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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A(6)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 5, 1996
Spinnaker Industries, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 2-66564 75-2493518
(STATE OR OTHER JURISDICTION) (COMMISSION) (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
600 N. Pearl Street, Suite 2160, Dallas, Texas 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: 214-855-0322
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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Item 1. Change in Control of Registrant
Not applicable
Item 2. Acquisition or Disposition of Assets
Not applicable.
Item 3. Bankruptcy or Receivership
Not applicable
Item 4. Changes in Registrant's Certifying Accountant
Not applicable
Item 5. Other Events
On April 5, 1996, the Registrant completed the refinancing of the two
subordinated notes of the Registrant totaling $25,000,000 held by Alco
Standard Corporation ("Alco"), which were issued in connection with the
Registrant's acquisition of Central Products Company. The refinancing
involved the issuance of a new subordinated convertible promissory note in
the aggregate principal amount of $20,250,000 to Alco Standard (the "Alco
Note"). The first $6,000,000 of principal (and the interest accrued on that
principal) of the Alco Note will be converted automatically into approximately
171,430 shares (the "Initial Conversion Shares") of common stock, no par value
per share (the Common Stock") of the Registrant on or about May 5, 1996, unless
Alco reasonably objects. The Registrant has agreed to engage an investment
banker to assist Alco with a private sale of the Initial Conversion Shares.
If a private sale cannot be effected on or before June 30, 1996, the Registrant
is obligated to register the Initial Conversion Shares to enable Alco to sell
the Initial Conversion Shares in the public market. The Registrant has agreed
to pay Alco the difference between the net proceeds received by it upon the
sale of the Initial Conversion Shares and $6,000,000. At Alco's option, the
remaining principal amount of the Alco Note becomes convertible into Common
Stock, at the then prevailing market price, commencing with an installment of
$7,000,000 on April 1, 1997 and the remaining balance on April 1, 1998.
Interest on the Alco Note is payable semiannually at an annual rate of 7%,
or 9% if the Registrant capitalizes the interest. The unconverted principal of
the Alco Note will be due in two installments. The first installment of
$7,000,000 will be due six months after the maturity date of the "Term Loan" (as
defined below) (but not before April 5, 1997) and balance will be due on the
first anniversary of the payment date of the $7,000,000 installment. Alco has
the right to demand immediate prepayment of the Alco Note, if the Registrant
successfully consummates certain subsequent financing transactions.
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The Registrant's financing arrangements included an $8,500,000 bridge
loan made by Bankers Trust Company, which matures in December 1996. If not
paid in full on or before its due date, the bridge loan converts into a
5-year term loan (the "Term Loan"). If the bridge loan converts into the
Term Loan, the lender will be entitled to receive a warrant to purchase at a
nominal price 2.5% of the common equity (on a fully diluted basis) upon
conversion of the bridge loan and for each quarter that the Term Loan is
outstanding the lender will receive an additional warrant to purchase 2.5% of
the common equity (on a fully diluted basis), up to 20% of the common equity
on a fully diluted basis. In order to facilitate the Registrant's financing
transaction, Boyle, Fleming, George & Co. ("BFI"), Inc., an affiliate of the
Registrant's chairman and president, purchased shares of Common Stock by a
partial exercise of a warrant held by BFI. An agreement with Bankers Trust
Company requires BFI to make further purchases of Common Stock under the
warrant if necessary to enable the Registrant to make the interest payments
due under the bridge loan or the Term Loan. BFI has pledged its warrant, all
of the shares of Common Stock owned by it, and any shares Common Stock
subsequently acquired by it, to secure the loans made by Bankers Trust Company
to the Registrant. In addition, Lynch Manufacturing Corporation, the holder
of approximately 78% of the Common Stock, has pledged all of its shares of
Common Stock to secure the loans made by Bankers Trust Company. The Alco Note
is subordinate to the financing provided by Bankers Trust Company. Both the
Bankers Trust Company financing and the Alco Note prohibit the Registrant from
making any cash dividends or other cash distributions on its Common Stock.
The Registrant is pursuing actively various alternatives to refinance the
indebtedness of the Registrant and its subsidiaries, including refinancing the
bridge loan before it matures. There can be no assurance that the Registrant
can successfully complete any such refinancing.
Item 6. Resignations of Registrant's Directors
Not applicable
Item 7. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Not applicable
(b) PRO FORMA FINANCIAL INFORMATION
Not applicable.
(C) EXHIBITS
7.1 Subordinated Convertible Promissory Note, dated April 5, 1996, in
the aggregate principal amount of $20,250,000, of Spinnaker
Industries, Inc.
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7.2 Senior Credit Agreement, dated as of April 5, 1996, among
Spinnaker Industries, Inc. and Bankers Trust Company.
7.3 Warrant Exercise Agreement, dated April 5, 1996, among Boyle,
Fleming, George & Co., Inc, Richard J. Boyle, Ned N. Fleming,
III, Spinnaker Industries, Inc. and Bankers Trust Company.
7.4 Pledge Agreement, dated April 5, 1996, by each of the named
pledgors in favor of Banker's Trusts Company.
Item 8. Change in Fiscal Year
Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Spinnaker Industries, Inc.
/s/ James W. Toman
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James W. Toman, Controller
Date April 19, 1996
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The payment of principal, interest and all other amounts owing on this Note is
subject to certain subordination provisions set forth in paragraph 3 herein.
This Note was originally issued on April 5, 1996 and has not been registered
under the Securities Act of 1933, as amended, or any comparable state securities
law. The transfer of this Note is subject to certain restrictions set forth in
paragraph 7 herein.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
April 5, 1996 $20,250,000.00
Spinnaker Industries, Inc., a Delaware corporation (the "Company"), hereby
promises to pay to Alco Standard Corporation ("Alco") or its permitted assigns
(Alco and each of its permitted assigns is a "Holder") the principal amount of
Twenty Million Two Hundred Fifty Thousand and No/100 Dollars ($20,250,000.00),
together with interest thereon calculated form the date hereof in accordance
with the provisions of this Note. This Note is being executed by the Company in
exchange for the cancellation of that certain Subordinated Promissory Note,
dated September 29, 1995, issued by the Company and payable to the order of
Alco.
1. INTEREST RATE/PAYMENT OF INTEREST.
(a) $6 MILLION 1996 PORTION. With respect to $6,000,000.00 of the
principal amount of this Note (the "$6 Million 1996 Portion"), interest shall
accrue from April 5,1996, at the rate of seven percent (7%) per annum, on the
unpaid principal amount of the $6 Million 1996 Portion outstanding from time to
time. Subject to the provisions of paragraphs 3 and 11 hereof, the Company
shall pay to the Holder, in arrears, all accrued interest on or before September
30, 1996. Any accrued interest, which for any reason has not theretofore been
paid with respect to the $6 Million 1996 Portion shall, subject to paragraph 3
hereof, be paid in full, in cash, within 30 days of the date on which the
principal amount of the $6 Million 1996 Portion is paid or converted pursuant to
paragraph 11 hereof.
(b) $7 MILLION 1997 PORTION. With respect to $7,000,000.00 of the
principal amount of this Note (the "$7 Million 1997 Portion"), interest shall
accrue from April 5, 1996, at the rate of seven percent (7%) per annum or at the
higher rate provided below, on the unpaid principal amount of the $7 Million
1997 Portion outstanding from time to time. Subject to the provisions of
paragraphs 3 and 11 hereof, the Company shall pay to the Holder, in arrears, all
accrued interest on each September 30 and March 31 (each September 30 and March
31 being an "Interest Payment Date") during the term of this Note, beginning on
September 30, 1996. Any accrued interest, which for any reason has not
theretofore been paid, or is not permitted to be paid by the terms of any Senior
Indebtedness (as defined in Annex A attached hereto) on any Interest Payment
Date with respect to the $7 Million 1997 Portion (the "1997 Capitalized
Interest") shall, subject to paragraph 3 hereof, be paid in full, either in cash
or, at the Company's election, by increasing the principal amount of the
$7 Million 1997 Portion of the Note by an amount equal to the 1997 Capitalized
Interest within
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20 days of the date on which the principal amount of the $7 Million 1997
Portion is converted pursuant to paragraph 11 hereof. Interest that is paid
by increasing the principal amount of the $7 Million 1997 Portion of the Note
shall accrue at the rate of 9% per annum.
(c) $7 MILLION 1998 PORTION. With respect to the remaining
$7,250,000.00 of the principal amount of this Note (the "$7 Million 1998
Portion"), interest shall accrue from April 5, 1996, at the rate of seven
percent (7%) per annum, on the unpaid principal amount of the $7 Million 1998
Portion outstanding from time to time. Subject to the provisions of paragraphs
3 and 11 hereof, the Company shall pay to the Holder, in arrears, all accrued
interest on each September 30 and March 31 during the term of this Note,
beginning on September 30, 1996. Any accrued interest, which for any reason has
not theretofore been paid, or is not permitted to be paid by the terms of any
Senior Indebtedness on any Interest Payment Date with respect to the $7 Million
1998 Portion (the "1998 Capitalized Interest") shall, subject to paragraph 3
hereof, be paid in full, either in cash or, at the Company's election, by
increasing the principal amount of the $7 Million 1998 Portion by an amount
equal to the 1998 Capitalized Interest within 20 days of the date on which the
principal amount of the $7 Million 1998 Portion is paid or converted pursuant to
paragraph 11 hereof. Interest that is paid by increasing the principal amount of
the $7 Million 1998 Portion of the Note shall accrue at the rate of 9% per
annum.
2. PAYMENT OF PRINCIPAL.
(a) SCHEDULED PAYMENTS. Subject to the provisions of subparagraph 2
(c) and paragraph 3 below, the Company shall repay or convert the entire
principal amount of the Note, together with all accrued and unpaid interest
thereon, as follows:
(i) $6 MILLION 1996 PORTION. The $6 Million 1996 Portion shall
be automatically converted into shares of the Company's common stock,
no par value per share (the "Common Stock") as provided in paragraph
11 hereof.
(ii) $7 MILLION 1997 PORTION. All of the outstanding principal
of the $7 Million 1997 Portion is due and payable in full on the
earlier of (x) six months after the Maturity Date of the Term Loans
(as those terms are defined in the Credit Agreement (as defined in
Annex A hereto)) and (y) six months after all obligations under the
Credit Agreement have been paid in full in cash (but in no event
earlier than April 5, 1997), unless previously converted pursuant to
paragraph 11 hereof.
(iii) $7 MILLION 1998 PORTION. All of the outstanding
principal of the $7 Million 1998 Portion is due and payable in full on
the first anniversary of the date on which the outstanding principal
amount of the $7 Million 1997 Portion is paid in full, unless
previously converted pursuant to paragraph 11 hereof.
(b) PREPAYMENT. Subject to the provisions of paragraph 3 hereof, the
Company may, at any time and from time to time without premium or penalty,
prepay all or a portion of the outstanding principal of this Note. Prepayments
of principal shall be applied as directed by the Company.
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(c) EVENTS OF ACCELERATION. Subject to paragraph 3 hereof, Alco will
have the right, but not the obligation, to demand immediate payment of all
outstanding principal, and all interest accrued hereon to the date of demand
upon consummation by the Company of an offering of approximately $100,000,000 of
the Company's senior subordinated notes in respect to which BT Securities
Corporation is acting as managing underwriter or placement agent.
3. SUBORDINATION: RESTRICTIONS ON PAYMENT.
Notwithstanding anything in this Note to the contrary, the obligations of
the Company in respect of the principal, interest, fees, charges and other
amounts on this Note, and all rights and remedies of the Holder under this Note,
shall be subordinate, junior and subject in right of payment, to the prior
payment in full in cash of all Senior Indebtedness to the extent and in the
manner hereinafter set forth on ANNEX A hereto, which Annex A is incorporated
herein in its entirety and made a part hereof.
4. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an "Event of Default"
shall be deemed to have occurred (subject to paragraph 3 hereof) if:
(i) the Company shall default in the payment of interest or
principal of this Note on the date when due, whether at maturity, by
acceleration or otherwise; or
(ii) the Company shall fail to perform any covenant required to
be performed hereunder, which failure shall continue for a period of
30 days after the Company receives notice of such failure; or
(iii) the Company shall make a Restricted Payment (defined in
paragraph 5); or
(iv) a liquidation, dissolution, bankruptcy, reorganization,
insolvency, receivership or similar proceeding occurs with respect to
the Company.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If an Event of Default of the type described in clause (i),
(ii) or (iii) of subparagraph 4(a) above has occurred and is
continuing, the Holder may, subject to paragraph 3 hereof, declare all
or any portion of the outstanding principal amount of this Note due
and payable and demand immediate payment of all or any portion of the
outstanding principal amount of this Note. If the Holder demands
immediate payment of all or any portion of this Note, the Company
shall, subject to paragraph 3 hereof, immediately pay to such Holder
the principal amount of this Note requested to be paid together with
all accrued and unpaid interest thereon.
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(ii) If an Event of Default of the type described in clause (iv)
of subparagraph 4(a) above has occurred, all of the outstanding
principal amount of this Note shall, subject to paragraph 3 hereof,
automatically be immediately due and payable without any notice or
other action on the part of the Holder.
(iii) Upon the occurrence of an Event of Default, the Holder,
subject to paragraph 3 hereof, shall also have any other rights which
such person may have been afforded by the Company under any contract
or agreement at any time and any other rights which such person may
have pursuant to applicable law.
5. RESTRICTED PAYMENTS. So long as any portion of the principal amount
of this Note (together with all accrued interest thereon) remains outstanding,
without the prior written consent of the Holder, the Company shall not (a)
declare or pay any cash dividends or make any cash distributions upon any of
its Common Stock or (b) redeem, retire, purchase or otherwise acquire any of
its equity securities for cash (other than redemptions, retirements, purchases
or acquisitions of equity securities from employees in connection with the
termination of their employment) each such prohibited declaration, payment,
distribution, purchase, redemption, acquisition or retirement being referred
to as a "Restricted Payment").
6. FINANCIAL STATEMENTS. So long as any portion of the principal
amount of this Note remains outstanding, the Company will deliver to Alco (a) as
soon as available but in any event within 45 days after the end of the first
three quarterly accounting periods in each fiscal year, unaudited consolidated
statements of income for such quarterly period, and consolidated balance sheets
as of the end of such quarterly period, and all such statements will be prepared
in accordance with United States generally accepted accounting principals,
consistently applied ("GAAP"), and (b) within 90 days after the end of each
fiscal year, audited consolidated statements of income for such fiscal year and
audited consolidated balance sheets as of the end of such fiscal year, all
prepared in accordance with GAAP.
7. TRANSFER RESTRICTIONS. This Note has not been registered under the
Securities Act of 1933, as amended, or any comparable state securities law. If
the Holder desires to transfer this Note, such person first must furnish the
Company with (a) a written opinion reasonably satisfactory to the Company in
form and substance from counsel reasonably satisfactory to the Company to the
effect that the Holder may transfer this Note as desired without registration
under the Securities Act of 1933 or any applicable state securities law, and (b)
a written undertaking executed by the desired transferee reasonably satisfactory
to the Company in form and substance agreeing to be bound by all of the
provisions of this Note, including, without limitation, the subordination
provisions set forth in paragraph 3 hereof.
8. CANCELLATION. After all principal and accrued interest at any time
owed on this Note has been paid in full or this Note has been converted into the
Common Stock pursuant to paragraph 11, this Note shall be surrendered to the
Company for cancellation and shall not be reissued.
9. PLACE OF PAYMENT; NOTICES. Payments of principal and interest,
delivery of shares of Common Stock and any notice hereunder are to be delivered
to the Holder at the following address:
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Alco Standard Corporation
825 Duportail Road
Chesterbrook, Wayne, PA 19087
Attention: Treasurer
Notices to the other parties hereto are to be delivered at the following
addresses:
Spinnaker Industries, Inc. Timothy R. Vaughan
600 North Pearl, Suite 2160, LB100 Crouch & Hallett, L.L.P.
Dallas, TX 75201 717 N. Harwood, Suite 1400
Attention: Treasurer Dallas, Texas 75201
Other addresses may be specified in written notices delivered to the other
parties hereto. Notices shall be deemed received when delivered personally, or
one day after being sent by Federal Express or other overnight carrier, or five
days after being sent by certified or registered mail.
10. GOVERNING LAW. The validity, construction, and interpretation of this
Note will be governed by the internal laws, and not the laws of conflicts, of
the State of New York.
11. CONVERSION.
(a) CONVERSION OF $6 MILLION 1996 PORTION. The $6 Million 1996
Portion, together with all interest accrued and unpaid on the $6 Million 1996
Portion, shall automatically, on that date that is 30 days after the execution
of this Note (the "Initial Conversion Date"), and without any action being
required on the part of the Holder of this Note, convert into shares of fully
paid and nonassessable shares of Common Stock (the "Initial Conversion Shares")
at an initial conversion price per share of $35.00 (plus or minus 10%, at the
discretion of the Company) (the "Initial Conversion Price"), unless the Holder
of this Note shall reasonably object. Upon surrender of this Note, the Company
shall deliver to the Holder certificates evidencing shares of Common Stock into
which the $6 Million 1996 Portion, together with accrued and unpaid interest
thereon, was converted. Based on the Initial Conversion Price, the number of
Initial Conversion Shares shall be 171,430 shares. Following such surrender,
the Company shall issue a replacement note, in form and substance substantially
similar to this Note, but appropriately revised to reflect such conversion.
(b) CONVERSION OF $7 MILLION 1997 AND $7 MILLION 1998 PORTION. The
Holder of this Note shall have the right, commencing on the dates set forth in
subparagraph 11 (c) below, at any time thereafter and from time to time to
convert all, or any portion, of the unpaid principal of the $7 Million 1997
Portion and the $7 Million 1998 Portion of this Note, together with all interest
accrued and unpaid on the principal amount so converted, into that number of
fully paid and nonassessable shares of Common Stock obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion,
together with accrued and unpaid interest thereon, by the applicable "Conversion
Price" (defined in subparagraph 11 (d) below). If a portion of this Note is
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converted, the principal amount (together with accrued and unpaid interest
thereon) so converted shall be applied for the proper number of shares of Common
Stock for the portion converted and the balance of the unpaid principal amount
hereof shall remain outstanding and due and payable in accordance with the terms
hereof, or may be converted at a subsequent date pursuant to the terms of this
Note. The conversion shall be deemed to have been effected immediately before
the close of business on the date the Company receives a notice of conversion
from the Holder; and at such time (i) the principal amount of the Note (together
with accrued and unpaid interest thereon) so converted shall be deemed to be
satisfied and paid in full and (ii) the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon conversion shall be deemed to have become the holder of record of such
shares of Common Stock as of that date, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then have been actually delivered. Following
such surrender, in the case of a partial conversion, the Company shall issue a
replacement note, in form and substance substantially similar to this Note, but
appropriately revised to reflect such conversion.
(c) CONVERSION PRICE. The price per share at which shares of Common
Stock shall be delivered upon conversion of the $7 Million 1997 Portion and $7
Million 1998 Portion (the "Conversion Price") shall be the Fair Market Value of
the Common Stock on the trading date immediately preceding the date fixed for
conversion.
(d) CONVERSION DATES.
(i) $7 MILLION 1997 PORTION. All or any part of the principal
of the $7 Million 1997 Portion may be converted commencing April 1,
1997.
(ii) $7 MILLION 1998 PORTION. All or any part of the principal
of the $7 Million 1998 Portion may be converted commencing April 1,
1998.
(e) FAIR MARKET VALUE. As used herein the term "Fair Market Value"
of a share of the Common Stock shall be the average of the mean of the closing
ask and bid prices of such Common Stock (or last sale price if the Common Stock
is then reported on the National Market System of NASDAQ or is then listed on a
major securities exchange) during the 20 trading days immediately preceding the
applicable date.
(f) The number of shares of Common Stock to be issued upon conversion
of this Note shall be subject to adjustment as follows:
(i) If the Company at any time shall consolidate or merge with,
or sell or convey all or substantially all its assets to, any other
corporation, partnership or limited liability company, this Note or
any portion hereof convertible into Common Stock as provided for
herein shall be convertible into such number and kind or securities
and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance upon or with respect
to the securities into which this Note or any portion hereof was
convertible immediately before such
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consolidation, merger, sale or conveyance. The Company shall take
such steps in connection with such consolidation or merger, sale or
conveyance as may be necessary to assure that the provisions of this
Note shall thereafter be applicable, as nearly as reasonably may be,
in relation to any security or property thereafter deliverable upon
conversion of this Note. The foregoing provisions shall similarly
apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the
foregoing, the provisions hereof shall apply to such securities of
such successor or purchaser after any such consolidation, merger or
conveyance.
(ii) If the shares of the Company's Common Stock are subdivided
or combined into a greater or smaller number of shares of Common
Stock, the (i) Initial Conversion Price with respect to the $6 Million
1996 Portion and (ii) the Conversion Price with respect to the $7
Million 1997 Portion and the $7 Million 1998 Portion shall be
proportionately reduced in case of a subdivision of shares or
proportionately increased in the case of a combination of shares, in
both cases by the ratio which the total number of shares of Common
Stock to be outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately before
such event.
(g) FRACTIONAL SHARES. No fractional shares of Common Stock are to
be issued in connection with any conversion, but in lieu of such fractional
share, the Company shall, subject to paragraph 3 hereof, make a cash payment
therefor upon the basis of the Fair Market Value of such share of Common Stock
on the conversion date.
12. COVENANTS OF THE COMPANY.
(a) The Company covenants that it will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company (i)
shall at all times reserve and keep available, so long as this Note remains
outstanding, free from preemptive rights, the number of shares of Common Stock
equal to the number of shares of Common Stock to be issued upon the conversion
of this Note, and (ii) will take all such action as may be reasonably necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the conversion of this Note.
(b) The Company shall engage Allen & Company, or such other
investment banking firm reasonably acceptable to both the Company and Alco, to
effect a private resale by Alco of the Initial Conversion Shares as soon as
practicable after conversion of the $6 Million 1996 Portion into the Initial
Conversion Shares. All costs of such resale, including without limitation fees
of Allen & Company or such other investment banking firm, shall be paid by the
Company. In the
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event that a private resale of the Initial Conversion Shares is not effected
on or before June 30, 1996, the Company shall use its best reasonable efforts
to cause to become effective a registration statement covering the public
resale by Alco of the Initial Conversion Shares so that Alco will be able to
sell the shares of Common Stock in the public market.
(c) Alco will have the right to designate a representative to attend
all meetings of the Company's board of directors, so long as it owns, or has the
right to acquire, at least five percent of the outstanding Common Stock.
(d) As long as either any portion of this Note is outstanding or any
shares of Common Stock are held by Alco, it will receive copies of (i) all
financial information delivered to the Company's lenders, (ii) all filings made
with the United States Securities and Exchange Commission, and (iii) all press
releases.
(e) Subject to paragraph 3 hereof, on or before September 30, 1996,
the Company will pay Alco the difference between the net proceeds received by
Alco upon the sale of the Initial Conversion Shares and $6,000,000.00 (the "Make
Whole Provision"). The Company will have the option of paying any amount due
under the Make Whole Provision either in cash or by delivering the number of
shares of Common Stock obtained by dividing the amount of the Make Whole
Provision by the Fair Market Value of the Common Stock on September 30, 1996.
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on the date first above written.
SPINNAKER INDUSTRIES, INC.
By:
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Title:
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SUBORDINATION PROVISIONS
ANNEX A
TO SUBORDINATED CONVERTIBLE PROMISSORY NOTE
Section 1.01. SUBORDINATION OF LIABILITIES. Spinnaker Industries, Inc. (the
"Company"), for itself, its successors and assigns, covenants and agrees, and
each holder of the Note to which this Annex A is attached (the "Note") by its
acceptance thereof likewise covenants and agrees, that the payment of the
principal of, interest on, and all other amounts owing in respect of, the Note
(the "Subordinated Indebtedness") is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, to the prior payment in full in
cash of all Senior Indebtedness (as defined in Section 1.07 of this Annex A).
The provisions of this Annex A shall constitute a continuing offer to all
persons who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are hereby made obligees
hereunder the same as if their names were written herein as such, and they
and/or each of them may proceed to enforce such provisions.
Section 1.02. COMPANY NOT TO MAKE PAYMENTS WITH RESPECT TO SUBORDINATED
INDEBTEDNESS.
(a) The Company may not, directly or indirectly, make any payment (whether
in respect of principal, interest or other amounts) of any Subordinated
Indebtedness and may not acquire (whether in respect of principal, interest or
other amounts) any Subordinated Indebtedness for cash or property until the
sixth month anniversary following the date on which all Senior Indebtedness has
been paid in full in cash, although the Company may issue shares of its common
stock upon conversion of any principal or interest on the Note in accordance
with the terms thereof, and provided further the Company may prepay the
Subordinated Indebtedness with the proceeds of the Take-Out Notes (as defined in
the Credit Agreement referred to in Section 1.07 hereof) so long as the proceeds
of such Take-Out Notes have been first used to prepay the Senior Indebtedness
then outstanding in full in cash.
(b) In the event that notwithstanding the provisions of the preceding
subsection (a) of this Section 1.02, the Company shall make any payment on
account of the Subordinated Indebtedness at a time when payment is not permitted
by said subsection (a), such payment shall be held by the holder of the Note, in
trust for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness or their representative or the trustee under the
indenture or other agreement pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, for application pro rata to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in cash in accordance with the terms of such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
(c) In the event that any payment of Subordinated Indebtedness is required
to be made pursuant to the terms thereof before the sixth month anniversary
following the date on which all
9
<PAGE>
Senior Indebtedness is paid in full in cash, such payment shall be extended
until such sixth month anniversary and each holder of the Note agrees that
such extension shall not give rise to a default or an event of default under
the Note and each holder of the Note agrees that it will not sue for, or
otherwise take any action to enforce the Company's obligation to pay, amounts
owing in respect of the Note until the sixth month anniversary following the
date on which all Senior Indebtedness has been paid in full in cash.
