borrowers hereby further agrees, jointly and severally, to pay any
and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel) which may be paid or incurred by the Agent in
enforcing, or obtaining advice of counsel in respect of, any rights with respect
to, or collecting, any or all of the Obligations and enforcing any rights with
respect to, or collecting against, the Borrowers under this Article IX.
SECTION 9.2. OBLIGATIONS UNCONDITIONAL. The obligations of each of
the Borrowers under Section 9.1 are continuing, absolute and unconditional,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the other Borrowers under this Agreement or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Obligations or any other collateral security therefor or guaranty or right of
offset with respect thereto at any time or from time to time held by the Agent
or the Lenders, and, to the fullest extent permitted by applicable law
irrespective of any other circumstance whatsoever (with or without notice to or
knowledge of the Borrowers) that might otherwise constitute, or might be
construed to constitute, a legal or equitable discharge or defense, setoff or
counterclaim of the other Borrowers for the Obligations, or the Borrowers under
this Article IX, in bankruptcy or in any other instance, it being the intent of
this Section 9.2 that the obligations of each of the Borrowers under this
Article IX shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of each of the Borrowers under this Article IX which shall remain
absolute and unconditional as described above:
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(i) at any time or from time to time, without notice to the
Borrowers, the time for any performance of or compliance with any of the
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or any other agreement or instrument referred to herein or
therein shall be done or omitted;
(iii) the maturity of any of the Obligations shall be accelerated,
or any of the Obligations shall be modified, supplemented or amended in any
respect, or any right under this Credit Agreement or any other Credit
Document or agreement or instrument referred to herein or therein shall be
waived or any other guarantee of any of the Obligations or any security
therefor shall be released or exchanged in whole or in part or otherwise
dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Agent or any Lender as security for any of the Obligations shall fail
to be perfected.
Each of the Borrowers waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by any Lender upon this cross guaranty or acceptance of this cross
guaranty; the Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended, amended or waived,
in reliance upon this cross guaranty; and all dealings between any of the
Borrowers, on the one hand, and the Agent and the Lenders, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this cross guaranty. Each of the Borrowers hereby expressly waives
diligence, presentment, demand of payment, protest and all notices whatsoever,
and any requirement that the Agent or any Lender exhaust any right, power or
remedy or proceed against any Borrower under this Credit Agreement or any other
Credit Document or agreement or instrument referred to herein or therein, or
against any other Person under any other guarantee of, or security for, any of
the Obligations. When pursuing its rights and remedies under this Article IX
against a Borrower, the Agent and each Lender may, but shall be under no
obligation to, pursue
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such rights and remedies as it may have against the other Borrowers or any
other Person or against any collateral security or guarantee for the
Obligations or any right of offset with respect thereto, and any failure by
the Agent or any Lender to pursue such other rights or remedies or to collect
any payments from the other Borrowers or any such other Person or to realize
upon any such collateral security or guarantee or to exercise any such right
of setoff, or any release of the other Borrowers or any such other Person or
of any such collateral security, guarantee or right of setoff, shall not
relieve the Borrowers of any liability under this Article IX, and shall not
impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Agent and the Lenders against the
Borrowers.
SECTION 9.3. REINSTATEMENT. The obligations of each of the Borrowers
under this Article IX shall be automatically reinstated if and to the extent
that for any reason any payment by or on behalf of the Borrowers in respect of
the Obligations is rescinded or must be otherwise restored by the Agent or any
Lender, whether as a result of any proceedings in bankruptcy or reorganization
or otherwise.
ARTICLE X
THE AGENT AND THE COLLATERAL AGENT
SECTION 10.1. APPOINTMENT OF AGENT.
(a) Each Lender hereby designates BTCC as its Agent and irrevocably
authorizes the Agent to take action on such Lender's behalf under the Credit
Documents and to exercise the powers and to perform the duties described therein
and to exercise such other powers as are reasonably incidental thereto. The
Agent may perform any of its duties by or through its agents or employees.
(b) Other than the Borrowers' rights under Section 10.9, the
provisions of this Article X are solely for the benefit of the Agent, the
Collateral Agent and the Lenders, and none of the Credit Parties shall have any
rights as a third party beneficiary of any of the provisions hereof. The Agent
shall act
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solely as agent of the Lenders and assumes no obligation toward or
relationship of agency or trust with or for any Credit Party.
SECTION 10.2. NATURE OF DUTIES OF AGENT AND COLLATERAL AGENT.
Neither the Agent nor the Collateral Agent shall have any duties or
responsibilities except those expressly set forth in the Credit Documents.
Neither the Agent, the Collateral Agent nor any of their respective officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of the Agent and the
Collateral Agent shall be mechanical and administrative in nature. Neither the
Agent nor the Collateral Agent shall have a fiduciary relationship in respect of
any Lender or any participant of any Lender.
SECTION 10.3. LACK OF RELIANCE ON AGENT.
(a) Independently and without reliance upon the Agent, each Lender,
to the extent it deems appropriate, has made and shall continue to make (i) its
own independent investigation of the financial or other condition and affairs of
each Credit Party in connection with the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of each
Credit Party, and, except as expressly provided in this Credit Agreement, the
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, whether coming into its possession before the making of the Loans or at
any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or the
Revolving Notes or the financial or other condition of any Credit Party. The
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Credit Agreement or the Revolving Notes, or the financial condition of any
Credit Party, or the existence or possible existence of any Default or
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Event of Default, unless specifically requested to do so in writing by any
Lender.
SECTION 10.4. CERTAIN RIGHTS OF THE AGENT. The Agent may request
instructions from the Majority Lenders at any time. If the Agent requests
instructions from the Majority Lenders with respect to any action or inaction,
the Agent shall be entitled to await instructions from the Majority Lenders
before such action or inaction. No Lender shall have any right of action based
upon the Agent's action or inaction in response to instructions from the
Majority Lenders.
SECTION 10.5. RELIANCE BY AGENT. The Agent may rely upon written or
telephonic communication it believes to be genuine and to have been signed, sent
or made by the proper person. The Agent may obtain the advice of legal counsel
(including counsel for the Borrowers with respect to matters concerning the
Borrowers), independent public accountants and other experts selected by it and
shall have no liability for any action or inaction taken or omitted to be taken
by it in good faith based upon such advice.
SECTION 10.6. INDEMNIFICATION OF AGENT. To the extent the Agent is
not reimbursed and indemnified by the Borrowers, each Lender will reimburse and
indemnify the Agent to the extent of its Proportionate Share for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever (including all Expenses) which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder or
otherwise relating to the Credit Documents unless resulting from the Agent's
gross negligence or willful misconduct. The agreements contained in this
Section shall survive any termination of this Credit Agreement and the other
Credit Documents and the payment in full of the Obligations.
SECTION 10.7. THE AGENT IN ITS INDIVIDUAL CAPACITY. In its
individual capacity, the Agent shall have the same rights and powers hereunder
as any other Lender or holder of a Revolving Note or participation interests and
may exercise the same as though it was not performing the duties specified
herein. The terms "Lenders," "Majority Lenders," "holders of Revolving
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Notes," or any similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity. The Agent and its
Affiliates may accept deposits from, lend money to, acquire equity interests
in, and generally engage in any kind of banking, trust, financial advisory or
other business with the Borrowers or any Affiliate of the Borrowers as if it
were not performing the duties specified herein, and may accept fees and
other consideration from the Borrowers for services in connection with this
Credit Agreement and otherwise without having to account for the same to the
Lenders.
SECTION 10.8. HOLDERS OF REVOLVING NOTES. The Agent may deem and
treat the payee of any Revolving Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
shall have been filed with the Agent. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is the holder of any Revolving Note, shall be conclusive and binding on
any subsequent holder, transferee or assignee of such Revolving Note or of any
Revolving Note or Revolving Notes issued in exchange therefor.
SECTION 10.9. SUCCESSOR AGENT.
(a) The Agent may, upon ten (10) Business Days' notice to the Lenders
and the Borrowers, resign by giving written notice thereof to the Lenders and
the Borrowers. The Agent's resignation shall be effective upon the appointment
of a successor Agent. Such resignation of the Agent shall be deemed to be a
resignation of Bankers Trust Company as Issuing Bank.
(b) Upon receipt of the Agent's resignation, the Majority Lenders may
appoint a successor Agent which shall also be a Lender. Unless an Event of
Default shall have occurred and be continuing at the time of such appointment,
the successor Agent shall be subject to approval by the Borrowers, which
approval shall not be unreasonably withheld and shall be delivered to the
Majority Lenders within ten (10) Business Days after the Borrowers' receipt of
notice of a proposed successor Agent. If a successor Agent has not accepted its
appointment within fifteen (15) Business Days, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent.
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(c) Upon its acceptance of the agency hereunder, such successor
Agent shall 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 this Credit Agreement. The
retiring Agent shall continue to have the benefit of this Article X for any
action or inaction while it was Agent.
SECTION 10.10. COLLATERAL MATTERS.
(a) Each Lender authorizes and directs the Agent to enter into
the Collateral Documents for the benefit of the Lenders. Except as otherwise
set forth herein, any action or exercise of powers by the Majority Lenders
under the Credit Documents, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Lenders.
Prior to an Event of Default, without notice to or consent from any Lender,
the Agent may take any action necessary or advisable to perfect and maintain
the perfection of the Liens upon the Collateral.
(b) The Agent is authorized to release any Lien granted to or
held by the Agent upon any Collateral (i) upon termination of the Commitments
and payment and satisfaction of all of the Obligations, (ii) required to be
delivered from permitted sales of Collateral hereunder, if any, upon receipt
of the proceeds or (iii) if the release can be and is approved by the
Majority Lenders. The Agent may request and the Lenders will provide
confirmation of the Agent's authority to release particular types or items of
Collateral.
(c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Credit Agreement, or consented to in
writing by the Majority Lenders or all of the Lenders, as applicable, and
upon at least five (5) Business Days' prior written request by the Borrowers,
the 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 the Collateral that was sold or transferred; PROVIDED that (i)
the Agent shall not be required to execute any such document on terms which,
in the Agent's opinion, would expose the Agent to liability or create
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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 the Credit Parties or any Subsidiary in respect of) all interests retained
by the Credit Parties or any Subsidiary, including (without limitation) the
proceeds of the sale, all of which shall continue to constitute part of the
Collateral. In the event of any sale or transfer of Collateral, or any
foreclosure with respect to any of the Collateral, the Agent shall be
authorized to deduct all of the Expenses reasonably incurred by the Agent
from the proceeds of any such sale, transfer or foreclosure.
(d) The Agent shall have no obligation to assure that the
Collateral exists or is owned by the Credit Parties or any Subsidiary, that
such Collateral is cared for, protected or insured, or that the Liens in the
Collateral have been created, perfected, or have any particular priority.
With respect to the Collateral, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in the
Collateral as one of the Lenders and it shall have no duty or liability
whatsoever to the Lenders, except for its gross negligence or willful
misconduct.
SECTION 10.11. ACTIONS WITH RESPECT TO DEFAULTS. In addition to
the Agent's right to take actions on its own accord as permitted under this
Credit Agreement, the Agent shall take such action with respect to a Default
or Event of Default as shall be directed by the Majority Lenders. Until the
Agent shall have received such directions, the Agent may act or not act as it
deems advisable and in the best interests of the Lenders.
SECTION 10.12. DELIVERY OF INFORMATION. The Agent shall not be
required to deliver to any Lender originals or copies of any documents,
instruments, notices, communications or other information received by the
Agent from the Borrowers, any Subsidiary, the Majority Lenders, any Lender or
any other Person under or in connection with this Credit Agreement or any
other Credit Document except (i) as specifically provided in this Credit
Agreement or any other Credit Document and (ii) as specifically requested
from time to time in writing by any Lender with respect to a specific
document, instrument, notice or other written communication received by and
in the possession of the
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Agent at the time of receipt of such request and then only in accordance with
such specific request.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ANY
DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OF
THE CREDIT DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE
CONFLICTS OF LAW PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) AND DECISIONS OF THE STATE OF NEW YORK.
SECTION 11.2. SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE
CREDIT PARTIES AND THE LENDERS (OR THE AGENT ACTING ON THEIR BEHALF), WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY
STATE AND FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENT, ON
BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO PROCEED AGAINST THE CREDIT PARTIES OR THEIR PROPERTY IN
ANY LOCATION REASONABLY SELECTED BY THE AGENT IN GOOD FAITH TO ENABLE THE
AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE AGENT. THE CREDIT PARTIES AGREE THAT THEY WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY THE AGENT. THE CREDIT PARTIES WAIVE ANY OBJECTION THAT
THEY MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON FORUM NON CONVENIENS.
SECTION 11.3. SERVICE OF PROCESS. THE CREDIT PARTIES HEREBY
IRREVOCABLY DESIGNATE CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW
YORK 10019 AS THE DESIGNEE, APPOINTEE AND AGENT OF THE CREDIT PARTIES TO
RECEIVE, FOR AND ON BEHALF OF THE CREDIT PARTIES, SERVICE OF PROCESS IN SUCH
RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
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THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT. IT IS UNDERSTOOD THAT
COPIES OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY
FORWARDED BY MAIL TO THE CREDIT PARTIES, BUT FAILURE OF THE CREDIT PARTIES TO
RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.
SECTION 11.4. JURY TRIAL. THE CREDIT PARTIES, THE AGENT, THE
ISSUING BANK, THE COLLATERAL AGENT AND THE LENDERS EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH
TRIAL.
SECTION 11.5. LIMITATION OF LIABILITY. NEITHER THE AGENT, THE
COLLATERAL AGENT NOR ANY LENDER SHALL HAVE ANY LIABILITY TO THE CREDIT
PARTIES (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES
SUFFERED BY THE CREDIT PARTIES IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS CREDIT
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON THE AGENT, THE COLLATERAL AGENT OR ANY SUCH LENDER, THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. THE CREDIT PARTIES HEREBY WAIVE ALL FUTURE CLAIMS
AGAINST THE AGENT, THE COLLATERAL AGENT AND EACH LENDER FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES UNLESS RESULTING FROM THE GROSS
NEGLIGENCE OF SUCH PERSON OR SUCH PERSON'S KNOWING VIOLATION OF THE LAW.
SECTION 11.6. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Agent, the Issuing Bank or the Lenders to exercise any right
or remedy hereunder shall impair any such right or operate as a waiver
thereof. No single or partial exercise by the Agent, the Issuing Bank or the
Lenders of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
SECTION 11.7. NOTICES. Except as otherwise provided herein, all
notices and correspondences hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, or by overnight
delivery service, with all charges prepaid, if to the Agent, or any of the
Lenders, then to BT Commercial Corporation, at 14 Wall Street, New York, New
York 10005, Attention: Credit Department, Mr. Bruce Addison, if to
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the Issuing Bank, then to Bankers Trust Company, One Bankers Trust Plaza, 130
Liberty Street, New York, New York 10006, Attention: Mr. Jack Kurzer and if
to a Credit Party, then to such Credit Party at c/o Spinnaker Industries,
Inc. 600 N. Pearl Street, Dallas, Texas 75201, Attention: President or by
facsimile transmission, promptly confirmed in writing sent by first class
mail, if to the Agent or any of the Lenders, at (212) 618-2630. and if to a
Credit Party, at (214) 855-0093. All such notices and correspondence shall
be deemed given (i) if sent by certified or registered mail, three (3)
Business Days after being postmarked, (ii) if sent by overnight delivery
service, when received at the above stated addresses or when delivery is
refused and (iii) if sent by telex or facsimile transmission, when receipt of
such transmission is acknowledged.
SECTION 11.8. ASSIGNMENTS AND PARTICIPATIONS.
(a) BORROWER ASSIGNMENT. The Borrowers shall not assign this
Credit Agreement or any rights or obligations hereunder, without the prior
written consent of the Agent and the Lenders.
(b) LENDER ASSIGNMENTS. Each Lender may assign to one or more
banks or other financial institutions all or a portion of its rights and
obligations under this Credit Agreement, the Revolving Notes and the other
Credit Documents, with the consent of the Agent (not to be unreasonably
withheld), and provided that no Default or Event of Default has occurred and
is continuing with the consent of the Borrowers (not to be unreasonably
withheld), and upon execution and delivery to the Agent, for its acceptance
and recording in the Register, of an agreement in substantially the form of
Exhibit N (an "ASSIGNMENT AND ASSUMPTION AGREEMENT"), together with surrender
of any Revolving Note or Revolving Notes subject to such assignment and a
processing and recordation fee of $2,500.00. No such assignment shall be for
less than $5,000,000 of the Commitments unless it is to another Lender. Upon
such execution and delivery of the Assignment and Assumption Agreement to the
Agent, from and after the date specified as the effective date in the
Assignment and Assumption Agreement (the "ACCEPTANCE DATE"), (x) the assignee
thereunder shall be a party hereto, and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
and Assumption Agreement, such
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assignee shall have the rights and obligations of a Lender hereunder and (y)
the assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Assumption
Agreement, relinquish its rights (other than any rights it may have pursuant
to Section 11.10 which will survive) and be released from its obligations
under this Credit Agreement (and, in the case of an Assignment and Assumption
Agreement covering all or the remaining portion of an assigning Lender's
rights and obligations under this Credit Agreement, such Lender shall cease
to be a party hereto). (This Section does not apply to branches and
Affiliates of a Lender, it being understood that a Lender may make, carry or
transfer Revolving Loans at or for the account of any of its branch offices
or Affiliates without consent of the Borrowers, the Agent or any Lender.)
By executing and delivering an Assignment and Assumption
Agreement, the assignee thereunder confirms and agrees as follows: (i) other
than as provided in such Assignment and Assumption Agreement, the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement,
the Revolving Notes or any other instrument or document furnished pursuant
hereto, (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrowers or any other Credit Parties or the performance or observance by the
Borrowers or any other Credit Parties of any of their obligations under this
Credit Agreement or any other instrument or document furnished pursuant
hereto, (iii) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the Financial Statements referred
to in Section 6.1(i), the Financial Statements delivered pursuant to Section
7.1(a), if any, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Assumption Agreement, (iv) such assignee will, independently
and without reliance upon the Agent or the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking
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action under this Credit Agreement, (v) such assignee appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers under this Credit Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Credit Agreement are
required to be performed by it as a Lender.
(c) AGENT'S REGISTER. The Agent shall maintain a register of the
names and addresses of the Lenders, their Commitments, and the principal
amount of their Revolving Loans (the "REGISTER"). The Agent shall also
maintain a copy of each Assignment and Assumption Agreement delivered to and
accepted by it and modify the Register to give effect to each Assignment and
Assumption Agreement. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrowers, the Agent
and the Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Credit Agreement. The
Register and copies of each Assignment and Assumption Agreement shall be
available for inspection by the Borrowers or any Lender at any reasonable
time and from time to time upon reasonable prior notice. Upon its receipt of
each Assignment and Assumption Agreement and surrender of the affected
Revolving Note or Revolving Notes subject to such assignment, the Agent will
give prompt notice thereof to the Borrowers. Within five (5) Business Days
after its receipt of such notice, the Borrowers shall execute and deliver to
the Agent a new Revolving Note or Revolving Notes to the order of the
assignee in the amount of the Commitment or Commitments assumed by it and to
the assignor in the amount of the Commitment or Commitments retained by it,
if any. Such new Revolving Note or Revolving Notes shall re-evidence the
indebtedness outstanding under the surrendered Revolving Note or Revolving
Notes and shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Revolving Note or Revolving Notes, shall
be dated as of the Closing Date. The Agent shall be entitled to rely upon
the Register exclusively for purposes of identifying the Lenders hereunder.
(d) LENDER PARTICIPATIONS. Each Lender may sell participations
(without the consent of the Agent, the Borrowers
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or any other Lender) to one or more parties (other than any Person in
competition with any of the Credit Parties in the same or a similar business
as a Credit Party) in or to all or a portion of its rights and obligations
under this Credit Agreement, the Revolving Notes and the other Credit
Documents. Notwithstanding a Lender's sale of a participation interest, such
Lender's obligations hereunder shall remain unchanged. The Borrowers, the
Agent, and the other Lenders shall continue to deal solely and directly with
such Lender. No participant shall have rights to approve any amendment or
waiver of this Credit Agreement except to the extent such amendment or waiver
would (i) increase the Commitment of the Lender from whom the participant
purchased its participation interest; (ii) reduce the principal of, or rate
or amount of interest on the Revolving Loans subject to such participation;
(iii) postpone any date fixed for any payment of principal of, or interest
on, the Revolving Loans subject to the participation interest; or (iv)
release all or a substantial portion of the Collateral, other than in each
case when otherwise permitted hereunder.
Each Lender agrees that, without the prior written consent of the
Borrowers and the Agent, it will not make any assignment hereunder in any
manner or under any circumstances that would require registration or
qualification of, or filings in respect of, any Loan, Revolving Note or other
Obligation under the securities laws of the United States or of any
jurisdiction.
(e) CONFIDENTIALITY. In connection with their efforts to assign
its rights or obligations or sell participations pursuant to Sections 11.8(b)
and (d) hereof, the Agent or the Lenders may disclose any information they
have, now or in the future, with respect to the business of the Borrowers to
prospective assignees or purchasers, provided that such disclosure is subject
to confidentiality arrangements substantially similar to those entered into
by BTCC and the Borrowers in connection with the transactions contemplated by
this Credit Agreement.
SECTION 11.9. CONFIDENTIALITY. Except as provided in Section
11.8(e), each Lender agrees that it will not disclose, without the prior
consent of the Borrowers, any information with respect to the Borrowers or
any of their Subsidiaries which is furnished pursuant to this Credit
Agreement and which is
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designated by the Borrowers to the Lenders in writing as confidential (the
information delivered pursuant to Sections 7.1(a)(ii), (iv) and (v), 7.1(b),
(c) and (e) and 8.4(a) being hereby so designated), PROVIDED, THAT any Lender
may disclose any such information (a) to its Affiliates, employees, auditors,
or counsel, or to another Lender if the disclosing Lender or such disclosing
Lender's holding or parent company in its reasonable discretion determines
that any such party should have access to such information provided that each
such person will be advised of the confidential nature of such information,
(b) as has become generally available to the public, (c) as may be required
or appropriate in any report, statement or testimony submitted to any
Governmental Authority having or claiming to have jurisdiction over such
Lender, (d) as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation and (e) in order to comply with
any Requirement of Law.
SECTION 11.10. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF
COLLECTION. (a) The Borrowers hereby, jointly and severally, indemnify and
agree to defend and hold harmless the Agent, the Collateral Agent, the
Issuing Bank and each of the Lenders and their respective directors,
officers, agents, employees and counsel (each, an "INDEMNIFIED PARTY") from
and against any and all losses, claims, damages, liabilities, deficiencies,
judgments or expenses incurred by any of them (except to the extent that it
is finally judicially determined to have resulted from their own gross
negligence or willful misconduct) arising out of or by reason of (i) any
litigations, investigations, claims or proceedings which arise out of or are
in any way related to (A) this Credit Agreement, any other Credit Document or
the transactions contemplated hereby or thereby including, without
limitation, the transactions contemplated by the Senior Note Documents, (B)
the issuance of the Letters of Credit, (C) the failure of the Issuing Bank to
honor a drawing under any Letter of Credit, as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or
de facto government or Governmental Authority, (D) any actual or proposed use
by the Borrowers of the proceeds of the Revolving Loans or (E) the Agent's,
the Collateral Agent's, the Issuing Bank's or the Lenders' entering into this
Credit Agreement, the other Credit Documents or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
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settlement, court costs and the reasonable fees and disbursements of counsel
incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(ii) any remedial or other action taken by the Borrowers, the Agent or any of
the Lenders in connection with compliance by the Borrowers or any of the
Subsidiaries, or any of their respective properties, with any federal, state
or local Environmental Laws. In addition, the Borrowers shall, upon demand,
jointly and severally, pay to the Agent all costs and expenses incurred by
the Agent (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Credit Documents, pay to
the Collateral Agent all costs and expenses incurred by it in connection with
collateral audits and inspections, and pay to the Agent and any Lender all
costs and expenses (including the reasonable fees and disbursements of
counsel and other professionals) paid or incurred by the Agent or such Lender
in (A) enforcing or defending its rights under or in respect of this Credit
Agreement, the other Credit Documents or any other document or instrument now
or hereafter executed and delivered in connection herewith, (B) in collecting
the Obligations, (C) in foreclosing or otherwise collecting upon the
Collateral or any part thereof and (D) obtaining any legal, accounting or
other advice in connection with any of the foregoing. If and to the extent
that the Obligations of the Borrowers hereunder are unenforceable for any
reason, the Borrowers hereby agree to make the maximum contribution to the
payment and satisfaction of such Obligations which is permissible under
applicable law.
(b) The Borrowers' Obligations under Sections 4.9, 4.10, 10.6 and
this Section 11.10 shall survive any termination of this Credit Agreement and
the other Credit Documents and the payment in full of the Obligations, and
are in addition to, and not in substitution of, any other of their
Obligations set forth in this Credit Agreement.