Section 1.03. SUBORDINATION TO PRIOR PAYMENT OF ALL SENIOR INDEBTEDNESS ON
DISSOLUTION. LIQUIDATION OR REORGANIZATION OF COMPANY. Upon any distribution of
assets of the Company upon dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payment in full in cash of all Senior Indebtedness (including, without
limitation, post-petition interest at the rate provided in the documentation
with respect to the Senior Indebtedness, whether or not such post-petition
interest is an allowed claim against the debtor in any bankruptcy or similar
proceeding) before the holder of the Note is entitled to receive any payment of
any kind or character, whether in cash, property, securities or otherwise on
account of the Subordinated Indebtedness:
(b) any payment or distributions of assets of the Company of any kind or
character, whether in cash, property or securities to which the holder of the
Note would be entitled except for the provisions of this Annex A, shall be paid
by the liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other trustee or agent, directly to the holders of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture under which any instruments evidencing any such Senior Indebtedness
may have been issued, to the extent necessary to make payment in full in cash of
all Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of this
Section 1.03, any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, shall be received by the
holder of the Note on account of Subordinated Indebtedness before all Senior
Indebtedness is paid in full in cash, such payment or distribution shall be
received and held in trust for and shall be paid over to the holders of the
Senior Indebtedness remaining unpaid or unprovided for or their representative
or representatives, or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have been
issued, for application to the payment of such Senior Indebtedness until all
such Senior Indebtedness shall have been paid in full in cash, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
Without in any way modifying the provisions of this Annex A or affecting
the subordination effected hereby if the hereafter referenced notice is not
given, the Company shall give prompt written notice to the holder of the Note of
any dissolution, winding up, liquidation or reorganization of the
10
<PAGE>
Company (whether in bankruptcy, insolvency or receivership proceedings or upon
assignment for the benefit of creditors or otherwise).
Section 1.04. SUBROGATION. Subject to the prior payment in full in cash of
all Senior Indebtedness, the holder of the Note shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Note shall be paid in full, and for the purpose
of such subrogation no payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the holder of
the Note by virtue of this Annex A which otherwise would have been made to the
holder of the Note shall, as between the Company, its creditors other than the
holders of Senior indebtedness, and the holder of the Note, be deemed to be
payment by the Company to or on account of the Senior Indebtedness, it being
understood that the provisions of this Annex A are and are intended solely for
the purpose of defining the relative rights of the holder of the Note, on the
one hand, and the holders of the Senior Indebtedness, on the other hand.
Section 1.05. OBLIGATION OF THE COMPANY UNCONDITIONAL. Except to the extent
set forth in this Annex A, nothing herein is intended to or shall impair, as
between the Company and the holder of the Note, the obligation of the Company,
which is absolute and unconditional, to pay to the holder of the Note the
principal of and interest on the Note as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holder of the Note and creditors of the Company other
than the holders of the Senior Indebtedness. Upon any distribution of assets of
the Company referred to in this Annex A, the holder of the Note shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the holder of the
Note, for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Annex A.
Section 1.06. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF
COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS. No right of any present or future
holders of any Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or BY ANY ACT or failure to act in good faith by
any such holder, or by any noncompliance by the Company with the terms and
provisions of the Note, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of the Senior
Indebtedness may, without in any way affecting the obligations of the holder of
the Note with respect hereto, at any time or from time to time and in their
absolute discretion, change the manner, place or terms of payment of, change or
extend the time of payment of, or renew or alter, any Senior Indebtedness or
amend, modify or supplement any agreement or instrument governing or evidencing
such Senior Indebtedness or any other document referred to therein, or exercise
or refrain from exercising any other of their rights under the Senior
Indebtedness including, without limitation, the waiver of default thereunder and
the release of any collateral securing such Senior Indebtedness, all without
notice to or assent from the holder of the Note.
11
<PAGE>
Section 1.07. SENIOR INDEBTEDNESS. The term "Senior Indebtedness" shall
mean all Obligations (as defined below) of the Company under, or in respect of,
the Senior Credit Agreement (as amended, modified, supplemented, extended,
restated, refinanced, replaced or refunded from time to time, the "Credit
Agreement"), dated as of April 5, 1996, by and among the Company, the Lenders
named therein and Bankers Trust Company, as Administrative Agent, or any other
Loan Document (as defined in the Credit Agreement) to which the Company is a
party, and in each case any renewal, extension, restatement, refinancing or
refunding thereof. As used herein, the term "Obligation" shall mean any
principal, interest, premium, penalties, fees, expenses, indemnities and other
liabilities and obligations payable under the documentation governing any Senior
Indebtedness (including interest accruing after the commencement of any
bankruptcy, insolvency, receivership or similar proceeding at the rate provided
for in the documentation with respect thereto, whether or not such interest is
an allowed claim against the debtor in any such proceeding).
Section 1.08. MISCELLANEOUS. If, at any time, all or part of any payment
with respect to Senior Indebtedness theretofore made by the Company or any other
person is rescinded or must otherwise be returned by the holders of Senior
Indebtedness for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Company or such other person),
the subordination provisions set forth herein shall continue to be effective or
be reinstated, as the case may be, all as though such payment had not been made.
12
<PAGE>
SENIOR CREDIT AGREEMENT
dated as of
April 5, 1996
among
SPINNAKER INDUSTRIES, INC.,
as Borrower,
THE LENDERS named herein,
and
BANKERS TRUST COMPANY,
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
Section Heading Page
- ------- ------- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.3 Other Definitional Provisions; Anniversaries . . . . . . . . . . . 22
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND
LOANS; NOTES . . . . . . . . . . . . . . . . . . . . . 22
2.1 Bridge Loan and Bridge Note. . . . . . . . . . . . . . . . . . . . 22
2.2 Term Loan and Term Note. . . . . . . . . . . . . . . . . . . . . . 25
2.3 Interest on the Loans. . . . . . . . . . . . . . . . . . . . . . . 26
2.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.5 Prepayments and Payments . . . . . . . . . . . . . . . . . . . . . 28
2.6 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.1 Conditions to Bridge Loan. . . . . . . . . . . . . . . . . . . . . 33
3.2 Conditions to Term Loan. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 41
4.1 Organization and Good Standing; Capitalization . . . . . . . . . . 42
4.2 Authorization and Power. . . . . . . . . . . . . . . . . . . . . . 42
4.3 No Conflicts or Consents . . . . . . . . . . . . . . . . . . . . . 43
4.4 Enforceable Obligations. . . . . . . . . . . . . . . . . . . . . . 43
4.5 Properties; Liens. . . . . . . . . . . . . . . . . . . . . . . . . 44
4.6 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . 44
4.7 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.9 Compliance with Contracts, Etc.. . . . . . . . . . . . . . . . . . 46
4.10 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.11 Use of Proceeds; Margin Stock, Etc.. . . . . . . . . . . . . . . . 47
4.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.14 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 49
4.15 Government Regulation. . . . . . . . . . . . . . . . . . . . . . . 49
(i)
<PAGE>
Section Heading Page
- ------- ------- ----
4.16 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.17 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 49
4.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 50
4.19 Survival of Representations and Warranties . . . . . . . . . . . . 51
4.20 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.21 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.22 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.23 Indebtedness; etc. . . . . . . . . . . . . . . . . . . . . . . . . 53
4.24 Take-Out Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.25 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . . . 54
SECTION 5. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 54
5.1 Financial Statements and Other Reports . . . . . . . . . . . . . . 54
5.2 Corporate Existence, Etc.. . . . . . . . . . . . . . . . . . . . . 59
5.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . 59
5.4 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . 60
5.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.6 Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . . . 60
5.7 Maintenance of Accurate Records, Etc.. . . . . . . . . . . . . . . 61
5.8 Take-Out Financing . . . . . . . . . . . . . . . . . . . . . . . . 61
5.9 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.10 Payments in U.S. Dollars . . . . . . . . . . . . . . . . . . . . . 63
5.11 Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.12 Lenders Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.13 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . 64
5.14 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 64
5.15 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . 64
5.16 Additional Security; Further Assurances; etc.. . . . . . . . . . . 65
5.17 Butler Warehouse. . . . . . . . . . . . . . . . . . . . . . . . . 66
5.18 Dividends and Intercompany Loan Payments. . . . . . . . . . . . . 66
5.19 Audited Financials. . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 66
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.3 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . 69
6.4 Investments; Joint Ventures. . . . . . . . . . . . . . . . . . . . 70
6.5 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . 71
6.6 Purchase or Sale of Assets, etc. . . . . . . . . . . . . . . . . . 71
6.7 Restriction on Fundamental Changes . . . . . . . . . . . . . . . . 72
6.8 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(ii)
<PAGE>
Section Heading Page
- ------- ------- ----
6.9 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . 73
6.10 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 74
6.11 Limitation on Issuance of Capital Stock. . . . . . . . . . . . . . 74
6.12 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.13 Amendments or Waivers of Certain Documents . . . . . . . . . . . . 75
6.14 Amendments to Charter Documents. . . . . . . . . . . . . . . . . . 75
6.15 Refinancing of the Loans in Part . . . . . . . . . . . . . . . . . 76
6.16 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.17 Creation of Subsidiaries . . . . . . . . . . . . . . . . . . . . . 76
SECTION 7. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 76
7.1 Failure To Make Payments When Due. . . . . . . . . . . . . . . . . 76
7.2 Default in Other Agreements. . . . . . . . . . . . . . . . . . . . 76
7.3 Breach of Certain Covenants. . . . . . . . . . . . . . . . . . . . 77
7.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . 77
7.5 Other Defaults Under Agreement or Loan Documents . . . . . . . . . 77
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc. . . . . . . 78
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc. . . . . . . . 78
7.8 Judgments and Attachments. . . . . . . . . . . . . . . . . . . . . 79
7.9 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.10 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.11 Boyle Fleming Warrant Exercise Agreement . . . . . . . . . . . . . 79
7.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . 81
8.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . 81
8.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . 82
8.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . 83
8.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . 83
8.6 Non-Reliance on Administrative Agent and Other Lenders . . . . . . 84
8.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.8 Administrative Agent in its Individual Capacity. . . . . . . . . . 85
8.9 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.10 Resignation of the Administrative Agent; Successor Administrative
Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.1 Representation of the Lenders. . . . . . . . . . . . . . . . . . . 86
(iii)
<PAGE>
Section Heading Page
- ------- ------- ----
9.2 Participations in and Assignments of Loans and Notes . . . . . . . 86
9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.4 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
9.5 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 92
9.7 Independence of Covenants. . . . . . . . . . . . . . . . . . . . . 93
9.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.9 Survival of Warranties and Certain Agreements. . . . . . . . . . . 93
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . . . 94
9.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.12 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.13 Successors and Assigns; Subsequent Holders of Notes. . . . . . . . 94
9.14 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . . . 95
9.15 Consent to Jurisdiction; Venue; Waiver of Jury Trial . . . . . . . 95
9.16 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . 96
9.17 Taxes and Other Taxes. . . . . . . . . . . . . . . . . . . . . . . 97
9.18 Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . . . 99
9.19 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.20 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . . 100
SCHEDULES
A SUBSIDIARIES; CAPITALIZATION
B EXISTING INDEBTEDNESS; EXISTING CONTINGENT OBLIGATIONS
C EXISTING LIENS
D EXISTING INVESTMENTS
E BROKERS FEES
F UNDISCLOSED LIABILITIES
EXHIBITS
I FORM OF BRIDGE NOTE
II FORM OF TERM NOTE
III FORM OF COMPLIANCE CERTIFICATE
IV-A FORM OF NOTICE OF BORROWING
IV-B FORM OF NOTICE OF CONVERSION
V FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
VI FORM OF SECTION 9.2F(ii) CERTIFICATE
(iv)
<PAGE>
VII FORM OF OPINION OF CROUCH & HALLET - COUNSEL
TO THE COMPANY
VIII FORM OF OPINION OF ROBERT A. HURWICH -
COUNSEL TO LYNCH MANUFACTURING CORPORATION
IX FORM OF OPINION OF HAYNES AND BOONE, L.L.P. -
COUNSEL TO THE COMPANY
X FORM OF SOLVENCY CERTIFICATE
XI FORM OF PLEDGE AGREEMENT
XII FORM OF BOYLE FLEMING WARRANT EXERCISE AGREEMENT
XIII FORM OF ESCROW AGREEMENT
XIV FORM OF SUBORDINATION PROVISIONS
(v)
<PAGE>
This Senior Credit Agreement is dated as of April 5, 1996, and entered
into by and among Spinnaker Industries, Inc., a Delaware corporation (the
"Company"), the Lenders (as defined in Section 1) from time to time party
hereto, and Bankers Trust Company, as administrative agent for the Lenders (in
such capacity, and together with any successor thereto, the "Administrative
Agent").
RECITALS
WHEREAS, the Company desires that the Lenders extend a senior credit
facility to the Company in connection with the Refinancing (as defined in
Section 1);
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Company and the Lenders hereby
agree as follows:
SECTION 1. DEFINITIONS.
1.1 CERTAIN DEFINED TERMS
The following terms used in this Agreement shall have the following
meanings:
"Additional Security Documents" has the meaning ascribed to such term
in Section 5.16.
"Administrative Agent" has the meaning ascribed to such term in the
introduction to this Agreement.
"Affiliate," as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise or (ii) the ownership of more than 5% of the voting
securities of that Person; provided that neither the Lenders, the Administrative
Agent nor any Affiliate thereof shall be treated as an Affiliate of the Company
or of any Subsidiary of the Company or shall be deemed to be a holder
<PAGE>
of 5% or more of any class of equity securities of the Company as said term
is used in Section 6.10.
"Agreement" means this Senior Credit Agreement dated as of April 5,
1996, as it may be amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof.
"Alco" means Alco Standard Corporation, an Ohio corporation.
"Applicable Rate" means for each Monthly Period the greater of (i) the
LIBOR Reference Rate for such Monthly Period and (ii) the Treasury Rate for such
Monthly Period.
"Applicable Spread" means 5% for the period from and including the
Closing Date and to but excluding the 90th day following the Closing Date and
for each subsequent 90-day period the Applicable Spread in effect for the
immediately preceding 90-day period plus .25%.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of EXHIBIT V annexed hereto and
appropriately completed.
"Bankruptcy Law" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a proceeding pursuant
to or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or providing for liquidation, winding up, dissolution
or reorganization, or appointing a custodian of a debtor or of all or any
substantial part of a debtor's property, or providing for the staying,
arrangement, adjustment or composition of indebtedness or other relief of a
debtor.
"Boyle Fleming" means Boyle, Fleming, George & Co., Inc., a Texas
corporation.
"Boyle Fleming Warrant Exercise Agreement" means the Warrant Exercise
Agreement between Boyle Fleming and the
-2-
<PAGE>
Administrative Agent substantially in the form of EXHIBIT XII annexed hereto,
as it may be amended, supplemented or otherwise modified from time to time.
"Bridge Loan" means, collectively, the loans made by the Lenders
pursuant to Section 2.1A.
"Bridge Loan Commitment" means the commitment of the Lenders to make
the Bridge Loan as set forth in Section 2.1A.
"Bridge Note" means the Original Bridge Note of the Company issued
pursuant to Section 2.1D and substantially in the form of EXHIBIT I annexed
hereto, as the same may be modified, endorsed or amended from time to time and
shall also include any Subsequent Bridge Note.
"Brown Bridge" means Brown-Bridge Industries, Inc., a Delaware
corporation.
"Brown Bridge Shareholder Roll-Up Agreement" shall have the meaning
provided in Section 3.1A.13.
"BTCo" means Bankers Trust Company.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of New York, New York or is a day on
which banking institutions therein located are authorized or required by law or
other governmental action to close.
"Butler Warehouse" means the warehouse located in Denver, Colorado
that is currently owned by Alco (or a Subsidiary thereof) and which is being
sold to the Company.
"Capital Expenditures" means, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with GAAP,
including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with GAAP) and the amount of Capitalized
Lease Obligations incurred by such Person.
"Capital Lease," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is required to be accounted for as a capital lease on the
balance sheet of that Person.
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"Capitalized 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 shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including,
without limitation, each class of Common Stock and Preferred Stock of such
Person and (ii) with respect to any Person that is not a corporation, any and
all partnerships or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued 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 the highest rating obtainable
from either Standard & Poor's Corporation 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 the highest rating obtainable
from either Standard & Poor's Corporation or 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 that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier 1
capital (as defined in such regulations) of not less than $100,000,000;
(v) shares of any money market mutual fund that (a) has at least 95% of its
assets invested continuously in the types of investments referred to in
clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000,
and (c) has the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; and (vi) repurchase agreements
with respect to, and which are fully secured by a perfected security interest
in, obligations of a type
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described in clause (i) or clause (ii) above and are with any commercial bank
described in clause (iv) above.
"Central Products" means Central Products Company, a Delaware
corporation.
"Change of Control" means (i) Lynch shall cease to own 100% of the
capital stock of LMC or (ii) LMC and Boyle Fleming shall in the aggregate cease
to own on a fully diluted basis at least 51% of the voting and economic interest
in the Company's capital stock or (iii) the occurrence of any "change of
control" or similar event under the Existing Central Products Credit Agreement,
the Existing Brown Bridge Credit Agreement or the Existing Entoleter Credit
Agreement.
"Change of Control Date" has the meaning ascribed to such term in
Section 2.5A(iv).
"Change of Control Offer" has the meaning ascribed to such term in
Section 2.5A(iv).
"Closing Date" means the date on or before March 29, 1996 on which the
initial Bridge Loan is made and the conditions set forth in Section 3.1 are
satisfied or waived in accordance with Section 9.6.
"Collateral Agent" means BTCo acting as collateral agent for the
Lenders pursuant to the Pledge Agreement and the Additional Security Documents,
and any successor thereto.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock, whether outstanding on the
Closing Date or issued after the Closing Date, and includes, without limitation,
all series and classes of such common stock.
"Company" has the meaning ascribed to such term in the introduction to
this Agreement.
"Company Plan" means any multiemployer or single-employer plan, as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an
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obligation to contribute of) the Company or a Subsidiary of the Company.
"Compliance Certificate" means a certificate substantially in the form
of EXHIBIT III annexed hereto delivered to the Administrative Agent by the
Company pursuant to Section 5.1(iv)(b).
"Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof,
(ii) with respect to any letter of credit issued for the account of that Person
or as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agreements. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guaranty, endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make take-or-
pay or similar payments if required regardless of non-performance by any other
party or parties to an agreement, and (c) any liability of such Person for the
obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
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"Contractual Obligation," as applied to any Person, means any
provision of any Security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"Conversion Date" means December 30, 1996.
"Covered Taxes" has the meaning ascribed to such term in Section 9.17.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect any Guarantor, the Company
or any of the Company's Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, interim receiver, receiver and
manager, trustee, assignee, liquidator, sequestrator or similar official charged
with maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Dollars" or the sign "$" means the lawful money of the United States
of America.
"18% Subordinated Promissory Notes" means (i) the First Amended and
Restated Subordinated Promissory Note, dated April 5, 1996, in the principal
amount of $964,950, issued by the Company to Lynch and (ii) the First Amended
and Restated Subordinated Promissory Note, dated April 5, 1996, in the principal
amount of $321,650, issued by the Company to James B. Fleming, Jr. (as attorney-
in-fact and individually).
"Entoleter" means Entoleter, Inc., a Delaware corporation.
"Environmental Claim" means any accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the
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environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, in each case
relating to, resulting from or in connection with Hazardous Materials and
relating to any Guarantor, the Company, any of the Company's Subsidiaries, or
any of their respective Affiliates or properties.
"Environmental Laws" means all statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and the like relating to
(i) environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to any Guarantor, the Company
or any of the Company's Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal
Water Pollution Control Act ( 33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act
(42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), the Federal Insecticide, Fungicide and Rodenticide Act (7
U.S.C. Section 136 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C.
Section 651 ET SEQ.) and the Emergency Planning and Community Right-to-Know Act
(42 U.S.C. Section 11001 ET SEQ.), each as amended or supplemented, and any
analogous future or present local, state and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of determination.
"Environmental Lien" means a Lien in favor of a Tribunal or other
Person (i) for any liability under an Environmental Law or (ii) for damages
arising from or costs incurred by such Tribunal or other Person in response to a
release or threatened release of hazardous or toxic waste, substance or
constituent into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
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Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" means each person (as defined in Section 3(9) of
ERISA) which together with the Company or any Subsidiary of the Company would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Internal Revenue Code or (ii) as a result of the Company or a
Subsidiary of the Company being or having been a general partner of such person.
"Escrow Account" has the meaning ascribed to such term in the Escrow
Agreement.
"Escrow Agreement" means an Escrow Agreement between the Company and
the Administrative Agent in the form of EXHIBIT XIII annexed hereto, as the same
may at any time be amended, modified and supplemented and in effect.
"Event of Default" means each of the events set forth in Section 7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Alco Subordinated Notes" means (i) the Subordinated
Promissory Notes aggregating $25,000,000 in principal amount that were issued by
the Company to Alco prior to the Closing Date and (ii) the Subordinated
Promissory Note in the principal amount of $5,000,000 that was issued by Central
Products to Alco prior to the Closing Date.
"Existing Brown Bridge Credit Agreement" means the Loan and Security
Agreement, dated as of September 16, 1994, among Brown Bridge, as borrower, and
TransAmerica Business Credit Corporation, as lender, as such Loan and Security
Agreement is in effect on the Closing Date and without giving effect to any
amendments, modifications, supplements or terminations thereof or thereto after
the Closing Date unless, and to the extent, such change is permitted by Section
6.13 or the Required Lenders specifically agree that the respective change will
be given effect to for purposes of this Agreement. Notwithstanding anything to
the contrary contained above, for purposes of determining whether the Existing
Brown Bridge Credit
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Agreement remains in effect or has terminated, amendments, modifications,
supplements or terminations thereof shall be given effect to.
"Existing Central Products Credit Agreement" means the Credit
Agreement, dated as of September 29, 1995, among the Company, as pledgor,
Central Products, as borrower, various lenders, and Heller Financial, Inc., as
Agent, as such Credit Agreement is in effect on the Closing Date and without
giving effect to any amendments, modifications, supplements or terminations
thereof or thereto after the Closing Date unless, and to the extent, such change
is permitted by Section 6.13 or the Required Lenders specifically agree that the
respective change will be given effect to for purposes of this Agreement.
Notwithstanding anything to the contrary contained above, for purposes of
determining whether the Existing Central Products Credit Agreement remains in
effect or has terminated, amendments, modifications, supplements or terminations
thereof shall be given effect to.
"Existing Contingent Obligations" has the meaning ascribed to such
term in Section 4.23.
"Existing Entoleter Credit Agreement" means the Loan and Security
Agreement, dated as of February 21, 1995, between Entoleter, as borrower, and
TransAmerica Business Credit Corporation, as lender, as such Loan and Security
Agreement is in effect on the Closing Date and without giving effect to any
amendments, modifications, supplements or terminations thereof or thereto after
the Closing Date unless, and to the extent, such change is permitted by Section
6.13 or the Required Lenders specifically agree that the respective change will
be given effect to for purposes of this Agreement. Notwithstanding anything to
the contrary contained above, for purposes of determining whether the Existing
Entoleter Credit Agreement remains in effect or has terminated, amendments,
modifications, supplements or terminations thereof shall be given effect to.
"Existing Indebtedness" has the meaning ascribed to such term in
Section 4.23.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by the Company
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or their Subsidiaries or any of their respective predecessors.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate 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 which
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fee Letters" means (i) the Letter, dated March 18, 1996, between the
Company and BTCo and (ii) the Letter, dated April 5, 1996, between the Company
and BTCo, and acknowledged by LMC in a separate Letter dated April 5, 1996.
"Fixed Rate" means a rate of interest PER ANNUM equal to 18.00%.
"Fixed Rate Loans" means Loans described in Section 2.3A(ii).
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by The Financial Accounting Standards
Board and which are consistently applied for all periods after the date hereof
so as to properly reflect the financial conditions, and the results of
operations and changes in financial position, of any Guarantor or of the Company
and its Subsidiaries, except that any accounting principle or practice required
to be changed in order to continue as a generally accepted accounting principle
or practice may be so changed.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive
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toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under
any applicable Environmental Laws or publications promulgated pursuant
thereto; (ii) any oil, petroleum, petroleum fraction or petroleum derived
substance; (iii) any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) asbestos in any form; (vii)
urea formaldehyde foam insulation; (viii) electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could pose a hazard
to the health and safety of the owners, occupants or any Persons in the
vicinity of any of the Facilities.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation, as required pursuant to GAAP or otherwise, of any such
Indebtedness or other obligation on the balance sheet of such Person (and
"INCURRENCE," "INCURRED," "INCURRABLE" and "INCURRING" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that any amendment,
modification or waiver of any document pursuant to which Indebtedness was
previously Incurred shall only be deemed to be an Incurrence of Indebtedness if
and to the extent such amendment, modification or waiver (i) increases the
principal thereof or interest rate or premium payable thereon or (ii) changes to
an earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness shall be redeemed.
"Indebtedness" means, with respect to any Person, (i) all
indebtedness, obligations and liabilities of such Person for borrowed money,
(ii) that portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any
indebtedness, obligation or liability owed for all or any part of the deferred
purchase price of property or services, and
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(v) all indebtedness, obligations and liabilities secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person except that "Indebtedness" shall not
include current trade payables and accrued expenses incurred in the ordinary
course of business and obligations under Interest Rate Agreements and
Currency Agreements (which constitute Contingent Obligations, not
Indebtedness).
"indemnified liabilities" has the meaning ascribed to such term in
Section 9.4.
"Indemnitees" has the meaning ascribed to such term in Section 9.4.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means, with respect to any Monthly
Period, the second Business Day on which banks in New York and London are open
prior to the first Business Day of such Monthly Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Internal Revenue Code are to the Internal
Revenue Code, as in effect at the date of this Agreement, and to any subsequent
provision of the Internal Revenue Code, amendatory thereof, supplemental thereto
or substituted therefor.
"Investment" means (i) any direct or indirect purchase or other
acquisition of, or of a beneficial interest in, any Securities of any other
Person or (ii) any direct or indirect loan, advance, extension of credit or
capital contribution to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or
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write-ups, write-downs or write-offs with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; PROVIDED,
HOWEVER, that, as to any such arrangement in corporate form, such corporation
shall not, as to any Person of which such corporation is a Subsidiary, be
considered to be a Joint Venture to which such Person is a party.
"Laws" means all applicable statutes, laws, ordinances, regulations,
rules, orders, judgments, writs, injunctions or decrees of any state,
commonwealth, nation, territory, possession, province, county, parish, town,
township, village, municipality or Tribunal, and "LAW" means each of the
foregoing.
"Lenders" means the Lenders listed on the signatures hereto, and any
assignee of any Lender in respect of any Loan, Note or Loan Commitment to the
extent of such assignment.
"LIBOR Rate Loans" means Loans that bear interest at the LIBOR
Reference Rate.
"LIBOR Reference Rate" means for each Monthly Period the rate
determined on the basis of the offered rates for deposits in U.S. Dollars for a
period of three months which appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the Interest Rate Determination Date for such Monthly
Period. If at least two rates appear on the Reuters Screen LIBO Page, the rate
for such Monthly Period will be the arithmetic mean of such rates rounded
upwards, if necessary, to the nearest 1/16 of 1%. If fewer than two rates
appear on the Reuters Screen LIBO Page, then such rate shall equal the interest
rate per annum at which deposits in U.S. Dollars for a period of three months
are offered by BTCo at approximately 11:00 a.m., London time, on such Interest
Rate Determination Date to first class banks in the London interbank market.
"Lien" means any lien, mortgage, pledge, assignment, 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) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
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"Litigation" means any action, suit, proceeding, claim, lawsuit and/or
investigation conducted or threatened by or before any Tribunal.
"LMC" means Lynch Manufacturing Corporation, a Delaware corporation.
"Loan Commitment" means the Bridge Loan Commitment and the Term Loan
Commitment.
"Loan Documents" means this Agreement, the Bridge Notes, the Term
Notes, the Pledge Agreement, the Escrow Agreement and the Additional Security
Documents.
"Loans" means the Bridge Loan and the Term Loan as each may be
outstanding.
"Lynch" means Lynch Corporation, a Delaware corporation.
"Margin Stock" has the meaning assigned to that term in Regulation U
and Regulation G of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects of the Company or the Company and its Subsidiaries taken
as a whole or (ii) the material impairment of the ability of the Company to
perform, or the impairment of the ability of the Administrative Agent or Lenders
to enforce, the Obligations.
"Maturity Date" has the meaning ascribed to such term in Section 2.2D.
"Maximum Cash Interest Rate" means an interest rate of 16% PER ANNUM;
PROVIDED, that in computing such interest rate, fees paid to the Administrative
Agent and the Lenders shall not be deemed an interest payment.
"Monthly Period" means each period commencing on the 15th calendar day
of each month, if such day is a Business Day, or the first Business Day
succeeding the 15th calendar day of each month and ending on the day next
preceding the 16th Business Day of the following Monthly Period; PROVIDED,
HOWEVER, that the first Monthly Period shall
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commence on the Closing Date and shall end on and exclude April 15, 1996.
"New Alco Subordinated Notes" means (i) the Subordinated Convertible
Promissory Note, dated April 5, 1996, in the principal amount of $20,250,000
that is issued by the Company to Alco on the Closing Date as part of the
Refinancing and as partial consideration for the purchase of the Butler
Warehouse, and (ii) the Subordinated Promissory Note, dated September 29, 1995,
in the principal amount of $5,000,000 that was initially issued by Central
Products to Alco, and which has been assumed by the Company and amended as of
April 5, 1996 as part of the Refinancing.
"Notes" means, collectively, the Bridge Notes and Term Notes.
"Notice of Borrowing" means a notice substantially in the form of
EXHIBIT IV-A annexed hereto with respect to a proposed borrowing.
"Notice of Conversion" means a notice substantially in the form of
EXHIBIT IV-B annexed hereto with respect to a proposed conversion.
"Obligations" means all obligations of every nature of the Company
from time to time owed to the Lenders and the Administrative Agent under the
Loan Documents and the Fee Letters, whether for principal, reimbursements,
interest, fees, expenses, indemnities or otherwise, and whether primary,
secondary, direct, indirect, contingent, fixed or otherwise (including
obligations of performance).
"Offer Payment Date" has the meaning ascribed to such term in Section
2.5A(iv).
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; PROVIDED, HOWEVER, that every Officers'
Certificate with respect to the compliance with a condition precedent to the
making of the Loans hereunder shall include (i) a statement that the officer or
officers making or giving such Officers' Certificate have read such condition
and any definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that, in the opinion of the signers, they have made or
have caused to be made such
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examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with,
and (iii) a statement as to whether, in the opinion of the signers, such
condition has been complied with.
"Original Bridge Note" has the meaning ascribed to such term in
Section 2.1D.
"Original Term Note" has the meaning ascribed to such term in
Section 2.2E.
"Other Taxes" has the meaning ascribed to such term in Section 9.17.
"Payment Office" means the office of the Administrative Agent located
at One Bankers Trust Plaza, New York, New York 10006 or such other office as the
Administrative Agent may designate to the Company and the Lenders from time to
time.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permits" has the meaning ascribed to such term in Section 4.20.
"Permitted Encumbrances" means (i) Liens granted to secure the
Obligations; (ii) Liens existing on the Closing Date set forth on SCHEDULE C
hereto to the extent and in the manner such Liens are in effect on the Closing
Date; (iii) inchoate Liens for taxes, assessments or governmental charges or
claims not yet due and payable or Liens for taxes, assessments or governmental
charges or claims being contested in good faith by appropriate proceedings for
which reserves have been established in accordance with GAAP; (iv) statutory
Liens of landlords and banks and rights of offset, and Liens of carriers,
warehousemen, workmen, repairmen, mechanics and materialmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor; (v) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids,
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leases, government contracts, trade contracts, utility payments, performance
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money); (vi) any attachment or
judgment Lien not constituting a Potential Event of Default or an Event of
Default; (vii) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Subsidiaries; (viii) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Subsidiaries; (ix) any
(a) interest or title of a lessor or sublessor under any lease, (b)
restriction or encumbrance that the interest or title of such lessor or
sublessor may be subject to (including without limitation ground leases or
other prior leases of the demised premises, mortgages, mechanics liens, tax
liens, and easements), or (c) subordination of the interest of the lessee or
sublessee under such lease to any restrictions or encumbrance referred to in
the preceding clause (b); (x) Liens arising from filing UCC financing
statements for precautionary purposes relating solely to true leases of
personal property permitted by this Agreement under which the Company or any
of its Subsidiaries is a lessee; and (xi) any zoning or similar law or right
reserved to or vested in any governmental office or agency to control or
regulate the use of any real property.
"Person" or "person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to such term in Section
2.3B.
"Plan" means any multiemployer or single-employer plan, as defined in
Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Company or a Subsidiary of the
Company or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Company or a Subsidiary of
the Company or an
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ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Pledge Agreement" means a Pledge Agreement among LMC, Boyle Fleming,
the Company and the Collateral Agent in the form of EXHIBIT XI annexed hereto,
as the same may at any time be amended, modified and supplemented and in effect.
"Pledged Securities" has the meaning ascribed to such term in the
Pledge Agreement.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights (as compared to any other Capital Stock of such
Person) with respect to dividends or redemptions or upon liquidation.
"Proceedings" has the meaning ascribed to such term in
Section 5.1(ix).
"Refinancing" means (i) the refinancing of the Existing Alco
Subordinated Notes issued by the Company with $7,500,000 of proceeds of the
Bridge Loan and the issuance by the Company of a New Alco Subordinated Note in
the principal amount of $20,250,000 and (ii) the assumption by the Company of,
and the amendment to, the Existing Alco Subordinated Note initially issued by
Central Products in the principal amount of $5,000,000.
"Register" has the meaning ascribed to such term in Section 5.11.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
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"Reportable Event" means an event described in Section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615.
"Required Lenders" means Lenders holding in the aggregate more than
50% of the outstanding principal amount of Notes.
"Restricted Payment" has the meaning ascribed to such term in Section
6.3.
"Returns" has the meaning ascribed to such term in Section 4.12.
"Section 9.2F(ii) Certificate" has the meaning ascribed to such term
in Section 9.2F(ii).
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit
sharing agreement or arrangement, bonds, debentures, options, warrants, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Subsequent Bridge Note" has the meaning ascribed to such term in
Section 2.1D.
"Subsequent Term Note" has the meaning ascribed to such term in
Section 2.2E.
"Subsidiary" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of stock or
other equity interest entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereto
is at the time owned or controlled, directly or indirectly, by any Person or one
or more of the other Subsidiaries of that Person or a combination thereof.
"Take-Out Banks" has the meaning ascribed to such term in Section
3.1L.
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"Take-Out Notes" means debt securities of the Company the proceeds of
which shall be used to repay the Bridge Notes in full issued on the terms and
conditions set forth in the engagement and related letters with the Take-Out
Banks.
"Take-Out Securities" means any Securities of the Company and/or the
Guarantors the proceeds of which are used to repay the Notes in full and any
Securities of the Company issued in accordance with Section 6.15 the proceeds of
which are used to refinance the Notes in part; including, without limitation,
the Take-Out Notes.
"Taxes" means all taxes, assessments, fees, levies, imposts, duties,
penalties, deductions, liabilities, withholdings or other charges of any nature
whatsoever from time to time or at any time imposed by any Law or any Tribunal.
"Tax Transferee" has the meaning ascribed to such term in Section
9.17.
"Term Loan" has the meaning ascribed such term in Section 2.2A.
"Term Loan Commitment" has the meaning ascribed such term in Section
2.2A.
"Term Notes" has the meaning ascribed to such term in Section 2.2E.
"Transaction Costs" means the fees, costs and expenses payable by the
Company pursuant hereto and other fees, costs and expenses payable by the
Company or a Subsidiary of the Company in connection with the Refinancing,
PROVIDED, HOWEVER, in no event shall Transaction Costs include any accrued
guarantee fees that may be due and payable by the Company to Lynch in connection
with Lynch's guaranty of the Company's obligations under the Existing Alco
Subordinated Notes issued by the Company.
"Treasury Rate" means the yield to maturity at the time of computation
of three-month United States Treasury securities (as compiled and published in
the most recent Federal Reserve Statistical Release H.15(519) that has become
publicly available on the Interest Rate Determination Date for such Monthly
Period (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)).
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"Treasury Rate Loans" means Loans that bear interest at the Treasury
Rate.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency, authority or
instrumentality of the United States or any state, province, commonwealth,
nation, territory, possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or existing.
"Unfunded Current Liability" of any Plan, means the amount, if any, by
which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan for which
actuarial assumptions were used.
1.2 ACCOUNTING TERMS
For the purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
1.3 OTHER DEFINITIONAL PROVISIONS; ANNIVERSARIES
References to "Section" and "Sections" shall be to a Section and
Sections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. For purposes of this Agreement, a monthly anniversary of the Closing
Date shall occur on the same day of the applicable month as the day of the month
on which the Closing Date occurred; PROVIDED, HOWEVER, that if the applicable
month has no such day (I.E., 29, 30 or 31), the monthly anniversary shall be
deemed to occur on the last day of the applicable month.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND
LOANS; NOTES.
2.1 BRIDGE LOAN AND BRIDGE NOTE
A. BRIDGE LOAN COMMITMENT. Subject to the terms and conditions of
this Agreement and in reliance upon the
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representations and warranties of the Company herein set forth, the Lenders
hereby agree to lend to the Company on the Closing Date $8,500,000 in the
aggregate (the "BRIDGE LOAN"), each such Lender committing to lend on a
several (but not joint) basis up to the amount set forth next to such
Lender's name on the signature pages hereto. The Lenders' commitments to
make the Bridge Loan to the Company pursuant to this Section 2.1A are herein
called individually, the "BRIDGE LOAN COMMITMENT" and collectively, the
"BRIDGE LOAN COMMITMENTS."
NOTICE OF BORROWING. When the Company desires to borrow under
this Section 2.1, it shall deliver to the Administrative Agent a Notice of
Borrowing no later than 11:00 A.M. (New York time), at least one Business Day
in advance of the Closing Date. The Notice of Borrowing shall specify (i) the
applicable date of borrowing (which shall be a Business Day) and (ii) the amount
of the Bridge Loan to be borrowed on such date. Upon receipt of such Notice of
Borrowing, the Administrative Agent shall promptly notify each Lender of its
share of the Bridge Loan and the other matters covered by the Notice of
Borrowing.
C. DISBURSEMENT OF FUNDS. (a) No later than 12:00 Noon (New York
time) on the Closing Date, each Lender will make available its pro rata share of
the Bridge Loan requested to be made on such date in the manner provided below.
All amounts shall be made available to the Administrative Agent in Dollars and
immediately available funds at the Payment Office and the Administrative Agent
promptly will make available to the Company by depositing to its account at the
Payment Office the aggregate of the amounts so made available in the type of
funds received. Unless the Administrative Agent shall have been notified by any
Lender prior to the Closing Date that such Lender does not intend to make
available to the Administrative Agent its portion of the Bridge Loan to be made
on such date, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on such date, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Company a
corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Lender and the Administrative
Agent has made available same to the Company, the Administrative Agent shall be
entitled to recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor,
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the Administrative Agent shall promptly notify the Company, and the Company
shall immediately pay such corresponding amount to the Administrative Agent.
The Administrative Agent shall also be entitled to recover from the Lender or
the Company, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Administrative Agent to the Company to the date such
corresponding amount is recovered by the Administrative Agent, at a rate per
annum equal to (x) if paid by such Lender, the overnight Federal Funds Rate
or (y) if paid by the Company, the then applicable rate of interest on the
Loans.
(b) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its Bridge Loan Commitment hereunder or to prejudice any
rights which the Company may have against any Lender as a result of any default
by such Lender hereunder.
D. BRIDGE NOTES. The Company shall execute and deliver to each
Lender on the Closing Date a Bridge Note dated the Closing Date substantially in
the form of EXHIBIT I annexed hereto to evidence the portion of the Bridge Loan
made on such date by such Lender and with appropriate insertions (collectively,
the "ORIGINAL BRIDGE NOTES"). On each interest payment date prior to the
Conversion Date on which the Company elects to pay a PIK Interest Amount
pursuant to Section 2.3B, the Company shall execute and deliver to each Lender
on such interest payment date a Bridge Note dated such interest payment date
substantially in the form of EXHIBIT I annexed hereto in a principal amount
equal to such Lender's pro rata portion of such PIK Interest Amount owing to
such Lender and with other appropriate insertions (each a "SUBSEQUENT BRIDGE
NOTE" and, together with the Original Bridge Notes, the "BRIDGE NOTES"). A
Subsequent Bridge Note shall bear interest from the date of its issuance at the
same rate then borne by all Bridge Notes.
E. SCHEDULED PAYMENT OF BRIDGE LOAN. Subject to Section 2.2, the
Company shall pay in full the outstanding amount of the Bridge Loan and all
other Obligations owing hereunder no later than December 30, 1996.
F. TERMINATION OF BRIDGE LOAN COMMITMENT. The Bridge Loan
Commitment hereunder shall terminate on April 5, 1996 if the initial Bridge Loan
is not made on or before such date. The Company shall have the right, without
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premium or penalty, to reduce or terminate the Bridge Loan Commitment of the
Lenders hereunder at any time on or prior to the Closing Date.
G. PRO RATA BORROWINGS. The Bridge Loan made under this Agreement
shall be made by the Lenders PRO RATA on the basis of their respective Bridge
Loan Commitments. It is understood that no Lender shall be responsible for any
default by any other Lender of its obligation to make its portion of the Bridge
Loan hereunder and that each Lender shall be obligated to make its portion of
the Bridge Loan hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.
2.2 TERM LOAN AND TERM NOTE
A. TERM LOAN COMMITMENT. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of the
Company herein set forth, the Lenders hereby agree, on the Conversion Date, upon
the request of the Company, to convert the then outstanding principal amount of
the Bridge Notes into a term loan (the "TERM LOAN"), such Term Loan to be in an
aggregate principal amount not exceeding the then outstanding principal amount
of the Bridge Notes. The Lenders' commitments under this Section 2.2A are
herein called collectively, the "TERM LOAN COMMITMENT."
B. NOTICE OF CONVERSION/BORROWING. If the Company does not repay
the Bridge Loan in full on the Conversion Date then the Company shall, subject
to the satisfaction of the conditions set forth in Section 3.2, convert the then
outstanding principal amount of the Bridge Notes into a Term Loan under this
Section 2.2, provided, in the event that the Bridge Loan is not so converted,
the Company shall be required to repay the Bridge Loan and all other outstanding
Obligations pursuant to Section 2.1E. The Company shall deliver to the Lenders
a Notice of Conversion no later than 11:00 A.M. (New York time), at least two
Business Days in advance of the Conversion Date. The Notice of Conversion shall
specify the principal amount of the Bridge Notes outstanding on the Conversion
Date to be converted into a Term Loan.
C. MAKING OF TERM LOAN. Upon satisfaction or waiver of the
conditions precedent specified in Section 3.2, each Lender shall extend to the
Company the Term Loan to be made on the Conversion Date by such Lender by
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cancelling on its records a corresponding principal amount of the Bridge Notes
held by such Lender.
D. MATURITY OF TERM LOAN. The Term Loan shall mature and the
Company shall pay in full the outstanding principal amount thereof and accrued
interest thereon on the fifth anniversary of the Conversion Date (the "MATURITY
DATE").
E. TERM NOTES. The Company, as borrower, shall execute and deliver
to the Lenders on the Conversion Date Term Notes dated the Conversion Date
substantially in the form of EXHIBIT II annexed hereto to evidence the Term Loan
made on such date, in the principal amount of the Bridge Notes held by such
Lender on such date and with other appropriate insertions (collectively, the
"ORIGINAL TERM NOTES"). On or after the Conversion Date, on each interest
payment date on which the Company elects to pay a PIK Interest Amount pursuant
to Section 2.3B, the Company shall execute and deliver to each Lender on such
interest payment date a Term Note dated such interest payment date substantially
in the form of EXHIBIT II annexed hereto in a principal amount equal to such
Lender's pro rata portion of the PIK Interest Amount owing to such Lender and
with other appropriate insertions (each a "Subsequent Term Note" and, together
with the Original Term Notes, the "TERM NOTES"). A Subsequent Term Note shall
bear interest at the same rate then borne by all Term Notes.
2.3 INTEREST ON THE LOANS
A. RATE OF INTEREST. (i) The Loans shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
prepayment, acceleration or otherwise) either at the Applicable Rate for each
Monthly Period plus the Applicable Spread or, to the extent provided in clause
(ii) below, at the Fixed Rate.
(ii) At any time on or after the time at which the Applicable Rate
plus the Applicable Spread on the Term Loan equals 18%, at the request of any
Lender, all or a portion of the Term Loan owing to such Lender shall from such
date until repaid, bear interest at a fixed rate per annum equal to the Fixed
Rate; PROVIDED that no such conversion shall be permitted in respect of amounts
to be voluntarily prepaid following receipt of a notice of prepayment pursuant
to Section 2.5A. In order to request the conversion of a LIBOR Rate Loan or a
Treasury Rate Loan
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to a Fixed Rate Loan, the Lender shall notify the Administrative Agent in
writing of its intention to do so at least twenty Business Days prior to an
interest payment date indicating the amount of the Term Loan for which it is
requesting conversion to a Fixed Rate Loan, which shall be not less than
$2,000,000 and increments of $10,000 in excess thereof, and the Administrative
Agent shall so notify the Company at least 10 Business Days prior to such next
succeeding interest payment date. Upon the conversion of a portion of a LIBOR
Rate Loan or a Treasury Rate Loan to a Fixed Rate Loan an appropriate notation
will be made on the Term Note and, on and after the first interest payment date
following the receipt by the Company of a notice hereunder, such portion of
the Term Loan which is converted to a Fixed Rate Loan shall thereafter bear
interest at the Fixed Rate until repaid.
(iii) In no event will the combined sum of interest (cash or
otherwise) on the Loans exceed 18.00% PER ANNUM.
B. INTEREST PAYMENTS. Interest shall be payable (i) with respect to
the Bridge Loan, in arrears on July 15, 1996, October 15, 1996, January 15, 1997
and upon any prepayment of the Bridge Loan (to the extent accrued on the amount
being prepaid) and at maturity of the Bridge Loan, (ii) with respect to the Term
Loan (other than with respect to any portion thereof that has been converted
into a Fixed Rate Loan) in arrears on each April 15, July 15, October 15 and
January 15 of each year, commencing on the first of such dates to follow the
Conversion Date, (iii) with respect to a Fixed Rate Loan in arrears on each July
15 and January 15 of each year, commencing on the first of such dates to follow
the respective conversion of any LIBOR Rate Loan or Treasury Rate Loan to a
Fixed Rate Loan and (iv) with respect to the Term Loan, upon any prepayment of
the Term Loan (to the extent accrued on the amount being prepaid) and at
maturity of the Term Loan; PROVIDED, HOWEVER, that if, on any interest payment
date, the interest rate borne by the Bridge Loan or the Term Loan, as the case
may be, exceeds the Maximum Cash Interest Rate, the Company may pay all or a
portion of the interest payable in excess of the amount of interest that would
be payable on such date at the Maximum Cash Interest Rate by issuance of
Subsequent Bridge Notes or Subsequent Term Notes, as the case may be, in an
aggregate principal amount equal to the amount of such interest being so paid
(the "PIK INTEREST AMOUNT").
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C. POST-MATURITY INTEREST. Any principal payments on the Loans not
paid when due and, to the extent permitted by applicable law, any interest
payment on the Loans not paid when due, in each case whether at stated maturity,
by notice of prepayment, by acceleration or otherwise, shall thereafter bear
interest payable upon demand at a rate which is 2.00% per annum in excess of the
rate of interest otherwise payable under this Agreement for the Loans.
D. COMPUTATION OF INTEREST. Interest on the Loans shall be computed
on the basis of a 360 day year and, with respect to any amount of the Loans
which are LIBOR Rate Loans or Treasury Rate Loans, the actual number of days
elapsed in the period during which it accrues or, with respect to any amount of
the Loans which are Fixed Rate Loans, twelve 30-day months. In computing
interest on the Loans, the date of the making of the Loans shall be included and
the date of payment shall be excluded; PROVIDED, HOWEVER, that if a Loan is
repaid on the same day on which it is made, one day's interest shall be paid on
that Loan.
2.4 FEES
A. The Company agrees to pay to the Administrative Agent all fees
and other obligations in accordance with, and at the times specified by, the Fee
Letters.
2.5 PREPAYMENTS AND PAYMENTS
A. PREPAYMENTS
(i) VOLUNTARY PREPAYMENTS. The Company may, upon not less than three
Business Days' prior written or telephonic notice confirmed in writing to
the Administrative Agent at any time and from time to time, prepay the
Loans made to the Company in whole or in part in an aggregate minimum
amount of $500,000 and integral multiples of $100,000 in excess of that
amount; PROVIDED that to the extent that all or any portion of the Term
Loan is prepaid prior to the three month anniversary of the Conversion
Date, such prepayment in respect of principal shall be in an amount equal
to 101.5% of the aggregate principal amount prepaid.
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Notice of prepayment having been given as aforesaid, the principal amount
of the Loans to be prepaid shall become due and payable on the prepayment
date. Amounts of the Loans so prepaid may not be reborrowed.
(ii) MANDATORY PREPAYMENTS
(a) PREPAYMENTS FROM CAPITAL CONTRIBUTIONS AND EQUITY ISSUANCES.
Concurrently with the receipt by the Company of cash proceeds from any
capital contribution or any sale or issuance of its equity (other than
proceeds received from (i) the exercise of any warrants issued to any
Lender or any of its Affiliates in connection with the transaction
contemplated by this Agreement, (ii) the exercise of any warrants issued to
Boyle Fleming to the extent that the proceeds thereof are required to be
(and are) deposited into the Escrow Account in accordance with the terms of
the Escrow Agreement and (iii) the consummation of the transactions
contemplated by the Brown Bridge Shareholder Roll-Up Agreement), the
Company shall prepay the Loans in a principal amount equal to the lesser of
the cash proceeds thereof (net of underwriting or placement discounts
commission and other reasonable costs associated therewith) or the
aggregate principal amount of the Notes then outstanding.