SECTION 11.11. AMENDMENTS AND WAIVERS. (a) No amendment or
waiver of any provision of this Credit Agreement or any other Credit Document
shall be effective unless in writing and signed by the Majority Lenders (or
by the Agent on their behalf) and the Credit Parties, except that:
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(i) the consent of all the Lenders is required to (A) reduce the
principal of, or interest on, the Revolving Notes, any Letter of Credit
reimbursement obligations or any Fees hereunder (other than Fees that are
exclusively for the account of the Agent, the Collateral Agent or the
Issuing Bank), (B) postpone the final scheduled date of maturity of the
Revolving Notes or any date fixed for any payment in respect of interest on
the Revolving Notes, any Letter of Credit reimbursement obligations or any
Fees hereunder, (C) change any minimum requirement necessary for the
Lenders or Majority Lenders to take any action hereunder or the percentage
of Commitments necessary to take any such action, (D) amend or waive this
Section 11.11(a), or change the definition of Majority Lenders, (E) release
any Liens in favor of the Lenders on all or substantially all of the
Collateral, except as otherwise expressly provided in this Credit
Agreement, and other than in connection with the financing, refinancing,
sale or other disposition of any asset of the Credit Parties permitted
under this Credit Agreement, (F) increase any of the advance rates from
those set forth in any of the definitions of Brown Accounts Borrowing Base,
Brown Inventory Borrowing Base, Central Accounts Borrowing Base, Central
Inventory Borrowing Base, Entoleter Accounts Borrowing Base or Entoleter
Inventory Borrowing Base, or (G) consent to the assignment or transfer by
the Borrowers of any of their rights and obligations under this Credit
Agreement;
(ii) no such amendment or waiver shall increase the Commitment of any
Lender over the amount thereof then in effect without the consent of such
Lender (it being understood that amendments or waivers of conditions
precedent, covenants, Defaults or Events of Default shall not constitute an
increase in the Commitment of any Lender, and that an increase in the
available portion of any Commitment of any Lender shall not constitute an
increase in the Commitment of such Lender);
(iii) the consent of the Agent, the Collateral Agent or the Issuing
Bank, as the case may be, shall be required for any amendment, waiver or
consent affecting the rights or duties of the Agent, the Collateral Agent
or the Issuing
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Bank under any Credit Document, in addition to the consent of the Lenders
otherwise required by this Section 11.11; and
(iv) the consent of the Borrowers shall not be required for any
amendment, modification or waiver of the provisions of Article X (other
than Section 10.9).
(b) The Borrowers and the Lenders hereby authorize the Agent to
modify this Credit Agreement by unilaterally amending or supplementing Annex I
to reflect assignments of the Commitments.
(c) Notwithstanding the foregoing, the Borrowers may amend Schedule
6.1(a) without the consent of the Majority Lenders; provided that, except as
contemplated by Section 8.1, no amendment to any such Schedule shall be
permitted to cure any Default or Event of Default which would otherwise have
existed in the absence of such amendment.
(d) If, in connection with any proposed amendment or waiver of any of
the provisions of this Credit Agreement as contemplated by Section 11.11(a)(i),
the consent of the Majority Lenders is obtained but the consent of one or more
of such other Lenders whose consent is required is not obtained, then the
Borrowers shall have the right to replace each such non-consenting Lender or
Lenders (so long as all non-consenting Lenders are so replaced) with one or more
replacement Lenders pursuant to Section 4.11 so long as at the time of such
replacement, each such replacement Lender consents to the proposed amendment or
waiver; provided that the Borrowers shall not have the right to replace a Lender
solely as a result of the exercise of such Lender's rights (and the withholding
of any required consent by such Lender) pursuant to Section 11.11(a)(ii).
SECTION 11.12. NONLIABILITY OF AGENT AND LENDERS. The relationship
between the Borrowers and the Lenders and the Agent and Collateral Agent shall
be solely that of borrower and lender. Neither the Agent, Collateral Agent nor
any Lender shall have any fiduciary responsibilities to the Credit Parties.
Neither the Agent, Collateral Agent nor any Lender undertakes any responsibility
to the Credit Parties to review or inform the Credit Parties of any matter in
connection with any phase of the Credit Parties' business or operations.
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<PAGE>
SECTION 11.13. INDEPENDENT NATURE OF LENDERS' RIGHTS. The amounts
payable at any time hereunder to each Lender under such Lender's Revolving Note
or Notes shall be a separate and independent debt.
SECTION 11.14. COUNTERPARTS. This Credit Agreement and any waiver or
amendment hereto may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
SECTION 11.15. EFFECTIVENESS. This Credit Agreement shall become
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and shall have delivered the
same to the Agent, or, in the case of the Lenders, shall have given to the Agent
written, telecopied or telex notice (actually received) at such office that the
same has been signed and mailed to it.
SECTION 11.16. SEVERABILITY. In case any provision in or obligation
under this Credit Agreement or the Revolving Notes or the other Credit Documents
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 11.17. MAXIMUM RATE. Notwithstanding anything to the
contrary contained elsewhere in this Credit Agreement or in any other Credit
Document, the Borrowers, the Agent, the Collateral Agent and the Lenders hereby
agree that all agreements among them under this Credit Agreement and the other
Credit Documents, whether now existing or hereafter arising and whether written
or oral, are expressly limited so that in no contingency or event whatsoever
shall the amount paid, or agreed to be paid, to the Agent, the Collateral Agent
or any Lender for the use, forbearance, or detention of the money loaned to the
Borrowers and evidenced hereby or thereby or for the performance or payment of
any covenant or obligation contained herein or therein, exceed the Highest
Lawful Rate. If due to any circumstance whatsoever, fulfillment of any
provisions of this Credit Agreement or any of the other Credit Documents at the
time performance of such
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provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and
if from any such circumstance any Lender should ever receive anything of
value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the
principal amount then outstanding hereunder or on account of any other then
outstanding Obligations and not to the payment of interest, or if such
excessive interest exceeds the principal unpaid balance then outstanding
hereunder and such other then outstanding Obligations, such excess shall be
refunded to the Borrowers. All sums paid or agreed to be paid to the Agent or
any Lender for the use, forbearance, or detention of the Obligations and
other indebtedness of the Borrowers to the Agent or any Lender shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness, until payment in full
thereof, so that the actual rate of interest on account of all such
indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such indebtedness. The terms and provisions of this Section shall
control every other provision of this Credit Agreement and all agreements
among the Borrowers, the Agent, the Collateral Agent and the Lenders.
SECTION 11.18. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Credit
Agreement and the other Credit Documents constitute the entire agreement among
the Credit Parties, the Agent, the Collateral Agent and the Lenders with respect
to the subject matter hereof, supersedes any prior agreements among them, and
shall bind and benefit the Credit Parties, the Agent, the Collateral Agent and
the Lenders and their respective successors and permitted assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their proper and duly authorized officers as of the
date set forth above.
BORROWERS
CENTRAL PRODUCTS COMPANY
By: /s/ MARK R. MATTESON
----------------------------------
Name: Mark R. Matteson
Title: Vice President
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ NED N. FLEMING, III
----------------------------------
Name: Ned N. Fleming, III
Title: Vice President
ENTOLETER, INC.
By: /s/ MARK R. MATTESON
----------------------------------
Name: Mark R. Matteson
Title: Vice President
GUARANTOR
SPINNAKER INDUSTRIES, INC.
By: /s/ RICHARD J. BOYLE
----------------------------------
Name: Richard J. Boyle
Title: Chief Executive Officer
and Chairman
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<PAGE>
AGENT
BT COMMERCIAL CORPORATION, as Agent
By: /s/ BRUCE W. ADDISON
----------------------------------
Name: Bruce W. Addison
Title:
COLLATERAL AGENT
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as Collateral Agent
By: /s/ TERRELL W. HARRIS
----------------------------------
Name: Terrell W. Harris
Title: Region Credit Manager
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ BRUCE W. ADDISON
----------------------------------
Name: Bruce W. Addison
Title:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ TERRELL W. HARRIS
----------------------------------
Name: Terrell W. Harris
Title: Region Credit Manager
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ISSUING BANK
BANKERS TRUST COMPANY, as Issuing Bank
By: /s/ BRUCE W. ADDISON
----------------------------------
Name: Bruce W. Addison
Title:
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<PAGE>
SCHEDULE 1
LENDERS, LENDING OFFICES AND COMMITMENTS
Domestic and Eurodollar
Lender Lending Office Commitment
------ -------------- ----------
BT Commercial 14 Wall Street $20,000,000
Corporation New York, NY 10014
Transamerica Business Two Ravinia Drive
Credit Corporation Suite 700 $20,000,000
Atlanta, GA 30346
-----------
-----------
Total Commitments $40,000,000
<PAGE>
EXHIBIT A
FORM OF REVOLVING NOTE
$_______________ October __, 1996
FOR VALUE RECEIVED, the undersigned, [Central Products Company] [Brown-Bridge
Industries, Inc.] [Entoleter, Inc.], a Delaware corporation (the "BORROWER")
promises to pay to the order of [__________________________] (the "LENDER") at
care of BT Commercial Corporation, as Agent for the Lenders, 14 Wall Street, New
York, New York 10005 in lawful money of the United States of America and in
immediately available funds, the principal amount of ___________________________
Dollars ($___________), or such lesser amount as may then constitute the unpaid
aggregate principal amount of the Lender's Proportionate Share of the Revolving
Loans made to the Borrower that are outstanding on the Expiration Date.
The Borrower further agrees to pay interest at said office, in like money, on
the unpaid principal amount owing hereunder from time to time from the date
hereof until paid in full (both before and after judgment) on the dates and at
the rates specified in Article IV of the Credit Agreement (as defined below).
If any payment on this promissory note becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This promissory note is one of the Revolving Notes referred to in the Credit
Agreement, dated as of October __, 1996 (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, [names
of other two Borrowers], Spinnaker Industries, Inc., the Lender, certain other
financial institutions from time to time parties thereto, BT Commercial
Corporation, as agent (in such capacity, the "AGENT"), Transamerica Business
Credit Corporation, as Collateral Agent, and Bankers Trust Company, as Issuing
Bank, and is subject to, and entitled to, all provisions and benefits thereof
and is subject to optional and mandatory prepayment in whole or in part as
provided therein. Capitalized terms used herein shall have the meanings given
to such terms in the Credit Agreement unless otherwise defined herein. The
Credit Agreement, among other
<PAGE>
things, provides [after giving effect to the Assignment and Assumption executed
by the Lender and [name of assigning Lender] as of date hereof]+ for the making
of Revolving Loans by the Lender to the Borrower from time to time in an
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned.
Upon the occurrence of any one or more of the Events of Default specified in the
Credit Agreement, which have not been cured by the Borrower or waived by the
Agent at the direction of the Lenders or the Required Lenders, as the case may
be, the Agent shall, upon the written, telecopied or telex request of the
Required Lenders, and by delivery of written notice to the Borrower from the
Agent, take any or all of the following actions, without prejudice to the rights
of the Agent, the Lender or any holder of this Revolving Note to enforce its
claims against the Borrower: (a) declare all Obligations due hereunder to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 8.1(g) of the Credit Agreement, in which case all Obligations
due hereunder shall automatically become immediately due and payable without the
necessity of any notice or other demand) without presentment, demand, protest or
any other action or obligation of the Lender; and (b) immediately terminate the
Credit Agreement and the Commitments thereunder; and at all times thereafter,
all loans and advances made by the Lender pursuant to the Credit Agreement shall
be at the Lender's sole discretion, unless such Event of Default is cured or
waived.
This promissory note is secured by the collateral described in the Security
Agreement and other Collateral Documents entered into pursuant to the Credit
Agreement [and re-evidences the indebtedness outstanding on the date hereof with
respect to the Revolving Loans made on the Closing Date, which indebtedness has
been assigned to the Lender pursuant to Section 11.8 of the Credit Agreement].+
- -------------
+Bracketed language to be used for replacement notes.
A-2
<PAGE>
The Borrower hereby waives presentment, demand, protest and notice of any kind.
No failure to exercise, and no delay in exercising any rights hereunder on the
part of the holder hereof shall operate as a waiver of such rights.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS PROMISSORY NOTE SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:
-----------------------------
Name:
Title:
Attest:
- -----------------------------
A-3
<PAGE>
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
OFFICER'S CERTIFICATE CERTIFYING
BORROWING BASE
I, _______________________, in my capacity as ______________________
of [Central Products Company] [Brown-Bridge Industries, Inc.] [Entoleter, Inc.],
a Delaware corporation (the "BORROWER"), hereby certifies in connection with the
Credit Agreement, dated as of October __, 1996 (as amended, supplemented or
otherwise modified from time to time the "CREDIT AGREEMENT"), among the
Borrower, certain of its affiliates, certain financial institutions from time to
time parties thereto, as Lenders, BT Commercial Corporation, as Agent,
Transamerica Business Credit Corporation, as Collateral Agent, and Bankers Trust
Company, as Issuing Bank, that I am the duly elected ______________________ of
the Borrower and that the information and each calculation set forth in the
attached Borrowing Base Certificate are, to the best of my knowledge, true,
correct and complete (subject to year-end audit adjustments) as of the date
hereof and are calculated in accordance with the Credit Agreement. Unless
otherwise defined herein, all capitalized terms used herein shall have the
meanings ascribed to them in the Credit Agreement.
Executed as of this ____ [CENTRAL PRODUCTS COMPANY]
day of ___________, 199_ [BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By: _____________________________
Name:
Title:
<PAGE>
Borrowing Base Certificate
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
Period Ending: ____________, 19__
A. Availability of Accounts
------------------------
1. Balance from previous period $
-------------
2. Plus: new Accounts $
-------------
3. Sub Total (line 1 plus line 2) $
-------------
4. Less: Collections $( )
------------
5. New Accounts balance
(line 3 less line 4) $
-------------
6. Ineligible Accounts:*
(a) the amount of sales to Affiliates
to the extent in excess of $250,000 $
-------------
(b) Accounts with payment terms of 42
days or less that remain
outstanding after 90 days from
the invoice date $
-------------
(c) Accounts with payment terms of
more than 42 days from the
invoice date that remain
outstanding less than 120 days
from the invoice date but only to
the extent such Accounts
exceed $1,000,000 $
-------------
(d) Accounts from any one account
debtor having 50% or more of its
Accounts deemed ineligible $
-------------
- ---------------
*Reserve and ineligible calculations shall be based upon the most recent
actual calculation of such reserve/ineligible amount, which calculation shall
be made on at least a monthly basis, unless and until the Agent or Collateral
Agent, exercising its Permitted Discretion, determines that more frequent
actual calculations of reserve/ineligible amounts are required and so informs
the Borrower.
<PAGE>
(e) the amount by which the aggregate
Accounts outstanding from any one
account debtor exceeds 25% of the
amount reported in line 5 above
less any Accounts supported by a
letter of credit and less any
Accounts from a Canadian account
debtor not to exceed $3,000,000 $
-------------
(f) offsetting accounts payable to
any account debtor to which the
Borrower has accounts payable or
which disputes liability $
-------------
(g) Accounts from any account debtor
which is (or whose assets are)
the subject of an Insolvency
Event $
-------------
(h) the amount of foreign sales less
any Accounts supported by a
letter of credit $
-------------
(i) the sale is on a sale-and-return,
bill and hold, sales on approval,
guaranteed sale or consignment
basis $
-------------
(j) all other amounts as required by
the Credit Agreement $
-------------
7. Total amount of Ineligible Accounts
Receivables (line 6(a) through 6(j)) $
-------------
8. Reserves:* $
-------------
(a) returns, discounts, claims,
credits and allowances and
contra accounts (to the extent of
amount owed to the account
debtor) $
-------------
(b) all other amounts as required by
the Credit Agreement $
-------------
9. Total amount of Reserves
(line 8(a) through 8(b)) $
-------------
10. Net Eligible Accounts Receivable
(line 5 less line 7 less line 9) $
-------------
---- ----
B-ii
<PAGE>
11. Advance rate of (85%) x 85 %
-------------
12. Availability (line 11 TIMES line 10) $
-------------
B. AVAILABILITY OF INVENTORY
1. Value of Inventory (at lower of cost
or market on a FIFO or a specific
identification basis)
(a) raw materials (exclusive of uncut
steel) $
-------------
(b) raw materials consisting of uncut
rolled steel $
-------------
(c) spare parts $
-------------
Total Inventory $
-------------
2. Ineligible Inventory:*
(a) Inventory not wholly-owned by
Borrower or to which Borrower
does not have good title $
-------------
(b) Inventory not on the premisesof
the Borrower or in a warehouse
subject to a Collateral Access
Agreement or located in the
United States $
-------------
(c) Inventory subject to liens other
than those granted in favor of
Agent or permitted by the Credit
Agreement $
-------------
(d) Inventory returned or rejected or
goods in transit to third parties $
-------------
(e) slow-moving or obsolete Inventory $
-------------
(f) all other amounts as required by
the Credit Agreement $
-------------
3. Total amount of Ineligible Inventory
(line 2(a) through 2(e)) $
-------------
4. Net value of Inventory
(line 1 LESS line 3) $
-------------
B-iii
<PAGE>
5. Advance rate of 65%** x 65%
-------------
6. Availability
(line 5 TIMES line 4) $
-------------
C. AVAILABILITY COMPUTATION
1. Total Availability -- sum of (i) A12
and (ii) the lesser of B6 and
$---------- $
-------------
2. LESS: the sum of the aggregate
outstanding principal amount of
Revolving Loans to the Borrower and
Letter of Credit Obligations of the
Borrower $( )
------------
NET AVAILABILITY $
-------------
- -----------
**For Entoleter only, the Advance Rates are (a) 60% of the Eligible Inventory
consisting of uncut rolled steel, (b) 50% of Eligible Inventory consisting of
raw materials other than rolled steel (cut or uncut) and (c) 30% of the
Eligible Inventory consisting of spare parts.
B-iv
<PAGE>
EXHIBIT C
FORM OF NOTICE OF BORROWING
[Name and Address of Borrower]
____________________ , 199__
BT Commercial Corporation, as Agent
14 Wall Street
New York, New York 10005
Attention: Mr. J. Jeffcott Ogden
Senior Vice President
Ladies and Gentlemen:
The undersigned, [Central Products Company][Brown-Bridge Industries,
Inc.][Entoleter, Inc.], a Delaware corporation (the "BORROWER"), refers to the
Credit Agreement, dated as of October __, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms
used herein shall have the meanings given such terms in the Credit Agreement
unless otherwise defined herein) among the Borrower, [insert names of other two
borrowers], Spinnaker Industries, Inc., certain financial institutions from time
to time parties thereto, as Lenders, BT Commercial Corporation, as Agent,
Transamerica Business Credit Corporation, as Collateral Agent, and Bankers Trust
Company, as Issuing Bank, and hereby gives you irrevocable notice, pursuant to
Section 2.4 of the Credit Agreement, that the undersigned hereby requests a
borrowing under the Credit Agreement, and in that connection sets forth below
the information relating to such borrowing (the "PROPOSED BORROWING") as
required by the Credit Agreement:
(i) The requested date of the Proposed Borrowing is _____________,
199__;
<PAGE>
(ii) The aggregate amount of the Proposed Borrowing is $____________;
(iii) The Proposed Borrowing shall be disbursed as follows:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------;
(iv) The Type of Loans comprising the Proposed Borrowing are [Base
Rate Loans][Eurodollar Rate Loans]; and
(v) [The initial Interest Period for each Eurodollar Rate Loan made
as part of the Proposed Borrowing is [one][two][three][six]
months.]
The undersigned hereby certifies that the following statements will be
true on the date of the Proposed Borrowing:
(A) the representations and warranties of the Credit Parties
contained in each Credit Document are true and correct in all
material respects on and as of the date of such Proposed
Borrowing before and after giving effect to such Proposed
Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date (other than any such
representations or warranties that, by their terms, refer to a
date other than the date of such Proposed Borrowing);
(B) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application
of the proceeds therefrom;
(C) no event has occurred since ________, 199_ which has had or could
reasonably be expected to have a Material Adverse Effect; and
(D) all of the other conditions to the Proposed Borrowing set forth
in Article V of the Credit Agreement have been fulfilled.
C-2
<PAGE>
If notice of this Proposed Borrowing has been given previously by
telephone, then this notice should be considered a written confirmation of
such telephonic notice as required by the Credit Agreement.
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:-----------------------------
Name:
Title:
C-3
<PAGE>
EXHIBIT D
FORM OF NOTICE OF CONTINUATION
BT Commercial Corporation, as Agent
14 Wall Street
New York, New York 10005
Attention: J. Jeffcott Ogden
Ladies and Gentlemen:
The undersigned, [Central Products Company][Brown-Bridge Industries,
Inc.][Entoleter, Inc.], a Delaware corporation (the "BORROWER"), refers to the
Credit Agreement dated as of October __, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms
used herein shall have the meanings given such terms in the Credit Agreement
unless otherwise defined herein) among the Borrower, [insert names of other two
borrowers], Spinnaker Industries, Inc., the financial institutions from time to
time parties thereto, as Lenders, BT Commercial Corporation, as Agent,
Transamerica Business Credit Corporation, as Collateral Agent, and Bankers Trust
Company, as Issuing Bank, and hereby gives you notice, irrevocably, pursuant to
Section 4.8(a) of the Credit Agreement that the undersigned hereby requires a
Continuation of a borrowing under the Credit Agreement, and in that connection
sets forth below the information relating to such Continuation (the "PROPOSED
CONTINUATION") as required by Section 4.8(a) of the Credit Agreement:
(i) The requested date of the Proposed Continuation is
______________.
(ii) The Type of Loans subject to the Proposed Continuation are
Eurodollar Rate Loans (the "LOANS").
(iii) The aggregate amount of the Loans subject to such Continuation is
$_______.
<PAGE>
(iv) The Interest Period for each Loan which is the subject of the
proposed Continuation is [one][two] [three][six] months.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Continuation:
(a) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Continuation; and
(b) the Proposed Continuation does not and will not violate any of
the terms and conditions set forth in the Credit Agreement (including, without
limitation, availability under the [Brown] [Central] [Entoleter] Borrowing
Base).
If notice of this Proposed Continuation has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice as required by Section 4.8(a) of the Credit Agreement.
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF NOTICE OF CONVERSION
BT Commercial Corporation, as Agent
14 Wall Street
New York, New York 10005
Attention: J. Jeffcott Ogden
Ladies and Gentlemen:
The undersigned, [Central Products Company][Brown-Bridge Industries, Inc.]
[Entoleter, Inc.], a Delaware corporation (the "BORROWER"), refers to the Credit
Agreement dated as of October __, 1996 (as amended, supplemented or otherwise
modified from time to time the "CREDIT AGREEMENT"; capitalized terms used herein
shall have the meanings given such terms in the Credit Agreement unless
otherwise defined herein) among the Borrower, [insert names of other two
borrowers], Spinnaker Industries, Inc., the financial institutions from time to
time parties thereto, as Lenders, BT Commercial Corporation, as Agent,
Transamerica Business Credit Corporation, as Collateral Agent, and Bankers Trust
Company, as Issuing Bank, and hereby gives you notice, irrevocably, pursuant to
Section 4.8(b) of the Credit Agreement that the undersigned hereby requests a
conversion of Loans of one Type into Loans of another Type under the Credit
Agreement, and in that connection sets forth below the information relating to
such Conversion (the "PROPOSED CONVERSION") as required by Section 4.8(b) of the
Credit Agreement:
(i) The requested date of the Proposed Conversion is ______________
(the "CONVERSION DATE").
(ii) The Type of Loans to be Converted pursuant hereto are presently
[Prime Rate][Eurodollar Rate] Loans in the principal amount of
$__________ outstanding as of the Conversion Date (the "CURRENT
LOANS").
<PAGE>
(iii) The portion of the Current Loans to be converted on the
Conversion Date is $___________ (the "CONVERSION AMOUNT").
(iv) The Conversion Amount is to be converted into [Prime Rate]
[Eurodollar Rate] Loans (the "CONVERTED LOANS") on the Conversion
Date.
(v) [The initial Interest Period for each Converted Loan is [one]
[two][three][six] months.](1)
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Conversion:
(a) [no Default or Event of Default has occurred and is continuing,
or would result from the Proposed Conversion;(2) and]
(b) the Proposed Conversion does not and will not violate any of the
terms and conditions set forth in the Credit Agreement (including, without
limitation, availability under the [Brown] [Central] [Entoleter] Borrowing
Base).
If notice of this Proposed Conversion has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice as required by Section 4.8(b) of the Credit Agreement.
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
- --------------
(1) For Eurodollar Rate Loans.
(2) For use only for conversion from Prime Rate Loans to Eurodollar Rate Loans.
E-2
<PAGE>
By:
------------------------------
Name:
Title:
E-3
<PAGE>
EXHIBIT F
FORM OF LETTER OF CREDIT REQUEST
TO: BT Commercial Corporation, as Agent
14 Wall Street
New York, New York 10005
Attn: Mr. J. Jeffcott Ogden
Ladies and Gentlemen:
Pursuant to Section 3.4 of the Credit Agreement, dated as of October __,
1996 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"; capitalized terms used herein shall have the meanings
ascribed to them in the Credit Agreement unless otherwise defined herein), among
the undersigned (the "Borrower"), [insert names of other two borrowers],
Spinnaker Industries, Inc., each of the financial institutions from time to time
parties thereto, as Lenders, BT Commercial Corporation, as Agent, Transamerica
Business Credit Corporation, as Collateral Agent, and Bankers Trust Company, as
Issuing Bank, the Borrower irrevocably requests the issuance of a Letter of
Credit for its account (the "PROPOSED ISSUANCE") containing the following terms:
1. Date of Issuance: --------------------
2. Face Amount: $-------------------
3. Expiration Date: --------------------
4. Beneficiary: [Name and Address]
-------------------------
-------------------------
-------------------------
-------------------------
Attached hereto is a completed application and agreement for letter of
credit on the Issuing Bank's standard form.
<PAGE>
The undersigned hereby certifies that the following statements will be true
and correct on the date of the Proposed Issuance:
A. the representations and warranties of the Credit Parties contained in
each Credit Document are true and correct on and as of the date of the
Proposed Issuance (other than any such representations or warranties
that relate solely to an earlier date);
B. no Default or Event of Default has occurred and is continuing or would
result from such Proposed Issuance;
C. no event has occurred since _____________, 199_ which has had or could
reasonably be expected to have a Material Adverse Effect; and
D. the Proposed Issuance may be issued in accordance with and will not
violate any of the requirements of the Credit Agreement (including,
without limitation, Sections 3.1 and 3.2 of the Credit Agreement).
Dated:
----------------------
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:
----------------------------
Name:
Title:
F-2
<PAGE>
EXHIBIT G
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") is made and entered
into as of October 23, 1996 by CENTRAL PRODUCTS COMPANY, a Delaware corporation
with its chief executive office and principal place of business at 748 Fourth
Street, Menasha, Wisconsin 54952-0330 ("CENTRAL"), BROWN-BRIDGE INDUSTRIES,
INC., a Delaware corporation with its chief executive office and principal place
of business at 518 East Water Street, Troy, Ohio 45373-0370 ("BROWN"),
ENTOLETER, INC., a Delaware corporation with its chief executive office and
principal place of business at 251 Welton Street, Hamden, Connecticut 06517
("ENTOLETER" and, together with Central and Brown, the "BORROWERS"), and
SPINNAKER INDUSTRIES, INC., a Delaware corporation with its chief executive
office and principal place of business at 600 N. Pearl Street, Dallas, Texas
75201 (the "GUARANTOR" and, together with the Borrowers, the "OBLIGORS"), in
favor of BT COMMERCIAL CORPORATION, acting as agent (in such capacity, the
"AGENT") on behalf of the Lenders referred to below, having an office at 14 Wall
Street, New York, New York 10005.
W I T N E S S E T H
WHEREAS, the Obligors are entering into a certain Credit Agreement dated as
of even date herewith (as amended, supplemented or otherwise modified from time
to time, the "CREDIT AGREEMENT"; capitalized terms which are used herein and not
otherwise defined shall have the meanings given to them in the Credit Agreement)
with the financial institutions from time to time parties thereto (the
"LENDERS") the Agent, Transamerica Business Credit Corporation, as Collateral
Agent (in such capacity, the "COLLATERAL AGENT"), and Bankers Trust Company, as
Issuing Bank (the "ISSUING BANK"); and
WHEREAS, it is a condition precedent to the obligation of the Agent, the
Collateral Agent and the Lenders to enter into the Credit Agreement that the
Obligors shall have (i) granted to the Agent, for the ratable benefit of the
Lenders, a security interest in and to the Collateral (as defined herein) and
G-1
<PAGE>
(ii) executed and delivered this Security Agreement in order to secure the
payment and performance by the Obligors of the Obligations.
AGREEMENT
NOW THEREFORE, in consideration of the premises and in order to induce the
Lenders to extend credit under the Credit Agreement, the Obligors hereby agree
as follows:
SECTION 1. CREATION OF SECURITY INTEREST. Each Obligor hereby pledges,
assigns and grants to the Agent, for the ratable benefit of the Lenders, the
Collateral Agent and the Issuing Bank, a continuing perfected Lien on and
security interest in all of the right, title and interest of such Obligor in and
to the collateral described in Section 2 hereof (the "COLLATERAL") in order to
secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all the Obligations.
SECTION 2. COLLATERAL. The Collateral is and consists of the following:
(a) ACCOUNTS. All of each Obligor's accounts, whether now existing or
existing in the future, including, without limitation, (i) all "accounts" as
such term is defined in the Uniform Commercial Code as in effect on the date
hereof in the State of New York ("UCC"); (ii) all accounts receivable,
including, without limitation, all accounts created by or arising from all of
such Obligor's right to payment for goods sold or leased or services performed,
sales of goods or rendition of services made under any of such Obligor's trade
names, or through any of its divisions, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper or
other evidence of indebtedness or security; (iii) all unpaid seller's rights
(including rescission, replevin, reclamation and stoppage in transit) relating
to the foregoing or arising therefrom; (iv) all rights to any goods represented
by any of the foregoing, including returned or repossessed goods;
(v) all reserves and credit balances held by such Obligor with respect to any
such accounts receivable or account debtors; (vi) all guarantees, endorsements
and indemnifications or
G-2
<PAGE>
collateral on, of or for any of the foregoing; (vii) all powers of attorney
for the execution of any evidence of indebtedness or security or other
writing in connection therewith and (viii) all evidences of the filing of
financing statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other
registration officers (all of the foregoing property and similar property
being hereinafter referred to as "ACCOUNTS");
(b) INVENTORY. All of each Obligor's inventory in all of its forms,
wherever located, including, without limitation, (i) all raw materials, work in
process, parts, components, assemblies, supplies and materials used or consumed
in such Obligor's business, wherever located and whether in the possession of
such Obligor or any other Person; (ii) all goods, wares and merchandise,
finished or unfinished, held for sale or lease or leased or furnished or to be
furnished under contracts of service, wherever located and whether in the
possession of such Obligor or any other Person; (iii) all goods returned to or
repossessed by such Obligor; (iv) all "inventory" as such term is defined in the
UCC and (v) all accessions thereto and products thereof and documents therefor
(all of the foregoing property being hereinafter referred to as "INVENTORY");
(c) INTANGIBLES. All of each Obligor's "general intangibles," as such
term is defined in the UCC, credits, claims, demands, documents, instruments,
letters of credit for which such Obligor is a beneficiary and letter of credit
proceeds, deposit accounts (including, without limitation, the Disbursement
Accounts, the Lockboxes, the Collection Accounts, the Guarantor Account and all
monies, securities and instruments deposited therein), money, tax refund claims,
contract rights, chattel paper, any United States or foreign trademarks, service
marks, tradenames, patents (and any divisions or continuations thereof) and
copyrights including any registration of any trademark, service marks, patents
or copyrights in the United States Patent and Trademark Office and the goodwill
of the business of such Obligor symbolized by any trademarks or service marks,
rights of setoff, rights of contribution, indemnity rights and all other rights
(including all rights to the payment of money) which are permitted to be
assigned or pledged, other obligations of any kind and interest on any of the
foregoing, now
G-3
<PAGE>
or hereafter existing (all of the foregoing property and similar property
being hereinafter referred to as "INTANGIBLES");
(d) NOTE COLLATERAL. The Intercompany Subordinated Notes, all loans,
liabilities and indebtedness, whether now or hereafter incurred, evidenced by
the Intercompany Subordinated Notes (the "PLEDGED DEBT"), all other instruments
evidencing the Pledged Debt, all interest, cash, instruments, rights and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Debt, and all additional
loans, liabilities and indebtedness from time to time owed to an Obligor by any
other Obligor, whether now or hereafter incurred, and the instruments evidencing
such loans, liabilities and indebtedness, and all interest, cash, instruments,
rights and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such loans,
liabilities and indebtedness (all of the foregoing, the "NOTE COLLATERAL");
(e) AFTER-ACQUIRED COLLATERAL AND PROCEEDS; BOOKS AND RECORDS. The
Collateral includes all of the kinds and types of property described in this
Section 2, whether now owned or hereafter at any time arising, acquired or
created by each Obligor and wherever located, and includes all replacements,
additions, accessions, substitutions, repairs, proceeds and products relating
thereto or therefrom, and all documents, books, records, ledger sheets, print-
outs, computer discs, computer software, computer programs of such Obligor and
all intellectual property rights therein and all other proprietary information
of such Obligor and other paper containing information relating to the
Collateral and files of such Obligor relating thereto. Proceeds hereunder
include (i) whatever is now or hereafter received by such Obligor upon the sale,
exchange, collection or other disposition of any item of Collateral, whether
such proceeds constitute inventory, accounts, accounts receivable, general
intangibles, instruments, securities (including, without limitation, United
States of America Treasury Bills), credits, claims, demands, documents, letters
of credit and letter of credit proceeds, chattel paper, documents of title,
certificates of title, certificates of deposit, warehouse receipts, bills of
lading, leases, deposit accounts, money, tax refund claims, contract rights,
goods or equipment or otherwise, (ii) any such items which are now or hereafter
acquired by such Obligor with any proceeds of Collateral hereunder and
(iii) cash.
G-4
<PAGE>
SECTION 3. THE OBLIGORS' REPRESENTATIONS AND WARRANTIES. Each Obligor
represents and warrants, which representations and warranties shall survive
execution and delivery of this Agreement, as follows:
(a) PLACE OF BUSINESS. Except as permitted in the Credit Agreement, the
Obligors have no places of business, or warehouses in which they lease space,
other than those set forth in Schedule 6.1(k) to the Credit Agreement.
(b) LOCATION OF COLLATERAL. Except as permitted in the Credit Agreement,
and except for the movement of Collateral from time to time from one place of
business or warehouse of such Obligor listed on Schedule 6.1(k) to the Credit
Agreement to another place of business or warehouse of such Obligor listed on
such Schedule 6.1(k), the Collateral of each Obligor is located at such
Obligor's chief executive offices or other places of business or warehouses of
such Obligor listed on Schedule 6.1(k) to the Credit Agreement, and not at any
other location.
(c) NO RESTRICTIONS ON COLLATERAL DISPOSITION. Except as permitted under
the Credit Agreement, none of the Collateral is subject to contractual
obligations that may restrict or inhibit the Agent's rights or ability to sell
or dispose of the Collateral or any part thereof after the occurrence of an
Event of Default.
(d) STATUS OF ACCOUNTS AND INVENTORY. Each Account is based on an actual
and bona fide sale and delivery of goods or rendition of services to customers,
made by the Obligors in the ordinary course of their respective businesses; the
goods and inventory being sold and the Accounts created are their exclusive
property and are not and shall not be subject to any Lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever,
except as permitted in the Credit Agreement. The Obligors' customers have
accepted the goods or services in respect of the Accounts, and owe and are
obligated to pay the full amounts stated in the invoices according to their
terms, without any dispute, offset, defense, counterclaim or contra. When
included in the Borrowing Base Certificate and the schedules attached thereto,
each Account and item of Inventory of a Borrower conforms to the representations
and warranties contained in this Section, the standards for eligibility set
G-5
<PAGE>
forth in the definition of Eligible Accounts Receivable and Eligible
Inventory, respectively, and such other prerequisites for eligibility of
which the Obligors have been informed by the Agent.
(e) POSSESSION AND CONTROL OF INVENTORY. Each Obligor has exclusive
possession and control of the Inventory in which such Obligor has granted a
security interest hereunder.
(f) RECOURSE. This Agreement is made with full recourse to each Obligor.
SECTION 4. COVENANTS OF EACH OBLIGOR. Each Obligor covenants, which
covenant shall survive execution and delivery of this Agreement, as follows:
(a) DEFEND AGAINST CLAIMS. Each Obligor will defend the Collateral
against all claims and demands of all Persons at any time claiming the same
or any interest therein, other than Permitted Liens, unless the Agent
otherwise agrees in writing. Each Obligor will not permit any Lien notices
with respect to the Collateral or any portion thereof to exist or be on file
in any public office, other than Permitted Liens.
(b) CHANGE IN COLLATERAL LOCATION; CHANGE OF NAME. Except as permitted
under the Credit Agreement, each Obligor will not (i) change the location of
its chief executive office or establish any place of business other than
those specified in Schedule 6.1(k) to the Credit Agreement with respect to
such Obligor, (ii) move or permit movement of the Collateral from the
locations of such Obligor specified in Schedule 6.1(k) except from one such
location to another such location, unless in each case such Obligor shall
have complied with the provisions of Section 7.1(c)(v) of the Credit
Agreement, or (iii) change its legal name or assume or operate in any
jurisdiction under any trade, fictitious or other name.
(c) ADDITIONAL FINANCING STATEMENTS. Promptly upon the reasonable request
of the Agent, at the expense of the Obligors, each Obligor will execute and
deliver or use its best efforts to procure any document, give any notices,
execute and file any financing statements, mortgages or other documents, all in
form and substance satisfactory to the Agent, mark any chattel paper, deliver
any chattel paper or instruments to the Agent and
G-6
<PAGE>
take any other actions that are necessary or, in the opinion of the Agent,
desirable to perfect or continue the perfection and the first priority of the
Agent's security interest in the Collateral except as permitted by the Credit
Agreement, to protect the Collateral against the rights, claims, or interests
of third persons, other than holders of Permitted Liens, to enable the Agent
to exercise and enforce its rights and remedies hereunder with respect to any
Collateral, or to effect the purposes and intent of this Security Agreement.
Without limiting the generality of the foregoing, such Obligor will: (i)
mark conspicuously each chattel paper included in the Accounts and, at the
request of the Agent, each of its records pertaining to the chattel paper
with a legend, in form and substance satisfactory to the Agent, indicating
that such chattel paper is subject to the security interest granted hereby;
(ii) if any other Collateral shall be evidenced by a promissory note with a
term of more than 90 days or other instrument or chattel paper, deliver and
pledge to the Agent such note or instrument or chattel paper duly indorsed
and accompanied by duly executed instruments of transfer or assignment, all
in form and substance satisfactory to the Agent; and (iii) execute and file
such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Agent may reasonably request, to perfect or continue the perfection and the
first priority of the Agent's security interest in the Collateral (except as
permitted in the Credit Agreement) and preserve the pledge, collateral
assignment and security interest granted or purported to be granted hereby.
(d) ADDITIONAL LIENS; TRANSFERS. Without the prior written consent of the
Agent, each Obligor will not in any way (i) hypothecate or create or permit to
exist any Lien, security interest, charge or encumbrance on or other interest in
the Collateral, except as permitted in the Credit Agreement, or (ii) sell,
transfer, assign (by operation of law or otherwise), pledge, collaterally
assign, exchange or otherwise dispose of, or grant any option with respect to,
any of the Collateral, except as permitted in the Credit Agreement. If the
proceeds of any such sale consist of notes, instruments, documents of title,
letters of credit or chattel paper (collectively "NON-CASH PROCEEDS"), such Non-
cash Proceeds shall be promptly delivered to the Agent to be held as Collateral
hereunder. If the Collateral, or any part thereof, is sold, transferred,
assigned, exchanged, or otherwise disposed of in violation of these provisions,
the
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security interest of the Agent shall continue in such Collateral or part
thereof notwithstanding such sale, transfer, assignment, exchange or other
disposition, and such Obligor will hold the proceeds thereof in trust for the
benefit of the Agent, and promptly transfer such proceeds to the Agent in
kind.
(e) CONTRACTUAL OBLIGATIONS. Except as permitted in the Credit Agreement,
each Obligor will not enter into any contractual obligations which may restrict
or inhibit the Agent's rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.
(f) FURTHER OBLIGATIONS WITH RESPECT TO ACCOUNTS. In furtherance of the
continuing assignment and security interest in the Accounts of the Obligors
granted pursuant to this Security Agreement, upon the creation of Accounts, each
Obligor will execute and deliver to the Agent in such form and manner as the
Agent may require, solely for its convenience in maintaining records of
Collateral, such confirmatory schedules of Accounts, and other appropriate
reports designating, identifying and describing the Accounts as the Agent may
reasonably require. In addition, upon the Agent's request, each Obligor shall
provide the Agent with copies of agreements with, or purchase orders from, the
customers of such Obligor and copies of invoices to customers, proof of shipment
or delivery and such other documentation and information relating to said
Accounts and other Collateral as the Agent may reasonably require. Furthermore,
promptly after its receipt thereof, each Obligor shall deliver to the Agent any
documents or certificates of title issued with respect to any property included
in the Collateral, any promissory note, letter of credit, document or instrument
related to or otherwise in connection with any property included in the
Collateral, which in any such case shall come into the possession of such
Obligor, or shall cause the issuer thereof to deliver any of the same directly
to the Agent, in each case with any necessary endorsements in favor of the
Agent. Failure to provide the Agent with any of the foregoing shall in no way
affect, diminish, modify or otherwise limit the security interests granted
herein. Each Obligor hereby authorizes the Agent to regard such Obligor's
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by such Obligor's authorized officers or
agents.
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(g) TURNOVER OF COLLECTIONS. Unless an Event of Default has occurred and
is continuing, each Obligor may and will enforce, collect and receive, at its
own expense, all amounts owing on the Accounts, for the benefit of and on behalf
of the Agent. In connection with such collections, each Obligor may take (and,
at the Agent's direction, upon the occurrence and during continuance of an Event
of Default such Obligor shall take) such action as such Obligor or the Agent may
deem necessary or advisable to enforce collection of the Accounts owing to such
Obligor. Such privilege shall terminate automatically, however, upon the
occurrence and during the continuance of an Event of Default. Any checks, cash,
notes or other instruments or property received by each Obligor with respect to
any Accounts shall be held by such Obligor in trust for the benefit of the
Lenders, separate from such Obligor's own property and funds, and immediately
(i) deposited into a Collection Account in accordance with Section 2.12 of the
Credit Agreement or (ii) if such property is not suitable for deposit, turned
over to the Agent with proper assignments or endorsements. No checks, drafts or
other instruments received by the Agent shall constitute final payment unless
and until such instruments have actually been collected.
(h) NOTIFICATION OF DISPUTES. Each Obligor agrees to notify the Agent
promptly of any matters materially affecting the value, enforceability or
collectibility of any of its Accounts, and of all material customer disputes,
offsets, defenses, counterclaims, returns and rejections, and all reclaimed or
repossessed merchandise or goods; PROVIDED, HOWEVER, that such notice shall only
be required as to any such matter that affects Accounts outstanding at one time
from any account debtor having a value greater than $100,000. Each Obligor
agrees to issue credit memos promptly (with duplicates to the Agent upon its
request for same) upon accepting returns or granting allowances, and may
continue to do so until the occurrence and continuance of an Event of Default.
After the occurrence and during the continuance of an Event of Default, each
Obligor agrees that, if the Agent so requests, all returned, reclaimed or
repossessed goods shall be set aside by such Obligor, marked with the Agent's
name and held by such Obligor for the Agent's account as owner and assignee, or,
at the election of the Agent, sold by such Obligor in the ordinary course of
business.
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(i) DISTRIBUTIONS WITH RESPECT TO NOTE COLLATERAL. Subject to the terms
of the Intercompany Subordinated Notes, so long as no Event of Default has
occurred and is continuing, each Obligor shall be entitled to receive and retain
any and all interest, principal and other amounts paid in respect of the Note
Collateral. If an Event of Default has occurred and is continuing, all rights
of each Obligor to receive the principal, interest and other amounts that it
would otherwise be authorized to receive and retain pursuant to the immediately
preceding sentence shall cease and all such rights shall thereupon become vested
in the Agent who thereupon shall have the sole right to receive and hold as
Collateral such principal, interest and other amounts. If any Obligor receives
any principal, interest or other amounts in violation of this Section 4(i), such
Obligor shall hold the same in trust for the benefit of the Agent, segregate the
same from the other property and funds of such Obligor and forthwith deliver the
same to the Agent as Collateral in the same form as so received (with any
necessary endorsement).
(j) ADDITIONAL NOTES. Promptly upon its receipt of any promissory note
payable to an Obligor, such Obligor shall pledge and deliver such note to the
Agent, together with note powers duly executed in blank.
SECTION 5. REMEDIES.
(a) OBTAINING THE COLLATERAL UPON DEFAULT. If any Event of Default shall
have occurred and be continuing, then and in every such case, subject to any
mandatory requirements of applicable law then in effect, the Agent, in addition
to other rights and remedies provided for herein and any rights now or hereafter
existing under applicable law, shall have all rights and remedies as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:
(i) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from the Obligors or
any other Person who then has possession of any part thereof, with or
without notice or process of law, and for that purpose may enter upon
the Obligors' premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of the Obligors;
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(ii) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Accounts) constituting the Collateral to make any payment required by
the terms of such instrument or agreement directly to the Agent;
(iii) withdraw all monies, securities and instruments held in any
Disbursement Account and any Collection Account, for application to
the Obligations;
(iv) sell, assign or otherwise liquidate, or direct the Obligors
to sell, assign or otherwise liquidate, any or all of the Collateral
or any part thereof, and take possession of the proceeds of any such
sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the Obligors in writing to deliver the same to the Agent at
any place or places designated by the Agent, in which event the
Obligors shall at their own expense:
(A) forthwith cause the same to be moved to the place or
places so designated by the Agent and delivered to the Agent,
(B) store and keep any Collateral so delivered to the Agent
at such place or places pending further action by the Agent as
provided in Section 5(b), and
(C) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain them
in good condition;
it being understood that the Obligors' obligation to so deliver the
Collateral is of the essence of this Security Agreement and that,
accordingly, upon application to a court of equity having
jurisdiction, the Agent shall be entitled to a decree requiring
specific performance by the Obligors of said obligation.
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(b) DISPOSITION OF THE COLLATERAL. Any collateral repossessed by the
Agent under or pursuant to Section 5(a) and any other Collateral whether or not
so repossessed by the Agent, may be sold, assigned, leased or otherwise disposed
of under one or more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in general in such
manner, at such time or times, at such place or places and on such terms as the
Agent may, in compliance with any mandatory requirements of applicable law,
determine to be commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the same existed when
taken by the Agent or after any overhaul or repair which the Agent shall
determine to be commercially reasonable. Any such disposition which shall be a
private sale or other private proceedings permitted by such requirements shall
be made upon not less than 10 days' written notice to the Obligors specifying
the time at which such disposition is to be made and the intended sale price or
other consideration therefor, and shall be subject, for the 10 days after the
giving of such notice, to the right of the Obligors or any nominee of the
Obligors to acquire the Collateral involved at a price or for such other
consideration at least equal to the intended sale price or other consideration
so specified. Any such disposition which shall be a public sale permitted by
such requirements shall be made upon not less than 10 days' written notice to
the Obligors specifying the time and place of such sale and, in the absence of
applicable requirements of law, shall be by public auction (which may, at the
option of the Agent, be subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers in general
circulation in the jurisdiction in which such auction is to be held. To the
extent permitted by any such requirement of law, the Agent may bid for and
become the purchaser of the Collateral or any item thereof, offered for sale in
accordance with this Section without accountability to the Obligors (except to
the extent of surplus money received). If, under mandatory requirements of
applicable law, the Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
the Obligors as hereinabove specified, the Agent need give the Obligors only
such notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law. The Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The
Agent may adjourn any
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public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Obligors acknowledge
that any disposition of the Collateral which takes place substantially in
accordance with this Section 5 shall be deemed to be commercially reasonable.
(c) AGENT'S RIGHT TO PROTECT COLLATERAL. Upon the occurrence and
continuance of an Event of Default, the Agent shall have the right at any time
to make any payments and do any other acts the Agent may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to pay, purchase, contest or compromise any encumbrance, charge or
Lien which, in the reasonable judgment of the Agent, appears to be prior to or
superior to the security interests granted hereunder, and appear in and defend
any action or proceeding purporting to affect its security interests in, or the
value of, the Collateral. The Obligors hereby agree to reimburse, jointly and
severally, the Agent for all payments made and expenses incurred under this
Security Agreement including reasonable fees, expenses and disbursements of
attorneys and paralegals acting for the Agent, including any of the foregoing
payments under, or acts taken to protect its security interests in, the
Collateral, which amounts shall be secured under this Security Agreement, and
agrees they shall be bound by any payment made or act taken by the Agent
hereunder absent the Agent's gross negligence or wilful misconduct. The Agent
shall have no obligation to make any of the foregoing payments or perform any of
the foregoing acts.