(b) PREPAYMENTS FROM ISSUANCES OF TAKE-OUT SECURITIES AND
CERTAIN OTHER INDEBTEDNESS. Concurrently with the receipt by the Company
of cash proceeds from the issuance or incurrence of Take-Out Securities or
other Indebtedness for borrowed money (other than Indebtedness permitted to
be Incurred under Section 6.1 as such Section is in effect on the Closing
Date), the Company shall prepay the Loans in a principal amount equal to
the lesser of the cash proceeds thereof (net of underwriting or placement
discounts and commissions and other reasonable costs associated therewith)
or the aggregate principal amount of the Notes then outstanding, it being
understood, however, that the Loans shall be prepaid in full with the
proceeds of the Take-Out Notes.
(c) NOTICE. The Company shall notify the Administrative Agent
of any prepayment to be made pursuant to this Section 2.5A(ii) at least two
Business Days prior to such prepayment date (unless
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shorter notice is satisfactory to the Required Lenders).
(iii) COMPANY'S MANDATORY PREPAYMENT OBLIGATION; APPLICATION OF
PREPAYMENTS. All prepayments shall include payment of accrued interest on
the principal amount so prepaid and shall be applied to payment of interest
before application to principal.
(iv) MANDATORY OFFER TO PURCHASE NOTES.
(a) Upon the occurrence of a Change of Control (the date of such
occurrence, the "CHANGE OF CONTROL DATE"), the Lenders shall have the right
to require the repurchase of all of the Notes pursuant to an offer to
purchase (the "CHANGE OF CONTROL OFFER") described below in this Section
2.5A(iv) at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued interest thereon to the date of repurchase.
(b) The notice to the Administrative Agent shall contain all
instructions and materials necessary to enable the Lenders to tender Notes.
(c) Within 30 days following any Change of Control the Company shall
mail a notice to the Administrative Agent stating:
(1) that the Change of Control Offer is being made pursuant to
this Section 2.5A(iv) and that all Notes validly tendered will be
accepted for payment;
(2) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days from the date such notice
is mailed (the "OFFER PAYMENT DATE");
(3) that any Note not tendered will continue to accrue interest;
(4) that any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Offer Payment
Date unless the Company shall default in the payment of the repurchase
price of the Notes;
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(5) that if a Lender elects to have a Note purchased pursuant to
a Change of Control Offer it will be required to surrender the Note,
with the form entitled "Option of Lender to Elect Purchase" on the
reverse of the Note completed, to the Company prior to 5:00 p.m. New
York time on the Offer Payment Date;
(6) that a Lender will be entitled to withdraw its election if
the Company receives, not later than 5:00 p.m. New York time on the
Business Day preceding the Offer Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the principal amount of
Notes such Lender delivered for purchase, and a statement that such
Lender is withdrawing its election to have such Note purchased; and
(7) that if Notes are purchased only in part a new Note of the
same type will be issued in principal amount equal to the unpurchased
portion of the Notes surrendered.
(d) On or before the Offer Payment Date, the Company shall
(i) accept for payment Notes or portions thereof which are to be purchased
in accordance with the above, and (ii) deposit at the Payment Office
Dollars sufficient to pay the purchase price of all Notes to be purchased.
The Administrative Agent shall promptly mail to the Lenders whose Notes are
so accepted payment in an amount equal to the purchase price.
(e) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the purchase of Notes pursuant to an offer hereunder. To
the extent the provisions of any securities laws or regulations conflict
with the provisions under this Section 2.5A(iv), the Company shall comply
with the applicable securities laws and regulations and shall not be deemed
to have breached its obligations under this Section by virtue thereof.
B. MANNER AND TIME OF PAYMENT. All payments of principal, interest,
fees and other amounts hereunder and under the Notes by the Company shall be
made without defense, set-off or counterclaim and in same-day funds and
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delivered to the Administrative Agent, unless otherwise specified, not later
than 11:00 A.M. (New York time) on the date due at the Payment Office for the
account of the Lenders or the Administrative Agent, as the case may be; funds
received by the Administrative Agent after that time shall be deemed to have
been paid by the Company on the next succeeding Business Day. The Company
hereby authorizes the Administrative Agent to charge its account with the
Administrative Agent in order to cause timely payment to be made of all
principal, interest, fees and other amounts due hereunder (subject to sufficient
funds being available in its account for that purpose).
C. PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a day which is not a
Business Day, the payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Notes or of the commitment and other fees
hereunder, as the case may be.
D. NOTATION OF PAYMENT. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting participations
therein), such Lender will make a notation thereon of all principal payments
previously made thereon and of the date to which interest thereon has been paid
and will notify the Company of the name and address of the transferee of that
Note; PROVIDED, HOWEVER, that the failure to make (or any error in the making
of) such a notation or to notify the Company of the name and address of such
transferee shall not limit or otherwise affect the obligation of the Company
hereunder or under such Notes with respect to the Loans and payments of
principal or interest on any such Note.
2.6 USE OF PROCEEDS
A. BRIDGE LOAN. (i) $5,500,000 of proceeds of the Bridge Loan
shall be used to repay a like principal amount of the Existing Alco Subordinated
Notes issued by the Company as part of the Refinancing, (ii) $1,000,000 of
proceeds of the Bridge Loan shall be applied to repay accrued interest on the
Existing Alco Subordinated Notes issued by the Company, (iii) $1,000,000 of
proceeds of the Bridge Loan will be used by the Company to finance, in part, the
purchase of the Butler Warehouse from Alco (or a Subsidiary thereof) and
(iv) $1,000,000 of proceeds of the Bridge Loan shall be used to pay Transaction
Costs.
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B. TERM LOAN. The proceeds of the Term Loan shall be used to cancel
any outstanding amount of Bridge Notes converted to Term Notes on the Conversion
Date.
C. MARGIN REGULATIONS. No portion of the proceeds of any borrowing
under this Agreement shall be used by the Company in any manner which might
cause the borrowing or the application of such proceeds to violate the
applicable requirements of Regulation G, Regulation U, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System or any
other regulation of such Board or to violate the Exchange Act, in each case as
in effect on the date or dates of such borrowing and such use of proceeds.
SECTION 3. CONDITIONS.
3.1 CONDITIONS TO BRIDGE LOAN
The obligation of the Lenders to make the Bridge Loan is subject to
prior or concurrent satisfaction of each of the following conditions:
A. On or before the Closing Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto shall be satisfactory
in form and substance to the Administrative Agent, and the Administrative Agent
shall have received on behalf of the Lenders the following items, each of which
shall be in form and substance satisfactory to the Administrative Agent and,
unless otherwise noted, dated the Closing Date:
1. a certified copy of the Company's, LMC's and Boyle Fleming's
charter, together with a certificate of status, compliance, good standing
or like certificate with respect to each such Person issued by the
appropriate government officials of the jurisdiction of its incorporation
and of each jurisdiction in which it owns any material assets or carries on
any material business, each to be dated a recent date prior to the Closing
Date;
2. a copy of the Company's, LMC's and Boyle Fleming's bylaws,
certified as of the Closing Date by its Secretary or one of its Assistant
Secretaries;
3. resolutions of the Company's, LMC's and Boyle Fleming's Board of
Directors approving and
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authorizing the execution, delivery and performance of (to the extent any
such Person is a party to) this Agreement, each of the other Loan
Documents, the engagement and related letters of the Take-Out Banks and
any other documents, instruments and certificates required to be executed
in connection herewith and therewith and, in the case of the Company,
approving and authorizing the execution, delivery and payment of the
Notes and the issuance or incurrence of the Take-Out Notes and the
Refinancing, each certified as of the Closing Date by its Secretary or one
of its Assistant Secretaries as being in full force and effect without
modification or amendment;
4. signature and incumbency certificates of the Company's, LMC's and
Boyle Fleming's officers executing this Agreement, the Bridge Notes and the
other Loan Documents to which such Person is a party;
5. originally executed copies of this Agreement and the Bridge Notes
substantially in the form of EXHIBIT I annexed hereto executed in
accordance with Section 2.1D drawn to the order of the Lenders and with
appropriate insertions;
6. an originally executed Notice of Borrowing substantially in the
form of EXHIBIT III annexed hereto, signed by the President or a Vice
President of the Company on behalf of the Company in writing delivered to
the Administrative Agent;
7. originally executed copies of one or more favorable written
opinions of (I) Crouch & Hallet, counsel for the Company, substantially in
the form of EXHIBIT VII annexed hereto and addressed to the Administrative
Agent and the Lenders, (II) Robert A. Hurwich, counsel to LMC,
substantially in the form of EXHIBIT VIII annexed hereto and addressed to
the Administrative Agent and the Lenders, (III) Haynes and Boone, L.L.P.,
counsel to the Company, substantially in the form of EXHIBIT IX annexed
hereto and addressed to the Administrative Agent and the Lenders and
(IV) such other opinions of counsel as the Administrative Agent shall have
reasonably requested and satisfactory to the Administrative Agent;
8. a solvency certificate from the Company substantially in the form
of EXHIBIT X annexed hereto;
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9. true and correct copies of each of the documents entered into in
connection with the Refinancing, including executed copies of the New Alco
Subordinated Notes, each of which documents shall be in full force and
effect and shall be in form and substance satisfactory to the
Administrative Agent;
10. (a)(i) an Officers' Certificate from the Company certifying that
each of the Existing Central Products Credit Agreement, the Existing Brown
Bridge Credit Agreement and the Existing Entoleter Credit Agreement is in
full force and effect on the Closing Date and, except as provided below in
this Section 3.1A(10), no term or condition thereof has been amended,
modified or waived from the form most recently provided to the
Administrative Agent prior to the Closing Date and (ii) an Officers'
Certificate from the Company certifying that each of Central Products,
Brown Bridge and Entoleter has performed or complied with all agreements
and conditions contained in the Existing Central Products Credit Agreement,
the Existing Brown Bridge Credit Agreement and the Existing Entoleter
Credit Agreement, respectively and any agreements or documents referred to
therein required to be performed or complied with by such party, and that
no such party is in default in the performance or compliance with any of
the terms or provisions thereof;
(b) a true and correct copy of an amendment to the Existing Brown
Bridge Credit Agreement, which amendment shall be in full force and effect
and shall be in form and substance satisfactory to the Administrative
Agent, to (i) permit the Company to grant to the Collateral Agent, for the
benefit of the Lenders, a second priority perfected security interest in
the capital stock of Brown Bridge owned by the Company, and the existing
pledgee of the capital stock of Brown Bridge under the Existing Brown
Bridge Credit Agreement shall agree to hold such capital stock for the
benefit of the Collateral Agent on a junior and subordinated basis, (ii)
permit Brown Bridge to make payments to the Company with respect to Brown
Bridge's allocable share of taxes payable by the Company and (iii) permit
the payments of dividends to the Company on a basis satisfactory to the
Administrative Agent;
(c) a true and correct copy of an amendment to the Existing Central
Products Credit Agreement, which
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amendment shall be in full force and effect and shall be in form and
substance satisfactory to the Administrative Agent, to permit Central
Products to pay cash dividends to the Company, to Incur at least $5,000,000
of intercompany indebtedness that is owed to the Company, to permit the
payment of interest and principal thereon by Central Products and to
modify Section 6.2A of the Existing Central Products Credit Agreement in
respect of Central Products' fiscal quarter ending March 31, 1996, in each
case on a basis satisfactory to the Administrative Agent (it being
understood, however, that the payment of such dividends, interest and
principal may be subject to compliance with the financial covenants set
forth in the Existing Central Products Credit Agreement as in effect on
the Closing Date); and
(d) a true and correct copy of an amendment to the Existing Entoleter
Credit Agreement, which amendment shall be in form and substance
satisfactory to the Administrative Agent, to (i) permit Entoleter to make
payments to the Company with respect to Entoleter's allocable share of
taxes payable by the Company and (ii) permit the Company to grant to the
Collateral Agent, for the benefit of the Lenders, a second priority
perfected security interest in the capital stock of Entoleter owned by the
Company, and the existing pledgee of the capital stock of Entoleter under
the Existing Entoleter Credit Agreement shall agree to hold such capital
stock for the benefit of the Collateral Agent on a junior and subordinated
basis;
11. an executed copy of the amended 18% Subordinated Promissory
Notes, each of which shall be in full force and effect and shall be in form
and substance satisfactory to the Administrative Agent;
12. an executed copy of a letter from the Board of Directors of the
Company (or a special committee thereof) concerning the continued
engagement by the Company of Boyle Fleming, or Richard J. Boyle and Ned N.
Fleming, III, which letter shall be in form and substance satisfactory to
the Administrative Agent;
13. an executed copy of (i) an Agreement made and entered into by and
among the Company, Brown Bridge and K.C. Caldabaugh and (ii) an Agreement
made and entered into by and between Lynch and LMC
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(collectively, the "BROWN BRIDGE SHAREHOLDER ROLL-UP AGREEMENT"), which
Brown Bridge Shareholder Roll-Up Agreement shall be in full force and
effect and shall be in form and substance satisfactory to the
Administrative Agent;
14. an originally executed copy of the Pledge Agreement substantially
in the form of EXHIBIT XI annexed hereto and the delivery to the Collateral
Agent of the Pledged Securities referred to therein (to the extent required
to be delivered on the Closing Date pursuant to the terms thereof);
15. an originally executed copy of the Boyle Fleming Warrant Exercise
Agreement substantially in the form of EXHIBIT XII annexed hereto;
16. an originally executed copy of the Escrow Agreement substantially
in the form of EXHIBIT XIII;
17. an originally executed copy of the Fee Letter referred to in
clause (ii) of the definition thereof;
18. a true and correct copy of the Company's audited financial
statements for its fiscal year ended December 31, 1995, which financial
statements shall have been audited by Ernst & Young and shall be in form
and substance satisfactory to the Administrative Agent; and
19. an executed copy of a letter from Lynch addressed to the Company,
Boyle Fleming, Richard J. Boyle, Ned N. Fleming, III, and Bankers Trust
Company, as Administrative Agent, pursuant to which Lynch shall agree (i)
to defer any accrued guarantee fees that may be due and owing by the
Company to Lynch in respect of Lynch's guaranty of the Company's
obligations under the Existing Alco Subordinated Notes issued by the
Company until such time as all Obligations have been paid in full and (ii)
that notwithstanding any agreements or arrangements to the contrary, Boyle
Flemings, Richard J. Boyle and Ned N. Fleming, III may enter into and
perform their respective obligation under the Boyle Fleming Warrant
Exercise Agreement and the Pledge Agreement, which letter shall be in form
and substance satisfactory to the Administrative Agent.
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B. On or before the Closing Date, all authorizations, consents and
approvals necessary in connection with the transactions contemplated by the Loan
Documents and otherwise referred to herein or therein shall have been obtained
and remain in full force and effect and all applicable waiting periods under Law
shall have expired without any action being taken by any competent authority
(including, without limitation, any Tribunal) which restrains, prevents or
imposes materially adverse conditions upon the completion of the transactions
contemplated by the Loan Documents and otherwise referred to herein or therein.
C. On or before the Closing Date, the Company shall have paid to the
Administrative Agent the fees (including legal fees and expenses) payable on the
Closing Date pursuant to Section 2.4.
D. On or before the Closing Date, the Company Lynch, LMC and Boyle
Fleming shall have performed all agreements which this Agreement provides shall
be performed on or before the Closing Date.
E. Simultaneously with the making of the Bridge Loan by the Lenders,
the Company shall have delivered to the Administrative Agent an Officers'
Certificate from the Company in form and substance satisfactory to the
Administrative Agent certifying that (i) the representations and warranties in
Section 4 and the representations and warranties in the other Loan Documents, in
each case to the extent made by the Company are true, correct and complete in
all material respects on and as of the Closing Date to the same extent as though
made on and as of that date, (ii) on or prior to the Closing Date, the Company
has performed and complied with all covenants and conditions to be performed and
observed by the Company on or prior to the Closing Date, (iii) no event shall
have occurred and be continuing or would result from the consummation of the
borrowing contemplated by the Notice of Borrowing which would constitute an
Event of Default or a Potential Event of Default and (iv) the Refinancing has
been consummated in accordance with the documents delivered to the
Administrative Agent on or prior to the Closing Date.
F. Simultaneously with the making of the Bridge Loan by the Lenders,
the Refinancing shall be consummated without the waiver of any conditions
precedent thereto.
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G. Neither the Company nor any of its Subsidiaries 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 labor dispute or any legal or governmental proceeding,
which loss or interference, in the sole judgment of the Administrative Agent,
has had or could reasonably be expected to have a Material Adverse Effect; there
shall not have been, and nothing shall have occurred, which in the sole judgment
of the Administrative Agent, has had or could reasonably be expected to have a
Material Adverse Effect.
H. No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by the Notice of Borrowing
which would constitute an Event of Default or a Potential Event of Default. All
representations and warranties set forth herein, in the other Loan Documents and
in the Boyle Fleming Warrant Exercise Agreement shall be true and correct in all
material respects as though made on and as of the Closing Date.
I. No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain the Lenders from
making the Bridge Loan.
J. No Litigation by any entity (private or governmental) shall be
pending or threatened with respect to this Agreement or any other Loan Document
or the transactions contemplated hereby or thereby, or which the Administrative
Agent shall determine in its sole discretion could reasonably be expected to
have a Material Adverse Effect.
K. The making of the Bridge Loan in the manner contemplated in this
Agreement shall not violate the applicable provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve Board or any other regulation
of such Board.
L. The Company shall have engaged one or more investment banks
(collectively, the "TAKE-OUT BANKS") satisfactory to the Administrative Agent to
publicly sell or privately place the Take-Out Notes. Such engagement shall have
been definitively documented on terms and conditions satisfactory to the
Administrative Agent, such documentation shall be in full force and effect and
the
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parties thereto shall be in compliance with all agreements thereunder.
M. There shall not have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on the New York Stock
Exchange or American Stock Exchange or in the over-the-counter market in the
United States; (ii) a declaration of a banking moratorium or any suspension of
payments in respect of the banks in the United States or New York; (iii) either
(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 sole judgement of the Administrative
Agent, makes it impracticable or inadvisable to proceed with the consummation of
the Refinancing or the Bridge Loan or any of the other transactions contemplated
hereby including, without limitation, the issuance of the Take-Out Notes; or
(iv) in the case of any of the foregoing existing at the time hereof, a material
acceleration or worsening thereof.
N. The results of the Administrative Agent's financial, business,
legal and accounting due diligence investigations shall be satisfactory in all
respects to the Administrative Agent and the Administrative Agent shall have
received any information reasonably necessary to conduct such due diligence.
O. Boyle Fleming shall have exercised warrants to purchase shares of
common stock of the Company pursuant to the Boyle Fleming Warrant Exercise
Agreement resulting in net cash proceeds to the Company in an amount equal to
the amount of the interest payment on the Bridge Loan that is due on each of
July 15, 1996 and October 15, 1996, and the Company shall have deposited such
cash proceeds in the Escrow Account pursuant to the Escrow Agreement.
3.2 CONDITIONS TO TERM LOAN
The obligation of the Lenders to make the Term Loan on the Conversion
Date is subject to the prior or concurrent satisfaction or waiver of the
following conditions precedent:
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A. The Administrative Agent shall have received in accordance with
the provisions of Section 2.2B an originally executed Notice of Conversion.
B. Neither the Company nor any of its Subsidiaries shall be subject
to a Bankruptcy Order or a bankruptcy or other insolvency proceeding.
C. No Event of Default or Potential Event of Default (whether
matured or not) shall have occurred.
D. On the Conversion Date, the Administrative Agent shall have
received an Officers' Certificate from the Company dated the Conversion Date and
satisfactory in form and substance to the Administrative Agent, to the effect
that the conditions in this Section 3.2 are satisfied on and as of the
Conversion Date.
E. The Company shall have executed and delivered to the
Administrative Agent on the Conversion Date for delivery to the Lenders Term
Notes dated the Conversion Date substantially in the form of EXHIBIT II annexed
hereto to evidence the Term Loan, in the principal amount of (which principal
amount shall not exceed in the aggregate the aggregate principal amount of the
Bridge Loan outstanding on the Conversion Date) the Term Loan and with other
appropriate insertions.
F. The Company shall have paid any fees owing pursuant to
Section 2.4 in cash to the Administrative Agent, and the Company shall have
entered into the Warrant Agreement referred to in the respective Fee Letter and
shall have issued the Warrants required to be issued thereunder on or prior to
the Conversion Date.
G. The making of the Term Loan shall not violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve Board or any other
regulation of such Board.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Agreement and to
make the Loans, the Company represents and warrants to the Lenders that, at the
time of execution hereof and immediately after consummation of the Refinancing
and the incurrence of the Loans, the following statements are true, correct and
complete:
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4.1 ORGANIZATION AND GOOD STANDING; CAPITALIZATION
(a) Each of the Company and each of its Subsidiaries is a corporation
duly organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and each of its Subsidiaries
has the corporate power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted and is
duly qualified as a foreign corporation and in good standing in all
jurisdictions in which it is doing business, except where failure to be so
qualified or in good standing, singly or in the aggregate, has not had and could
not reasonably be expected to have a Material Adverse Effect.
(b) All of the Subsidiaries of the Company as of the Closing Date are
identified in SCHEDULE A annexed hereto. The capital stock of each of the
Subsidiaries of the Company identified in SCHEDULE A annexed hereto is duly
authorized, validly issued, fully paid and nonassessable.
(c) As of the Closing Date, the authorized capital stock of the
Company consists of 10,000,000 shares of common stock, no par value, of which
2,715,694 shares are issued and outstanding. All such outstanding shares have
been duly and validly issued, are fully paid and nonassessable. The Company
does not have outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock except as set forth in Schedule A
annexed hereto.
4.2 AUTHORIZATION AND POWER
The Company has the corporate power and requisite authority, and has
taken all corporate action necessary, to consummate the Refinancing and to
execute, deliver and perform the Loan Documents to which it is a party and each
other document and instrument to be delivered by it in connection with the
Refinancing or otherwise referred to in Section 3 and to issue the Notes and the
Take-Out Securities.
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4.3 NO CONFLICTS OR CONSENTS
(a) The execution and delivery of the Loan Documents and each other
document to be executed and delivered in connection with the Refinancing or
otherwise referred to in Section 3, the consummation of each of the transactions
herein or therein contemplated, the compliance with each of the terms and
provisions hereof or thereof, and the issuance, delivery and performance of the
Notes and the Take-Out Securities, do not and will not (i) violate any provision
of any Law applicable to the Company or any of its Subsidiaries, the Certificate
or Articles of Incorporation or Bylaws of any of them or any order, judgment or
decree of any court or other agency of government binding on any of them,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any material Contractual Obligation of
the Company or any its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of any of the
Company or any of its Subsidiaries (other than any Liens created under the Loan
Documents), (iv) require any approval of stockholders or any approval or consent
of any Person under any Contractual Obligation of the Company or any of its
Subsidiaries except for (x) such approvals or consents which will be obtained on
or before the Closing Date and (y) the approval of the Company's stockholders to
amend the Company's Certificate of Incorporation to authorize a class a non-
voting common stock in connection with the issuance of warrants to purchase
shares of common stock of the Company as contemplated by the Fee Letters.
(b) No consent, approval, authorization or order of any Tribunal or
other Person is required in connection with the execution and delivery by the
Company of the Loan Documents to which it is a party or any other document or
instrument to be delivered by the Company in connection with the Refinancing or
the consummation of the transactions contemplated hereby or thereby, other than
any such consent, approval, authorization or order which has been obtained and
remains in full force and effect.
4.4 ENFORCEABLE OBLIGATIONS
Each of the Loan Documents and each other document or instrument to be
delivered by the Company in connection therewith and in connection with the
Refinancing and the other transactions contemplated herein have been duly
authorized; each of the Loan Documents and each such
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other document or instrument to be executed and delivered by the Company on
or prior to the Closing Date have been duly executed and delivered by the
Company; and each of the Loan Documents and each such other document or
instrument to be executed and delivered by the Company on or prior to the
Closing Date are, and each of the Loan Documents to be executed and delivered
by the Company after the Closing Date will be, upon such execution and
delivery, the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
4.5 PROPERTIES; LIENS
The Company and each Subsidiary of the Company have good, sufficient
and legal title to all their respective properties and assets, and all
properties held under lease by any of them are held under valid, subsisting and
enforceable leases. Except as permitted by this Agreement, all such properties
and assets owned or leased are so owned or leased free and clear of Liens except
as permitted under Section 6.2.
4.6 FINANCIAL CONDITION
(a) The consolidated statements of financial condition of the Company
and its Subsidiaries at December 31, 1995 and the related consolidated
statements of income and cash flow and changes in shareholders' equity of the
Company and its Subsidiaries for the fiscal year ended on such date, and
furnished to the Administrative Agent prior to the Closing Date present fairly
the financial condition of the Company and its Subsidiaries at the date of such
statements of financial condition and the results of the operations of the
Company and its Subsidiaries for the respective fiscal year. All such financial
statements have been prepared in accordance with GAAP. Since December 31, 1995,
there has been no Material Adverse Effect.