(d) POWER OF ATTORNEY. Each Obligor hereby irrevocably authorizes
and appoints the Agent, or any Person or agent the Agent may designate, as such
Obligor's attorney-in- fact, with full authority in the place and stead of such
Obligor and in the name of such Obligor or otherwise, at such Obligor's cost and
expense, in the Agent's discretion, to take any action and to execute any
instrument that the Agent may deem necessary or advisable to accomplish the
purposes and intent of this Security Agreement and to exercise all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default, which powers, being coupled with an
interest, shall be irrevocable until all of the Obligations shall have been paid
and satisfied in full:
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(i) ask for, demand, collect, bring suit, recover, compromise,
administer, accelerate or extend the time of payment, issue credits,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(ii) obtain and adjust insurance required to be paid to the
Agent;
(iii) receive, take, endorse, negotiate, sign, assign and deliver
and collect any checks, notes, drafts or other instruments, documents
and chattel paper, in connection with clause (i) or (ii) above;
(iv) receive, open and dispose of all mail addressed to such
Obligor and notify postal authorities to change the address for
delivery thereof to such address as the Agent may designate;
(v) give customers indebted on Accounts notice of the Agent's
interest therein, and/or to instruct such customers to make payment
directly to the Agent for such Obligor's account and/or to request, at
any time from customers indebted on Accounts, verification of
information concerning the Accounts and the amounts owing thereon;
(vi) convey any item of Collateral to any purchaser thereof;
(vii) give any notices or record any Liens under Section 4(c)
hereof;
(viii) make any payments or take any acts under Section 5(c)
hereof; and
(ix) file any claims or take any action or institute any
proceedings that the Agent may reasonably deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
the rights of the Agent with respect to any of the Collateral.
The Agent's authority under this section 5(d) shall include, without limitation,
the authority to execute and give receipt for
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any certificate of ownership or any document, transfer title to any item of
Collateral, sign such Obligor's name on all financing statements or any
other documents deemed necessary or appropriate to preserve, protect or
perfect the security interest in the Collateral and to file the same,
prepare, file and sign such Obligor's name on any notice of Lien, assignment
or satisfaction of Lien or similar document in connection with any Account
and prepare, file and sign such Obligor's name on a proof of claim in
bankruptcy or similar document against any customer of such Obligor, and to
take any other actions arising from or incident to the rights, powers and
remedies granted to the Agent in this Security Agreement. This power of
attorney is coupled with an interest and is irrevocable by each Obligor.
(e) APPLICATION OF PROCEEDS. All cash proceeds received by the Agent
in respect of any sale of, collection from, or other realization upon all or any
part of the Collateral shall be applied by the Agent against the Obligations in
such order as the Agent may determine.
(f) WAIVER OF CLAIMS. Except as otherwise provided in this Security
Agreement, EACH OBLIGOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING
POSSESSION OF OR DISPOSING OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT WHICH SUCH OBLIGOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each
Obligor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of possession except
any damages which are the direct result of the Agent's gross
negligence or wilful misconduct;
(ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Security
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Agreement or the absolute sale of the Collateral or any portion
thereof, and such Obligor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the
benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral of each Obligor shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of such Obligor therein
and thereto, and shall be a perpetual bar both at law and in equity against such
Obligor and against any and all persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Obligor.
(g) REMEDIES CUMULATIVE. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Security Agreement or
under the other Credit Documents or now or hereafter existing at law or in
equity, or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time or simultaneously and as often and in such order as may be deemed expedient
by the Agent. All such rights, powers and remedies shall be cumulative and the
exercise or the beginning of exercise of one shall not be deemed a waiver of the
right to exercise of any other or others. No delay or omission of the Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or any acquiescence
therein.
SECTION 6. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in writing and
sent by certified or registered mail, return receipt requested, or by overnight
delivery service, with all charges prepaid, if to the Agent, or any of the
Lenders, then to BT Commercial Corporation, at 14 Wall Street, New York, New
York 10005, Attention: Credit Department, Mr. Bruce Addison, if to the Issuing
Bank, then to Bankers Trust Company, One Bankers Trust Plaza, 130 Liberty
Street, New York, New York 10006,
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Attention: Mr. Bruce Addison, and if to an Obligor, then to such Obligor at
c/o Spinnaker Industries, Inc., 600 N. Pearl Street, Dallas, Texas 75201,
Attention: President, or by facsimile transmission, promptly confirmed in
writing sent by first class mail, if to the Agent or any of the Lenders, at
(214) 855-0093, and if to an Obligor, at (212) 618-2630. All such notices
and correspondence shall be deemed given (i) if sent by certified or
registered mail, three (3) Business Days after being postmarked, (ii) if
sent by overnight delivery service, when received at the above stated
addresses or when delivery is refused and (iii) if sent by telex or
facsimile transmission, when receipt of such transmission is acknowledged.
(b) HEADINGS. The headings in this Security Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Security Agreement.
(c) SEVERABILITY. The provisions of this Security Agreement are
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect, in that jurisdiction only, such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Security Agreement in any jurisdiction.
(d) AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver of any
provision of this Security Agreement and any consent to any departure by the
Obligors from any provision of this Security Agreement shall not be effective
unless the same shall be in writing and signed by each Obligor, the Agent (with
the consent of the Majority Lenders or all of the Lenders, as required by the
Credit Agreement) and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of the Agent to exercise, and no delay in exercising any right
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right.
(e) INTERPRETATION. Time is of the essence in each provision of this
Security Agreement of which time is an element. All terms not defined herein or
in the Credit Agreement shall
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have the meaning set forth in the Code, except where the context otherwise
requires. To the extent a term or provision of this Security Agreement
conflicts with the Credit Agreement and is not dealt with herein with more
specificity, the Credit Agreement shall control with respect to the subject
matter of such term or provision. Acceptance of or acquiescence in a course
of performance rendered under this Security Agreement shall not be relevant
in determining the meaning of this Security Agreement even though the
accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
(f) CONTINUING SECURITY INTEREST. This Security Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the payment in full in cash of the Obligations, no
Letter of Credit remains outstanding and the termination of the Commitments,
(ii) be binding upon the Obligors and their successors and assigns and
(iii) inure, together with the rights and remedies of the Agent hereunder, to
the benefit of the Agent, the Issuing Bank, the Collateral Agent and the Lenders
and their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), any Lender may, in accordance with the
terms or the Credit Agreement, assign or otherwise transfer all or any portion
of its rights and obligations under the Credit Documents (including, without
limitation, all or any portion of any Commitment, any Loans or any Notes held by
it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such Lender herein or
otherwise, in each case as provided in the Credit Agreement.
(g) REINSTATEMENT. To the extent permitted by law, this Security
Agreement shall continue to be effective or be reinstated if at any time any
amount received by the Agent, the Issuing Bank, the Collateral Agent or any of
the Lenders in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Agent, the Issuing Bank, the Collateral Agent or any
of the Lenders upon the occurrence or during the pendency of any bankruptcy,
reorganization or other similar proceeding applicable to any Obligor, or upon or
during the occurrence of any dissolution, liquidation or winding up of any
Obligor, all as though such payments had not been made.
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(h) SURVIVAL OF PROVISIONS. All representations, warranties and
covenants of the Obligors contained herein shall survive the execution and
delivery of this Security Agreement, and shall terminate only upon the full and
final payment and performance by the Obligors of the Obligations secured hereby
and termination of the Credit Agreement and the other Credit Documents.
(i) AGENT MAY PERFORM. If the Obligors fail to perform any agreement
contained herein, the Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Agent incurred in connection therewith shall
be jointly and severally payable by the Obligors and shall constitute
Obligations secured by this Security Agreement.
(j) NO DUTY ON AGENT. The powers conferred on the Agent hereunder
are solely to protect the interest of the Lenders in the Collateral and shall
not impose any duty upon the Agent to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as to any
Collateral, as to the taking of any necessary steps to preserve rights against
any parties or any other rights pertaining to any Collateral. The Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Agent accords its own property. To the
extent the Collateral is held by a custodian, the Agent shall be deemed to have
exercised reasonable care if it has selected the custodian with reasonable care.
(k) DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission of
the Agent to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Agent of any right or remedy shall preclude any other or
further exercise thereof, or preclude any other right or remedy.
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(l) RELEASE; TERMINATION OF AGREEMENT.
(i) The Agent shall release any Lien in favor of the Lenders
upon the sale, transfer or disposition of any Collateral permitted to
be released pursuant to Section 7.2(e) of the Credit Agreement in
accordance with the terms of such Section.
(ii) Subject to the provisions of subsection (g) hereof and
provided that no Letters or Credit are outstanding, upon the payment
in full in cash of the Obligations and the termination of the
Commitments, this Security Agreement shall terminate and all rights in
the Collateral shall revert to the Obligors. At such time, the Agent
shall, upon the request and at the joint and several expense of the
Obligors, (A) execute and deliver to the Obligors such documents as
the Obligors shall reasonably request to evidence such termination and
(B) reassign and redeliver to the Obligors all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by
the Agent in accordance with the terms hereof. Such reassignment and
redelivery shall be without warranty by or recourse to the Agent,
except as to the absence of any prior assignments by the Agent of its
interest in the Collateral.
(m) COUNTERPARTS. This Security Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same agreement.
(n) GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(o) SUBMISSION TO JURISDICTION. EACH OBLIGOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS SECURITY AGREEMENT AND THE OTHER CREDIT
DOCUMENTS TO WHICH IT IS
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A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT
AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO SUCH OBLIGOR AT ITS ADDRESS SET FORTH IN SECTION 6(a) OR
AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED
PURSUANT THERETO;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(v) WAIVES THE RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR
CROSS-CLAIM IN RESPECT OF, AND ALL STATUTES OF LIMITATIONS WHICH MAY
BE RELEVANT TO, SUCH ACTION OR PROCEEDING.
(p) SERVICE OF PROCESS. EACH OBLIGOR AGREES THAT SERVICE OF PROCESS
IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL) POSTAGE PREPAID, TO SUCH OBLIGOR AT ITS
ADDRESS SET FORTH ON THE SIGNATURE PAGE HERETO. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
BRING ANY ACTION OR PROCEEDING AGAINST SUCH OBLIGOR OR ITS PROPERTY IN THE
COURTS OF OTHER JURISDICTIONS.
G-21
<PAGE>
(q) WAIVER OF JURY TRIAL. THE OBLIGORS AND THE AGENT EACH HEREBY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF
THIS SECURITY AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY OTHER
AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
G-22
<PAGE>
IN WITNESS WHEREOF, the Obligors have caused this Security Agreement
to be executed by their proper and duly authorized officers as of the date first
set forth above.
CENTRAL PRODUCTS COMPANY
By:
------------------------------------
Name:
Title:
748 Fourth Street
Menasha, Wisconsin 54592-0330
Telecopier No.: (414) 729-4117
BROWN-BRIDGE INDUSTRIES, INC.
By:
------------------------------------
Name:
Title:
518 East Water Street
Troy, Ohio 45373-0370
Telecopier No.: (513) 335-2843
ENTOLETER, INC.
By:
------------------------------------
Name:
Title:
251 Welton Street
Hamden, Connecticut 06517
Telecopier No.: (203) 782-9739
G-23
<PAGE>
SPINNAKER INDUSTRIES, INC.
By:
-----------------------------------
Name:
Title:
600 N. Pearl Street
Dallas, Texas 75201
Telecopier No.: (214) 855-0093
Accepted and Agreed as of
the date first set forth above:
BT COMMERCIAL CORPORATION,
as Agent
By:
------------------------------
Name:
Title:
14 Wall Street
New York, New York 10005
Telecopier No.: (212) 618-2630
G-24
<PAGE>
EXHIBIT H
GUARANTY
GUARANTY, dated as of October 23, 1996 (this "GUARANTY"), made by
Spinnaker Industries Inc., a Delaware corporation (the "GUARANTOR"), in favor of
BT Commercial Corporation, as Agent (in such capacity, the "AGENT") for each of
the lenders (the "LENDERS") from time to time parties to the Credit Agreement
(as hereafter defined).
W I T N E S S E T H
WHEREAS, the Agent, Transamerica Business Credit Corporation, as
collateral agent (the "COLLATERAL AGENT"), the Lenders and Bankers Trust
Company, as issuer of letters of credit (the "ISSUING BANK"), have agreed to
enter into a Credit Agreement dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT";
terms which are capitalized herein and not otherwise defined shall have the
meanings given to them in the Credit Agreement) with Central Products Company, a
Delaware corporation, Brown-Bridge Industries, Inc., a Delaware Corporation,
Entoleter, Inc., a Delaware corporation (collectively, the "BORROWERS"), and the
Guarantor, pursuant to which the Agent, the Lenders and the Issuing Bank shall
make loans and advances and provide other financial accommodations to the
Borrowers, subject to the terms and conditions set forth in the Credit Agreement
and in the other Credit Documents;
WHEREAS, the Borrowers are wholly owned subsidiaries of the Guarantor,
and therefore, the Guarantor has a direct interest in the financial affairs and
well-being of the Borrowers; and
WHEREAS, it is a condition precedent to the obligation of the Agent,
Issuing Bank and the Lenders to enter into the Credit Agreement that the
Guarantor shall have executed and delivered this Guaranty in favor of the Agent
on behalf of the Lenders.
NOW, THEREFORE, in consideration of the premises and to induce the
Agent, the Issuing Bank and the Lenders to execute and
<PAGE>
deliver the Credit Agreement and in recognition of the substantial direct
and indirect benefit from the transactions contemplated by the Credit
Agreement, the Guarantor hereby agrees as follows:
SECTION 1. GUARANTY. The Guarantor hereby unconditionally,
absolutely, continuingly and irrevocably guarantees to the Agent for the benefit
of the Lenders, the Collateral Agent and the Issuing Bank the prompt and
complete payment when due (whether at stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the Borrowers of any kind owing
to the Agent, the Issuing Bank, the Collateral Agent or any Lender, whether now
or hereafter owing or required to be paid to the Agent, the Issuing Bank, the
Collateral Agent or any Lender, in respect of or under the Credit Agreement, the
Revolving Notes or any other Credit Document, whether or not the right of the
Agent, the Collateral Agent, the Issuing Bank or such Lender to payment in
respect of such claim is reduced to judgment, liquidated or unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding seeking to adjudicate any Borrower a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of any Borrower or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for any Borrower or for
any substantial part of its property (collectively, the "OBLIGATIONS"). Without
limiting the generality of the foregoing, the Obligations include the obligation
of the Borrowers to pay principal, interest (including interest accruing on or
after any assignment for the benefit of creditors, the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to any Borrower, whether or not a claim for such post-filing
or post-petition interest is allowed), reimbursement obligations, letter of
credit fees or commissions, charges, expenses, fees, reasonable attorneys' fees
and disbursements, indemnities and other present and future amounts payable by
the Borrowers to the Agent, the Issuing Bank, the Collateral Agent or any Lender
in respect of or under the Credit Agreement, the Revolving Notes or any other
Credit Document. Without limiting the generality of the foregoing, the
Guarantor's liability shall
H-2
<PAGE>
extend to all amounts that constitute part of the Obligations and would be
owed by the Borrowers to the Agent, the Issuing Bank, the Collateral Agent
or any Lender but for the fact that they are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving any Borrower.
SECTION 2. GUARANTY ABSOLUTE AND UNCONDITIONAL. The Guarantor
guarantees that, with respect to the Agent, the Issuing Bank, the Collateral
Agent and each Lender, the Obligations will be paid strictly in accordance with
the terms of the Credit Agreement and the other Credit Documents, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Agent, the Collateral Agent,
the Issuing Bank or any of the Lenders with respect thereto. This Guaranty is
one of payment and performance and not collection and the obligations of the
Guarantor under this Guaranty are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against the Guarantor to enforce
this Guaranty, irrespective of whether any action is brought against any
Borrower or any other guarantor or whether any Borrower or any other guarantor
is joined in any such action or actions. The liability of the Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any contractual or
other agreement, instrument or document including, without limitation, the
Credit Agreement, any of the other Credit Documents, any of the
Obligations, or any guarantee thereof;
(ii) any change in the time, manner or place of payment of, or in
any other terms of, all or any of the Obligations, or any other amendment
or waiver of or any consent to departure from any contractual or other
agreement among the Borrowers and the Agent, the Collateral Agent, the
Issuing Bank or any Lender or any instrument or document relating thereto,
including, without limitation, any increase in the Obligations resulting
from the extension of additional credit to the Borrowers or otherwise;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or
H-3
<PAGE>
waiver of or consent to or departure from any other guaranty (including
this Guaranty with respect to any other guarantor), for all or any of
the Obligations;
(iv) any failure of any other guarantor to satisfy its
obligations in respect of any Obligations;
(v) any manner of application of collateral securing any
Obligation, or proceeds thereof, to all or any of the Obligations, or any
manner of sale or other disposition of any collateral for all or any of the
Obligations or any other assets of any Borrower;
(vi) any change, restructuring or termination of the corporate
structure or existence of any Borrower; or
(vii) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Borrowers, the Guarantor or
any other guarantor with respect to the Obligations (including, without
limitation, all defenses based on suretyship or impairment of collateral,
and all defenses that the Borrowers may assert to the repayment of the
Obligations, including, without limitation, failure of consideration,
breach of warranty, fraud, statute of frauds, bankruptcy, lack of legal
capacity, statute of limitations, lender liability, accord and
satisfaction, and usury) or which might otherwise constitute a defense to
this Guaranty and the obligations of the Guarantor under this Guaranty.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by the Agent, the Collateral Agent, the Issuing Bank or
any Lender upon the insolvency, bankruptcy or reorganization of any Borrower or
otherwise, all as though such payment had not been made. The Guarantor agrees
that if any Borrower or any other guarantor of all or a portion of the
Obligations is the subject of a bankruptcy proceeding under Title 11 of the
United States Code, it will not assert the pendency of such proceeding or any
order entered therein as a defense to the timely payment of the Obligations.
H-4
<PAGE>
SECTION 3. WAIVERS. (a) The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Agent or any Lender
protect, secure, perfect or insure any lien securing any Obligation or any
property subject thereto or exhaust any rights or take any action against any
Borrower or any other person or any collateral. The Guarantor hereby waives
notice of or proof of reliance by the Agent or any Lender upon this Guaranty,
and the Obligations shall conclusively be deemed to have been created,
contracted, incurred, renewed, extended, amended or waived in reliance upon this
Guaranty.
(b) The Guarantor hereby agrees that, until the Obligations and all
of the Guarantor's obligations hereunder are paid in full, it shall not assert
any claim or other right that it may now or hereafter acquire against any
Borrower or any other insider guarantor that arises from the existence, payment,
performance or enforcement of the Guarantor's obligations under this Guaranty or
the Credit Agreement, the other Credit Documents or the Obligations or
guarantees thereof, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or any Lender against the
Guarantor, any other insider guarantor or any collateral securing any Guaranteed
Obligation, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Guarantor or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off (including under Section 8
hereof) or in any other manner, payment or security on account of such claim,
remedy or right. If any amount shall be paid to the Guarantor in violation of
the preceding sentence at any time prior to the indefeasible cash payment in
full of the Obligations and all other amounts payable under this Guaranty, the
Guarantor shall immediately give the Agent notice of its receipt of such amount
and such amount shall be held in trust for the benefit of the Agent and the
Lenders owed the Obligations which gave rise to the Guarantor's right of
recovery, segregated from other funds of the Guarantor, and shall forthwith be
paid to the Agent to be credited and applied to the Obligations then due and
payable and all other amounts payable under this Guaranty then due and payable,
whether matured or unmatured, in such order as the Agent may determine. The
H-5
<PAGE>
Guarantor acknowledges that it will receive direct and indirect benefits from
the Credit Agreement and the transactions consummated in connection therewith
and that the waiver set forth in this subsection is knowingly made in
contemplation of such benefits.
(c) Until all of the Obligations shall have been paid in full in
cash, the Guarantor will not enforce any other claim or exercise any other
rights which it may have against any Borrower.
SECTION 4. PAYMENTS FREE AND CLEAR OF TAXES, ETC. (a) Any and all
payments made by the Guarantor hereunder, under the Revolving Loans or under the
Letters of Credit to or for the benefit of any Lender, the Issuing Bank, the
Collateral Agent or the Agent shall be made free and clear of and without
deduction for any and all present or future Covered Taxes. If the Guarantor
shall be required by law to deduct any Covered Taxes from or in respect of any
sum payable hereunder, under any Revolving Loan or under any Letter of Credit to
or for the benefit of any Lender, the Issuing Bank, the Collateral Agent or the
Agent or any Tax Transferee, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions of Covered Taxes
(including deductions of Covered Taxes applicable to additional sums payable
under this Section) such Lender, the Agent, the Issuing Bank, the Collateral
Agent or such Tax Transferee, as the case may be, receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Guarantor shall make such deductions and (iii) the Guarantor shall pay the full
amount so deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Guarantor agrees to pay any present or future
stamp, documentary, excise, privilege, intangible or similar levies that arise
at any time or from time to time (i) from any payment made under any and all
Credit Documents, (ii) from the transfer of the rights of the Lender under any
Credit Documents to any transferee, or (iii) from the execution or delivery by
the Borrowers of, or from the filing or recording or maintenance of, or
otherwise with respect to the exercise by the Agent or the Lenders of their
rights under, any and all Credit Documents (hereinafter referred to as
"OTHER TAXES").
H-6
<PAGE>
(c) The Guarantor hereby indemnifies each Lender, the Issuing Bank,
the Agent, the Collateral Agent and any Tax Transferee for the full amount of
(i) Covered Taxes imposed on or with respect to amounts payable hereunder,
(ii) Other Taxes, and (iii) any Taxes (other than Covered Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by such Lender, the
Issuing Bank, the Collateral Agent or the Agent or such Tax Transferee, as the
case may be, and any liability (including penalties, interest and expenses)
arising solely therefrom or with respect thereto. Payment of this
indemnification shall be made within 30 days from the date such Lender, the
Issuing Bank, the Collateral Agent or the Agent or Tax Transferee certifies and
sets forth in reasonable detail the calculation thereof as to the amount and
type of such Taxes. Any such certificate submitted by the Lender, the Issuing
Bank, the Agent, the Collateral Agent or any Tax Transferee in good faith to the
Borrowers shall, absent manifest error, be final, conclusive and binding on all
parties.
(d) Within 30 days after having received a receipt of Covered Taxes
or Other Taxes, the Guarantor will furnish to the Agent or the applicable
Lender, at its address referred to in Section 6, the original or a certified
copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of the
Guarantor hereunder, the agreements and obligations of the Guarantor contained
in this Section 4 shall survive the payment in full of all Obligations.
SECTION 5. AMENDMENTS; SUPPLEMENT. No amendment or waiver of any
provision of this Guaranty, and no consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent and the Guarantor and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 6. ADDRESSES FOR NOTICES. All notices and correspondence
hereunder shall be in writing and sent by certified or registered mail, return
receipt requested, or by overnight delivery service with all charges prepaid, if
to the Guarantor at its address at 600 N. Pearl Street, Dallas, Texas 75201,
Attention: President, Telecopy: (214) 855-0093, with a
H-7
<PAGE>
copy to Haynes and Boone, 3100 Nationsbank Plaza, 901 Main Street,
Dallas, Texas 45202-3789, Attention: Paul Amiel, Esq., Telecopy: (214)
651-5940; and if to the Agent or any of the Lenders, at its address
specified on Schedule I hereto, with a copy to Luskin & Stern, 330
Madison Avenue, New York, New York 10017, Attention: Richard Stern,
Esq., Telecopy: 212-293-2705, or, as to any party, at such other
address as shall be designated by such party in a written notice to each
other party. All such notices and correspondence shall be deemed given
(i) if sent by certified or registered mail, three (3) Business Days
after being post marked, (ii) if sent by overnight delivery service,
when received at the above stated addresses or when delivery is refused
and (iii) if sent by facsimile transmission, when receipt of such
transmission is acknowledged.
SECTION 7. NO WAIVER; REMEDIES. No failure on the part of the Agent
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8. RIGHT OF SETOFF. Upon the occurrence of an Event of
Default, the Agent and each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the Agent
or such Lender to or for the credit or the account of the Guarantor against any
and all of the obligations of the Guarantor now or hereafter existing under this
Guaranty, whether or not the Agent or such Lender shall have made any demand
under this Guaranty and although such obligations may be contingent and
unmatured. Any amount received as a result of the exercise of such setoff
rights shall be reallocated as set forth in Section 2.7 of the Credit Agreement.
Each of the Agent and the Lenders agree to notify the Guarantor after any such
setoff and application made by such Person, PROVIDED that the failure to give
such notice shall not affect the validity of such setoff and application. The
rights of each of the Agent and the Lenders under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which the Agent or such Lender may have.
H-8
<PAGE>
SECTION 9. CONTINUING GUARANTY; ASSIGNMENTS UNDER CREDIT AGREEMENT.
This Guaranty is a continuing guaranty and shall (i) remain in full force and
effect until the payment in full of the Obligations and all other amounts
payable under this Guaranty, until no Letter of Credit is outstanding and until
no Lender shall have any Commitment, notwithstanding that from time to time
during the term of the Credit Agreement the Borrowers may be free from any
Obligations, (ii) be binding upon the Guarantor, its successors and permitted
assigns, and (iii) inure to the benefit of, and be enforceable by, the Agent and
the Lenders and their respective successors, transferees and permitted assigns.
Without limiting the generality of the foregoing clause (iii), the Agent or any
Lender may, in accordance with the terms of the Credit Agreement, assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to the Agent or
such Lender herein or otherwise. The Guarantor may not assign any of its rights
and obligations under this Guaranty without the prior written consent of all of
the Lenders.
SECTION 10. INDEMNIFICATION. The Guarantor hereby agrees to
indemnify and hold harmless the Agent, each Lender, the Collateral Agent, the
Issuing Bank and each director, officer, employee, affiliate and agent thereof
(each, an "INDEMNIFIED PERSON") against, and to reimburse each Indemnified
Person, upon its demand, for, any losses, claims, damages, liabilities or other
expenses ("LOSSES") to which such Indemnified Person may become subject insofar
as such Losses arise out of or in any way relate to or result from any
investigation or defense of, or participation in, any legal proceeding relating
to the Credit Agreement, any other Credit Document, any document or instrument
delivered in connection therewith and the transactions contemplated thereby
including, without limitation, Losses consisting of reasonable attorneys' fees
or other expenses incurred in connection with investigating, defending or
participating in any such legal proceeding (whether or not such Indemnified
Person is a party thereto), PROVIDED that the foregoing will not apply to any
Losses to the extent they (i) are found by a decision of a court of competent
jurisdiction to have resulted from the gross negligence or wilful misconduct of
such Indemnified Person or (ii) arise out of claims by one Indemnified Person
against another Indemnified Person.
H-9
<PAGE>
SECTION 11. PAYMENTS. The Guarantor agrees that all payments made
hereunder will be paid to the Agent without setoff or counterclaim at the office
of the Agent located at the address set forth in Section 6. The Guarantor
agrees that whenever it shall make any payment on account of its liability
hereunder, it will promptly notify the Agent in writing that such payment is
made under this Guaranty for such purpose.
SECTION 12. EXPENSES. The Guarantor agrees to pay or reimburse the
Agent and the Lenders on demand for any and all expenses (including reasonable
attorneys' fees and expenses) incurred by the Agent or any Lender in enforcing
any rights under this Guaranty.
SECTION 13. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS GUARANTY AND THE OTHER CREDIT DOCUMENTS TO WHICH THE
GUARANTOR IS A PARTY AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY OR ANY OF THE OTHER CREDIT DOCUMENTS, WHETHER SOUNDING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICTS OF LAW PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW) AND DECISIONS OF THE STATE OF NEW YORK.
SECTION 14. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF
THIS GUARANTY OR ANY OTHER CREDIT DOCUMENTS TO WHICH IT IS A PARTY OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
H-10
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by its proper and duly authorized officer as of the date first set
forth above.
SPINNAKER INDUSTRIES INC.
By:
-----------------------------------
Name:
Title:
H-11
<PAGE>
SCHEDULE I
BT Commercial Corporation,
as Agent and as a Lender
14 Wall Street
New York, New York 10005
Attn: Mr. J. Jeffcott Ogden
Telephone: 212-618-2609
Telecopier: 212-618-2630
Transamerica Business Credit Corporation
Two Ravinia Drive, Suite 700
Atlanta, Georgia 30346
Attn: Mr. Terrell W. Harris
Telephone: 770-390-7014
Telecopier: 770-390-7017
<PAGE>
EXHIBIT I
FORM OF LOCKBOX AGREEMENT
This Lockbox Agreement is made as of the 23rd day of October, 1996,
by and among [Central Products Company] [Brown-Bridge Industries, Inc.]
[Entoleter, Inc.], a Delaware corporation (the "BORROWER"), BT Commercial
Corporation, as agent (the "AGENT"), and ____________________ (the "BANK").
WHEREAS, the Agent, Transamerica Business Credit Corporation, as
Collateral Agent, Bankers Trust Company, as Issuing Bank, and certain
financial institutions from time to time parties thereto (the "LENDERS") have
entered into a Credit Agreement dated as of October 23, 1996 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
with the Borrower and certain of its affiliates;
WHEREAS, pursuant to Security Agreement, dated as of October 23,
1996 (the "SECURITY AGREEMENT"), the Borrower and certain of its affiliates
have granted the Agent a security interest in its present and future accounts
receivable, and all proceeds thereof and the Borrower has agreed that all
collections and proceeds of such accounts receivable shall be remitted in
kind to the Agent;
WHEREAS, in order to provide for a more efficient and faster
collection and deposit of said collections and proceeds, the Agent and the
Borrower desire to use the lockbox service of the Bank; and
WHEREAS, the Bank is willing to provide said service for the
Borrower and the Agent commencing as of the date hereof.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. POST OFFICE BOX. The Bank will rent P.O. Box
__________ (the "LOCKBOX") of the post office located at
_____________________________ in the name of the Borrower. Customers of the
Borrower have been, or will be, instructed to mail their remittances to the
Lockbox.
SECTION 2. ACCESS TO MAIL. The Bank will have exclusive and
unrestricted access to the Lockbox and will have
<PAGE>
complete and exclusive authority to receive, pick up and open all regular,
registered, certified or insured mail addressed to the Lockbox. On written
demand of the Agent, the Bank shall cease its processing of said mail, and
shall release same, in kind, to the Agent, without the prior consent of the
Borrower, and the Agent shall thereafter process said mail promptly in
accordance with this Agreement. The Bank shall not inquire into the Agent's
right to make such a demand under any agreement among the Agent, the Lenders
and the Borrower, and shall be forever released of all obligations with
respect to said remittances upon release to the Agent. The Borrower shall
have no control whatsoever over any mail, checks, money orders, collections
or other forms of remittances received in the Lockbox. Appropriate
instructions have been, or will be, given by the Bank to the United States
Post Office where the Lockbox is maintained, and such instructions shall not
be revoked without the prior written consent of the Agent. Any instruction
given to the Bank by the Borrower without the prior or concurrent written
agreement of the Agent shall be void and of no force or effect. All mail
addressed to the Lockbox will be picked up by the Bank according to its
regular collection schedule.
SECTION 3. REMITTANCE COLLECTION. On the day received, the Bank
will open all mail addressed to the Lockbox and remove and inspect the
enclosures. All checks, money orders and other forms or orders for the
payment of money and other collection remittances (hereinafter collectively
referred to as "CHECKS") shall be processed by the Bank as follows:
a. MISSING DATE. All undated checks will be dated by the
Bank as of the postmark date and processed as hereafter provided.
b. POSTDATED. Checks postdated up to three days from date
of receipt shall be processed on the date indicated on the check. The Bank
shall not deposit checks postdated more than three days, but shall notify the
Agent by telephone of such checks and follow the Agent's instructions for
disposition of such checks.
c. STALE DATE. Checks dated six months or more prior to
the date of collection will not be deposited and shall be sent to the
Borrower.
d. DIFFERENT AMOUNT. Where written and numeric
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<PAGE>
amounts differ, a check will be processed by the Bank only if the correct
amount can be determined from the accompanying documents, otherwise the check
will not be deposited and shall be sent to the Borrower.
e. SIGNATURE MISSING. Checks which do not bear the
drawer's signature and do not indicate the drawer's identity will not be
deposited but shall be sent to the Borrower. If, as determined by the Bank,
the drawer can be identified from the face of the check, the Bank will
deposit and process the check by affixing a stamped impression requesting the
drawer bank to contact the drawer for authority to pay.
f. ALTERATIONS AND RESTRICTIONS. Checks with alterations
and checks bearing restrictive notations such as "Payment in Full" will not
be deposited, and the Bank shall notify the Agent of such checks by telephone
on the day of receipt and will deposit, hold or forward such checks with
accompanying written matter, if any, as requested by the Agent.
g. FOREIGN BANKS AND CURRENCY. Checks drawn in foreign
currency will be processed in accordance with the Bank's normal procedure for
such checks and the Agent will be notified by advice of any such checks on
the date received by the Bank.
h. OTHER ITEMS. Any items which the Agent has
specifically instructed the Bank in writing not to process will not be
deposited and shall be sent to the Agent.
Notwithstanding anything to the contrary contained in this
Agreement, the Bank shall have no obligation to perform services on a basis
any different than it performs lockbox services in the normal course of
business, except as set forth in this Section 3 and except with respect to
receiving instructions from the Agent rather than the Borrower.
SECTION 4. PROCESSING ACCEPTABLE CHECKS. All checks, except those
not acceptable for deposit under the terms of this Agreement, shall be
deposited on the day of receipt by the Bank to Account No. _________________
(the "COLLECTION ACCOUNT"), which is an account owned and controlled
exclusively by the
I-3
<PAGE>
Agent, and all such checks shall be endorsed as follows:
credited to account number _________________; absence of endorsement
hereby supplied and guaranteed by ____________________
Any funds in the Collection Account will be wired on a daily basis
with the following instructions:
Bankers Trust Company/Money Transfer Division
1 BT Plaza for further credit to:
BT Commercial Corporation
14 Wall Street -- Level C
New York, New York 10005
Attn: ________________________
Account No. ___________________
For the account of the Borrower
; PROVIDED, HOWEVER, that no funds shall be required to be wired unless and
until the amount of funds in the Collection Account shall be in excess of an
aggregate of $_________, unless the Agent shall, in its sole discretion,
otherwise instruct the Bank.
All remittance advices, envelopes, and written matter (except as expressly
provided herein) received in the Lockbox together with photocopies of all
checks shall be sent to the Borrower and, if requested by the Agent, copies
of same shall be sent to the Agent. The Bank shall mail both a deposit
advice for all deposits to the Collection Account, on a daily basis, and a
statement of account, on a monthly basis, to both the Agent and the Borrower
and, if no deposit is made on a bank business day, a deposit advice,
correctly dated, will be sent to the Agent and the Borrower with the notation
"No Deposit" appearing thereon. In addition, the Bank shall indicate by
telephone to the Agent on each Bank business day by 2:30 p.m. (New York City
time) the amount of each day's deposit total.
SECTION 5. RETURNED CHECKS. Checks deposited in the Collection
Account which are returned unpaid because of "Insufficient Funds,"
"Uncollected Funds," etc. will be redeposited by the Bank only once, except
that if a returned check exceeds $l,000 the Bank shall not redeposit such
check but shall telephone the Agent for further instructions on the day such
check is received. If redeposit is not warranted for reasons such as "account
closed" or "payment stopped" or if a
I-4
<PAGE>
check is returned a second time, the Bank will charge the Collection Account
and send a debit advice with the item to the Borrower with copies of same to
the Agent.
SECTION 6. APPOINTMENT OF, AND ACCEPTANCE AS, BANK. The Agent
hereby appoints the Bank as its agent to act by and on behalf of the Agent in
accordance with the terms of this Lockbox Agreement. The Bank hereby accepts
its appointment as the agent for the Agent and hereby acknowledges and agrees
(i) that the Lockbox and the Collection Account and all items of Collateral
(as defined in the Security Agreement) at any time deposited in the Lockbox
and the Collection Account shall be held therein for the benefit of the Agent
and shall be subject to the Agent's security interests as provided in the
Security Agreement and (ii) to perform its functions as the Bank provided
herein.
SECTION 7. ACKNOWLEDGMENT OF SECURITY INTEREST. The Borrower and
the Bank acknowledge and confirm that the Agent holds a security interest in
all funds now or at any time hereafter deposited into the Lockbox or the
Collection Account and all of the Borrower's rights with respect to the
Lockbox and the Collection Account and that the same constitute part of the
Collateral granted to the Agent to secure performance and payment of the
Obligations (as defined in the Credit Agreement).
SECTION 8. REMITTANCE RECEIVED BY THE BORROWER. Remittances which
are sent directly to or received by the Borrower shall be forwarded to the
Lockbox or the Collection Account on the day received.
SECTION 9. RECORD MAINTENANCE. All deposit checks will be
microfilmed (on front and back) by the Bank and retained for five years by
the Bank prior to destruction. Photocopies of filmed items will be provided
to the Agent or the Borrower on request, within the five-year period.
SECTION 10. BANK CHARGES. All charges of the Bank for services
rendered pursuant to this agreement shall be billed to and paid directly by
the Borrower. Said charges shall not be charged against remittances nor
shall they be debited to the Collection Account.
I-5
<PAGE>
SECTION 11. NO OFFSET. The Bank hereby agrees that it will treat
all remittances received in the Lockbox in accordance with the terms of this
agreement and it will not offset or assert any claim against the Lockbox or
the Collection Account or divert such remittances on account of any
obligations owed to the Bank by the Borrower or by the party making the
remittance, except as provided in Section 5 hereof.
SECTION 12. TERM. This Agreement shall continue in full force and
effect until termination by the Bank on 60 days' prior written notice to all
other parties. The Agent may terminate this Agreement at any time which
termination shall be effective on receipt of written notice by the Bank and
the Borrower and in the event of such termination, the Agent shall at its
option have the sole right to remove mail from the Lockbox. The Borrower
shall have no right to unilaterally terminate this Agreement.
SECTION 13. MODIFICATION. This agreement may only be modified by
a writing signed by all of the parties hereto.
SECTION 14. ADDRESSES.
a. All notices, including phone notice, daily deposit advices,
monthly statements of account and copies of all checks and the documents
which are to be given or sent to the Agent shall be sent to the following
address, and, where applicable, given at the following phone number:
BT Commercial Corporation
14 Wall Street
New York, NY 10005
Attn.:
Phone:
b. All notices to the Bank shall be sent to:
--------------------------
--------------------------
--------------------------
Attn.:
Phone:
I-6
<PAGE>
c. All notices and items which are to be sent to the Borrower shall
be sent to:
-----------------------
-----------------------
-----------------------
Attn.:
----------------------
Phone:
----------------------
SECTION 15. INDEMNIFICATION. The Borrower agrees that it will
indemnify and hold the Bank harmless from any and all loss, liability,
expense or damage that the Bank may incur in processing lockbox items in
accordance with this Agreement, including, without limitation, any loss that
the Bank experiences as a result of returned items to the extent the balances
in the Collection Account referenced in Section 5 are insufficient to cover
such losses or in the event the balances in such Collection Account are
insufficient to cover the Bank charges referenced in Section 10.
SECTION 16. LIMITATION ON LIABILITY. The Agent and the Borrower
acknowledge that the Bank undertakes to perform only such duties as are
expressly set forth in this Agreement and those which are normally undertaken
by the Bank in connection with lockbox processing. Notwithstanding any other
provision of this Agreement, it is agreed by the parties that the Bank shall
not be liable for any action taken by the Bank or any of its directors,
officers, agents or employees in accordance with this Agreement, except for
the Bank's or such natural person's gross negligence or wilful misconduct.
In no event shall the Bank be liable for losses or delays resulting from
force majeure, computer malfunction, interruption of communication
facilities, labor difficulties or other causes beyond its reasonable control
or for any indirect, special or consequential damages.
SECTION 17. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
SECTION 18. EFFECTIVENESS. This Agreement shall become effective
upon its receipt by the Agent, properly executed by all of the parties hereto.
I-7
<PAGE>
SECTION 19. GOVERNING LAW. This Agreement shall be governed in
accordance with the laws of the State of New York, without giving effect to
the conflict of law principles thereof (other than Section 5-1401 of the New
York General Obligations Law).
I-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lockbox
Agreement to be executed by their proper and duly authorized officers as of
the date first set forth above.
BT COMMERCIAL CORPORATION
By:
---------------------------------
Name:
Title:
[LOCKBOX BANK]
By:
---------------------------------
Name:
Title:
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:
---------------------------------
Name:
Title:
I-9
<PAGE>
EXHIBIT J
FORM OF COLLATERAL ACCESS AGREEMENT
BT COMMERCIAL CORPORATION, as Agent
14 Wall Street
New York, New York 10005
To be delivered to the
Landlord signatory below
Re: Proposed Financing of Central Products Company,
BROWN-BRIDGE INDUSTRIES, INC. AND ENTOLETER, INC.
Ladies and Gentlemen:
We have been asked by [Central Products Company]
[Brown-Bridge Industries, Inc.] [Entoleter, Inc.] (the "COMPANY") to act as
agent for a syndicate of lenders under certain credit facilities to be
provided to the Company and certain of its affiliates in connection with its
proposed financing. The proposed credit facilities would be secured by
certain assets of the Company, including the Company's Inventory (as defined
below). We understand that the Company leases certain real property (the
"FACILITY") from you pursuant to a lease agreement (as amended, supplemented
or otherwise modified from time to time, the "AGREEMENT").
In connection with the loans to be made to the Company, the lenders
will be lending, in part, against the value of the Company's inventory (the
"COMPANY'S INVENTORY"), including that portion of the Company's Inventory now
or in the future located at the Facility. Therefore, we will be making
customary Uniform Commercial Code filings on behalf of the lenders with
respect to the Company's Inventory located at the Facility. In addition, we
request your acknowledgement, and cooperation, for preserving and enforcing
the lenders' security interests. In order to expedite the consummation of
the proposed credit facilities, we would appreciate your signing and
returning the enclosed copy of this
<PAGE>
letter to our counsel, Luskin & Stern, at 330 Madison Avenue, New York, New
York 10017, Attention: Michael Barocas, Esq.
By signing and returning the enclosed copy of this letter you
confirm and acknowledge the following matters to us:
1. You will allow us, or our auditors or our other designees,
reasonable access to the Facility in order to inspect the Company's Inventory
and verify the amount of the Company's inventory located at the Facility. In
addition, if we elect to remove the Company's Inventory from the Facility
ourselves, you will grant us access to the Facility at reasonable times to do
so.
2. In the event that the Company defaults in its obligations
under the Agreement or you desire or elect to terminate the Agreement for any
reason, including a default by the Company under the Agreement, you will
notify us in writing of this fact prior to your terminating the Agreement and
retaking possession of the Facility and you will allow us to either (i)
undertake to cure any and all defaults under the Agreement and assume the
Company's obligations under the Agreement, or (ii) enter the facility in
order to remove the Company's Inventory. In any case, you confirm and
acknowledge to us that you do not have any claim to or lien upon any of the
Company's Inventory.
We would appreciate your confirming to us your agreement to the
foregoing provisions of this letter by signing and returning to us the
enclosed additional copy of this letter to the address shown above.
[THIS SPACE INTENTIONALLY BLANK]
J-2
<PAGE>
Although the Company is not a party to this agreement, it has
signed below to indicate its acknowledgment of and agreement to the
provisions of this letter.
Very truly yours,
BT COMMERCIAL CORPORATION,
as Agent
By:
--------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
[LANDLORD]
By:
--------------------------------------
Name:
Title:
Landlord Name:
---------------------------
Address:
---------------------------------
---------------------------------
ACKNOWLEDGED AND AGREED:
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:
--------------------------------------
J-3
<PAGE>
Name:
Title:
J-4
<PAGE>
EXHIBIT K
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "AGREEMENT") is entered into as
of October 23, 1996 by Central Products Company, a Delaware corporation
("CENTRAL"), Brown-Bridge Industries, Inc., a Delaware corporation ("BROWN"),
and Entoleter, Inc., a Delaware corporation ("ENTOLETER" and, together with
Central and Brown, the "BORROWERS"), in favor of BT Commercial Corporation,
as agent (in such capacity, the "AGENT") for the Lenders referred to below.
W I T N E S S E T H :
WHEREAS, the Borrowers are party to that certain Credit Agreement
dated as of even date herewith (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"; terms which are
capitalized herein and not otherwise defined shall have the meanings given to
them in the Credit Agreement) among the Borrowers, Spinnaker Industries,
Inc., the financial institutions from time to time party thereto as lenders
(the "LENDERS"), the Agent, Transamerica Business Credit Corporation, as
Collateral Agent, and Bankers Trust Company, as Issuing Bank, pursuant to
which the Borrowers have agreed, among other things, to guaranty each other's
Obligations to the Agent, for the benefit of the Lenders; and
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement that the Borrowers shall have executed and delivered this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the premises
and the covenants hereinafter contained, it is agreed as follows:
To the extent that any Borrower shall, under Article IX of the
Credit Agreement, make a payment (a "PAYMENT") in respect of an amount (the
"Guaranteed Amount") owing under a Revolving Note issued by another Borrower
(the "Defaulting Borrower") which, taking into account all other Payments
then previously or
<PAGE>
concurrently made by the other Borrower that is not the Defaulting Borrower
exceeds the amount which such Borrower would otherwise have paid if each
Borrower other than the Defaulting Borrower (collectively, the "Paying
Borrowers") had paid the aggregate Obligations satisfied by such Payment in
the same proportion as such Paying Borrower's Allocable Amount (as defined
below) in effect immediately prior to such Payment bore to the Aggregate
Allocable Amounts of all of the Paying Borrowers in effect immediately prior
to the making of such Payment, then such Borrower shall be entitled to
contribution and indemnification from, and be reimbursed by, the other Paying
Borrower for the amount of such excess, PRO RATA based upon their respective
Allocable Amounts in effect immediately prior to such Payment.
As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount which could then be claimed by
the Agent and the Lenders under Article IX of the Credit Agreement without
rendering such claim voidable or avoidable under Section 548 of Chapter 11 of
the United States Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute
or common law.
This Agreement is intended only to define the relative rights of
the Borrowers, and nothing set forth in this Agreement is intended to or
shall impair the obligations of the Borrowers, jointly and severally, to pay
any amounts to the Agent, for the benefit of the Lenders, as and when the
same shall become due and payable in accordance with the terms of Article IX
and the other provisions of the Credit Agreement.
The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute an asset in favor of any Borrower
to which such contribution and indemnification is owing.
This Agreement shall become effective upon its execution by each of
the Borrowers and shall continue in full force and effect and may not be
terminated or otherwise revoked by any Borrower until the Obligations shall
have been indefeasibly paid in full in cash, no Letter of Credit is
outstanding and the Commitments shall have been terminated. Each Borrower
agrees that if, notwithstanding the foregoing, such
K-2
<PAGE>
Borrower shall have any right under applicable law to terminate or revoke
this Agreement, and such Borrower shall attempt to exercise such right, then
such termination or revocation shall not be effective until a written notice
of such revocation or termination, specifically referring hereto and signed
by such Borrower, is actually received by each of the other Borrowers and by
the Agent at its notice address set forth in such the Credit Agreement. Such
notice shall not affect the right or power of any Borrower to enforce rights
arising prior to receipt of such written notice by each of the other
Borrowers and the Agent. If the Agent or any Lender makes any Loans or takes
any other action giving rise to Obligations after any Borrower has exercised
any right to terminate or revoke this Agreement but before the Agent receives
such written notices, the rights of each other Borrower to contribution and
indemnification hereunder in connection with any Payments made with respect
to such Loans or Obligations shall be the same as if such termination or
revocation had not occurred.
The provisions of this Agreement may not be modified or waived,
except in a writing signed by the Borrowers and the Agent. This Agreement
and any amendments, waivers, consents, or supplements with respect thereto
may be executed in counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Agreement shall be governed
by the laws of the State of New York, without giving effect to conflicts of
law principles (other than Section 5-1401 of the New York General Obligations
Law).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their proper and duly authorized officers as of the date
first set forth above.
CENTRAL PRODUCTS COMPANY
By:
---------------------------
Name:
Title:
K-3
<PAGE>
BROWN-BRIDGE INDUSTRIES, INC.
By:
---------------------------
Name:
Title:
ENTOLETER, INC.
By:
---------------------------
Name:
Title:
K-4
<PAGE>
EXHIBIT L
FORM OF INTERCOMPANY SUBORDINATED NOTE
--------------------------------------
$_________________ New York, New York
October 23, 1996
FOR VALUE RECEIVED, [Guarantor] [Borrower], a Delaware corporation
(the "Maker"), hereby promises to pay to [Guarantor] [Borrower] or its
assigns ("Payee") in lawful money of the United States of America in
immediately available funds, at ___________________, the principal sum of
_____________ DOLLARS or, if less, the aggregate unpaid principal amount of
all loans made by the Payee to the Maker, which amount shall be payable on
December 31, 2001.
The Maker promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
a rate per annum equal to the Prime Lending Rate (as defined in the Credit
Agreement described below) then in effect PLUS 1.75%, such interest to be
paid monthly in arrears on the second business day of each Month and at
maturity hereof.
This Note is subject to voluntary prepayment, in whole or in part,
at the option of the Maker, without premium or penalty.
This Note is one of the Intercompany Subordinated Notes referred in
the Credit Agreement, dated as of October 23, 1996, by and among Central
Products Company, Brown-Bridge Industries, Inc. and Entoleter, Inc., as
Borrowers, Spinnaker Industries, Inc., as Guarantor, BT Commercial
Corporation, as Agent, Transamerica Business Credit Corporation, as
Collateral Agent, Bankers Trust Company, as Issuing Bank and the financial
institutions from time to time party thereto as Lenders (as amended,
modified, supplemented, extended, restated, refinanced, replaced or refunded
from time to time, the "Credit Agreement") and shall be subject to the
provisions thereof. Unless otherwise defined herein, all capitalized terms
used herein or in Annex A attached hereto and defined in the Credit Agreement
shall have the meaning assigned to such terms in the Credit Agreement.
<PAGE>
Notwithstanding anything to the contrary contained in this Note,
the Payee understands and agrees that the Maker shall not be required to
make, and shall not make, any payment of principal or interest on this Note
to the extent that such payment is prohibited by the terms of Annex A or the
terms of any Senior Indebtedness (as defined in Annex A attached hereto).
This Note, and the Maker's obligations hereunder, shall be
subordinate and junior to all indebtedness of the Maker constituting Senior
Indebtedness (as defined in Section 1.07 of Annex A attached hereto, which
Annex A is herein incorporated by reference and made a part hereof as if set
forth herein in its entirety.