(b) On and as of the Closing Date, after giving effect to the
Refinancing and the Loans being incurred and Liens created by the Company in
connection therewith, (i) the sum of the assets, at a fair valuation, of each of
the Company on a stand-alone basis and the Company and its
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Subsidiaries taken as a whole will exceed its debts; (ii) the Company on a
stand-alone basis and the Company and its Subsidiaries taken as a whole has
not incurred and does not intend to incur, and does not believe that they
will incur, debts beyond its ability to pay such debts as such debts mature;
and (iii) the Company on a stand-alone basis and the Company and its
Subsidiaries taken as a whole will have sufficient capital with which to
conduct its business. For purposes of this Section 4.6(b), "debt" means any
liability on a claim, and "claim" means (i) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right
to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
(c) Except as disclosed in the financial statements delivered
pursuant to Section 4.6(a) in accordance with GAAP and as set forth on Schedule
F annexed hereto, there were as of the Closing Date no liabilities or
obligations with respect to the Company or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, would be material to the
Company on a stand-alone basis or the Company and its Subsidiaries taken as a
whole. As of the Closing Date, the Company does not know of any basis for the
assertion against the Company or any of its Subsidiaries of any liability or
obligation of any nature whatsoever that is not disclosed in the financial
statements delivered pursuant to Section 4.6(a) in accordance with GAAP or as
disclosed on Schedule F annexed hereto which, either individually or in the
aggregate, could reasonably be expected to be material to the Company or any of
its Subsidiaries.
4.7 FULL DISCLOSURE
The financial projections (including, without limitation, the pro
forma financial statements included therewith) furnished to the Administrative
Agent by the Company are complete, were prepared by or under the direction of an
officer of the Company and were prepared in good faith on the basis of
information and assumptions that the Company believed to be fair, complete and
reasonable as of the date of such information, and which assumptions are
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believed to be fair, complete and reasonable as of the date hereof. All other
factual information heretofore or contemporaneously furnished by or on behalf of
any Loan Party to the Administrative Agent or Lenders for purposes of or in
connection with this Agreement does not contain any untrue statement of a
material fact or omit to state any material fact necessary to keep the
statements contained herein or therein from being misleading. No fact is known,
no condition exists nor has any event occurred which has not been disclosed
herein or in any other document, certificate or statement furnished to the
Administrative Agent or the Lenders for use in the transactions contemplated
hereby which could, singly or in the aggregate, have a Material Adverse Effect.
4.8 NO DEFAULT
No event has occurred and is continuing which constitutes a Potential
Event of Default or an Event of Default.
4.9 COMPLIANCE WITH CONTRACTS, ETC.
Neither the Company nor any of its Subsidiaries is in violation of (A)
its Certificate or Articles of Incorporation, By-Laws or other organizational
documents or (B) any applicable Law, except, with respect to this clause (B),
for such violations that could not reasonably be expected to, singly or in the
aggregate, have a Material Adverse Effect, or (C) any order, decree or judgment
of any Tribunal having jurisdiction over any of them; and no event of default or
event that but for the giving of notice or the lapse of time, or both, would
constitute an event of default exists under any Contractual Obligation to which
the Company or any Subsidiary of the Company is a party to or is otherwise
subject to, except, with respect to this clause (C), for such violations that
could not reasonably be expected to, singly or in the aggregate, have a Material
Adverse Effect.
4.10 NO LITIGATION
There is no Litigation pending or, to the best knowledge of the
Company after due investigation, threatened, by, against, or which may relate to
or affect (a) any benefit plan or any fiduciary or administrator thereof, (b)
the transactions contemplated by this Agreement, or (c) the Company or any of
its Subsidiaries which, singly or in the aggregate, could reasonably be
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expected to have a Material Adverse Effect. There are no outstanding
injunctions or restraining orders prohibiting consummation of any of the
transactions contemplated by the Loan Documents.
4.11 USE OF PROCEEDS; MARGIN STOCK, ETC.
The proceeds of the Bridge Loan will be used solely for the purposes
specified herein. None of such proceeds will be used for the purpose of
purchasing or carrying any Margin Stock within the meaning of the applicable
provisions of Regulation G, T, U or X, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
Margin Stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of the applicable provisions
of Regulation G, T, U or X. Neither the Company nor any of its Subsidiaries has
taken or will take any action which might cause any of the Loan Documents to
violate the applicable provisions of Regulation G, T, U or X, or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
Section 8 of the Exchange Act or any rule or regulation thereunder, in each case
as now in effect or as the same may hereafter be in effect.
4.12 TAXES
The Company and each of its Subsidiaries have timely filed or caused
to be timely filed with the appropriate taxing authority, all Federal, state and
other material returns, statements, forms and reports for Taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Company and/or any of its Subsidiaries. The Returns accurately reflect
all liability for Taxes of the Company and its Subsidiaries for the periods
covered thereby. The Company and each of its Subsidiaries have paid all Taxes
payable by them other than Taxes which are not established, and other than those
contested in good faith and for which reserves have been established in
accordance with GAAP. There is no material action, suit, proceeding,
investigation, audit, or claim now pending or, to the best knowledge of the
Company, threatened by any authority regarding any Taxes relating to the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of Taxes of the
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Company or any of its Subsidiaries, or is aware of any circumstances that
would cause the taxable years or other taxable periods of the Company or any
of its Subsidiaries not to be subject to the normally applicable statute of
limitations. Neither the Company nor any of its Subsidiaries has provided,
with respect to themselves or property held by them, any consent under
Section 341 of the Code.
4.13 ERISA
Each Company Plan is in substantial compliance with ERISA and the
Internal Revenue Code; no Reportable Event has occurred with respect to a
Company Plan; no Company Plan is insolvent or in reorganization; the aggregate
amount of Unfunded Current Liabilities under all Company Plans does not exceed
$500,000; no Company Plan has an accumulated or waived funding deficiency or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Internal Revenue Code; all contributions required to be made
with respect to a Company Plan have been timely made; neither the Company nor
any Subsidiary of the Company has incurred any material liability to or on
account of a Company Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975
or 4980 of the Internal Revenue Code or expects to incur any material liability
(including any indirect, contingent or secondary liability) under any of the
foregoing Sections with respect to any Company Plan; no proceedings have been
instituted to terminate or appoint a trustee to administer any Plan; no
condition exists which presents a likely risk to the Company or any Subsidiary
of the Company of incurring a material liability to or on account of a Company
Plan pursuant to the foregoing provisions of ERISA and the Internal Revenue
Code; using actuarial assumptions and computation methods consistent with Part 1
of subtitle E of Title IV of ERISA, the Company and each of its Subsidiaries do
not have any multiemployer plans (as defined in Section 4001(a)(3) of ERISA); no
lien imposed under the Internal Revenue Code or ERISA on the assets of the
Company or any Subsidiary of the Company exists or is likely to arise on account
of any Company Plan; and the Company and each of its Subsidiaries may cease
contributions to or terminate any employee benefit plan maintained by any of
them without incurring any liability in excess of $1,500,000 in the aggregate.
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4.14 COMPLIANCE WITH LAW
The Company and each of its Subsidiaries are in compliance with all
Laws, except where the failure to comply, singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
4.15 GOVERNMENT REGULATION
Neither the Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts have
been amended) or other Law which regulates the Incurring by the Company or any
of its Subsidiaries of Indebtedness, including, but not limited to, Laws
relating to common contract carriers or the sale of electricity, gas, steam,
water or other public utility services.
4.16 PLEDGE AGREEMENT
The security interests created in favor of the Collateral Agent, as
Pledgee, for the benefit of the Lenders under the Pledge Agreement constitute
first priority perfected security interests in the Pledged Securities (or, in
the case of the capital stock of Brown Bridge and Entoleter, second priority
perfected security interests so long as the Existing Brown Bridge Credit
Agreement or the Existing Entoleter Credit Agreements, as the case may be, is in
effect), subject to no security interests of any other Person (other than in
favor of the lenders under the Existing Brown Bridge Credit Agreement or the
Existing Entoleter Credit Agreement, as the case may be). No filings or
recordings are required in order to perfect (or maintain the perfection or
priority of) the security interests created in the Pledged Securities and the
proceeds thereof under the Pledge Agreement.
4.17 INTELLECTUAL PROPERTY
Each of the Company and each of its Subsidiaries owns all the patents,
trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and formulas, or rights with respect to the foregoing, and has
obtained assignments of all leases and other rights of whatever nature,
necessary for the present conduct of its business, without any known conflict
with the rights of others which, or the failure to obtain which, as the case may
be, could
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reasonably be expected to result in a Material Adverse Effect.
4.18 ENVIRONMENTAL MATTERS
(i) The operations of the Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) comply with all Environmental Laws;
(ii) each of the Company and each of its Subsidiaries has obtained
all Permits under Environmental Laws necessary to their respective
operations, and all such Permits are in good standing, and each of the
Company and each of its Subsidiaries is in compliance with all terms and
conditions of such Permits;
(iii) neither the Company nor any of its Subsidiaries has received
(a) any notice or claim to the effect that it is or may be liable to any
Person as a result of or in connection with any Hazardous Materials or
(b) any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9604) or comparable state laws and, to the best of the
Company's knowledge, none of the operations of the Company or any of its
Subsidiaries is the subject of any federal or state investigation relating
to or in connection with any Hazardous Materials at any Facility or at any
other location;
(iv) none of the operations of the Company or any of its Subsidiaries
is subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws;
(v) neither the Company nor any of its Subsidiaries or any of their
respective Facilities or operations are subject to any outstanding written
order or agreement with any governmental authority or private party
relating to (a) any Environmental Laws or (b) any Environmental Claims;
(vi) neither the Company nor any of its Subsidiaries has any
contingent liability in connection with any Release of any Hazardous
Materials by the Company or any of its Subsidiaries;
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(vii) neither the Company nor any of its Subsidiaries has filed any
notice under any Environmental Law indicating past or present treatment or
Release of Hazardous Materials at any Facility, and neither the Company nor
any of its Subsidiaries' operations involves the generation, transaction,
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state equivalent other than in compliance with
all Environmental Laws;
(viii) no Hazardous Materials exist on, under or about any Facility
in a manner that has a reasonable possibility of giving rise to an
Environmental Claim, and neither the Company nor any of its Subsidiaries
has filed any notice or report of a Release of any Hazardous Materials that
has a reasonable possibility of giving rise to an Environmental Claim;
(ix) neither the Company nor any of its Subsidiaries has disposed of
any Hazardous Materials in a manner that has a reasonable possibility of
giving rise to an Environmental Claim; and
(x) no unpermitted underground storage tanks or surface impoundments
are on or at any Facility.
Notwithstanding anything to the contrary in this Section 4.18, the
representations made in this Section 4.18 shall only be untrue if the effect of
any such failures and noncompliances of the types described above, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.19 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Subject to Section 9.9, all representations and warranties in the Loan
Documents shall survive delivery of the Bridge Notes and the Term Notes and the
making of the Bridge Loan and the Term Loan and the repayment of all
Obligations.
4.20 PERMITS
Each of the Company and each of its Subsidiaries have such
certificates, permits, licenses, franchises, consents, approvals, authorizations
and clearances that are material to the condition (financial or otherwise),
business, properties, operations or prospects of the
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Company or the Company and its Subsidiaries taken as a whole ("PERMITS"), and
are in compliance in all material respects with all applicable Laws of all
Tribunals as are necessary to own, lease or operate their respective
properties and to conduct their businesses in the manner as presently
conducted, and all such Permits are valid and in full force and effect. Each
of the Company and each of its Subsidiaries are in compliance in all material
respects with their respective obligations under such Permits and no event
has occurred that allows, or after notice or lapse of time would allow,
revocation or termination of such Permits, except for any such revocation or
termination as could not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
4.21 INSURANCE
Each of the Company and each of its Subsidiaries carry or are entitled
to the benefits of insurance (including self-insurance) in such amounts and
covering such risks as is generally maintained by companies of established
repute engaged in the same or similar businesses, and all such insurance is in
full force and effect.
4.22 LABOR MATTERS
Neither the Company nor any of its Subsidiaries is engaged in any
unfair labor practice that could reasonably be expected to have a Material
Adverse Effect. There is (i) no unfair labor practice complaint pending against
the Company or any of its Subsidiaries or, to the best knowledge of the Company,
threatened against any of them, before the National Labor Relations Board, and
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened against any of
them, (ii) no strike, labor dispute, slowdown or stoppage pending against the
Company or any of its Subsidiaries or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries and (iii) to the best
knowledge of the Company, no union representation question existing with respect
to the employees of the Company or any of its Subsidiaries, except (with respect
to any matter specified in clause (i), (ii) or (iii) above, either individually
or in the aggregate) such as could not reasonably be expected to have a Material
Adverse Effect.
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4.23 INDEBTEDNESS; ETC.
(a) SCHEDULE B sets forth a true and complete list of all
Indebtedness and Contingent Obligations of the Company and its Subsidiaries as
of the Closing Date and which is to remain outstanding after giving effect
thereto (excluding the Obligations, such Indebtedness, the "EXISTING
INDEBTEDNESS," and such Contingent Obligations, the "EXISTING CONTINGENT
OBLIGATIONS"), in each case showing the aggregate principal amount thereof and
the name of the respective borrower and any other entity which directly or
indirectly guaranteed such debt.
(b) The subordination provisions contained in the 18% Subordinated
Promissory Notes and in the New Alco Subordinated Notes are enforceable against
the Company and the respective holders of such notes, and all Obligations are
within the definition of "Senior Indebtedness" included in such subordination
provisions.
4.24 TAKE-OUT NOTES
The Company shall, on the date it executes and delivers Take-Out Notes
and the indenture governing the Take-Out Notes, have the full corporate power,
authority and capacity to do so and to perform all of its obligations to be
performed thereunder; all corporate and other acts, conditions and things
required to be done and performed or to have occurred prior to such execution
and delivery to constitute them as valid and legally binding obligations of the
Company enforceable against the Company in accordance with their respective
terms shall have been done and performed and shall have occurred in due
compliance with all applicable Laws; on the date of such execution and delivery
by the Company, the Take-Out Notes and the indenture governing the Take-Out
Notes shall constitute legal, valid, binding and unconditional obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
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4.25 BROKER'S OR FINDER'S FEES
Except as disclosed on SCHEDULE E annexed hereto, no broker's or
finder's fees or commissions will be payable by the Company with respect to any
transaction contemplated hereby, and no similar fees or commissions will be
payable by the Company for any other services rendered to the Company or any of
its Subsidiaries in connection with the transactions contemplated hereby and
thereby. The Company represents, warrants, covenants and agrees that the
Company will indemnify the Lenders and the Administrative Agent against, and
hold each of them completely harmless from and against, any and all claims,
demands or liabilities for broker's or finder's fees or similar fees or
commissions asserted to have been incurred in connection with any of the
transactions contemplated hereby.
SECTION 5. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that, until the Loans and the Notes
and all other obligations have been paid in full, the Company will perform all
covenants in this Section 5 required to be performed by it:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
The Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated financial
statements in conformity with GAAP. The Company will deliver, as applicable,
to each Lender and the Administrative Agent:
(i) within 30 days after the end of each fiscal month of the Company,
the consolidated balance sheet of the Company and its Subsidiaries as at
the end of such fiscal month and the related consolidated statements of
income and retained earnings for such fiscal month and for the elapsed
portion of the fiscal year ended with the last day of such month, in each
case setting forth comparative figures for the corresponding month in the
prior fiscal year and the budgeted figures for such month as set forth in
the respective budget delivered pursuant to Section 5.1(v);
(ii) within 45 days after the close of the first three quarterly
accounting periods in each fiscal year
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of the Company, the consolidated and consolidating balance sheets of the
Company and its Subsidiaries as at the end of such quarterly accounting
period and the related consolidated and consolidating statements of
income and retained earnings and consolidated statements of cash flows
for such quarterly accounting period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly accounting period,
all of which shall be certified by the Chief Financial Officer or
Treasurer of the Company, subject to normal year-end audit adjustments;
(iii) within 90 days after the close of each fiscal year of the
Company, the consolidated and consolidating balance sheets of the Company
and its Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income and retained earnings
and of cash flows for such fiscal year setting forth comparative figures
for the preceding fiscal year and certified (x) in the case of the
consolidated financial statements, by Ernst & Young or such other
independent certified public accountants of recognized national standing
reasonably acceptable to the Administrative Agent, together with a report
of such accounting firm stating that in the course of its regular audit of
the financial statements of the Company and its Subsidiaries, which audit
was conducted in accordance with generally accepted auditing standards,
such accounting firm obtained no knowledge of any Event of Default which
has occurred and is continuing or, if in the opinion of such accounting
firm such an Event of Default has occurred and is continuing, a statement
as to the nature thereof and (y) in the case of the consolidating financial
statements, by the Chief Financial Officer or Treasurer of the Company;
(iv) together with each delivery of financial statements pursuant to
clauses (ii) and (iii) above, (a) an Officers' Certificate of the Company,
stating that the signers have reviewed the terms of this Agreement and the
Notes and have made, or caused to be made under their supervision, a review
in reasonable detail of the transactions and condition the Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signers do not have
knowledge of the existence as at
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the date of the Officers' Certificate, of any condition or event which
constitutes an Event of Default or a Potential Event of Default, or, if
any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Company has taken, is
taking and proposes to take with respect thereto; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance (as determined
in accordance with GAAP) during and at the end of such accounting
periods with the restrictions contained in Sections 5.15, 6.1, 6.2, 6.3,
6.4, 6.5, 6.6, 6.9, 6.10 and 6.16;
(v) no later than the commencement of the first day of each fiscal
year of the Company (commencing with the fiscal year beginning January 1,
1997), a budget in form satisfactory to the Administrative Agent (including
budgeted statements of income and sources and uses of cash and balance
sheets) prepared by the Company for (x) each of the twelve months of such
fiscal year prepared in detail and (y) each of the two years immediately
following such fiscal year prepared in summary form, in each case, of the
Company and its Subsidiaries on a consolidated basis and of the Company and
each of its Subsidiaries on a consolidating basis, accompanied by the
statement of the Chief Financial Officer of the Company to the effect that,
to the best of such officer's knowledge, the budget is a reasonable
estimate for the period covered thereby;
(vi) promptly upon receipt thereof (unless restricted by applicable
professional standards), copies of all reports submitted to the Company or
any of its Subsidiaries by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of the Company and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(vii) promptly upon the sending or filing thereof, copies of (a) all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its security holders or by any
Subsidiary of the Company to its security holders other than the Company,
(b) all regular and periodic reports and all registration
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statements (other than on Form S-8 or a similar form) and prospectuses,
if any, filed by the Company or any of its Subsidiaries with any
securities exchange or with the Commission or any governmental or
private regulatory authority, and (c) all press releases and other
statements made available generally by the Company or any of its
Subsidiaries to the public concerning material developments in the
business of the Company or any of its Subsidiaries;
(viii) promptly upon any officer of the Company obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or a
Potential Event of Default, or becoming aware that any Lender or the
Administrative Agent has given any notice or taken any other action with
respect to a claimed Event of Default or a Potential Event of Default, (b)
that any Person has given any notice to the Company or any Subsidiary of
the Company or taken any other action with respect to a claimed default or
event or condition which might result in an Event of Default referred to in
Section 7.2, (c) of any condition or event which would be required to be
disclosed in a current report filed with the Commission on Form 8-K whether
or not the Company is required to file such reports under the Exchange Act,
or (d) of the occurrence of any event or change that has caused or
evidences, either in any case or in the aggregate, a Material Adverse
Effect, an Officers' Certificate of the Company specifying the nature and
period of existence of any such condition or event, or specifying the
notice given or action taken by such holder or Person and the nature of
such claimed default, Event of Default, Potential Event of Default, event
or condition, and what action the Company has taken, is taking and proposes
to take with respect thereto;
(ix) promptly upon any officer of the Company obtaining knowledge of
(X) the institution of, or threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting the Company or any of its Subsidiaries or
any property of the Company or any of its Subsidiaries (collectively,
"PROCEEDINGS") or (Y) any material development in any Proceeding that, in
any case:
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(1) if adversely determined, could reasonably be expected to
give rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement and the other Loan
Documents;
written notice thereof together with such other information as may be
reasonably available to the Company to enable Lenders and their counsel to
evaluate such matters;
(x) as soon as practicable after the last day of each fiscal year of
the Company, a report in form and substance satisfactory to the
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by the Company and its Subsidiaries all
material insurance coverage planned to be maintained by such Persons in the
subsequent fiscal year;
(xi) promptly upon its becoming available, one copy of each report
sent by the Company or any of its Subsidiaries to any Tribunal pursuant to
any Environmental Law, and notice to each Lender, in writing, promptly upon
the Company's learning that the Company or any of its Subsidiaries has
received notice or otherwise learned of any claim, demand, action, event,
condition, report or investigation indicating any potential or actual
liability arising in connection with (x) the non-compliance with or
violation of the requirements of any Environmental Law which could
reasonably be excepted to have, individually or in the aggregate, a
Material Adverse Effect, (y) the release or threatened release of any toxic
or hazardous waste, substance or constituent into the environment which
might have, individually or in the aggregate, a Material Adverse Effect or
which release the Company or any of its Subsidiaries would have a duty to
report to a Tribunal under an Environmental Law, or (z) the existence of
any Environmental Lien on any properties or assets of any Guarantor, the
Company or any of the its Subsidiaries;
(xii) promptly after the availability thereof, copies of all
amendments to the Certificate or
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Articles of Incorporation or By-laws of the Company or any of its
Subsidiaries;
(xiii) while any of the Notes remain outstanding, upon request of any
holder of Notes, the information specified in Rule 144A(d)(4) under the
Securities Act of 1933, as amended, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act; and
(xiv) with reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries or any of their
respective property, business or assets as from time to time may be
reasonably requested by the Administrative Agent or any Lender.
5.2 CORPORATE EXISTENCE, ETC.
The Company will, and will cause each of its Subsidiaries to, do or
cause to be done, all things necessary to preserve and keep in full force and
effect its existence and its material rights, franchises, licenses and patents;
PROVIDED, HOWEVER, that nothing in this Section 5.2 shall prevent (i) sales of
assets in accordance with Section 6.6 or (ii) the withdrawal by the Company or
any of the its Subsidiaries of its qualification as a foreign corporation in any
jurisdiction where such withdrawal could not reasonably be expected to have a
Material Adverse Effect.
5.3 PAYMENT OF TAXES AND CLAIMS; Tax CONSOLIDATION
The Company will, and will cause each of its Subsidiaries to, pay all
Taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business, income or
property, in each case on a timely basis, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien upon any
of its properties or assets prior to the time when any penalty or fine shall be
incurred with respect thereto, PROVIDED, HOWEVER, that no such charge or claim
need be paid if being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such reserve or
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other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor.
5.4 MAINTENANCE OF PROPERTIES; INSURANCE
The Company will maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used or useful in the business of the Company and its Subsidiaries
and from time to time promptly will make or cause to be made all necessary
repairs, renewals and replacements thereof. The Company will maintain or cause
to be maintained, with financially sound and reputable insurers or with self
insurance programs, in each case to the extent consistent with prudent business
practices and customary in their respective industries, insurance with respect
to its properties and business and the properties and businesses of its
Subsidiaries against loss or damage of the kinds (including, in any event,
business interruption insurance) and in the amounts customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses and owning similar properties in the same general
areas in which the Company or any of its Subsidiaries, as the case may be,
operates.
5.5 INSPECTION
The Company will permit any authorized representatives designated by
the Administrative Agent or the Lenders to visit and inspect any of the
properties of the Company or its Subsidiaries, including, without limitation,
its and their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants, all upon
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested.
5.6 COMPLIANCE WITH LAWS, ETC.
The Company will, and will cause each of its Subsidiaries to, comply
with the requirements of all applicable Laws of any Tribunal, noncompliance with
which, singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
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5.7 MAINTENANCE OF ACCURATE RECORDS, ETC.
The Company will keep, and will cause each of its Subsidiaries to
keep, true books and records and accounts in which full and correct entries will
be made of all its respective business transactions, and will reflect, and cause
each of its Subsidiaries to reflect, in its respective financial statements
adequate accruals and appropriations to reserves.
5.8 TAKE-OUT FINANCING
A. The Company will take any and every action necessary or
desirable, to the extent within the power of the Company, so that the Take-Out
Banks can, as soon as practicable after the Closing Date, publicly sell or
privately place Take-Out Notes.
B. The Company agrees that upon demand of the Take-Out Banks or the
Required Lenders, at any time and from time to time following the Closing Date
and prior to the Conversion Date, the Company will cause the issuance and sale
of Take-Out Notes; PROVIDED that (i) the interest rate thereon shall be
determined by the Take-Out Banks, in light of the then prevailing market
conditions and market rates, but in no event shall the annual interest rate on
the Take-Out Notes exceed 16%; (ii) in the event that the transactions
contemplated by the Brown Bridge Shareholder Roll-Up Agreement are not
consummated by the time that the Take-Out Notes are sold or issued, the Take-Out
Banks shall have the right to request that the Company issue to the prospective
holders of such Take-Out Notes, and upon such request the Company agrees to
issue to such prospective holders, common equity of the Company (or warrants to
purchase common equity of the Company) on a basis reasonably satisfactory to the
Take-Out Banks but only to the extent that the Take-Out Banks have reasonably
determined that the issuance of such equity is necessary to effect the sale or
issuance of the Take-Out Notes; (iii) the Take-Out Banks shall determine whether
the Take-Out Notes shall be issued through a public offering or a private
placement and, if issued in a private placement, the Take-Out Notes will be
accompanied by customary registration rights; (iv) in no event will the Take-Out
Notes have terms and conditions that are more restrictive in any material
respect than those terms and conditions set forth in this Agreement; and (v) in
no event will the Company be required to sell more than $110,000,000
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aggregate principal amount of Take-Out Notes pursuant to this Section 5.8B.