The Maker hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
The occurrence of any of the following events shall be an Event of
Default under this Note:
1. The failure by the Maker to pay any amounts owing under this
Note when due; or
2. If the Maker shall become insolvent, make an assignment for
the benefit of its creditors, or a receiver, conservator, liquidator,
custodian or trustee of the Maker is appointed by order or decree of any
court or agency or supervisory authority having jurisdiction, or if the Maker
obtains an order for relief under the Federal Bankruptcy Code or a petition
is filed or a proceeding is commenced by or against the Maker under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or hereafter
in effect; or
3. The occurrence and continuance of an Event of Default (as
defined in the Credit Agreement).
Upon the occurrence of an Event of Default, the entire principal
amount of this Note, together with all accrued and unpaid interest thereon,
shall automatically and immediately become due and payable.
-2-
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
[ ]
By:
---------------------------
Title:
-3-
<PAGE>
EXHIBIT M
FORM OF COMPLIANCE CERTIFICATE
___________________, 1996
BT Commercial Corporation, as Agent
14 Wall Street
New York, NY 10005
Attention: J. Jeffcott Ogden
Ladies and Gentlemen:
I hereby certify to you as follows:
(a) I am the duly elected ________________________ of
[Central Products Company] [Brown-Bridge Industries, Inc.] [Entoleter, Inc.],
a Delaware corporation (the "BORROWER"). Capitalized terms used in this
Certificate unless otherwise defined herein shall have the meanings given
such terms in the Credit Agreement, dated as of October 23, 1996 (the "CREDIT
AGREEMENT"), among the Borrower, certain of its affiliates, the financial
institutions from time to time parties thereto, as Lenders, Bankers Trust
Company, as Issuing Bank, Transamerica Business Credit Corporation, as
Collateral Agent, and you, as Agent.
(b) I have reviewed the terms of the Credit Agreement, and have
made, or have caused to be made under my supervision, a review in reasonable
detail of the transactions and the condition of the Credit Parties during the
immediately preceding month.
(c) The review described in paragraph (b) above did not disclose
the existence during or at the end of such month, and I have no knowledge of
the existence as of the date hereof, of any condition or event which
constitutes a Default or an Event of Default, except as hereinafter set
forth. Described in a separate attachment to this Certificate are the
exceptions, if
<PAGE>
any, to this paragraph (c) listing, in detail, the nature of the condition or
event, the period during which it has existed and the action which the Credit
Parties have taken, is taking, or proposes to take with respect to such
condition or event.
M-2
<PAGE>
(d) I further certify that, based on the review described in
paragraph (b) above, neither the Credit Parties nor any of their Restricted
Subsidiaries at any time during or at the end of such month, except as
specifically described in paragraph (e) below, did any of the following:
(i) Maintained in the aggregate in all deposit accounts of the
Guarantor, the Borrowers and their Restricted Subsidiaries (other
than the Disbursement Accounts and payroll accounts) total cash
balances and Investments permitted by Sections 7.2(f)(i) of the Credit
Agreement in excess of [$ ].
(ii) Made or committed to make any payments for Capital
Expenditures (on a consolidated basis), in excess of the Base Amount
per fiscal year (or portion thereof) set forth on Annex A attached
hereto, except as specifically described in paragraph (e) below.
(iii) Permitted Consolidated Net Worth to be less than (a)
$8,750,000, plus (b) 50% of the Net Income of the Credit Parties and
their Restricted Subsidiaries to the extent such Net Income is
positive from the Closing Date through the last day of such month,
plus (c) 100% of the aggregate Net Cash Proceeds received by a Credit
Party from any Person (other than a Subsidiary of a Credit Party) from
the Closing Date through the last day of such month from the issuance
and sale of capital stock of any Credit Party.
(iv) Permitted Consolidated Current Ratio to be less than the
ratio set forth on Annex B attached hereto.
(v) Permitted Consolidated Interest Coverage Ratio to be less
than the ratio set forth on Annex C attached hereto.
(e) [List exceptions, if any, to paragraphs (d)(i) through (vi)
above].
M-3
<PAGE>
The foregoing certifications are made and delivered this ____ day
of __________, 199_.
Very truly yours,
[CENTRAL PRODUCTS COMPANY]
[BROWN-BRIDGE INDUSTRIES, INC.]
[ENTOLETER, INC.]
By:
---------------------------
Name:
Title:
M-4
<PAGE>
ANNEX A
-------
CAPITAL EXPENDITURES
--------------------
Quarter Amount
------- ------
From the Closing Date through December 31, 1996 $2,000,000
January 1, 1992 through June 30, 1997 $4,000,000
July 1, 1997 through December 31, 1997 $4,000,000
each six-month period thereafter $5,000,000
<PAGE>
ANNEX B
-------
CONSOLIDATED CURRENT RATIO
--------------------------
Period Ratio
------ -----
Closing date through December 31, 1998 1.20:1
January 1, 1999 and thereafter 1.25:1
<PAGE>
ANNEX C
-------
CONSOLIDATED INTEREST COVERAGE
------------------------------
Period Ratio
------ -----
October 1, 1996 through
December 31, 1996 1.40:1.00
January 1, 1997 through
March 31, 1997 1.40:1.00
April 1, 1997 through
June 30, 1997 1.50:1.00
July 1, 1997 through
September 30, 1997 1.55:1.00
October 1, 1997 through
December 31, 1997 1.60:1.00
January 1, 1998 through
March 31, 1998 1.65:1.00
April 1, 1998 through
June 30, 1998 1.70:1.00
July 1, 1998 through
September 30, 1998 1.80:1.00
October 1, 1998 through
December 31, 1998 1.80:1.00
January 1, 1999 through
March 31, 1999 1.90:1.00
April 1, 1999 through
June 30, 1999 1.90:1.00
Each fiscal quarter and
thereafter 2.00:1.00
<PAGE>
SCHEDULE OF CALCULATIONS
------------------------
For the period from ________________ through ________________
I. Excess Cash
1. Borrowers' total cash balances $
------------
2. Borrowers' Investments
------------
3. Subsidiaries' total cash balances
------------
4. Subsidiaries' Investments
------------
5. Total (lines 1 through 4) $
------------
6. Permitted Cash $
------------
II. Capital Expenditures
1. Balance from previous month $
------------
2. Plus: Capital expenditures
made this month
------------
3. Plus: Capital expenditures
committed to be made this month
------------
4. Total (lines 1 through 3) $
------------
5. Base Amount
------------
6. Plus: Carry-over
------------
7. Total Permitted Capital
Expenditures (lines 5 and 6) $
------------
III. Consolidated Net Worth
1. Consolidated assets $
------------
2. Less: Consolidated liabilities
------------
3. Net Worth $
------------
4. Base Amount $
------------
5. 50% of Net Income to the extent
such Net Income is positive $
------------
6. 100% of aggregate Net Cash proceeds
<PAGE>
from the issuance and sale of
capital stock $
------------
7. Permitted Net Worth
(sum of lines 4, 5 and 6) $
------------
<PAGE>
IV. Consolidated Current Ratio
1. Consolidated current assets $
------------
Divided by:
2. Consolidated current liabilities $
------------
3. Minimum Current Ratio
------------
V. Consolidated Interest Coverage Ratio
1. Adjusted Net Income $
------------
2. Plus: Interest Expense
3. Plus: income tax expense
4. Plus: Senior Note expense
5. Plus: depreciation
6. Plus: amortization
7. Total EBITDA for this period
(lines 1 through 5) $
------------
Divided by:
8. All Interest Expense
9. Total Interest Coverage
------------
10. Minimum Permitted Interest Coverage
------------
[VI. Consolidated Fixed Charge Coverage Ratio]
<PAGE>
EXHIBIT N
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to the Credit Agreement dated as of October 23,
1996 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among Central Products Company ("CENTRAL"), Brown-Bridge
Industries, Inc. ("BROWN"), Entoleter, Inc. ("ENTOLETER" and, together with
Central and Brown, the "BORROWERS"), Spinnaker Industries, Inc., the
financial institutions from time to time parties thereto (the "LENDERS"), BT
Commercial Corporation, as agent (in such capacity, the "AGENT") for the
Lenders, Transamerica Business Credit Corporation, as Collateral Agent and
Bankers Trust Company, as Issuing Bank. Capitalized terms used herein and not
otherwise defined herein shall have the meanings given such terms in the
Credit Agreement.
____________________________________________ (the "ASSIGNOR") and
__________________________________ (the "ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor without recourse to
the Assignee, that interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the date hereof which represents
the percentage interest specified in Item 4(b) of Annex I of all of the
Assignor's outstanding rights and obligations under the Credit Agreement
relating to the credit facility listed in Item 4(a) of Annex I, including
without limitation, such interest in the Assignor's Commitment, the Loans
owing to the Assignor relating to such facility, and the Revolving Notes held
by the Assignor. After giving effect to such sale and assignment, the
Assignee's Commitment will be as set forth in Item 4(c) of Annex I.
2. The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Documents or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Credit Party or the performance or observance by
such Credit Party of any of its obligations under the Credit Documents or any
other instrument or document furnished pursuant thereto; and (iv) attaches
the Revolving Notes referred to in paragraph 1 above and requests that the
Agent exchange such Notes for [a new Revolving Note made by Brown dated as
of the Closing Date in the principal amount of $______ payable to the order
of the Assignee, a new Revolving Note made by Central dated as of the
<PAGE>
Closing Date in the principal amount of $__________ payable to the order of
the Assignee and a new Revolving Note made by Entoleter dated as of the
Closing Date in the principal amount of $__________ payable to the order of
the Assignee] [new Notes as follows: a Revolving Note made by Brown dated as of
the Closing Date in the principal amount of $__________ payable to the order
of the Assignee, a Revolving Note made by Brown dated as of the Closing Date
in the principal amount of $__________ payable to the order of the Assignee,
a Revolving Note made by Central dated as of the Closing Date in the principal
amount of $_________ payable to the order of the Assignee, a Revolving Note
made by Central dated as of the Closing Date in the principal amount of
$________ payable to the order of the Assignor, a Revolving Note made by
Entoleter dated as of the Closing Date in the principal amount of $_________
payable to the order of the Assignee and a Revolving Note made by Entoleter
dated as of the Closing Date in the principal amount of $_________ payable to
the order of the Assignor].
3. The Assignee (i) confirms that it has received a copy of the
Credit Documents, together with copies of the financial statements referred
to in Section 6.1(i) of the Credit Agreement, the financial statements
delivered pursuant to Section 7.1(a) of the Credit Agreement, if any, and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Assumption
Agreement; (ii) agrees that it will, independently and without reliance upon
the Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit
Documents; (iii) confirms that it is eligible as an assignee under the terms
of the Credit Agreement; (iv) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Documents as are delegated to the Agent by the terms thereof; together with
such powers as are reasonably incidental thereto; (v) appoints and authorizes
the Co-Agent to take such action as co-agent on its behalf and to exercise
such powers under the Credit Documents as are delegated to the Co-Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (vi) agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender; [and] (vii) specifies as its Domestic Lending
Office, Eurodollar Lending Office (and address for notices) the office set
forth in Item 6 of Annex I[; and (viii) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the
N-2
<PAGE>
Assignee under the Credit Documents or such other documents as are necessary
under Section 4.10 of the Credit Agreement.](1)
4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, it will be delivered to the Agent
for recording by the Agent. The effective date of this Assignment shall be
the date of the execution hereof by the Assignor and the Assignee and the
receipt of any consent of the Borrowers and the Agent, unless otherwise
specified in Item 5 of Annex I (the "Acceptance Date").
5. Upon such acceptance and recording by the Agent, as of the
Acceptance Date (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Assumption Agreement, have
the rights and obligation of a Lender thereunder and under the other Credit
Documents and (ii) the Assignor shall, to the extent provided in this
Assignment and Assumption Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement and the other Credit
Documents.
6. Upon such acceptance and recording by the Agent, from and after
the Acceptance Date, the Agent shall make all payments under the Credit
Agreement and the Revolving Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees, if applicable, with respect thereto) to the Assignee. Upon
the Acceptance Date, the Assignee shall pay to the Assignor the purchase
price agreed to by the Assignor and the Assignee. The Assignor and the
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Acceptance Date directly
between themselves.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS ASSIGNMENT
AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
- --------------------
(1) If the Assignee is organized under the laws of a jurisdiction outside
the United States.
N-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Assumption Agreement to be executed by their proper and duly authorized
officers as of the date first set forth above.
[Name of Assignor]
By:
------------------------
Name:
Title:
[Name of Assignee]
By:
------------------------
Name:
Title:
Accepted:
BT COMMERCIAL CORPORATION,
as Agent
By:
------------------------
Name:
Title:
N-4
<PAGE>
AGREEMENT AND PLAN OF MERGER
(BROWN-BRIDGE MINORITY INTEREST)
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of the 1st
day of October, 1996, is by and among Spinnaker Industries, Inc., a Delaware
corporation ("Purchaser"), BB Merger Corp., a Delaware corporation and wholly
owned subsidiary of Purchaser ("Acquisition"), Brown-Bridge Industries, Inc., a
Delaware corporation (the "Company"), and those stockholders of the Company
listed on EXHIBIT A hereto (the "Stockholders," and each of them individually,
along with their respective assigns, a "Stockholder").
W I T N E S S E T H:
WHEREAS, Purchaser desires to merge the Company with and into Acquisition
in order to facilitate the offering and sale (the "Offering") of $100 million
aggregate principal amount of Purchaser's Senior Secured Notes due 2006; and
WHEREAS, the Stockholders collectively own 194,321 shares (the "Shares") of
the common stock, $0.10 par value, of the Company (the "BBI Stock"), and options
for an additional 71,065 shares of BBI stock (the "Option Shares," and together
with the Shares, the "Merger Shares") which will be exercised immediately prior
to such merger transaction; and
WHEREAS, Purchaser owns the remainder of the outstanding shares of BBI
Stock; and
WHEREAS, the Company and the Stockholders desire to enter into such merger
transaction;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. THE MERGER; CLOSING
1.1 MERGER. In accordance with the provisions of the Delaware General
Corporation Law (the "DGCL") at the Effective Date (as defined herein) the
Company shall be merged (the "Merger") into Acquisition, and Acquisition shall
be the surviving corporation (the "Surviving Corporation") and as such shall
continue to be governed by the laws of the State of Delaware. It is intended
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code and shall have the following attributes:
<PAGE>
(a) CONTINUING OF CORPORATE EXISTENCE. Except as may otherwise be
set forth herein, the corporate existence and identity of Acquisition, with
all its purposes, powers, franchises, privileges, rights and immunities,
shall continue unaffected and unimpaired by the Merger, and the corporate
existence and identity of the Company, with all its purposes, powers,
franchises, privileges, rights and immunities, at the Effective Date shall
be merged with and into that of Acquisition, and the Surviving Corporation
shall be vested fully therewith and the separate corporate existence and
identity of the Company shall thereafter cease except to the extent
continued by statute.
(b) EFFECTIVE DATE. The Merger shall become effective upon the date
of issuance of a certificate of merger (the "Effective Date") by the
Secretary of State of the State of Delaware subsequent to the filing on the
Closing Date (as defined herein) of a certificate of merger with the
Secretary of State of the State of Delaware pursuant to the DGCL.
(c) CORPORATE GOVERNMENT. The Certificate of Incorporation of
Acquisition as in effect on the Effective Date shall continue in full force
and effect and shall be the Certificate of Incorporation of the Surviving
Corporation. The Bylaws of Acquisition as in effect as of the Effective
Date shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation. The members of the Board of Directors and the
officers of the Surviving Corporation shall be the persons holding such
offices in the Company as of the Effective Date.
(d) RIGHTS AND LIABILITIES OF THE SURVIVING CORPORATION. The
Surviving Corporation shall have the following rights and obligations: (i)
the Surviving Corporation shall have all the rights, privileges, immunities
and powers and shall be subject to all the duties and liabilities of a
corporation organized under the laws of the State of Delaware; (ii) the
Surviving Corporation shall possess all of the rights, privileges,
immunities and franchises, of either a public or private nature, of the
Company and Acquisition and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all
other choses in action, and every other interest of or belonging or due to
the Company and Acquisition shall be taken and deemed to be transferred or
invested in the Surviving Corporation, without any further act or deed; and
(iii) at the Effective Date, the Surviving Corporation shall thenceforth be
responsible and liable for all liabilities and obligations of the Company
and Acquisition and any claim existing or action or proceeding pending by
or against Acquisition or the Company may be prosecuted as if the Merger
had not occurred, or the Surviving Corporation may be substituted in its
place. Neither the rights of creditors nor any liens upon the property of
the Company or Acquisition shall be impaired by the Merger.
1.2 TIME OF CLOSING. A closing (the "Closing") for the Merger shall be
held at 9:00 a.m., Dallas, Texas time, on the date on which the Offering is
consummated (the "Closing Date"), at the law offices of Crouch & Hallett, L.L.P.
located at 717 N. Harwood, Suite 1400, Dallas, Texas, or at such other place or
places and/or time as may be agreed upon by the parties.
Agreement and Plan of Merger
November 6, 1996
Page 2
<PAGE>
1.3 PUT OPTION AGREEMENTS. The parties hereto agree that, effective at
the time of the Closing, all of those certain Put Option Agreements, each of
which is dated on or about September 19, 1994, among Purchaser, the Company and
the Stockholders, or attorneys-in-fact for the Stockholders, are hereby
terminated effective at the time the last required action is taken at the
Closing.
1.4 CLOSING PROCEDURE. At the Closing, Acquisition and the Company will
cause to be prepared, executed and delivered a Certificate of Merger to be filed
with the Secretary of State of Delaware, and all other appropriate and customary
documents as another party or its counsel may reasonably request for the purpose
of consummating the transactions contemplated by this Agreement. Prior to the
Closing, any documents required to be filed to effect the Merger shall be
approved by Purchaser's counsel and in a form appropriate for filing. All
actions taken at the Closing shall be deemed to have been taken simultaneously
at the time the last of any such actions is taken or completed.
2. CONVERSION OF MERGER SHARES; MERGER CONSIDERATION
2.1. CONVERSION OF MERGER SHARES. The manner and basis of converting the
shares of BBI Stock on the Effective Date shall be as follows:
(a) At the Effective Date, each Merger Share outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive the Closing Price (as defined herein), the Contingent Price (as
defined herein) and the Adjustment Shares (as defined herein). The
"Closing Price" shall be equal to (i) $8.25 in cash plus (ii) 0.04714
shares (the "Closing Shares") of the common stock, no par value, of
Purchaser ("Purchaser Stock"), payable on the Effective Date in accordance
with Section 2.3 hereof; provided, however, that the Closing Price payable
for each Share owned by Lynch Corporation shall be $9.90 in cash. The
"Contingent Price" shall be determined as follows: (i) the Fair Market
Value (as defined herein) shall be multiplied by a fraction, the numerator
of which shall be equal to the aggregate number of Merger Shares held by
the Stockholders on the Closing Date, and the denominator of which shall be
the number of shares of BBI Stock outstanding on that date; (ii) the
difference between the product obtained in subpart (i) and the aggregate
amount of the cash portion of the Closing Price paid for the Merger Shares
shall be divided by the Purchaser Stock Value (as defined herein); (iii)
the aggregate number of Closing Shares issued by Purchaser shall then be
subtracted from the number of shares of Purchaser Stock resulting from the
calculations in subpart (ii); and (iv) the number of shares of Purchaser
Stock remaining after performing the calculation in subpart (iii) shall
then be divided by the number of Merger Shares held by the Stockholders as
of the Closing Date; provided, that for purposes of this calculation, Lynch
Corporation shall be deemed to have received the same Closing Price per
Share as the rest of the Stockholders. An example of the calculation of the
Contingent Price is set forth on EXHIBIT B hereto.
Agreement and Plan of Merger
November 6, 1996
Page 3
<PAGE>
(1) As used herein, the term "Fair Market Value" shall mean 75%
of the fair market value of all of the outstanding capital stock of
Acquisition, which shall be calculated in accordance with this
paragraph 2.1(a)(1) as of the date a Contingent Price Notice (as
defined herein) is delivered to the Purchaser. The FMV Representative
(as defined herein) elected pursuant to such Contingent Price Notice
and the Purchaser shall use their reasonable best efforts to come to
an agreement as to the Fair Market Value prior to the date (the
"Beginning Date") that is 20 days after the date of delivery of the
first effective Contingent Price Notice. If the FMV Representative
and Purchaser are unable to agree on the Fair Market Value prior to
the Beginning Date, then, within 20 days of the Beginning Date, they
shall mutually agree on and appoint an "Independent Investment Bank,"
which shall be an investment bank. The agreed upon Independent
Investment Bank shall determine the Fair Market Value within 30 days
of its appointment. If the FMV Representative and the Purchaser are
unable to agree on an Independent Investment Bank within the 20-day
period following the Beginning Date, then they shall each select an
Independent Investment Bank within 35 days of the Beginning Date, and
the Independent Investment Banks so selected shall select an
Independent Investment Bank no later than 60 days after the Beginning
Date, and such third-party Independent Investment Bank shall determine
the Fair Market Value within 30 days of its appointment; provided,
that in the event one of the parties fails to choose an Independent
Investment Bank within 35 days of the Beginning Date, then the
Independent Investment Bank chosen by the other party shall determine
the Fair Market Value. Purchaser, Acquisition and the Appointed
Representatives agree to instruct the Independent Investment Bank to
be guided by the factors and assumptions set forth on EXHIBIT C hereto
in determining the Fair Market Value and to provide the Independent
Investment Bank with such information as it may request in order to
determine the Fair Market Value. All costs of determining the Fair
Market Value hereunder shall be borne equally by Purchaser and the
Appointed Representatives, who shall apportion their half of the costs
among the Stockholders on a pro rata basis.
(2) PAYMENT OF CONTINGENT PRICE. Within 10 business days of the
determination of the Fair Market Value, Purchaser shall deliver to the
appropriate Appointed Representatives (as defined herein) stock
certificates representing the number of shares of Purchaser Stock (the
"Contingent Shares," and together with the Closing Shares and the
Adjustment Shares, the "Payment Shares") that, in each case, is equal
to the Contingent Price and the Adjustment Shares payable for the
Shares held by each Stockholder represented by such Appointed
Representative. Subject to the conditions of this Agreement,
Purchaser, at its option, may deliver to the appropriate Appointed
Representatives, in lieu of the Contingent Shares and the Payment
Shares, cash or certified or cashier's checks, in an amount equal to
the product obtained by multiplying the number of Contingent Shares
that would, but for Purchaser's election to deliver cash, have been
deliverable to such Appointed Representative by the Purchaser Stock
Value.
Agreement and Plan of Merger
November 6, 1996
Page 4
<PAGE>
(3) CONTINGENT PRICE NOTICE. The "Contingent Price Notice"
means a written notice delivered to the Purchaser by one or more
Appointed Representatives who have been granted the authority by this
Agreement to act on behalf of Stockholders owning rights to receive no
less than 51% of the Contingent Shares in the aggregate stating that,
in accordance with the authority granted to them hereunder, such
Appointed Representatives are requesting payment to such Stockholders
of the Contingent Price in accordance with this Section 2.1. Upon
receipt of an effective Contingent Price Notice, Purchaser shall
immediately, and no less than three days of the date of its receipt of
the Contingent Price Notice, inform the remaining Appointed
Representatives that a valid Contingent Price Notice has been
tendered. A Contingent Price Notice may be delivered to Purchaser at
any time during the period beginning after September 30, 1998, and
ending at 5:00 p.m., Dallas, Texas time, on September 30, 2000;
provided, that if a valid Contingent Price Notice has not been
delivered prior to 5:00 p.m., Dallas, Texas time on September 30,
2000, then one shall be deemed to have been delivered to Purchaser as
of that date.
(4) FMV REPRESENTATIVE. On the fifth business day after the
date the Contingent Price Notice is delivered, the Appointed
Representatives shall hold a meeting at 9:00 a.m., Troy, Ohio time, at
the offices of Acquisition, which may be attended in person or by
telephone or other similar device, for the purpose of choosing a
person to act on behalf of the Stockholders with regard to the
determination of the Fair Market Value (the "FMV Representative").
The FMV Representative shall be elected by a vote of the Appointed
Representatives, with each such Appointed Representative having one
vote for each Share held by the Stockholders he or it represents as of
the Closing, and the FMV Representative being chosen by a majority of
such votes.
(5) PURCHASER STOCK VALUE. As used herein, the term "Purchaser
Stock Value" shall mean the average over the 30 days immediately
preceding the date on which the Contingent Price Notice is delivered
of: (A) the last reported sales price of the Purchaser Stock on the
New York Stock Exchange, or (B) (if Purchaser Stock Value cannot be
determined pursuant to the preceding (A)) the last reported sales
price of the Purchaser Stock on such other national security exchange
as the Purchaser Stock is then listed or admitted to unlisted trading
privileges, or (C) (if Purchaser Stock Value cannot be determined
pursuant to the preceding (A) or (B)) the average of the last "ask"
quotation and the last "bid" quotation as reported in the Nasdaq
National Market System (the "NMS"), or (D) (if Purchaser Stock Value
cannot be determined pursuant to the preceding (A), (B) or (C), the
average of the last "ask" quotation and the last "bid" quotation in
the over-the-counter market as reported by the Nasdaq Stock Market,
Inc.
(6) APPOINTED REPRESENTATIVES. Each of the Stockholders, except
for K.C. Caldabaugh, Andrew Aarons, Stuart Postle, Christopher Beigie,
Arthur W. Smith,
Agreement and Plan of Merger
November 6, 1996
Page 5
<PAGE>
III and Joseph Sentendrey (collectively the "Management Group"),
Lynch Corporation and Richard T. Ray, hereby irrevocably and
severally constitutes and appoints James B. Fleming, Jr. (the
"Stockholders Representative") his agent and attorney-in-fact, with
full power of substitution and resubstitution in his name, place
and stead, and for his use and benefit, to take or cause to be
taken or performed any and all actions, deeds and things concerning
the Contingent Shares owned by such Stockholder and the
consummation of the transactions contemplated by this Agreement as
the Stockholders Representative, in his sole discretion, deems
necessary. Each of the Stockholders in the Management Group hereby
irrevocably and severally constitutes and appoints K. C. Caldabaugh
(the "Management Representative") his agent and attorney-in-fact,
with full power of substitution and resubstitution in his name,
place and stead, and for his use and benefit, to take or cause to
be taken or performed any and all actions, deeds and things
concerning the Contingent Shares owned by such Stockholder and the
consummation of the transactions contemplated by this Agreement as
the Management Representative, in his sole discretion, deems
necessary. Lynch Corporation hereby irrevocably and severally
constitutes and appoints Robert E. Dolan (the "Lynch
Representative") its agent and attorney-in-fact, with full power of
substitution and resubstitution in his name, place and stead, and
for its use and benefit, to take or cause to be taken or performed
any and all actions, deeds and things concerning the Contingent
Shares owned by such Stockholder and the consummation of the
transactions contemplated by this Agreement as the Lynch
Representative, in his sole discretion, deems necessary. Richard T.
Ray ("Ray's Representative," and together with the Stockholders
Representative, the Lynch Representative and the Management
Representative, the "Appointed Representatives") shall act on his
own behalf for purposes of this Agreement. The powers of each
Appointed Representative shall include, without limitation, the
power to (A) act on behalf of the Stockholders who appointed him
for purposes of executing and delivering the Contingent Price
Notice and the power to elect the FMV Representative, (B) withhold
expenses, including without limitation expenses of legal counsel,
incurred by such Appointed Representative in performing its duties
hereunder, from proceeds due such Stockholders pursuant to
Purchaser's payment of the Contingent Price, (C) receive the
Contingent Price on behalf of such Stockholders, (D) amend, modify
or waive any provisions of this Agreement, (E) retain legal counsel
in connection with any and all matters described herein or
contemplated hereby (which counsel may, but need not be, counsel
for Purchaser), (F) take delivery and, if necessary, maintain
custody of certificates evidencing the Contingent Shares owned by
such Stockholders, and (G) make, execute, acknowledge and deliver
all other contracts, orders, receipts, notices, requests,
instructions and other documents required, in the sole discretion
of the such Appointed Representative, in connection with any of the
foregoing.
The power of attorney granted herein is a special power coupled with
an interest and is irrevocable, and may be exercised by any person who
is at the time of exercise an Appointed Representative. Each of the
Stockholders agrees to be bound by any
Agreement and Plan of Merger
November 6, 1996
Page 6
<PAGE>
decisions, actions or deeds taken or made by their respective
Appointed Representative with regarding to their authority granted
herein, and further agrees to indemnify and hold harmless any
person acting as their respective Appointed Representative with
regard to any liability or obligation such person may incur as a
result of the performance of his obligations hereunder, except to
the extent that any such liability or obligation is found by a
court of competent jurisdiction in a judgment that has become
final, in that it is no longer subject to appeal or review, to have
resulted from such person's gross negligence or willful misconduct.
(7) ADJUSTMENT SHARES. As used herein, the term "Adjustment
Shares" shall be that number of additional shares of Purchaser Stock
as is necessary to compensate each Stockholder for brokerage
commissions that may be incurred by such Stockholder in selling the
Payment Shares. For purposes of computing the number of Adjustment
Shares, each Stockholders' brokerage costs shall be deemed to be $0.10
per Payment Share and the number of Adjustment Shares that shall be
necessary to compensate each Stockholder for such costs shall be
determined based on the Purchaser Stock Value of the Purchaser Stock
by dividing (A) the product obtained by multiplying the number of
Payment Shares by $0.10 by (B) the Purchaser Stock Value.
(b) Each share of BBI Stock held in the treasury of the Company shall
automatically be canceled and extinguished without any conversion thereof
and no payment will be made with respect thereto.
(c) Each share of BBI Stock owned by Purchaser shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into an aggregate number of shares of Purchaser Stock having a
fair market value equal to the sum of the Closing Price and the Contingent
Price, to be issued (and valued) when and as the Closing Price and the
Contingent Price are paid. Such shares of Purchaser Stock may be held by
Purchaser as treasury stock or canceled in the sole discretion of
Purchaser.
(d) Each share of common stock, $0.01 par value, of Acquisition which
shall be outstanding immediately prior to the Effective Date shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one share of newly issued stock of
the Surviving Corporation.
2.2 FRACTIONAL SHARES. No scrip or fractional shares of Purchaser Stock
shall be issued in the Merger. Any fractional share of Purchaser Stock to which
a Stockholder would otherwise be entitled shall be converted into the right to
receive from Purchaser a full share of Purchaser Stock in lieu of such
fractional share.
Agreement and Plan of Merger
November 6, 1996
Page 7
<PAGE>
2.3 EXCHANGE AGENT.
(a) Purchaser shall authorize Chase Mellon Shareholder Services to
serve as exchange agent hereunder (the "Exchange Agent"). Promptly after
the Effective Date, Purchaser shall deposit or shall cause to be deposited
in trust with the Exchange Agent certificates representing the number of
whole Closing Shares to which the Stockholders are entitled pursuant to
this Article 2, together with cash sufficient to pay the Closing Price
(such cash amounts and certificates being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions received from Purchaser, deliver the number of Closing Shares
and pay the amounts of cash provided for in this Article 2 out of the
Exchange Fund. The Exchange Fund shall not be used for any other purpose,
except as provided in this Agreement, or as otherwise agreed to by
Purchaser, Acquisition and BBI prior to the Effective Date.
(b) Within 15 days after the Effective Date, the Exchange Agent shall
mail and otherwise make available to each Stockholder who, as of the
Effective Date, was a holder of an outstanding certificate or certificates
which immediately prior to the Effective Date represented shares of BBI
Stock (the "Certificates"), a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificates for
payment therefor and conversion thereof, which letter of transmittal shall
comply with all applicable rules of the Nasdaq National Market System.
Delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent and the form of letter of transmittal shall so reflect. Upon
surrender to the Exchange Agent of a Certificate, together with such letter
of transmittal duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor one or more certificates as
requested by the holder (properly issued, executed and countersigned, as
appropriate) representing that number of whole Closing Shares to which such
Stockholder shall have become entitled pursuant to the provisions of this
Article 2 along with the cash portion of the Closing Price to which such
Stockholder is entitled. No interest will be paid or accrued on the cash
payable upon surrender of the Certificates. Purchaser shall pay any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of Purchaser Stock; provided, however, that such
certificate is issued in the name of the person in whose name the
Certificate surrendered in exchange therefor is registered; provided
further, however, that Purchaser shall not pay any income taxes incurred by
the Stockholders nor shall Purchaser pay any transfer or other tax if
payment of any such tax by Purchaser otherwise would cause the Merger to
fail to qualify as a tax-free reorganization under the Code. If any
portion of the consideration to be received pursuant to this Article 2 upon
exchange of a Certificate is to be issued or paid to a person other than
the person in whose name the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such issuance and payment that
the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such exchange shall
pay in advance any transfer or other taxes required by reason of the
issuance of a certificate representing Closing Shares to such other person,
or establish to the satisfaction of the Exchange Agent that such tax has
been paid or that no such tax is applicable. From the
Agreement and Plan of Merger
November 6, 1996
Page 8
<PAGE>
Effective Date until surrender in accordance with the provisions of this
Section 2.3, each Certificate (other than Certificates representing
treasury shares of BBI and Certificates representing Dissenting Shares)
shall represent for all purposes only the right to receive the
consideration provided in Sections 2.1 and 2.2. No dividends that are
otherwise payable on Closing Shares will be paid to persons entitled to
receive Closing Shares until such persons surrender their Certificates.
After such surrender, there shall be paid to the person in whose name
Closing Shares shall be issued any dividends on such Closing Shares that
shall have a record date on or after the Effective Date and prior to such
surrender. If the payment date for any such dividend is after the date of
such surrender, such payment shall be made on such payment date. In no
event shall the persons entitled to receive such dividends be entitled to
receive interest on such dividends.
(c) In the case of any lost, mislaid, stolen or destroyed
Certificates, the holder thereof may be required, as a condition precedent
to the delivery to such holder of the consideration described in this
Article 2, to deliver to Purchaser a bond in such reasonable sum as
Purchaser may direct as indemnity against any claim that may be made
against the Exchange Agent, Purchaser or the Surviving Corporation with
respect to the Certificate alleged to have been lost, mislaid, stolen or
destroyed.
(d) After the Effective Date, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of BBI
Stock that were outstanding immediately prior to the Effective Date. If,
after the Effective Date, Certificates are presented to the Surviving
Corporation for transfer, they shall be canceled and exchanged for the
consideration described in this Article 2.
(e) Any portion of the Exchange Fund that remains unclaimed by the
Stockholders for six months after the Effective Date shall be returned to
Purchaser, upon demand, and any holder of BBI Stock who has not theretofore
complied with Section 2.3(b) shall thereafter look only to Purchaser for
issuance of the number of shares of Purchaser Stock and other consideration
to which such holder has become entitled pursuant to this Article 2;
provided, however, that neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of BBI Stock for any amount required
to be paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
2.4 ADJUSTMENTS.
(a) If, between the date of this Agreement and the Effective Date,
(i) the outstanding shares of BBI Stock shall have been changed into a
different number of shares or a different class by reason of any
classification, recapitalization, split-up, combination, exchange of
shares, or readjustment or a stock dividend thereon shall be declared with
a record date within such period or (ii) BBI shall have issued additional
shares of BBI Stock (other than upon the exercise of employee stock options
granted prior to the date hereof) or options or warrants to purchase the
same, or securities convertible into the same, the Closing Price and the
Contingent Price to be delivered pursuant to the Merger shall be adjusted
so
Agreement and Plan of Merger
November 6, 1996
Page 9
<PAGE>
that the Stockholders will receive the same consideration for their
Shares as they would have received immediately prior to such transaction.
(b) If, between the first date used for determining the Purchaser
Stock Value in accordance with this Agreement and the date a Stockholder
receives the Contingent Price for his Merger Shares, Purchaser shall (i)
pay a dividend in or make a distribution of shares of Purchaser Stock, (ii)
subdivide its outstanding shares of Purchaser Stock, (iii) combine its
outstanding shares of Purchaser Stock into a smaller number of shares of
Purchaser Stock, or (iv) issue any shares of its capital stock in a
reclassification of its Purchaser Stock (including any such
reclassification in connection with a consolidation or merger in which
Purchaser is the continuing corporation), the number of Payment Shares to
be delivered hereunder immediately prior thereto shall be adjusted so that
such Stockholder shall be entitled to receive the kind and number of shares
or other securities of Purchaser which such Stockholders would have owned
or would have been entitled to receive after the happening of any of the
events described above, had the Closing Price or the Contingent Price, as
applicable, been paid immediately prior to the happening of such event or
any record date with respect thereto.
(c) Any adjustment made pursuant to this Section 2.4 shall become
effective immediately after the effective date of the event necessitating
such adjustment retroactive to the record date, if any, for such event.
2.5 REGISTRATION RIGHTS. Purchaser hereby grants to the Stockholders the
registration rights set forth in Section 3 hereof, which apply to any shares of
Purchaser Stock delivered by Purchaser pursuant to Section 2.1 hereof.
3. REGISTRATION RIGHTS
3.1 DEMAND REGISTRATION RIGHTS. At any time that written demand is made
by the Stockholders who hold at least 20% in the aggregate of the Contingent
Shares, Purchaser (i) will promptly give written notice of the proposed
registration to all of the holders of Payment Shares, and (ii) will use its
reasonable best efforts to file a registration statement under the Securities
Act of 1933, as amended (the "Act") within 30 days of such request and to
effect, as promptly as possible, the registration under the Act of the Payment
Shares to be registered by the Stockholders, subject to the other provisions of
this Agreement, for disposition in an underwritten public offering managed by an
underwriting firm selected by Purchaser. Each person desiring to include his or
her Payment Shares in such a registration must so notify Purchaser in writing
within 30 days of the giving of notice of registration by Purchaser. If a
managing underwriter is participating in such a registration and advises the
Stockholders in writing that marketing factors require a limitation on the
number of Payment Shares to be included in any registration statement filed
pursuant to this Section 3.1, then such Payment Shares may be omitted from the
registration statement to the extent necessary to consummate the offering on
terms reasonably acceptable to the managing underwriter and a majority in
interest, based upon ownership of Payment Shares, of the Stockholders requesting
registration. If some, but not all, of the Payment Shares that the
Agreement and Plan of Merger
November 6, 1996
Page 10
<PAGE>
Stockholders desire to sell exceeds the number of Payment Shares acceptable
by the managing underwriter, then the number of Payment Shares that may be
included in the registration and underwriting shall be allocated among all
such Stockholders in proportion, as nearly as practicable, to the respective
amounts of Payment Shares which they had requested to be included in such
registration at the time of filing the registration statement. Additionally,
if the managing underwriter advises Purchaser in writing that marketing
factors require that the registration of the Payment Shares be deferred, or
if the registration of the Payment Shares, if not deferred, would, in the
opinion of the Board of Directors of Purchaser, determined reasonably and in
good faith, materially and adversely affect an important business situation,
transaction or negotiation affecting Purchaser at the time, then Purchaser
may defer the filing of such registration statement for a period not
exceeding 120 days from the date of such deferral.
3.2 PIGGY BACK REGISTRATION RIGHTS. If at any time Purchaser shall
determine to register (including pursuant to a demand of any person exercising
its registration rights hereunder) any of its securities under the Act, other
than a Form S-8 or Form S-4 or the then equivalent forms, it shall promptly send
to each holder of Payment Shares written notice of such determination and, if
within 30 days after receipt of such notice, any holders of Payment Shares shall
request in writing, Purchaser shall use its reasonable best efforts to include
in such registration statement the Payment Shares so requested to be registered
on the same terms and conditions as any similar securities of Purchaser included
therein, and to effect, as promptly as possible, the registration of such
Payment Shares under the Act, subject, however, to the other provisions of this
Article 3. If a managing underwriter is participating in a registration
described in this Section 3.2 and advises Purchaser in writing that marketing
factors require a limitation on the number of Payment Shares to be included in
any registration statement filed pursuant to this Section 3.2, then such Payment
Shares may be omitted from the registration statement to the extent necessary to
consummate the offering on terms reasonably acceptable to Purchaser and the
managing underwriter, and Purchaser shall so advise the holders of Purchaser
Stock who requested registration; provided, that, Payment Shares requested to be
registered by the Stockholders (if any) shall be omitted or excluded from the
registration statement before any securities to be registered by Purchaser may
be so omitted or excluded. If some, but not all, of the Payment Shares that
the Stockholders desire to sell exceeds the number of Payment Shares acceptable
by the managing underwriter, then the number of Payment Shares that may be
included in the registration and underwriting shall be allocated among all such
Stockholders in proportion, as nearly as practicable, to the respective amounts
of Payment Shares which they had requested to be included in such registration
at the time of filing the registration statement.
3.3 FURTHER OBLIGATIONS OF PURCHASER. If and whenever Purchaser is
required by the provisions of this Article 3 to use its reasonable best efforts
to effect the registration of Payment Shares under the Act, Purchaser will:
(a) prepare and file with the United States Securities and Exchange
Commission (the "SEC") the appropriate registration statement with respect
to such securities and use its reasonable best efforts to cause such
registration statement to become and remain effective for 90 days or until
the intended distribution is completed, whichever first occurs;
Agreement and Plan of Merger
November 6, 1996
Page 11
<PAGE>
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for 90
days or until the intended distribution is completed, whichever first
occurs, and to comply with the requirements of the Act and the rules and
regulations promulgated by the SEC thereunder relating to the sale or other
disposition of the securities covered by such registration statement;
(c) furnish to the holders of Payment Shares covered by the
registration statement copies of a prospectus, including a preliminary
prospectus, complying with the requirements of the Act and such other
documents as such holders may reasonably request in order to facilitate the
public sale or other disposition of the Payment Shares covered by such
registration statement;
(d) use its reasonable best efforts to register or qualify the
Payment Shares covered by such registration statement under such securities
or blue sky laws as a majority of the Appointed Representatives involved in
the offering or, in the case of an underwritten offering, the managing
underwriter for the offering, designates; provided, however, that Purchaser
shall not be required to qualify as a foreign corporation in any such
jurisdiction or be required to execute a consent to submit generally to the
jurisdiction of the courts of such jurisdiction or to escrow any of its
securities;
(e) supply the Appointed Representatives or, in the case of an
underwritten offering, the managing underwriter with copies of all
correspondence and communications between Purchaser and the SEC relating to
all registration statements, notifications or offering circulars provided
for hereunder;
(f) endeavor to cause Purchaser's counsel and accountants to furnish
the Appointed Representatives or, in the case of an underwritten offering,
the managing underwriter with such documents, opinions and confirmations as
may be called for by the managing underwriter and which are in the usual
form incident to and as are normally required in an underwritten offering;
and any such opinions as to the Payment Shares or any accountant's comfort
letters shall be also addressed to the Stockholders; and
(g) do any and all such other acts and things as may reasonably,
without material additional cost, be necessary or advisable to enable
holders of Payment Shares to consummate the public sale or other
disposition of their Payment Shares in such jurisdictions as are covered by
the registration statement.
3.4 EXEMPTION FROM REGISTRATION. Notwithstanding anything contained in
this Article 3, Purchaser shall not be required by this Article 3 to register
any Payment Shares under the Act or under any state securities law if, according
to a written opinion of counsel for Purchaser, a copy of which shall be provided
to each holder of the Payment Shares, the proposed public sale or transfer of
the Payment Shares as to which registration is requested is exempt from the
Agreement and Plan of Merger
November 6, 1996
Page 12
<PAGE>
registration provisions of the Act and the securities laws of the states in
which the Payment Shares are to be sold or transferred.
3.5 INDEMNIFICATION. The parties hereto further agree that they shall
have the following respective indemnification obligations:
(a) Each person having their Payment Shares registered under this
Article 3 (the "Registering Stockholders") shall indemnify and hold
harmless Purchaser and its officers, directors, and each person (if any)
who controls Purchaser within the meaning of Section 15 of the Act or
Section 20 of the United States Securities Exchange Act of 1934, as
amended, against any losses, claims, damages or liabilities to which such
persons may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which the Payment Shares are
registered under the Act, or in any preliminary prospectus, final
prospectus, or amendment or supplement to any of the foregoing, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission is based upon information furnished by such Registering
Stockholder to Purchaser in writing in connection with the preparation and
filing of the registration statement and specifically stating that it is
being produced in connection with the preparation thereof. The
indemnification obligations of each Registering Stockholder under this
Section 3.6 shall be limited to the proceeds of the Payment Shares sold in
such offering by such Registering Stockholder.
(b) Purchaser shall indemnify and hold harmless each Registering
Stockholder against any losses, claims, damages or liabilities to which
such holders may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which the Purchaser Stock is
registered under the Act, or in any preliminary prospectus, final
prospectus, or amendment or supplement to any of the foregoing, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made, except to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission is based upon information
furnished by such Registering Stockholder to Purchaser in connection with
the preparation and filing of the registration statement.
(c) The indemnifying party will pay any legal or other expenses
reasonably incurred by any indemnified party in connection with
investigating or defending any such
Agreement and Plan of Merger
November 6, 1996
Page 13
<PAGE>
loss, claim, damage, liability or action incurred by the indemnified
party as a result of the misinformation furnished by the other party.
(d) Any person entitled to indemnification herein will (i) give
prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party pursuant to this Agreement
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(e) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of
securities. Purchaser also agrees to make such provisions as are
reasonably requested by any indemnified party for contribution to such
party in the event Purchaser's indemnification is unavailable for any
reason.
3.6 PAYMENT OF EXPENSES. All costs and expenses in connection with any
registration statement prepared and filed in accordance with this Article 3,
including (but not limited to) federal and state registration and filing fees,
printing expenses, and the fees and disbursements of counsel and independent
accountants and other experts of Purchaser, shall be borne by Purchaser;
provided, however, that Purchaser shall not be obligated to pay the fees and
disbursements of counsel of any Shareholder or any underwriting commissions or
discounts relating to any Payment Shares.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby represents and warrants to Purchaser, severally and
not jointly, that as to such Stockholder:
4.1 DUE AUTHORIZATION; EXECUTION AND DELIVERY. Such Stockholder has full
power and authority to enter into and perform this Agreement and to carry out
the transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except as may be limited by the
availability of equitable remedies or by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.
Agreement and Plan of Merger
November 6, 1996
Page 14
<PAGE>
4.2 GOVERNMENTAL CONSENTS. No approval, authorization, consent, order or
other action of, or filing with, any governmental authority or administrative
agency is required in connection with the execution and delivery by such
Stockholder of this Agreement or the consummation of the transactions
contemplated hereby. No approval, authorization or consent of any other third
party is required in connection with the execution and delivery by such
Stockholder of this Agreement and the consummation of the transactions
contemplated hereby.
4.3 SHARES. As of the Closing, such Stockholder shall be the lawful, sole
and beneficial owner of the Merger Shares owned by such Stockholder, as
reflected on Exhibit A hereto, free and clear of all liens, claims and
encumbrances of every kind.
4.4 FINDERS AND BROKERS. No person has as a result of any agreement or
action of the Stockholders any valid claim against any of the parties hereto for
a brokerage commission, finder's fee or other like payment.
4.5 INVESTMENT REPRESENTATIONS AND WARRANTIES. Each Stockholder hereby
represents and warrants that:
(a) He has such knowledge and experience in business and financial matters
as to be capable of evaluating the merits and risks to him of an
investment in the Payment Shares;
(b) Prior to executing this Agreement, he has had access to information
regarding the financial condition and business of Purchaser;
(c) He is receiving the Payment Shares for his own account for investment
and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Act; and
(d) He understands that he cannot offer for sale, sell or otherwise
dispose of his Payment Shares unless such Payment Shares have been
registered under the Act and any applicable state securities laws, or
unless an exemption from such registration is available with respect
to any such proposed offer, sale or disposition, and he understands
that the certificates evidencing such Payment Shares will have
restrictive legends thereon describing such restrictions on
disposition.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Stockholders as follows:
5.1 ORGANIZATION AND GOOD STANDING. Each of Purchaser and Acquisition is
a corporation duly organized, validly existing and in good standing under the
laws of the State of
Agreement and Plan of Merger
November 6, 1996
Page 15
<PAGE>
Delaware and has all requisite corporate power and authority to own and lease
its properties and carry on its business as currently conducted.
5.2 DUE AUTHORIZATION. Each of Purchaser and Acquisition has full
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Purchaser and
Acquisition. This Agreement has been duly executed and delivered by Purchaser
and Acquisition and constitutes the legal, valid and binding obligation of each
of them, enforceable against them in accordance with its respective terms,
except as may be limited by the availability of equitable remedies or by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally.
5.3 EXECUTION AND DELIVERY. The execution and delivery by Purchaser and
Acquisition of this Agreement and the consummation of the transactions
contemplated hereby will not: (i) conflict with or result in a breach of the
certificate of incorporation or bylaws of Purchaser or Acquisition, (ii) violate
any law, statute, rule or regulation or any order, writ, injunction or decree of
any court or governmental authority, or (iii) as of the Closing, violate or
conflict with or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under) any indenture, mortgage, lease,
contract or other instrument to which either Purchaser or Acquisition is a party
or by which it is bound or affected.
5.4 PAYMENT SHARES. On the date of their respective issuances, all of the
Payment Shares shall be duly authorized and validly issued and fully paid and
nonassessable, and all required regulatory approvals pertaining to the Offering
shall have been obtained. The Payment Shares shall be transferred to the
Stockholders free and clear of any lien, privilege, pledge, option or other
encumbrance.
5.5 FINDERS AND BROKERS. No person has as a result of any agreement or
action of the Purchaser any valid claim against any of the parties hereto for a
brokerage commission, finder's fee or other like payment.