5.9 ERISA COMPLIANCE
As soon as possible and, in any event, within 10 days after the
Company or any Subsidiary of the Company knows or has reason to know of the
occurrence of any of the following, the Company will deliver to each of the
Lenders a certificate of the chief financial officer of the Company setting
forth details as to such occurrence and the action, if any, that the Company or
such Subsidiary is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Company, such
Subsidiary, the PBGC, a Company Plan participant or the Company Plan
administrator with respect thereto: that a Reportable Event has occurred with
respect to a Company Plan; that an accumulated funding deficiency has been
incurred or an application could reasonably be expected to be or has been made
to the Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Internal Revenue Code with
respect to a Company Plan; that a contribution required to be made to a Company
Plan has not been timely made; that a Company Plan has been or could reasonably
be expected to be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA; that a Company Plan has an Unfunded Current Liability
giving rise to a lien under ERISA or the Internal Revenue Code; that proceedings
could reasonably be expected to or have been instituted to terminate or appoint
a trustee to administer a Company Plan; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent contribution to a
Company Plan; that the Company or any Subsidiary of the Company will or could
reasonably be expected to incur any accrued post-retirement benefit material
liability (including any material contingent or secondary liability) to or on
account of the termination of or withdrawal from a Company Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Company
Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Internal Revenue Code
or Section 409 or 502(i) or 502(l) of ERISA; or that the Company or any
Subsidiary of the Company may incur any accrued post-retirement benefit
liability in excess of $100,000 in the aggregate pursuant to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as required
by
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Section 601 of ERISA) or any employee pension benefit plan (as defined in
Section 3(2) of ERISA)). The Company will deliver to each of the Lenders a
complete copy of the annual report (Form 5500) of each Company Plan (including,
to the extent required, the related financial and actuarial statements and
opinions and other supporting statements, certifications, schedules and
information) required to be filed with the Internal Revenue Service. In
addition to any certificates or notices delivered to the Lenders pursuant to the
first sentence hereof, copies of annual reports and any material notices
received by the Company or any Subsidiary of the Company with respect to any
Company Plan shall be delivered to the Lenders no later than 10 days after the
date such report has been filed with the Internal Revenue Service or such notice
has been received by the Company or any Subsidiary of the Company, as
applicable.
5.10 PAYMENTS IN U.S. DOLLARS
All payments of any Obligations to be made hereunder or under the
Notes by the Company, or any other obligor with respect thereto, shall be made
solely in Dollars or, to the extent permitted herein, PIK Interest Amounts, or
such other currency as is then legal tender for public and private debts in the
United States of America.
5.11 REGISTER
The Company hereby designates the Administrative Agent to serve as the
Company's agent, solely for purposes of this Section 5.11, to maintain a
register (the "REGISTER") on which it will record the Loans made by each of the
Lenders and each repayment in respect of the principal amount of the Loans of
each Lender. Failure to make any such recordation, or any error in such
recordation, shall not affect the Company's obligations in respect of such
Loans. With respect to any Lenders, the transfer of the Loan Commitments of
such Lender and the rights to the principal of, and interest on, any Loan made
pursuant to such Loan Commitments shall not be effective until such transfer is
recorded on the Register maintained by the Administrative Agent with respect to
ownership of such Loan Commitments and Loans and prior to such recordation all
amounts owing to the transferor with respect to such Loan Commitments and Loans
shall remain owing to the transferor. The registration of assignment or
transfer of all or part of any Loan Commitments and Loans shall be recorded by
the Administrative Agent on the Register only upon the receipt
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by the Administrative Agent of a properly executed and delivered Assignment
and Assumption Agreement pursuant to Section 9.2A. Coincident with the
delivery of such an Assignment and Assumption Agreement to the Administrative
Agent for acceptance and registration of assignment or transfer of all or
part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Lender shall surrender the Note evidencing such Loan, and
thereupon one or more new Notes of the same type and in the same aggregate
principal amount shall be issued to the assigning or transferor Lender and/or
the new Lender. The Company agrees to indemnify the Administrative Agent
from and against any and all losses, claims, damages and liabilities of
whatsoever nature which may be imposed on, asserted against or incurred by
the Administrative Agent in performing its duties under this Section 5.11.
5.12 LENDERS MEETING
The Company will participate in a meeting with the Lenders once during
each fiscal year to be held at a location and a time selected by the Company and
reasonably satisfactory to the Required Lenders.
5.13 END OF FISCAL YEARS; FISCAL QUARTERS
The Company will cause (i) each of its, and each of its Subsidiaries',
fiscal years to end on December 31, and (ii) each of its, and each of its
Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and
December 31.
5.14 PERFORMANCE OF OBLIGATIONS
The Company will, and will cause each of its Subsidiaries to, perform
all of its obligations under the terms of each mortgage, indenture, security
agreement and other debt instrument by which it is bound, except such non-
performances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.15 INCORPORATION BY REFERENCE
The Company will cause each of Brown Bridge, Central Products and
Entoleter to comply with each of the covenants contained in Sections 11(a)
through 11(c) of the Existing Brown Bridge Credit Agreement, Sections 6.2
through 6.5 of the Existing Central Products Credit
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Agreement and Sections 11(a) through 11(c) of the Existing Entoleter Credit
Agreement, respectively, which Sections, together with all definitions in the
Existing Brown Bridge Credit Agreement, in the Existing Central Products
Credit Agreement and in the Existing Entoleter Credit Agreement applicable to
such Sections, are hereby incorporated by reference as if set forth herein in
their entirety (in each case as such Sections and definitions are in effect
on the Closing Date and without giving effect to any changes thereto after
the Closing Date, whether or not such changes are permitted by this
Agreement).
5.16 ADDITIONAL SECURITY; FURTHER ASSURANCES; ETC.
(a) (i) At the request of the Administrative Agent or the Required
Lenders, the Company will, at its own expense, grant to the Collateral Agent,
for the benefit of the Lenders, security interests and mortgages in such assets
and properties of the Company as are not covered by the Pledge Agreement or as
may be requested from time to time by the Administrative Agent or the Required
Lenders (the "Additional Security Documents"). Such security interests and
mortgages shall be granted pursuant to documentation satisfactory in form and
substance to the Administrative Agent and shall constitute valid and enforceable
perfected security interests superior to and prior to the rights of all third
Persons and subject to no other Liens, except such Liens as are permitted by
Section 6.2. The Additional Security Documents or other instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish, perfect, preserve and protect the Liens, in
favor of the Collateral Agent for the benefit of the Lenders, required to be
granted pursuant to the Additional Security Documents and all taxes, fees and
other charges payable in connection therewith shall have been paid in full.
(b) The Company will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, appraisals, reports and other assurances or instruments and
take such further steps relating to the collateral covered by the Pledge
Agreement or any of the Additional Security Documents as the Collateral Agent
may reasonably require. Furthermore,
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the Company shall cause to be delivered to the Collateral Agent such opinions
of counsel, title insurance and other related documents as may be requested
by the Administrative Agent to assure themselves that this Section 5.16 has
been complied with.
(c) The Company agrees that each action required by this Section 5.16
shall be completed as soon as possible, but in no event later than 60 days after
such action is requested to be taken by the Administrative Agent or the Required
Lenders.
5.17 BUTLER WAREHOUSE
On or prior to April 30, 1996, the Company shall have consummated the
purchase of the Butler Warehouse from Alco (or a Subsidiary thereof) and the
Company shall have good, sufficient and legal title to the Butler Warehouse free
and clear of all Liens except for Liens of the type described in clauses (iii)
and (viii) of the definition of Permitted Encumbrances contained in Section 1.
5.18 DIVIDENDS AND INTERCOMPANY LOAN PAYMENTS
The Company shall cause (i) each of Brown Bridge and Central Products
to pay dividends to the Company and (ii) Central Products to make payments to
the Company in respect of the $5,000,000 intercompany loan referred to in
Section 3.1A(10)(c), in each case to the maximum extent permitted by the
Existing Brown Bridge Credit Agreement and the Existing Central Products Credit
Agreement, as the case may be.
5.19 AUDITED FINANCIALS
Within 15 days following the Closing Date, the Company shall deliver a
copy of its audited financial statements for its fiscal year ended December 31,
1995, together with a revised audit opinion of Ernst & Young, which opinion
shall not contain any qualifications.
SECTION 6. NEGATIVE COVENANTS.
The Company covenants and agrees that until the Loans and the Notes
and all other Obligations have been paid in full, the Company will fully and
timely perform all covenants in this Section 6.
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6.1 INDEBTEDNESS
The Company will not, nor will it permit any of its Subsidiaries,
directly or indirectly, to Incur, or remain or become directly or indirectly
liable with respect to, any Indebtedness, except for the following:
(i) the Company may become and remain liable with respect to the
Obligations;
(ii) Existing Indebtedness to the extent the same is listed on
SCHEDULE B annexed hereto, and any refinancings or renewals thereof so long
as (i) the aggregate principal amount thereof does not exceed the sum of
(1) the outstanding principal amount of the Existing Indebtedness to be
refinanced or renewed at the time of such refinancing or renewal plus (2)
the aggregate amount of any unutilized commitments to make revolving loans
in respect of such Existing Indebtedness at such time, (ii) the final
maturity date and the interim amortization payments (and the principal
amounts of such interim amortization payments) occur no earlier than (and
are in amounts no greater than) those respective dates (and amounts) set
forth in the Existing Indebtedness to be refinanced or renewed, (iii) the
interest rate is no greater than the interest rate on the Existing
Indebtedness to be refinanced or renewed, (iv) any such refinancing or
renewal does not encumber any additional assets or properties of the
Company or the Subsidiary thereof that incurred such Existing Indebtedness
and (v) all of the other terms and conditions thereof (including, without
limitation, covenants and events of default) are no more restrictive on the
Company or any of its Subsidiaries, or less favorable to the Lenders, in
each case than those terms and conditions contained in the Existing
Indebtedness to be refinanced or renewed;
(iii) Indebtedness of the Company's Subsidiaries evidenced by
Capitalized Lease Obligations to the extent permitted pursuant to Section
6.9, provided that in no event shall the aggregate principal amount of
Capitalized Lease Obligations permitted by this clause (iii) exceed
$2,020,000 at any time outstanding;
(iv) Indebtedness of the Company's Subsidiaries subject to Liens
permitted under Section 6.2(iv);
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(v) intercompany Indebtedness among the Company and its Subsidiaries
to the extent provided in Section 6.4(iii);
(vi) the Company may Incur and remain liable with respect to the
Take-Out Securities; and
(vii) the Company and the its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by Section 6.5 and,
upon any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished.
6.2 LIENS
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or permit to exist any Lien on or
with respect to any property or asset (including any document or instrument in
respect of goods or accounts receivable) of the Company or of any of its
Subsidiaries, whether now owned or hereafter acquired, or assign or otherwise
convey any right to receive any income or profits therefrom, or file or permit
the filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except for the following:
(i) Permitted Encumbrances;
(ii) Liens created pursuant to the Loan Documents;
(iii) Liens upon assets subject to Capitalized Lease Obligations to the
extent permitted by Section 6.1(iii), provided that (x) such Liens only
serve to secure the payment of Indebtedness arising under such Capitalized
Lease Obligation and (y) the Lien encumbering the asset giving rise to the
Capitalized Lease Obligation does not encumber any other asset of any
Subsidiary of the Company; and
(iv) Liens placed upon equipment or machinery used in the ordinary
course of business of the Company's Subsidiaries at the time of acquisition
thereof by such Subsidiary or within 60 days
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thereafter to secure Indebtedness incurred to pay all or a portion of
the purchase price thereof, provided that (x) the aggregate outstanding
principal amount of all Indebtedness secured by Liens permitted by this
clause (iv) shall not at any time exceed $725,000 and (y) in all events,
the Lien encumbering the equipment or machinery so acquired does not
encumber any other asset of such Subsidiary.
6.3 RESTRICTED PAYMENTS
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any distribution
(other than dividends or distributions payable solely in non-redeemable Common
Stock of such Person) on its shares of Capital Stock, whether outstanding on the
date hereof or hereafter, to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any of its Capital Stock, or any
warrants, rights or options to acquire shares of any class of such Capital
Stock, (c) make any principal, interest or other payment on, purchase, defease,
redeem, repay, prepay, or otherwise acquire or retire for value, any New Alco
Subordinated Note or any 18% Subordinated Promissory Note, (d) make any payment,
distribution or advance whatsoever to Lynch, LMC or any Affiliate or Subsidiary
thereof (other than a Subsidiary of the Company but only to the extent otherwise
permitted by this Agreement) or (e) make any Investment in any Person (any such
dividend, distribution, purchase, redemption, acquisition, retirement,
defeasance, prepayment, payment, advance or Investment set forth in clauses (a),
(b), (c) (d) and (e) above a "RESTRICTED PAYMENT") except for the following:
(i) any Subsidiary of the Company may pay cash dividends to its
shareholders generally so long as the Company or the respective Subsidiary
which owns the equity interest or interests in the Subsidiary paying such
dividends receives at least its proportions share thereof (based upon its
relative holdings of capital stock or other equity interests in the
Subsidiary paying such dividends);
(ii) Investments may be made to the extent permitted by Section 6.4;
(iii) the Company may issue shares of its non-redeemable Common Stock
to satisfy its obligations
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under the two Put Option Agreements, each dated as of September 16, 1994,
by and among the Company, Brown Bridge and the respective holder named
therein; and
(iv) the Company may capitalize the regularly scheduled interest
payments on the New Alco Subordinated Notes and add the same to the
principal amount of the New Alco Subordinated Notes in accordance with the
terms thereof, and the Company may issue shares of its common stock to Alco
upon conversion of all or any portion of the principal or interest on the
New Alco Subordinated Notes issued by the Company in accordance with the
terms thereof, and in each case subject to the subordination provisions
thereof;
(v) the Company may make certain payments to the minority
stockholders of Brown Bridge in connection with the consummation of the
transactions contemplated by the Brown Bridge Shareholder Roll-Up Agreement
so long as the amount of such payments and the final form of the
documentation with respect to the transactions contemplated thereby are in
form and substance satisfactory to the Required Lenders;
(vi) payments to Lynch and Boyle Fleming shall be permitted to the
extent specifically permitted by clauses (iii) and (iv) of Section 6.10;
and
(vii) so long as no Event of Default exists and otherwise subject to
the subordination provisions thereof, the Company may make cash interest
payments on each 18% Subordinated Promissory Note in an amount not to
exceed for any year that amount which equals the respective holder's
reasonable good faith estimate of its federal income tax liabilities for
the immediately preceding year arising from such holder's right to receive
interest on the outstanding balance of such 18% Subordinated Promissory
Note.
6.4 INVESTMENTS; JOINT VENTURES
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except for the following:
(i) the Company and its Subsidiaries may acquire and hold Cash
Equivalents;
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(ii) the Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date described on SCHEDULE D
annexed hereto, provided that any additional Investments with respect
thereto made on or after the Closing Date shall only be permitted to the
extent allowed to be made pursuant to another clause of this Section 6.4;
(iii) (x) on the Closing Date, Central Products may issue a
$5,000,000 intercompany note to the Company in consideration for the
Company assuming Central Products' obligations under the Existing Alco
Subordinated Note issued by Central Products, and (y) Subsidiaries of the
Company may make intercompany loans to one another and to the Company,
provided that any such intercompany loans made to the Company pursuant to
this clause (iii) shall be subject to the subordination provisions set
forth in EXHIBIT XIV annexed hereto;
(iv) the Company and its Subsidiaries may own Investments received in
connection with the bankruptcy of suppliers and customers or received
pursuant to a plan of reorganization of any supplier or customer, in each
case in settlement of delinquent obligations or disputes with such
suppliers or customers; and
(v) so long as no Potential Event of Default or Event of Default
shall have occurred and be continuing, Subsidiaries of the Company may make
loans to their respective employees in the ordinary course of business,
PROVIDED that the aggregate amount of all such loans (determined without
regard to any write-downs or write-offs thereof) shall not exceed $200,000
at any time outstanding.
6.5 CONTINGENT OBLIGATIONS
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except that the Company and its Subsidiaries may remain
liable with respect to Existing Contingent Obligations described in SCHEDULE B
annexed hereto.
6.6 PURCHASE OR SALE OF ASSETS, ETC.
The Company will not, nor will it permit any of its Subsidiaries to,
convey, sell, lease or otherwise dis-
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pose of (or agree to do any of the foregoing at any future time) all or
any part of its property or assets, or enter into any sale-leaseback
transactions, or purchase or otherwise acquire (in one or a series of
related transactions) any part of the property or assets (other than
purchases or other acquisitions of inventory, materials and equipment in
the ordinary course of business) of any Person, except that:
(i) Capital Expenditures shall be permitted to the extent not in
violation of Section 6.9;
(ii) Subsidiaries of the Company may, in the ordinary course of
business, (x) sell, lease or otherwise dispose of any equipment or
materials which, in the reasonable judgment of such Person, are no longer
useful in the conduct of such Person's business, provided that the
aggregate amount of all proceeds received from such sales or other
dispositions shall not exceed $300,000 in any fiscal year of the Company
and (y) sell additional equipment, materials or other assets (other than
capital stock of any Subsidiary), provided that the aggregate amount of
proceeds received from such sales or dispositions shall not exceed $500,000
in any fiscal year of the Company
(iii) Investments may be made to the extent permitted by Section 6.4;
(iv) Subsidiaries of the Company may lease (as lessee) real or
personal property to the extent permitted by Section 6.16 (so long as any
such lease does not create a Capitalized Lease Obligation);
(v) the Company and its Subsidiaries may make sales of inventory in
the ordinary course of business; and
(vi) Entoleter may sell or discount, in each case without recourse, up
to $200,000 in the aggregate of foreign accounts receivable arising in the
ordinary course of business.
6.7 RESTRICTION ON FUNDAMENTAL CHANGES
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction, or series of related
transactions, of merger, amalgamation, consolidation or combination, or
consolidate,
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or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution).
6.8 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
The Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or permit or suffer to exist
or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on its Capital Stock or any other interest or participation in, or measured by,
such Subsidiary's profits; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or to any Subsidiary of the Company; or (c)
transfer any of its property or assets to the Company or to any Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (i) the Loan Documents; (ii) applicable Law; (iii) any Existing
Indebtedness pertaining to a Subsidiary of the Company; (iv) restrictions on the
transfer of any asset subject to a Lien permitted by the Loan Documents; and (v)
customary non-assignment provisions of any lease governing a leasehold interest
of any Subsidiary of the Company.
6.9 CAPITAL EXPENDITURES
The Company will not, nor will it permit any of its Subsidiaries to,
make any Capital Expenditures, except that (i) Subsidiaries of the Company may
make Capital Expenditures so long as the aggregate amount of such Capital
Expenditures does not exceed (x) $4,750,000 in each of the Company's fiscal
years ending December 31, 1996 and December 31, 1997 or (y) $3,750,000 in each
of the Company's fiscal years thereafter and (ii) Brown Bridge may make
additional Capital Expenditures in an aggregate amount not to exceed $4,100,000
to purchase a new silicone coating equipment line to be installed in its plant
located at 30 Maybill Drive, Troy, Ohio, so long as at least $2,500,000 of such
Capital Expenditures are financed through the incurrence by Brown Bridge of
loans under the Existing Brown Bridge Credit Agreement.
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6.10 TRANSACTIONS WITH AFFILIATES
The Company will not, nor will it permit any of its Subsidiaries to,
enter into any transaction or series of related transactions, whether or not in
the ordinary course of business, with any Affiliate of the Company or any of its
Subsidiaries, other than in the ordinary course of business and on terms and
conditions substantially as favorable to the Company or such Subsidiary as would
reasonably be obtained by the Company or such Subsidiary at that time in a
comparable arm's-length transaction with a Person other than an Affiliate,
except that (i) Restricted Payments may be made to the extent provided in
Section 6.3, (ii) loans may be made and other transactions may be entered into
by the Company and its Subsidiaries to the extent permitted by Sections 6.1 and
6.4, (iii) the Company may enter into the Boyle Fleming Management Agreement,
(iv) so long as no Potential Event of Default or Event of Default then exists,
the Company may pay a management fee to Lynch in an aggregate amount not to
exceed $100,000 per year payable in equal monthly installments, (v) the Company
may perform its obligations in respect of the transactions contemplated by the
Brown Bridge Shareholder Roll-Up Agreement so long as the final documentation
therefor, and all of the terms and conditions thereof, are in form and substance
satisfactory to the Required Lenders, (vi) the Company may issue shares of its
Common Stock to the extent permitted by Section 6.1(iii), (vii) Subsidiaries of
the Company may pay management and other fees to the Company and may make
payments to the Company in respect of such Subsidiaries' allocable share of the
Company's tax liabilities and (viii) the Company may make payments to Lynch
pursuant to the existing Tax Allocation Agreement among Lynch and its
Consolidated Subsidiaries in respect of Lynch's tax liabilities for years 1994
and 1995 so long as the Company receives from each of its Subsidiaries such
Subsidiaries' allocable share of such tax liabilities.
6.11 LIMITATION ON ISSUANCE OF CAPITAL STOCK
(a) The Company will not, nor will it permit any of its Subsidiaries
to, issue (i) any class of Preferred Stock or (ii) any class of redeemable
(except at the sole option of the Company or such Subsidiary) Common Stock.
(b) The Company will not permit any of its Subsidiaries to issue any
Capital Stock (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, Capital Stock,
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except (i) for transfers and replacements of then outstanding shares of
Capital Stock, (ii) for stock splits, stock dividends and similar issuances
which do not decrease the percentage ownership of the Company or any of its
Subsidiaries in any class of the Capital Stock of such Subsidiary, and (iii)
to qualify directors to the extent required by applicable law.
6.12 BUSINESS
The Company will not, nor will it permit any of its Subsidiaries to,
engage (directly or indirectly) in any business other than the business in which
the Company and its Subsidiaries are engaged on the Closing Date and reasonable
extensions thereof.
6.13 AMENDMENTS OR WAIVERS OF CERTAIN DOCUMENTS
The Company will not, nor will it permit any of its Subsidiaries to,
(i) amend, modify or change, or permit the amendment, modification or change of,
any provision of any New Alco Subordinated Note, any 18% Subordinated Promissory
Note, the Existing Brown Bridge Credit Agreement, the Existing Central Products
Credit Agreement, the Existing Entoleter Credit Agreement except as otherwise
required pursuant to Section 3A and except for amendments, modifications or
changes to the covenants and/or defaults in the Existing Brown Bridge Credit
Agreement, the Existing Central Products Credit Agreement or the Existing
Entoleter Credit Agreement in each case so long as the effect thereof is to make
the covenants and/or defaults less stringent or restrictive as applied to the
respective Subsidiary of the Company, (ii) enter into any new tax sharing or tax
allocation agreement except for any such agreement among the Company and its
Subsidiaries on terms acceptable to the Administrative Agent, (iii) amend,
modify or change the Boyle Fleming Management Agreement in any manner that is
adverse to the interests of the Banks in any material respect or (iv) amend,
modify or change the Brown Bridge Shareholder Roll-Up Agreement.
6.14 AMENDMENTS TO CHARTER DOCUMENTS
The Company will not, nor will it permit any of its Subsidiaries to,
amend its Certificate or Articles of Incorporation (including, without
limitation, by the filing or modification of any certificate of designation) or
Bylaws other than any such amendments or modifications that are not in any way
adverse to the interests of the Lenders.
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6.15 REFINANCING OF THE LOANS IN PART
The Company will not, nor will it cause or permit any of its
Subsidiaries to, Incur any Take-Out Securities to refinance the Loans in part
unless the terms, conditions, covenants, events of default and other provisions
in respect of the instruments evidencing such Take-Out Securities shall have
been approved in writing by the Required Lenders prior to the Incurrence
thereof.
6.16 LEASES
The Company will not permit the aggregate payments (including, without
limitation, any property taxes paid as additional rent or lease payments) made
by the Company and its Subsidiaries on a consolidated basis under any agreement
to rent or lease any real or personal property (or any extension or renewal
thereof) (excluding Capitalized Lease Obligations) to exceed $1,300,000 for any
fiscal year of the Company.
6.17 CREATION OF SUBSIDIARIES
The Company will not, nor will it permit any of its Subsidiaries to,
establish, create or acquire any new Subsidiary.
SECTION 7. EVENTS OF DEFAULT.
If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur and be continuing:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE
Failure to pay any installment of principal of the Loans when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; or failure to pay any interest on the Loans or any other amount due
under this Agreement, the other Loan Documents or the Fee Letters within three
days after the date due; or
7.2 DEFAULT IN OTHER AGREEMENTS
(i) The Company or any Subsidiary of the Company shall (x) default in
any payment of any Indebtedness (other than the Obligations) beyond the period
of grace, if any, provided in the instrument or agreement under which such
Indebtedness was created or (y) default in the observance or performance of any
agreement or condition relating to
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any Indebtedness (other than the Obligations) or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity, or (ii) any
Indebtedness (other than the Obligations) of the Company or any Subsidiary of
the Company shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof, provided that it shall not be a Potential Event of
Default or an Event of Default under this Section 7.2 unless the aggregate
principal amount of all Indebtedness as described in preceding clauses (i)
and (ii) is at least $1,000,000; or
7.3 BREACH OF CERTAIN COVENANTS
Failure by the Company to perform or comply with any covenant, term or
condition contained in (x) Section 2.5A(iv), 5.1(viii), 5.2, 5.13, 5.15, 5.16 or
5.18 or Section 6 or (y) in any Fee Letter; or
7.4 BREACH OF WARRANTY
Any representation, warranty or certification made by the Company, LMC
or Boyle Fleming in any Loan Document to which they are a party or in any
statement or certificate at any time given by the Company in writing pursuant
hereto or thereto or in connection herewith or therewith shall be false or
incorrect in any material respect on the date as of which made or deemed made;
or
7.5 OTHER DEFAULTS UNDER AGREEMENT OR LOAN DOCUMENTS
The Company, LMC or Boyle Fleming shall default in the performance of
or compliance with any covenant, term or condition contained in this Agreement
or the other Loan Documents to which they are a party to (other than those
covered by Sections 7.1, 7.3 or 7.4) and such default shall not have been
remedied or waived in accordance with this Agreement within 30 days after the
date of written notice from the Administrative Agent or the holder or holders of
not less than 25% in aggregate principal amount of the Loans then outstanding of
such default; or
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7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF CUSTODIAN, ETC.
A court of competent jurisdiction enters a Bankruptcy Order under any
Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary of the
Company in an involuntary case or proceeding, or
(B) appoints a Custodian of the Company or any Subsidiary of the
Company for all or substantially all of its properties, or
(C) orders the liquidation of the Company or any Subsidiary of the
Company,
and in each case the order or decree remains unstayed and in effect for 60 days;
or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF CUSTODIAN, ETC.
The Company or any Subsidiary of the Company pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
(B) consents to the entry of a Bankruptcy Order for relief against it
in an involuntary case or proceeding, or
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors or
files a proposal or scheme of arrangement involving the rescheduling or
composition of its indebtedness, or
(E) consents to the filing of a petition in bankruptcy, or
(F) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally; or
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7.8 JUDGMENTS AND ATTACHMENTS
One or more judgments or decrees shall be entered against the Company
or any Subsidiary of the Company involving in the aggregate for all such Persons
a liability (not paid or fully covered by a reputable and solvent insurance
company) and such judgments and decrees either shall be final and non-appealable
or shall not be vacated, discharged or stayed or bonded pending appeal for any
period of 30 consecutive days, and the aggregate amount of all such judgments
equals or exceeds $1,000,000; or
7.9 DISSOLUTION
Any order, judgment or decree shall be entered against the Company or
any Subsidiary of the Company decreeing the dissolution or split-up of the
Company or any Subsidiary of the Company and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
7.10 PLEDGE AGREEMENT
The Pledge Agreement or, after the execution and delivery thereof, any
Additional Security Document, shall cease to be in full force and effect, or
shall cease to give the Collateral Agent the Liens, rights, powers and
privileges purported to be created thereby, superior to and prior to the rights
of all third Persons (except to the extent set forth therein); or
7.11 BOYLE FLEMING WARRANT EXERCISE AGREEMENT
The Boyle Fleming Warrant Exercise Agreement or any provision thereof
shall cease to be in full force and effect or Boyle Fleming, Ned N. Fleming III
or Richard J. Boyle shall fail to observe or perform any of its obligations
thereunder or shall deny or disaffirm any of its obligations thereunder; or
7.12 ERISA
(a) Any Plan shall fail to satisfy the minimum funding standard
required for any plan year or part thereof or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412 of
the Code, any Plan is, shall have been or is likely to be terminated or the
subject of termination proceedings under ERISA, any Plan shall have an Unfunded
Current
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Liability, or the Company or any Subsidiary of the Company or any ERISA
Affiliate thereof has incurred or is likely to incur a liability to or on
account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980
of the Code, or the Company or any Subsidiary of the Company has incurred or
is likely to incur liabilities pursuant to one or more employee welfare
benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to
retired employees (other than as required by Section 601 of ERISA) or
employee pension benefit plans (as defined in Section 3(2) of ERISA); (b)
there shall result from any such event or events the imposition of a lien,
the granting of a security interest, or a liability or a material risk of
incurring a liability; and (c) which lien, security interest or liability,
either individually and/or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 7.6 or 7.7 with respect to the Company, all of the unpaid
principal amount of and accrued interest on the Loans and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by the Company, and the obligations of the Lenders hereunder
shall thereupon terminate, (ii) upon the occurrence of any other Event of
Default (including any Event of Default under Section 7.6 or 7.7 with respect to
any Person covered thereby other than the Company), the Administrative Agent
may, upon written notice of the Required Lenders, by written notice to the
Company, declare all of the unpaid principal amount of and accrued interest on
the Loans and all other Obligations to be, and the same shall forthwith become,
due and payable, and the obligations of the Lenders hereunder shall thereupon
terminate and (iii) upon the occurrence of any Event of Default, the
Administrative Agent or the Collateral Agent may, upon written notice of the
Required Lenders, enforce all of the Liens, security interests and other rights,
powers, privileges and remedies created or afforded to it pursuant to the Pledge
Agreement, the Escrow Agreement and the Additional Security Documents.
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SECTION 8. THE ADMINISTRATIVE AGENT.
8.1 APPOINTMENT
Each Lender hereby irrevocably designates and appoints BTCo as
Administrative Agent of such Lender to act as specified herein and in the other
Loan Documents, and each such Lender hereby irrevocably authorizes BTCo as the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto. The Administrative Agent
agrees to act as such upon the express conditions contained in this Section 8.
Notwithstanding any provision to the contrary elsewhere in this Agreement or in
any other Loan Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other Loan
Documents, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent. The provisions of this Section 8 are solely
for the benefit of the Administrative Agent and the Lenders, and neither the
Company nor any of its Subsidiaries or Affiliates shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Administrative Agent shall act
solely as agent of the Lenders and the Administrative Agent does not assume and
shall not be deemed to have assumed any obligation or relationship of agent or
trust with or for the Company or any of its Subsidiaries or Affiliates.
8.2 DELEGATION OF DUTIES
The Administrative Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Administrative Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 8.3.
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8.3 EXCULPATORY PROVISIONS
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct) or (ii) responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by LMC, Boyle Fleming, the Company or any of the Company's
Subsidiaries or any of their respective officers contained in this Agreement,
any other Loan Documents, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document or for
any failure of LMC, Boyle Fleming, the Company or any of the Company's
Subsidiaries or any of their respective officers to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Loan Documents, or to inspect the properties, books or
records of the Company any of its Subsidiaries. The Administrative Agent shall
not be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the
Administrative Agent to the Lenders or by or on behalf of the Company or any of
its Subsidiaries to the Administrative Agent or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Potential Event of Default or Event of Default.
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8.4 RELIANCE BY ADMINISTRATIVE AGENT
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, facsimile, telex or
teletype message, statement, order or other document conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons upon advice and statements of legal counsel (including,
without limitation, counsel to any Loan Party or any of its Subsidiaries),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
8.5 NOTICE OF DEFAULT
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Potential Event of Default or Event of Default
hereunder unless the Administrative Agent has actually received notice from a
Lender the Company referring to this Agreement, describing such Potential Event
of Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Potential Event
of Default or Event of Default as shall be reasonably directed by the Required
Lenders; PROVIDED, that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Potential Event of Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
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8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact or affiliates have made any representations or warranties to
it and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Company or any of its Subsidiaries shall be deemed
to constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of the Company and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
condition, prospects and creditworthiness of the Company its Subsidiaries. The
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
assets, property, financial and other condition, prospects or creditworthiness
of the Company any of its Subsidiaries which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
8.7 INDEMNIFICATION
The Lenders agree to indemnify the Administrative Agent in its
capacity as such ratably according to their respective "percentages" as used in
determining the Required Lenders at such time, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the
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payment of the Obligations) be imposed on, incurred by or asserted against
the Administrative Agent in its capacity as such in any way relating to or
arising out of this Agreement or any other Loan Document, or any documents
contemplated by or referred to herein or the transactions contemplated hereby
of any action taken or omitted to be taken by the Administrative Agent under
or in connection with any of the foregoing, but only to the extent that any
of the foregoing is not paid by the Company; PROVIDED, that no Lender shall
be liable to the Administrative Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Administrative Agent. If any
indemnity furnished to the Administrative Agent for any purpose shall, in the
opinion of the Administrative Agent be insufficient or become impaired, the
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity
is furnished. The agreements in this Section 8.7 shall survive the payment
of all Obligations.
8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Company, its
Subsidiaries and their respective Affiliates as though the Administrative Agent
were not the Administrative Agent hereunder. With respect to the Loans made by
it and all Obligations owing to it, the Administrative Agent shall have the same
rights and powers under this Agreement as any Lender and may exercise the same
as though it were not the Administrative Agent and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
8.9 HOLDERS
The Administrative Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Administrative Agent. Any request, authority or consent of
any Person or entity who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee
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or indorsee, as the case may be, of such Note or of any Note or Notes issued
in exchange therefor.
8.10 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR ADMINISTRATIVE
AGENT
The Administrative Agent may resign as the Administrative Agent upon
20 days' notice to the Lenders. Upon the resignation of the Administrative
Agent, the Required Lenders shall appoint from among the Lenders a successor
Administrative Agent which is a bank or a trust company for the Lenders,
whereupon such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent, and the term "Administrative Agent" shall include such
successor agent effective upon its appointment, and the resigning Administrative
Agent's rights, powers and duties as the Administrative Agent shall be
terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement. After the
resignation of the Administrative Agent hereunder, the provisions of this
Section 8.10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
SECTION 9. MISCELLANEOUS.
9.1 REPRESENTATION OF THE LENDERS
Each Lender hereby represents that it is a commercial lender which
makes loans in the ordinary course of its business and that it will make the
Loans hereunder for its own account or the account of its affiliates in the
ordinary course of such business.
9.2 PARTICIPATIONS IN AND ASSIGNMENTS OF LOANS AND
NOTES
A. Each Lender shall have the right at any time to sell, assign,
transfer or negotiate all or any portion of its Notes or its Loan Commitment to
one or more Persons. In the case of any sale, transfer or negotiation of all or
part of the Notes or any Loan Commitment authorized under this Section 9.2A, the
assignee, transferee or recipient shall become a party to this Agreement as a
Lender by execution of an Assignment and Assumption Agreement, PROVIDED that
(i) at such time Section 2.1A or 2.2A, as the case may be, shall be deemed
modified to reflect the Loan Commitment of such new Lender and of the
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existing Lenders, (ii) upon surrender of the Notes, new Notes will be issued,
at the Company's expense, to such new Lender and to the assigning Lender,
such new Notes to be in conformity with the requirements of Section 2.1D or
2.2E, as the case may be (with appropriate modifications), to the extent
needed to reflect the revised Loan Commitment, and (iii) the Administrative
Agent shall receive at the time of each such assignment, from the assigning
or assignee Lender, the payment of a non-refundable assignment fee of $3,500
and, PROVIDED, FURTHER, that such transfer or assignment will not be
effective until recorded by the Administrative Agent on the Register pursuant
to Section 5.11. To the extent of any assignment pursuant to this Section
9.2A, the assigning Lender shall be relieved of its obligations hereunder
with respect to its assigned Loan Commitment, and the assignee, transferee or
recipient shall have, to the extent of such sale, assignment, transfer or
negotiation, the same rights, benefits and obligations as it would if it were
a Lender with respect to such Notes or Loan Commitment, including, without
limitation, the right to approve or disapprove actions which, in accordance
with the terms hereof, require the approval of a Lender. At the time of each
assignment pursuant to this Section 9.2A to a Person which is not already a
Lender hereunder and which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Internal Revenue Code) for Federal
income tax purposes, the respective assignee Lender shall provide to the
Company and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable, a Section 9.2F(ii) Certificate) described in
Section 9.2F.
B. Each Lender may grant participations in all or any part of its
Notes or its Loan Commitment to one or more Persons. The Company hereby
acknowledges and agrees that any such disposition will give rise to a direct
obligation of the Company to the participant and the participant shall for
purposes of Sections 9.3 and 9.4 be considered to be a "Lender."
C. Each Lender may deliver a copy of any financial statement or any
other information relating to the business, assets or condition (financial and
otherwise) of the Company and its Subsidiaries which may be furnished to them
under this Agreement or otherwise to any prospective or other participant,
transferee or assignee to the extent reasonably required by such participant,
transferee or assignee in connection with its interest or the proposed
acquisition of an interest in the Loans or the
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Notes. In connection with any sales, assignments or transfers referred to in
Section 9.2A, the respective purchasers, assignees or transferees, as the
case may be, shall agree that all information given to such parties will be
held in strict confidence subject to customary exceptions.
D. The Company shall, at its own cost and expense, provide such
certificates, acknowledgments and further assurances in respect of this
Agreement and the Loans as any Lender may reasonably require in connection with
any participation, transfer or assignment pursuant to this Section 9.2.
E. Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loan and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by such Lender from such Federal Reserve Bank.
F. Each Lender that is an assignee or transferee of an interest
under this Agreement pursuant to Section 9.2A (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or transfer) and
that is not a United States person (as such term is defined in Section
7701(a)(30) of the Internal Revenue Code) agrees to deliver to the Company and
the Administrative Agent, on the date of such assignment or transfer to such
Lender, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or
(ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Internal Revenue Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (i) above, two accurate and complete
original signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note and a certificate substantially in the form of
EXHIBIT VI annexed hereto (a "SECTION 9.2F(II) CERTIFICATE"). In addition, each
Lender agrees that, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Company and the Administrative Agent two new accurate and
complete
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original signed copies of Internal Revenue Service Form 4224 or 1001, or Form
W-8 and a Section 9.2F(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement of
such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note,
or it shall immediately notify the Company and the Administrative Agent of
its inability to deliver any such Form or Certificate. Subject to Section
9.2A and the immediately succeeding sentence, the Company shall be entitled,
to the extent it is required to do so by law, to deduct or withhold income
or similar taxes imposed by the United States (or any political subdivision
or taxing authority thereof or therein) from interest, fees or other amounts
payable hereunder for the account of any Lender which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code) for U.S. Federal income tax purposes to the extent that such
Lender has not provided to the Company U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding.
Notwithstanding anything to the contrary contained in the preceding sentence
or elsewhere in this Section 9.2F and except as set forth in Section 9.2A,
the Company agrees to pay additional amounts and to indemnify and hold
harmless each Lender (without regard to the identity of the jurisdiction
requiring the deduction or withholding), and reimburse such Lender upon its
written request, in respect of any amounts deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes
after the date of such assignment or transfer in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of income or similar Taxes.
9.3 EXPENSES
Whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to promptly pay (i) the reasonable costs and
expenses of preparation of the Loan Documents and the reasonable costs of
furnishing all opinions by counsel required to be delivered hereunder, and of
LMC, Boyle Fleming's and the Company's performance of and compliance with all
agreements and conditions contained herein or in the other Loan Documents on
their part to be performed or complied with; (ii) the reasonable fees, expenses
and disbursements of the Administrative Agent (including the reasonable fees,
expenses and
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disbursements of counsel) in connection with the negotiation, preparation,
execution, administration and syndication of the Loan Documents and the Loans
hereunder, and any amendments, modifications and waivers hereto or thereto
and consents to departures from the terms hereof and thereof; and (iii) after
the occurrence of an Event of Default, all costs and expenses (including
attorneys fees and costs of settlement) incurred by the Lenders or the
Administrative Agent in enforcing any Obligations of or in collecting any
payments due from the Company hereunder or under the Notes by reason of such
Event of Default or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of a
"work-out" or of any insolvency or bankruptcy proceedings.
9.4 INDEMNITY
In addition to the payment of expenses pursuant to Section 9.3,
whether or not the transactions contemplated hereby shall be consummated, the
Company agrees to indemnify, pay and hold each of the Lenders, the
Administrative Agent and any holder of any of the Notes, and each of their
officers, directors, employees, agents, and affiliates (collectively called the
"INDEMNITEES"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated as a
party thereto), which may be suffered by, imposed on, incurred by, or asserted
against that Indemnitee, in any manner resulting from, connected with, in
respect of, relating to or arising out of (i) this Agreement, the other Loan
Documents, the transactions contemplated hereby, the Fee Letters, the Lenders'
agreements to make the Loans or the use or intended use of any of the proceeds
of the Loans hereunder, the issuance of the Take-Out Securities or the
Refinancing or (ii) the actual or alleged presence of Hazardous Materials in the
air, surface water or groundwater or on the surface or subsurface of any real
property owned or at any time operated by the Company or any of its
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Subsidiaries, the generation, storage, transportation, handling or disposal
of Hazardous Materials at any location, whether or not owned or operated by
the Company or any of its Subsidiaries, the non-compliance of any real
property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any real
property, or any Environmental Claim asserted against the Company, any of its
Subsidiaries or any real property owned or at any time operated by the
Company or any of its Subsidiaries, including, in each case, without
limitation, the fees and disbursements of counsel and other consultants
incurred in connection with any such investigation, litigation or other
proceeding (collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED, HOWEVER,
that, the Company shall have no obligation to an Indemnitee hereunder with
respect to indemnified liabilities to the extent such is finally judicially
determined to have resulted solely from the gross negligence or willful
misconduct of that Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the
Company shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them.
9.5 SETOFF
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default, each Lender and the Administrative Agent and each subsequent
holder of any Note is hereby authorized by the Company at any time or from time
to time, without notice to the Company, or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other Indebtedness at any time held or
owing by such Person or that subsequent holder to or for the credit or the
account of the Company against and on account of the obligations and liabilities
of the Company to such Person or that subsequent holder under this Agreement and
the Notes, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement or the Notes,
irrespective of whether or not (a) such Person or that subsequent holder shall
have made any demand hereunder or (b) such Person or that subsequent holder
shall have declared the principal of or the interest on its portion of
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the Loans and its Notes and other amounts due hereunder to be due and payable
as permitted by Section 7 and although said obligations and liabilities, or
any of them, may be contingent or unmatured.
9.6 AMENDMENTS AND WAIVERS
No amendment, modification, termination or waiver of any term or
provision of this Agreement, of the Notes, any other Loan Document or the Boyle
Fleming Warrant Exercise Agreement or consent to any departure by the Company or
any other party to any of the foregoing agreements therefrom, shall in any event
be effective without the prior written concurrence of the Company and the
Required Lenders; PROVIDED, HOWEVER, that without the prior written consent of
each Lender affected, an amendment, modification, termination or waiver of this
Agreement, any Notes, or the Pledge Agreement or any Additional Security
Document or consent to departure from a term or provision hereof or thereof may
not: (i) reduce the principal amount of Notes whose holders must consent to any
such amendment, modification, termination, waiver or consent; (ii) reduce the
rate of or extend the time for payment of principal or interest on any Note;
(iii) reduce the principal amount of any Note; (iv) make any Note payable in
money other than that stated in the Note; (v) make any change in Section
2.5A(iv) or in the definition of Change of Control, in the last paragraph of
Section 7 or in Section 9.6; (vi) reduce the rate or extend the time of payment
of fees or other compensation payable hereunder; (vii) waive performance by the
Company of its obligations under, or consent to any departure from any of the
terms and provisions of, Section 2.5A(iv); or (viii) release all or
substantially all of the collateral under the Pledge Agreement and the
Additional Security Documents (except as otherwise provided therein), and
PROVIDED, FURTHER, that without the consent of the Administrative Agent, no such
amendment, modification, termination or waiver may amend, modify, terminate or
waive any provision of Section 8 as the same applies to the Administrative Agent
or any other provision of this Agreement as it relates to the rights or
obligations of the Administrative Agent. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Company in any case shall entitle
the Company to any further notice or demand in similar or other circumstances.
Any amendment, modification, termination, waiver or consent effected in
accordance with this Section 9.6 shall be
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binding upon each holder of the Notes at the time outstanding, each further
holder of the Notes, and, if signed by the Company, on the Company.
9.7 INDEPENDENCE OF COVENANTS
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of an Event of
Default or a Potential Event of Default if such action is taken or condition
exists.
9.8 NOTICES
Unless otherwise provided herein, any notice or other communications
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, telexed or sent by mail and shall be deemed to
have been given when delivered in person, receipt of telecopy or telex against
receipt of answer back or four Business Days after depositing it in the mail,
registered or certified, with postage prepaid and properly addressed; PROVIDED,
HOWEVER, that notices to the Administrative Agent shall not be effective until
received. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 9.8) shall
be set forth under each party's name on the signature pages hereto.
9.9 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS
A. All agreements, representations and warranties made herein and in
the other Loan Documents shall survive the execution and delivery of this
Agreement, the making of the Loans hereunder and the execution and delivery of
the Notes and, notwithstanding the making of the Loans, the execution and
delivery of the Notes or any investigation made by or on behalf of any party,
shall continue in full force and effect. The closing of the transactions herein
contemplated shall not prejudice any right of one party against any other party
in respect of any thing done or omitted hereunder or in respect of any right to
damages or other remedies.
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B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of the Company set forth in Sections 9.3 and 9.4
shall survive the payment of the Loans and the Notes and the termination of this
Agreement.
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
No failure or delay on the part of the Administrative Agent or any
Lender or any holder of any Note in the exercise of any power, right or
privilege hereunder, under the Notes or under any other Loan Document shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under
this Agreement, the Notes or under any other Loan Document are cumulative to and
not exclusive of any rights or remedies otherwise available.
9.11 HEADINGS
Section and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.12 APPLICABLE LAW
THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL BE
GOVERNED BY AND SHALL BE INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
9.13 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF
NOTES
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders. The terms and provisions
of this Agreement and each other Loan Document shall inure to the benefit of any
assignee or transferee of the Notes pursuant to Section 9.2A, and in the event
of such transfer or assignment, the rights and privileges herein conferred upon
the Lenders shall automatically
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extend to and be vested in such transferee or assignee, all subject to the
terms and conditions hereof. Notwithstanding any other provision of this
Agreement, in determining whether the holders of a sufficient aggregate
principal amount of the Loans shall have consented to any action under this
Agreement, any amount of the Loans owned or held by the Company or any of its
Affiliates shall be disregarded. The Company's rights or any interest
therein hereunder may not be assigned without the prior express written
consent of each of the Lenders.
9.14 COUNTERPARTS; EFFECTIVENESS
This Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto, and delivery
thereof to the Administrative Agent or, in the case of the Lenders, written
telex or facsimile notice or telephonic notification (confirmed in writing) of
such execution and delivery. The Administrative Agent will give the Company and
each Lender prompt notice of the effectiveness of this Agreement.
9.15 CONSENT TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL
A. Any legal action or proceeding with respect to this Agreement or
any other Loan Document may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, the Company hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company hereby further irrevocably
waives any claim that any such courts lack jurisdiction over the Company, and
agrees not to plead or claim, in any legal action or proceeding with respect to
this Agreement or any other Loan Document brought in any of the aforesaid
courts, that any such court lacks jurisdiction over the Company. The Company
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Company, at its address for notices pursuant to Section 9.8,
such service
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to become effective 30 days after such mailing. The Company each hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or
proceeding commenced hereunder or under any other Loan Document that service
of process was in any way invalid or ineffective. Nothing herein shall
affect the right of the Administrative Agent, any Lender or the holder of any
Note to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
B. The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Loan Document brought in the courts referred to in clause A above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
C. Each of the parties to this Agreement hereby irrevocably waives
all right to a trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby.
9.16 PAYMENTS PRO RATA
A. The Administrative Agent agrees that promptly after its receipt
of each payment of any interest or premium on or principal of the Notes from or
on behalf of the Company, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Lenders (other than any Lender that
has consented in writing to waive its PRO RATA share of such payment) PRO RATA
based upon their respective PRO RATA shares, if any, of such payment.
B. Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or otherwise)
which is applicable to the payment of the principal of, or interest on, the
Loans of a sum which with respect to the related sum or sums received by other
Lenders is in a greater proportion than the total
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of such Obligation then owed and due to such Lender bears to the total of
such Obligation then owed and due to all of the Lenders immediately prior to
such receipt, then such Lender receiving such excess payment shall purchase
for cash without recourse or warranty from the other Lenders an interest in
the Obligations of the Company to such Lenders in such amount as shall result
in a proportional participation by all of the Lenders in such amount;
PROVIDED that, if all or any portion of such excess amount is thereafter
recovered from such Lender, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
9.17 TAXES AND OTHER TAXES
A. Any and all payments by the Company hereunder or under any of the
other Loan Documents shall be made free and clear of and without deduction or
withholding for any and all present or future Taxes, but excluding (i) in the
case of each such Lender and the Administrative Agent, taxes imposed on its net
income by the jurisdiction under the laws of which such Person is organized or
any political subdivision thereof, (ii) in the case of each Lender, taxes
imposed on its net income by the jurisdiction of such Lender's applicable
lending office or any political subdivision thereof, (iii) in the case of each
such Lender and the Administrative Agent, any Taxes that are in effect and that
would apply to a payment to such Person, as applicable, as of the Closing Date,
and (iv) if any person acquires any interest in this Agreement, or a Lender or
the Administrative Agent changes the office in which the Loan is made, accounted
for or booked (any such person, or such Lender or the Administrative Agent in
that event, being referred to as a "TAX TRANSFEREE"), any Taxes 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 Company shall be required by Law or the administration thereof
to deduct or withhold any Covered Taxes from or in respect of any sum payable
hereunder, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions or withholdings (including deductions or
withholdings applicable to additional amounts paid under this paragraph), the
Lender receives an amount equal to the sum they would have received if no such
deduction or withholding had been made; (ii) the Company shall make such
deductions or withholdings; and (iii) the Company forthwith
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shall pay the full amount deducted or withheld to the relevant taxation or
other authority in accordance with applicable Law.
B. The Company agrees to pay forthwith any present or future stamp
documentary taxes or any other excise or property taxes, charges or similar
levies (all such taxes, charges and levies being herein referred to as "OTHER
TAXES") imposed by any jurisdiction (or any political subdivision or taxing
authority thereof or therein) which arise from any payment made by the Company
hereunder or under any of the other Loan Documents or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Loan Documents.