6. CERTAIN COVENANTS AND AGREEMENTS
6.1 BEST EFFORTS. Each of the Stockholders, the Company, Acquisition and
Purchaser shall take all reasonable action necessary to consummate the
transactions contemplated by this Agreement and will use all necessary and
reasonable means at their disposal to obtain all necessary consents and
approvals of other persons and governmental authorities required to enable it to
consummate the transactions contemplated by this Agreement. Each party shall
make all filings, applications, statements and reports to all governmental
agencies or entities which are required to be made prior to the Closing Date by
or on its behalf pursuant to any statute, rule or regulation in order to
consummate the transactions contemplated by this Agreement, and copies of all
such filings, applications, statements and reports shall be provided to the
other.
Agreement and Plan of Merger
November 6, 1996
Page 16
<PAGE>
6.2 FINANCIAL INFORMATION. Purchaser hereby agrees that it shall provide
any of the Stockholders who have not previously received the Contingent Price
for their Merger Shares with the following:
(a) Unless an Appointed Representative for a Stockholder requests
otherwise, Purchaser shall, within 90 days following the end of each of the
twelve-month periods ending on December 31, 1997, December 31, 1998,
December 31, 1999 and December 31, 2000, respectively (each such twelve-
month period being referred to herein as a "Determination Period"), furnish
to the Stockholders an audited balance sheet of Acquisition as of the close
of such Determination Period and audited statements of income and cash flow
of Acquisition for each Determination Period then ended, including
footnotes, prepared in accordance with generally accepted accounting
principles, consistently applied. Purchaser shall bear the costs of such
audits. In addition, Purchaser shall cause to be furnished to the
Appointed Representatives a balance sheet, statement of income and
statement of cash flow of Acquisition for each fiscal quarter of
Acquisition, beginning with the quarter ending June 30, 1998, up to and
through the date a Contingent Price Notice is delivered to Purchaser and,
if requested by the Appointed Representatives, for each month beginning
with the month ending June 30, 1998, up to and through the date a
Contingent Price Notice is delivered to Purchaser. All such quarterly and
monthly financial statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied (except that such
financial statements shall not include footnotes).
(b) Concurrently with the delivery of audited financial statements in
accordance with paragraph (a) above, Purchaser shall provide a calculation,
certified by Purchaser's independent auditors, of Acquisition's "Adjusted
Net Earnings," "Outstanding Debt," "EBITDA" and "Free Cash Flows" (as each
is defined in EXHIBIT C hereto) for the relevant Determination Period.
Concurrently with the delivery of other, unaudited financial statements in
accordance with paragraph (a) above, Purchaser shall provide the
information necessary to make a calculation of Acquisition's "Adjusted Net
Earnings", "Outstanding Debt", "EBITDA" and "Free Cash Flow" for the
relevant period.
(c) If at any time Purchaser or one of its affiliates, on the one
hand, or the Stockholders, on the other, engages an appraiser to determine
the fair market value of Acquisition, then, subject to the terms of any
applicable confidentiality agreements, the party requesting such appraisal
shall provide the results of such appraisal to the other parties hereunder.
(d) Each of the Stockholders acknowledges that the information and
financial data that shall be provided to them in accordance with this
Section 6.2 is confidential, and they hereby covenant and agree to keep
such information confidential and not to disclose its contents to any
other person, except as required by law or a court order.
Agreement and Plan of Merger
November 6, 1996
Page 17
<PAGE>
6.3 SUCCESSORS AND ASSIGNS; SUBSEQUENT SALES OF ACQUISITION.
(a) In the event that Purchaser or any of its successors or assigns
(i) consolidates or merges with or into any other person and shall not be
the continuing or surviving corporation, receiving association or entity of
such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of Purchaser assume all of the obligations of Purchaser set forth
herein; provided, that if the corporation issuing stock on behalf of the
person who survives such consolidation or merger or acquires such
properties and assets is not a corporation whose common stock is publicly
traded on a national security exchange or the NMS, then such person shall
pay the Contingent Price in cash. This subparagraph (a) shall similarly
apply to successive consolidations, mergers, sales or transfers.
(b) In the event that Purchaser or any of its successors or assigns
(i) transfers more than a majority of the voting power or control over
Acquisition or (ii) permits the transfer or conveyance of all or
substantially all of Acquisition's properties and assets to any person,
then, prior to Purchaser consummating such transfer, Purchaser shall cause
the acquiring person to execute and deliver an agreement to the Appointed
Representatives providing that such person agrees to maintain Acquisitions
on a stand-alone basis for accounting purposes and to assume all of
Purchaser's obligations hereunder, including the obligations to provide all
the information that is necessary for purposes of calculating the
Contingent Price and to pay the Contingent Price, which shall be paid in
shares of common stock of such acquiring person or corporation of which
such acquiring person is a wholly owned subsidiary; provided, that if the
corporation issuing stock on behalf of such acquiring person is not a
corporation whose common stock is traded on a national security exchange or
the NMS, then the acquiring corporation shall pay the Contingent Price in
cash; provided further, that nothing herein shall relieve Purchaser of its
obligations hereunder.
6.4 EXERCISE OF OPTIONS. K.C. Caldabaugh and Richard T. Ray hereby agree
that, no later than the time of the Closing, they will exercise their options to
purchase the Option Shares.
7. CONDITIONS TO PURCHASER'S CLOSING
All obligations of Purchaser under this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, it being
understood that Purchaser may, in its sole discretion, waive any or all of such
conditions in whole or in part:
7.1 REPRESENTATIONS, ETC. The Stockholders shall have performed in all
material respects the covenants and agreements contained in this Agreement that
are to be performed by each of them at or prior to the Closing, and the
representations and warranties of the Stockholders contained in this Agreement
shall be true and correct as of the Closing Date with the same effect as though
made at such time (except as contemplated or permitted by this Agreement).
Agreement and Plan of Merger
November 6, 1996
Page 18
<PAGE>
7.2 CONSENTS. As of the Closing, all consents and approvals of
governmental agencies, and from any other third parties required to consummate
the transactions contemplated by this Agreement, shall have been obtained
without material cost or other materially adverse consequence to Purchaser and
shall be in full force and effect.
7.3 NO ADVERSE LITIGATION. As of the Closing, no order or preliminary or
permanent injunction shall have been entered and no action, suit or other legal
or administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may have
the effect of (i) making any of the transactions contemplated hereby illegal, or
(ii) making Purchaser or the Company, or any director or controlling person
thereof, liable for the payment of a material amount of damages to any person.
7.4 CLOSING DELIVERIES. Purchaser shall have received each of the
documents or items required to be delivered to it pursuant to Section 9.1
hereof.
7.5 OFFERING. Purchaser shall have consummated the Offering; provided
that Purchaser is not in any way obligated to consummate the Offering.
7.6 STOCK OPTIONS. All options for shares of BBI Stock then outstanding
shall have been exercised.
8. CONDITIONS TO THE STOCKHOLDERS' CLOSING
All obligations of the Stockholders under this Agreement shall be subject
to the fulfillment at or prior to the Closing of the following conditions, it
being understood that the Stockholders may, in their sole discretion, waive any
or all of such conditions in whole or in part:
8.1 REPRESENTATIONS, ETC. Purchaser shall have performed in all material
respects the covenants and agreements contained in this Agreement that are to be
performed by Purchaser or the Company at or prior to the Closing, and the
representations and warranties of Purchaser or the Company contained in this
Agreement shall be true and correct as of the Closing Date with the same effect
as though made at such time (except as contemplated or permitted by this
Agreement).
8.2 NO ADVERSE LITIGATION. As of the Closing, no order or preliminary or
permanent injunction shall have been entered and no action, suit or other legal
or administrative proceeding by any court or governmental authority, agency or
other person shall be pending or threatened on the Closing Date which may have
the effect of (i) making any of the transactions contemplated hereby illegal or
(ii) making the Stockholders liable for the payment of a material amount of
damages to any person.
8.3 CLOSING DELIVERIES. The Stockholders shall have received each of the
documents or items required to be delivered to them pursuant to Section 9.2
hereof.
Agreement and Plan of Merger
November 6, 1996
Page 19
<PAGE>
8.4 OFFERING. Purchaser shall have consummated the Offering; provided
that Purchaser is not in any way obligated to consummate the Offering.
9. DOCUMENTS TO BE DELIVERED AT CLOSING
9.1 TO PURCHASER. At the Closing, there shall be delivered to Purchaser:
(a) a copy of all consents and approvals referred to in Section 7.2
hereof; and
(b) all other items reasonably requested by Purchaser.
(c) an opinion of counsel to Purchaser as to the treatment of the
merger as a tax-free reorganization under the Code.
9.2 TO THE STOCKHOLDERS. At the Closing, there shall be delivered to the
Stockholders:
(a) a certificate, signed by the President of Purchaser, as to the
fulfillment of the conditions set forth in Sections 8.1 and 8.2 hereof;
(b) all other items reasonably requested by the Stockholders;
(c) an opinion of counsel to Purchaser deliverable to the
Stockholders as to the treatment of the Merger as a tax-free reorganization
under the Code; and
(d) an opinion of counsel to Purchaser as to the enforceability of
this Agreement and the due authorization and valid issuance of the
Purchaser Stock.
10. SURVIVAL
All representations, warranties, covenants and agreements made by any party
to this Agreement or pursuant hereto shall be deemed to be material and to have
been relied upon by the parties hereto and shall survive the Closing. The
representations and warranties hereunder shall not be affected or diminished by
any investigation at any time by or on behalf of the party for whose benefit
such representations and warranties were made. All statements contained herein
or in any certificate, exhibit, list or other document delivered pursuant hereto
or in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties.
11. FAILURE TO CLOSE BECAUSE OF DEFAULT
In the event that the Closing is not consummated by virtue of a material
default made by a party in the observance or in the due and timely performance
of any of its covenants or agreements herein contained ("Default"), the parties
shall have and retain all of the rights afforded them at law or in equity by
reason of that Default. In addition, the Stockholders and Purchaser acknowledge
that the Merger Shares and the transactions contemplated hereby are unique, that
a
Agreement and Plan of Merger
November 6, 1996
Page 20
<PAGE>
failure by the Stockholders or Purchaser to complete such transactions will
cause irreparable injury to the other, and that actual damages for any such
failure may be difficult to ascertain and may be inadequate. Consequently,
Purchaser and the Stockholders agree that each shall be entitled, in the
event of a Default by the other, to specific performance of any of the
provisions of this Agreement in addition to any other legal or equitable
remedies to which the non-defaulting party may otherwise be entitled. In the
event any action is brought, the prevailing party shall be entitled to
recover court costs, arbitration expenses and reasonable attorneys' fees.
12. TERMINATION RIGHTS
This Agreement may be terminated by either Purchaser or any of the
Stockholders, if either such party is not then in Default, upon written notice
to the other upon the occurrence of any of the following:
(a) if the Closing has not occurred on or before December 30, 1996;
(b) if any party hereto Defaults and such Default has not been cured
within 30 days of written notice of such Default by another party;
(c) subject to the provisions of Sections 7 and 8 hereof, by any
party hereto if on the Closing Date any of the conditions precedent to the
obligations of Stockholders or Purchaser, respectively, set forth in this
Agreement have not been satisfied or waived by such party; or
(d) by mutual consent of the Stockholders and Purchaser.
13. MISCELLANEOUS PROVISIONS
13.1 EXPENSES. The Purchaser shall pay the fees and expenses incurred by
it, the Company and Acquisition in connection with the transactions contemplated
by this Agreement and shall also pay the first $7,500 in legal fees incurred by
the Stockholders pursuant to the negotiation of this Agreement. If any action
is brought for breach of this Agreement or to enforce any provision of this
Agreement, the prevailing party shall be entitled to recover court costs,
arbitration expenses and reasonable attorneys' fees.
13.2 AMENDMENT. This Agreement may be amended at any time but only by an
instrument in writing signed by the parties hereto.
13.3 NOTICES. All notices and other communications delivered hereunder
shall be in writing and shall be deemed given if delivered personally or upon
actual receipt if mailed by certified mail, return receipt requested, or
delivered by nationally recognized "next-day" delivery service to the
Stockholders at their respective addresses appearing on EXHIBIT A hereto or, if
to the other parties hereto, at the appropriate addresses set forth below:
Agreement and Plan of Merger
November 6, 1996
Page 21
<PAGE>
If to the Appointed Representatives:
Lynch Corporation
Eight Sound Shore Drive
Greenwich, CT 06830
Attention: Robert E. Dolan
Telephone: (203) 629-3333
Telecopy: (203) 629-3718
James B. Fleming, Jr.
Columbia Capital Corp.
201 N. Union Street, Suite 300
Alexandria, VA 22314
Telephone: 703-519-3028
Telecopy: 703-519-3904
K.C. Caldabaugh
518 East Water Street
Troy, Ohio 45373
Telephone: (513) 332-6500
Telecopy: (513) 335-2843
Richard T. Ray
518 East Water Street
Troy, Ohio 45373
Telephone: (513) 332-6500
Telecopy: (513) 335-2843
If to Purchaser, Acquisition or the Company:
Spinnaker Industries, Inc.
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
Attention: Ned N. Fleming, III
Telephone: (214) 855-0322
Telecopy: (214) 855-0093
Agreement and Plan of Merger
November 6, 1996
Page 22
<PAGE>
with a copy to:
Lynch Corporation
Eight Sound Shore Drive
Greenwich, CT 06830
Attention: Robert Hurwich
Telephone: (203) 629-3333
Telecopy: (203) 629-3718
and to:
Crouch & Hallett, L.L.P.
717 N. Harwood, Suite 1400
Dallas, TX 75201
Attention: Lance M. Hardenburg
Telephone: (214) 922-4167
Telecopy: (214) 922-4193
or such other address or addresses as any party shall have designated by notice
to each other party in accordance with this Section 13.3.
13.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, heirs and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of a majority of Stockholders Representatives and
Purchaser; provided, that any Stockholder may transfer, sell or assign his
rights hereunder to another Stockholder or to any member of his immediate
family, whether by inter vivos or testamentary transfer; provided, that any
assignee of one or more Stockholders' rights hereunder shall be bound by the
terms and provisions of this Agreement as to the exercise of such rights,
including the method of calculation and receipt of the Payment Shares.
Purchaser or Lynch may assign its rights under this Agreement to any of its
subsidiaries or affiliated corporations, or to any of its successors pursuant to
Section 6.3 hereof.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.6 HEADINGS. The headings of the Sections of this Agreement are inserted
for convenience only and shall not constitute a part hereof.
13.7 ENTIRE AGREEMENT. This Agreement and the documents referred to herein
contain the entire understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties,
conveyances or undertaking other than those expressly set forth herein. This
Agreement supersedes any prior agreements and understandings between the parties
with respect to the subject matter.
Agreement and Plan of Merger
November 6, 1996
Page 23
<PAGE>
13.8 WAIVER. No attempted waiver of compliance with any provision or
condition hereof, or consent pursuant to this Agreement, will be effective
unless evidenced by an instrument in writing by the party against whom the
enforcement of any such waiver or consent is sought.
13.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
13.10 SEVERABILITY. The event that any of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable shall not affect
any other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had not been contained herein.
13.11 INTENDED BENEFICIARIES. The rights and obligations contained in
this Agreement are hereby declared by the parties hereto to have been provided
expressly for the exclusive benefit of such entities as set forth herein and
shall not benefit, and do not benefit, any unrelated third parties, except for
permitted assigns under Sections 6.3 and 13.4 hereof.
13.12 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no provision
of this Agreement shall be construed against any party on the ground that such
party drafted the provision or caused it to be drafted or the provision contains
a covenant of such party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SPINNAKER INDUSTRIES, INC.
By: /s/ Richard J. Boyle
-----------------------------------------
Richard J. Boyle, Chief Executive Officer
BB MERGER CORP.
By: /s/ Ned N. Fleming, III
----------------------------------------
Ned N. Fleming, III
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ K. C. Caldabaugh
----------------------------------------
K.C. Caldabauth
Agreement and Plan of Merger
November 6, 1996
Page 24
<PAGE>
STOCKHOLDERS:
Lynch Corporation
By: /s/ Robert E. Dolan
----------------------------------------
Robert E. Dolan, Chief Financial Officer
/s/ Richard J. Boyle
----------------------------------------
Richard J. Boyle
/s/ Michael L. George
----------------------------------------
Michael L. George
/s/ Ned N. Fleming
----------------------------------------
Ned N. Fleming
/s/ Lane T. Fleming
----------------------------------------
Lane T. Fleming
/s/ Mark R. Matteson
----------------------------------------
Mark R. Matteson
George Group Partners, L.P.
By: /s/ Michael L. George
----------------------------------------
Michael L. George
/s/ Mark Curcio
----------------------------------------
Mark Curcio
/s/ James B. Fleming, Jr.
----------------------------------------
James B. Fleming, Jr.
Agreement and Plan of Merger
November 6, 1996
Page 25
<PAGE>
/s/ Grant Wilkinson
----------------------------------------
Grant Wilkinson
/s/ Timothy R. Vaughan
----------------------------------------
Timothy R. Vaughan
/s/ K.C. Caldabaugh
----------------------------------------
K.C. Caldabaugh
/s/ Andrew Aarons
----------------------------------------
Andrew Aarons
/s/ Stuart Postle
----------------------------------------
Stuart Postle
/s/ Richard T. Ray
----------------------------------------
Richard T. Ray
/s/ Christopher M. Beige
----------------------------------------
Christopher M. Beige
/s/ Arthur W. Smith, III
----------------------------------------
Arthur W. Smith, III
/s/ Joseph Sentendrey
----------------------------------------
Joseph Sentendrey
Agreement and Plan of Merger
November 6, 1996
Page 26
<PAGE>
EXHIBIT A
NAME ADDRESS SHARES
---- ------- ------
Lynch Corporation 8 Sound Shore Drive, Suite 290 61,621
Greenwich, CT 06830
Richard J. Boyle 6110 Blue Circle Drive, Suite 250 10,000
Minnetonka, MN 55343
Michael L. George One Galleria Tower, Suite 1100 10,000
13355 Noel Road
Dallas, TX 75240
Ned N. Fleming 600 N. Pearl Street, Suite 2160 7,500
Dallas, TX 75201
Lane T. Fleming 600 N. Pearl Street, Suite 2160 2,500
Dallas, TX 75201
Mark Matteson 600 N. Pearl Street, Suite 2160 3,030
Dallas, TX 75201
George Group Partners One Galleria Tower, Suite 1100 17,606
13355 Noel Road
Dallas, TX 75240
Mark Curcio 1999 Avenue of the Stars 985
Los Angeles, CA 90067
James B. Fleming, Jr. 201 N. Union Street, Suite 300 7,576
Alexandria, VA 22314
Grant Wilkinson 5944 Wakefield Drive 757
Sylvania, OH 43560
Timothy R. Vaughan 717 N. Harwood, Suite 1400 1,667
Dallas, TX 75201
K.C. Caldabaugh 518 E. Water Street 92,879
Troy, OH 45373
Andrew Aarons 518 E. Water Street 758
Troy, OH 45373
Stuart Postle 518 E. Water Street 1,515
Troy, OH 45373
Richard T. Ray 518 E. Water Street 38,792
Troy, OH 45373
Christopher M. Beige 518 E. Water Street 5,000
Troy, OH 45373
Arthur W. Smith, III 518 E. Water Street 1,200
Troy, OH 45373
Joseph Sentendrey 518 E. Water Street 2,000
Troy, OH 45373
<PAGE>
EXHIBIT B
The following is an example of the calculation of the Contingent Price:
(i) Fair Market Value X 265,386 shares of BBI Stock/1,066,386 shares of BBI
Stock = BBI Minority Interest Value
(ii) (BBI Minority Interest Value - $2,189,434.50) DIVIDED BY Purchaser Stock
Value = gross shares of Purchaser Stock
(iii) gross shares of Purchaser Stock - 12,510 Closing Shares = net shares
of Purchaser Stock
(iv) net shares of Purchaser Stock DIVIDED BY 265,386 Merger Shares = shares
of Purchaser Stock/1 Merger Share
<PAGE>
EXHIBIT C
The following financial and certain accounting guidelines shall be used by
Purchaser and the FMV Representative, or any Independent Investment Bank chosen
by them or on their behalf, in determining the Fair Market Value of Acquisition,
as a stand alone public entity, pursuant to Section 2.1 of the Agreement. Market
valuation factors considered shall include, but not necessarily be limited to,
comparable multiples of EBITDA and Adjusted Net Earnings (as defined herein).
In determining the Fair Market Value of Acquisition neither party nor any
Independent Investment Banker selected pursuant to Section 2.1(a)(1) of this
Agreement shall take into account, or apply, any discount in value as a result
of the equity of Acquisition being illiquid or as a result of the Contingent
Rights representing a minority interest.
DEFINITIONS
"Adjusted Net Earnings" of Acquisition shall be equal to the amount
reported as "Net Earnings" on the audited (or unaudited) Statement of Earnings
for each twelve months then ended on the Valuation Date (as defined herein),
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, except that Adjusted Net Earnings shall not be reduced by
any of the following:
a. any management and consulting fees ("Management Fees") incurred
by Purchaser, or payable by Acquisition to Purchaser, Boyle, Fleming &
Co., George Group, Inc. or any one or more of their affiliates, which in
the aggregate exceed 0.25% of Acquisition's net sales, as reported on the
audited financial statements; provided that such limitation shall only
apply for purposes of determining Fair Market Value and shall not limit the
amount of Management Fees that may, in fact, be paid to Purchaser by
Acqusition;
b. charges to earnings, if any, relating to Acquisition's issuance
or repurchase of any equity or debt security or any security convertible
into, exercisable for or exchangeable for any equity security to or from
any person, including, without limitation, any charges to earnings, if any,
required as a result of the transactions contemplated by this Agreement;
c. expenses incurred by either Acquisition or Purchaser related to
the issuance of debt or equity securities, or the refinancing of debt owed
by Acquisition to Transamerica Business Credit Corporation ("Transamerica")
under that certain Loan and Security Agreement between Acquisition and
Transamerica dated September 16, 1994, as amended (the "Transamerica
Agreement");
d. other expenses allocated to, or incurred on behalf of Acquisition
by, Purchaser or its affiliates; and
Exhibit C to Agreement and Plan of Merger
Page 1
<PAGE>
e. interest expense related to all obligations of Acquisition to the
extent such expense exceeds that which would have been payable on the
Outstanding Debt (as defined herein), calculated each month end, beginning
with January 1996, using an annual interest rate equal to 1.25% over the
Prime Rate at the end of such month (as published in the Wall Street
Journal); however, interest expense related to borrowings from Purchaser,
which are in excess of Acquisition's total availability under the
Transamerica Agreement, shall be included in the computation of Adjusted
Net Earnings and shall bear interest at the weighted average cost of
capital of Purchaser, as agreed to by FMV Representative and Purchaser, or
if they are unable to mutually agree, then as determined by a mutually
agreed upon Independent Investment Bank.
"EBITDA" shall mean for any period the Adjusted Net Earnings of
Acquisition, as calculated in Section B above with respect to such period, and
as such amount is further adjusted by adding back the following expenses, all as
computed under GAAP throughout such period:
a. the provision for interest expense and income tax expense, each
for the same said period, but only to the extent that such expense was
included in Adjusted Net Earnings for such period;
b. depreciation and amortization expense for such period, but only
to the extent that such expense was included in Adjusted Net Earnings for
such period;
c. franchise taxes for such period, but only to the extent that such
expense was included in Adjusted Net Earnings for such period; and
d. Management Fees expensed for such period, but only to the extent
that such expense was included in Adjusted Net Earnings for such period.
"Outstanding Debt" of Acquisition on the Valuation Date shall be deemed to
be equal to, (i) $19,337,000, representing the total amount owed as of December
31, 1995 to Transamerica, less (ii) Free Cash Flow (as defined below) of
Acquisition for the period January 1, 1996 through the Valuation Date, plus
(iii) total capital lease obligations of Acquisition as of the Valuation Date.
"Free Cash Flow," as used herein, shall be equal to (i) "Cash Flows From
Operating Activities," as defined under GAAP, except that such amount shall be
adjusted (A) to include only the interest expense that would have been payable
on the Outstanding Debt, calculated each month-end for the previous month
beginning with January 1996, using an annual interest rate equal to 1.25% over
the Prime Rate (as published in the Southwest Edition of the Wall Street
Journal), and (B) to exclude cash paid or assets transferred in satisfaction of
expenses excluded from the computation of Net Earnings above; less (ii) "Cash
Flows From Investing Activities," as defined under GAAP.
In addition to the above, the fair market value of Acquisition shall be:
Exhibit C to Agreement and Plan of Merger
Page 2
<PAGE>
a. decreased by all amounts owed by Acquisition to Purchaser or its
affiliates for income taxes and Management Fees as of the Valuation Date,
but only to the extent that Management Fees do not exceed 0.25% of
Acquisition's net sales per year;
b. increased by the full undiscounted balance of all amounts owed by
Purchaser or its affiliates to Acquisition as of the Valuation Date; and
c. if there is no Outstanding Debt on the Valuation Date, increased
by the book value of cash and marketable securities held by Acquisition on
such Valuation Date.
"Valuation Date," shall mean the date a Contingent Price Notice is
delivered to Purchaser.
100322.010/ LMH