C. The Company agrees to indemnify the Administrative Agent and each
of the Lenders for the full amount of Covered Taxes or Other Taxes not deducted
or withheld and paid by the Company in accordance with Section 9.17(A) and (B)
to the relevant taxation or other authority and any Taxes other than Covered
Taxes or Other Taxes imposed by any jurisdiction on amounts payable by the
Company under this Section 9.17 paid by the Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not any such Taxes or Other Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days from the date
the Administrative Agent or such Lender makes written demand therefor. A
certificate as to the amount of such Taxes or Other Taxes and evidence of
payment thereof submitted to the Company shall be conclusive, absent manifest
error, of the amount due from the Company to the Administrative Agent or such
Lender.
D. The Company shall furnish to the Administrative Agent and each of
the Lenders the original or a certified copy of a receipt evidencing any payment
of Taxes or Other Taxes made by the Company, as soon as such receipt becomes
available.
E. The provisions of this Section 9.17 shall survive the termination
of the Agreement and repayment of all Obligations.
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9.18 WAIVER OF STAY, EXTENSION OR USURY LAWS
The Company 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 the Company from paying all or any
portion of the principal of or interest on the Loans as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Agreement; and (to the extent that it may
lawfully do so) the Company 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 Administrative Agent, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
9.19 COMPENSATION
The Company shall compensate each Lender, upon its written request
(which request shall set forth the basis for requesting such compensation), for
all reasonable losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by such Lender to fund its
LIBOR Rate Loans or Treasury Rate Loans but excluding loss of anticipated profit
with respect to any Loans) which such Lender may sustain: (i) if for any reason
(other than a default by such Lender or the Administrative Agent) a borrowing of
LIBOR Rate Loans or Treasury Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion (whether or not
withdrawn by the Company); (ii) if any repayment of LIBOR Rate Loans or Treasury
Rate Loans occurs on a date which is not the last day of a Monthly Period
applicable thereto; (iii) if any prepayment of any LIBOR Rate Loans is not made
on any date specified in a notice of prepayment given by the Company; or (iv) as
a consequence of any other default by the Company to repay its LIBOR Rate Loans
or Treasury Rate Loans when required by the terms of this Agreement.
Calculation of all amounts payable to a Lender under this Section 9.19 shall be
made as though that Lender had actually funded its relevant LIBOR Rate Loan or
Treasury Rate Loan, as the case may be, through the purchase of a LIBOR rate
deposit bearing interest at the LIBOR Reference Rate or through the purchase of
a United States Treasury
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Security bearing interest at the Treasury Rate, in either case in an amount
equal to the amount of that Loan, having a maturity comparable to the
relevant Monthly Period.
9.20 REQUIREMENTS OF LAW
In the event that any change in law occurring after the date that any
lender becomes a Lender party to this Agreement with respect to any such Lender
shall, in the opinion of such Lender, require that any Loan Commitment of such
Lender be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by such Lender or
any corporation controlling such Lender, and such change in law shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital, as the case may be, as a consequence of such Lender's obligations
hereunder to a level below that which such Lender or such corporation, as the
case may be, could have achieved but for such change in law (taking into account
such Lender's or such corporation's policies, as the case may be, with respect
to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time following notice by such Lender to the Company of such change
in law within 15 days after demand by such Lender, the Company shall pay to such
Lender such additional amount or amounts as will compensate such Lender or such
corporation, as the case may be, for such reduction. Each Lender, upon
determining that any additional amounts will be payable pursuant to this Section
9.20, will give prompt written notice thereof to the Company, which notice shall
show the basis for calculation of such additional amounts (which calculation
shall, absent manifest error, be final and conclusive and binding on the
Company).
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WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
COMPANY:
SPINNAKER INDUSTRIES, INC.
By: /s/ NED N. FLEMING III
-----------------------------------
Name: Ned N. Fleming III
Title: President
Notice Address:
600 North Pearl Street
Suite 2160
Dallas, Texas 75201
Attention: Mark R. Matteson
Telephone: 214-855-0322
Telecopy: 214-855-0093
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY,
as administrative agent
By: /s/ MARY KAY COYLE
-----------------------------------
Name: Mary Kay Coyle
Title: Managing Director
Notice Address:
One Bankers Trust Plaza
130 Liberty Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Telecopy: (212) 250-7218
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BRIDGE COMMITMENTS: LENDERS:
$8,500,000 BANKERS TRUST COMPANY
By:
-----------------------------------
Name:
Title:
Notice Address:
One Bankers Trust Plaza
130 Liberty Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Telecopy: (212) 250-7218
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WARRANT EXERCISE AGREEMENT
WARRANT EXERCISE AGREEMENT, dated as of April 5, 1996 (as amended,
modified or supplemented from time to time, this "Agreement") among BOYLE,
FLEMING, GEORGE & CO., INC., a Texas corporation ("BFG"), Richard J. Boyle, in
his individual capacity ("Boyle"), Ned N. Fleming III, in his individual
capacity ("Fleming"), SPINNAKER INDUSTRIES, INC., a Delaware corporation (the
"Company") and BANKERS TRUST COMPANY, as Administrative Agent (in such capacity,
the "Administrative Agent") under the Credit Agreement (as defined below).
Unless otherwise defined herein, capitalized terms used herein shall have the
respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, BFG and the Company are parties to that certain Warrant
Purchase Agreement, dated June 10, 1994 (as amended, modified or supplemented
from time to time, the "Warrant Purchase Agreement"), pursuant to which BFG
holds Class A Warrants (the "A Warrants") to purchase up to 678,945 shares of
common stock, no par value, of the Company (subject to adjustment as provided in
the A Warrants) for an aggregate exercise price of $1,810,518.
WHEREAS, the Company, the Lenders named therein and the Administrative
Agent have entered into the Senior Credit Agreement, dated as of April 5, 1996
(as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the making of Loans to the Company as contemplated
therein; and
WHEREAS, each of Boyle and Fleming are shareholders of BFG;
WHEREAS, in order to induce the Lenders to make the Loans to the
Company, BFG has agreed, on the terms and conditions set forth herein, to
exercise its A Warrants to purchase shares of common stock of the Company to
provide the Company with additional funds to facilitate the payment of interest
on the Bridge Loans and the Term Loans, and each of Boyle and Fleming have
agreed to guaranty the obligations of BFG hereunder;
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. On the date hereof, BFG shall exercise A Warrants to purchase
187,476 shares of common stock of the Company resulting in cash proceeds to the
Company equal to $500,000, which amount equals the amount of interest on the
Bridge Loans that will be due and payable on the first two quarterly interest
payment dates that occur after the Closing Date (based on the Applicable Rate
plus the Applicable Spread as in effect on the Closing Date).
2. So long as any Obligations are outstanding and interest on the
Bridge Loans or any Term Loans, as the case may be, shall be payable on a
quarterly basis, no later than December 15 and June 15 of each year (commencing
on December 15, 1996), BFG shall exercise A Warrants to purchase shares of
common stock of the Company in an amount determined by the Administrative Agent
to be necessary to provide the Company with sufficient funds to pay in full the
interest on such Bridge Loans or Term Loans, as the case may be, that will be
due on the two quarterly interest payment dates immediately following each such
December 15 and June 15.
3. In addition to any payment that may be required pursuant to
Section 2 above, so long as any Obligations are outstanding and if the interest
on any Term Loans shall be payable on a semi-annual basis, no later than 30 days
prior to the first semi-annual interest payment on the Term Loans and no later
than each anniversary of such 30th day (each an "Exercise Date"), BFG shall
exercise A Warrants to purchase shares of common stock of the Company in an
amount determined by the Administrative Agent to be necessary to provide the
Company with sufficient funds to pay in full the interest on such Term Loans
that will be due on the two semi-annual interest payment dates immediately
following each such Exercise Date.
4. In addition, if, on any date on which a payment of interest is
due on the Bridge Loans or any Term Loans, as the case may be, the amount of
Escrowed Property (as defined in the Escrow Agreement) is insufficient to pay in
full the interest on such Loans that is due on such date and to the extent that
the Company has not otherwise made such interest payment in full, BFG shall
exercise A Warrants to purchase shares of common stock of the Company on such
date resulting in cash proceeds to the Company equal to such shortfall.
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5. The Company hereby agrees that all moneys received by the Company
at any time, or from time to time, from the exercise of A Warrants by BFG
(whether such exercise occurs on a date specified above or otherwise) shall
immediately be deposited into the Escrow Account in accordance with the
provisions of the Escrow Agreement.
6. Notwithstanding anything to the contrary contained in the Warrant
Purchase Agreement or in any A Warrant (including, without limitation, the
restrictions set forth in Sections 3.3 and 3.4 of the A Warrants), the Company
hereby agrees that BFG shall be permitted to (i) exercise the A Warrants on the
terms, and at the times, set forth in this Agreement and (ii) pledge the A
Warrants and the shares of common stock of the Company issuable upon the
exercise of the A Warrants pursuant to the terms of the Pledge Agreement. The
Company further agrees that notwithstanding anything to the contrary contained
in the Warrant Purchase Agreement or in any A Warrant, the Company may not
exercise its repurchase right set forth in Section 9.01 of the Warrant Purchase
Agreement without the prior written consent of the Required Lenders. The
Company and BFG hereby agree that the terms of the Warrant Purchase Agreement
and the A Warrants are hereby modified to give effect to this Section 6.
7. BFG hereby agrees that it shall not sell, transfer, assign,
pledge or otherwise encumber the A Warrants other than pursuant to the Pledge
Agreement.
8. (A) BFG, Boyle and Fleming each hereby represents and warrants
(as to itself) to the Administrative Agent and the Company that:
(a) BFG (i) is a duly organized and validly existing corporation in
good standing under the laws of the State of Texas and (ii) has the
corporate power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to
engage in.
(b) BFG has the corporate power and authority to execute, deliver and
perform the terms and provisions of this Agreement and has taken all
necessary corporate action to authorize the execution, delivery and
performance by it of this Agreement.
(c) Each of BFG, Boyle and Fleming has duly executed and delivered
this Agreement and this Agreement constitutes the legal, valid and binding
obligation of
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each of BFG, Boyle and Fleming enforceable in accordance with its terms
except to the extent that the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law).
(d) Each of BFG, Boyle and Fleming have the financial resources to
comply with its obligations under this Agreement.
(e) On the date hereof, BFG holds A Warrants to purchase 678,945
shares of common stock of the Company (subject to adjustment as provided in
the A Warrants), each with an exercise price of approximately $2.667
(subject to adjustment as provided in the A Warrants). The A Warrants may
be exercised at any time or from time to time on or after the date hereof
and prior to 5:00 p.m. (Dallas, Texas time) on June 10, 1999.
(f) The unaudited balance sheet of Richard J. and Karen A. Boyle as
at May 30, 1995 and the unaudited balance sheet of Ned N. Fleming III as at
February 28, 1996 and furnished to the Administrative Agent prior to the
Closing Date, in each case present fairly the financial condition of such
persons as at the date of such balance sheets. The brokerage statement of
Richard J. Boyle for the month ending February 29, 1996 and the brokerage
statement for Ned N. Fleming III for the month ending December 31, 1995 and
furnished to the Administrative Agent prior to the Closing Date, in each
case are true and correct in all material respects as of such dates. In
addition, since the date of such balance sheets and brokerage statements,
as the case may be, there has been no material adverse change in the
financial condition of such persons.
(B) The Company hereby represents and warrants to the Administrative
Agent that:
(a) The Company had all the necessary corporate power and authority
to issue and deliver the A Warrants, and that the issuance and delivery of
the A Warrants had been duly authorized by all necessary corporate action.
(b) The Company had duly issued and delivered the A Warrants and the
A Warrants constitute the legal, valid and binding obligation of the
Company enforceable
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in accordance with its terms except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
9. As security for the prompt and complete payment and performance
when due of all the Obligations of the Company under the Loan Documents, the
Company hereby sells, assigns, and transfers unto the Administrative Agent for
the benefit of the Lenders a security interest in all of the Company's rights
under this Agreement.
10. BFG and the Administrative Agent agree that the Administrative
Agent and the Lenders will suffer damages if BFG is unable to fulfill its
obligations under this Agreement and that it would not be feasible to ascertain
the extent of such damages with precision. Accordingly, in the event that BFG
does not comply with any of its obligations under this Agreement as provided
herein, BFG shall pay to the Administrative Agent for the benefit of the
Lenders, as liquidated damages, an amount in cash equal to the cash proceeds
that the Company would have received on any date on which BFG was required to
exercise A Warrants less the amount of cash proceeds, if any, received by the
Company as a result of any such exercise.
11. (a) In order to induce the Lenders to enter into the Credit
Agreement and to extend credit thereunder and in recognition of the direct
benefits to be received by each of Boyle and Fleming (collectively, the
"Guarantors," and each a "Guarantor") from the proceeds of the Loans, each
Guarantor hereby agrees with the Administrative Agent for the benefit of the
Lenders as follows: Each Guarantor hereby unconditionally and irrevocably,
jointly and severally, guarantees, as primary obligor and not merely as surety,
the full and prompt payment and performance when due, whether upon maturity,
acceleration or otherwise, of any and all of the obligations of BFG under this
Agreement, including all such obligations under Section 10 hereof (the
"Guaranteed Obligations"). Additionally, each Guarantor unconditionally and
irrevocably, jointly and severally, guarantees the payment and performance of
any and all of the Guaranteed Obligations of BFG whether or not due or payable
by BFG upon the occurrence of any of the events of the type specified in Section
7.6 or 7.7 of the Credit Agreement with respect to BFG.
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(b) The liability of each Guarantor hereunder is joint and several
and exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of BFG whether executed by such Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
is not affected or impaired by (a) any direction as to application of payment by
BFG or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of BFG, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by BFG, or (e) any payment made to the Lenders
on the Guaranteed Obligations which any such Lender repays to BFG pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, and each Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.
(c) The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor, any other party or
BFG, and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor, any other party or BFG and whether or not any other guarantor,
any other party or BFG be joined in any such action or actions. Each Guarantor
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by BFG or other circumstance which operates to toll any statute of
limitations as to BFG shall operate to toll the statute of limitations as to any
Guarantor. Each Guarantor hereby agrees with the Administrative Agent that it
will not exercise any right of subrogation it may at any time otherwise have as
a result of this guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
(d) Each Guarantor waives any right (except as shall be required by
applicable statute and cannot be waived) to require any Lender to (i) proceed
against the Company, BFG, any other Guarantor, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Company, BFG,
any other Guarantor, any other guarantor or any other party or (iii) pursue any
other remedy in any Lender's power whatsoever. Each Guarantor waives any
defense
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<PAGE>
based on or arising out of any defense of the Company, BFG, any other
Guarantor, any other guarantor or any other party, other than payment in full
of the Guaranteed Obligations, based on or arising out of the disability of
the Company, BFG, any other Guarantor, any other guarantor or any other
party, or the unenforceability of the Guaranteed Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of
the Company or BFG other than payment in full of the Guaranteed Obligations.
(e) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations.
12. This Agreement shall terminate on the earlier of (x) the
repayment in full of all Obligations and (y) the date and time upon which BFG
has exercised in full all of its A Warrants to purchase shares of common stock
of the Company and all of the cash proceeds received by the Company therefrom
shall have been deposited into the Escrow Account.
13. This Agreement may only be modified by a writing signed by BFG,
Boyle, Fleming, the Company and the Administrative Agent (with the consent of
the Required Lenders), and no waiver hereunder shall be effective unless in a
writing signed by the party or parties against whom enforcement of such waiver
is sought.
14. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. Any legal action or proceeding with respect to this
Agreement may be brought in the courts of the State of New York or of the United
States for the Southern District of New York, and, by execution and delivery of
this Agreement, BFG, Boyle, Fleming and the Company each hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. BFG, Boyle, Fleming
and the Company each hereby further irrevocably waives any claim that any such
courts lack jurisdiction over such party, and agrees not to plead or claim, in
any legal action or proceeding with respect to this Agreement brought in any of
the aforesaid courts, that any such court lacks jurisdiction over such party.
BFG, Boyle, Fleming and the Company each irrevocably consents to the service of
process in any such action or proceeding by the
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<PAGE>
mailing of copies thereof by registered or certified mail, postage prepaid,
to such party at its address set forth opposite its signature below, such
service to become effective 30 days after such mailing. BFG, Boyle, Fleming
and the Company each hereby irrevocably waives any objection to such service
of process and further irrevocably waives and agrees not to plead or claim in
any action or proceeding commenced hereunder that service of process was in
any way invalid or ineffective. Nothing herein shall affect the right of the
Administrative Agent to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against BFG, Boyle,
Fleming or the Company in any other jurisdiction.
(b) BFG, Boyle, Fleming and the Company each hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement brought in the courts referred to in clause (a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
15. None of BFG, Boyle, Fleming or the Company may assign any of its
rights or obligations under this Agreement except as set forth in Section 9 of
this Agreement.
16. This Agreement may be executed in any number of counterparts and
by the different parties hereto on 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.
17. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
previous negotiations and writings with respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
BOYLE, FLEMING, GEORGE & CO.,
INC.
Address:
600 N. Pearl Street
Suite 2160 By /s/ Ned N. Fleming III
Dallas, Texas 75201 ------------------------------------
Attention: Ned N. Fleming III Title: President
Address: RICHARD J. BOYLE
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 /s/ Richard J. Boyle
Attention: Richard J. Boyle --------------------------------------
Address: NED N. FLEMING III
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 /s/ Ned N. Fleming III
Attention: Ned N. Fleming III ---------------------------------------
Address: SPINNAKER INDUSTRIES, INC.
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 By /s/ Ned N. Fleming III
Attention: Mark R. Matteson ------------------------------------
Title: President
Address: BANKERS TRUST COMPANY,
130 Liberty Street
as Administrative Agent
New York, New York 10006 By /s/ Mary Kay Coyle
Attention: Mary Kay Coyle ------------------------------------
Title: Managing Director
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<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as April 5, 1996 (as amended, modified or
supplemented from time to time, this "Agreement"), made by each of the
undersigned pledgors (each a "Pledgor" and, collectively, the "Pledgors"), in
favor of BANKERS TRUST COMPANY, as Collateral Agent for the benefit of the
Secured Creditors referred to below (in such capacity, the "Pledgee"). Except
as otherwise defined herein, capitalized terms used herein and defined in the
Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Spinnaker Industries, Inc. (the "Company"), the Lenders named
therein and Bankers Trust Company, as Administrative Agent, have entered into a
Senior Credit Agreement, dated as of April 5, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of the Loans to the Company as contemplated therein, (each such Lender,
together with the Pledgee, are herein called) the "Secured Creditors");
WHEREAS, it is a condition precedent to the making of the Loans to the
Company under the Credit Agreement that each Pledgor shall have executed and
delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee, in each case for the benefit
of the Secured Creditors, as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
of the Borrower, whether now existing or hereafter incurred under, arising
out of, or in connection with, the
<PAGE>
Credit Agreement and any other Loan Document to which the Borrower is a
party and the due performance and compliance by the Borrower with the terms
of each such Loan Document;
(ii) any and all sums advanced by the Pledgee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest in
the Collateral;
(iii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of retaking, holding, preparing for
sale or lease, selling or otherwise disposing or realizing on the
Collateral, or of any exercise by the Pledgee of its rights hereunder,
together with reasonable attorneys' fees and court costs; and
(iv) all amounts paid by any Indemnitee (as defined in Section 11
hereof) as to which such Indemnitee has the right to reimbursement under
Section 11 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (iv) of this Section 1 being herein collectively called the
"Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i)
the term "Stock" shall mean all of the issued and outstanding shares of capital
stock at any time owned by (x) the Company in any corporation (other than
Central Products, except as provided below), including Entoleter and Brown
Bridge, provided that the term Stock shall include (and the Company shall pledge
hereunder) the capital stock of Central Products upon the earlier of (A) the
payment in full of all amounts outstanding under the Existing Central Products
Credit Agreement and (B) the release by the lenders under the Existing Central
Products Credit Agreement of their lien on such capital stock, (y) each other
Pledgor in the Company (including any capital stock issued upon the exercise of
any option's, rights or warrants to purchase capital stock of the Company),
Entoleter and Brown Bridge and (z) Boyle Fleming in any warrants (the
"Warrants") to purchase shares of the capital stock of the Company; (ii) the
term "Notes" shall mean all promissory notes from time to time issued to, or
held by, the Company; and (iii) the term "Securities" shall mean all of the
Stock and Notes. Each Pledgor represents and warrants that on the date hereof
(i) the Stock held by such Pledgor consists of the number and type of shares of
(or Warrants to purchase shares of) the stock of the corporations as described
in Annex A hereto; (ii) such Stock constitutes that percentage of the issued and
outstanding capital stock of (or, in the case of Warrants, the right to purchase
that percentage of the issued and outstanding capital stock of) the issuing
corporation as is set forth in Annex A hereto; (iii) the Notes held by the
Company consist of the promissory notes described in Annex B hereto; and (iv) on
the date hereof, such Pledgor owns no other Securities.
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<PAGE>
3. PLEDGE OF SECURITIES, ETC.
3.1 PLEDGE. To secure the Obligations and for the purposes set forth
in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee for the
benefit of the Secured Creditors a security interest in all of the Collateral at
any time owned by such Pledgor; (ii) pledges and deposits as security with the
Pledgee the Securities owned by such Pledgor on the date hereof, and delivers to
the Pledgee certificates or instruments therefor, duly endorsed in blank in the
case of Notes and accompanied by undated stock powers duly executed in blank by
such Pledgor in the case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates,
mortgages, charges and sets over to the Pledgee all of such Pledgor's right,
title and interest in and to such Securities (and in and to all certificates or
instruments evidencing such Securities) at any time owned by such Pledgor, to be
held by the Pledgee, upon the terms and conditions set forth in this Agreement.
3.2 SUBSEQUENTLY ACQUIRED SECURITIES. If any Pledgor shall acquire
(by purchase, stock dividend, exercise of any Warrant or otherwise) any
additional Securities at any time or from time to time after the date hereof,
such Pledgor will forthwith pledge and deposit such Securities (or certificates
or instruments representing such Securities) as security with the Pledgee and
deliver to the Pledgee certificates therefor or instruments thereof, duly
endorsed in blank in the case of Notes and accompanied by undated stock powers
duly executed in blank in the case of Stock, or such other instruments of
transfer as are acceptable to the Pledgee, and will promptly thereafter deliver
to the Pledgee a certificate executed by a principal executive officer of such
Pledgor describing such Securities and certifying that the same have been duly
pledged with the Pledgee hereunder.
3.3 UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the respective
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York UCC, if applicable). Each Pledgor further agrees to take such actions
as the Pledgee deems necessary or desirable to effect the foregoing and to
permit the Pledgee to exercise any of its rights and remedies hereunder, and
agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee
with respect to any such pledge of uncertificated Securities promptly upon
request of the Pledgee.
3.4 DEFINITION OF PLEDGED STOCK, PLEDGED NOTES, PLEDGED SECURITIES
AND COLLATERAL. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock;" all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes;" all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities," which together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, is hereinafter called the "Collateral."
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<PAGE>
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the
relevant Pledgor after the appointment of any sub-agent; PROVIDED, HOWEVER, that
the failure to give such notice shall not affect the validity of such
appointment. Notwithstanding anything to the contrary contained in this
Agreement, the agent or any lender under the Existing Brown Bridge Credit
Agreement and the Existing Entoleter Credit Agreement, as the case may be, which
holds the capital stock of Brown Bridge and Entoleter shall act as a sub-agent
for the Pledgee for purposes of retaining physical possession of the shares of
capital stock of Brown Bridge and Entoleter, as the case may be, so long as the
shares of Brown Bridge and Entoleter remain subject to the pledge under the
Existing Brown Bridge Credit Agreement and the Existing Entoleter Credit
Agreement, as the case may be.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until (i) an
Event of Default shall have occurred and be continuing and (ii) written notice
thereof shall have been given by the Pledgee to the relevant Pledgor (PROVIDED,
that if an Event of Default specified in Section 7.6 or 7.7 of the Credit
Agreement shall occur, no such notice shall be required), each Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities and to give all consents, waivers or ratifications in
respect thereof; PROVIDED, that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate or be inconsistent
with any of the terms of this Agreement or any other Loan Document, or which
would have the effect of impairing the position or interests of the Pledgee in
the Collateral. All such rights of such Pledgor to vote and to give consents,
waivers and ratifications shall cease in case an Event of Default shall occur
and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the respective Pledgor to the extent that the payment thereof is permitted by
the Credit Agreement; PROVIDED, that all cash dividends payable in respect of
the Pledged Stock which are (i) not permitted to be paid pursuant to the Credit
Agreement or (ii) determined by the Pledgee to represent in whole or in part an
extraordinary, liquidating or other distribution in return of capital shall be
paid, to the extent so determined to represent an extraordinary, liquidating or
other distribution in return of capital, to the Pledgee and retained by it as
part of the Collateral. The Pledgee shall also be entitled to receive directly,
and to retain as part of the Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock;
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<PAGE>
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock by way
of stock-split, spin-off, split-up, reclassification, combination of shares
or similar rearrangement; and
(iii) all other or additional stock or other securities or
property (including cash) which may be paid in respect of the Collateral by
reason of any consolidation, merger, exchange of stock, conveyance of
assets, liquidation or similar corporate reorganization;
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Loan Document or by law) for the protection and
enforcement of its rights in respect of the Collateral, and the Pledgee shall be
entitled, without limitation, to exercise the following rights, which each
Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees (the Pledgee agrees
to promptly notify the relevant Pledgor after such transfer; PROVIDED,
HOWEVER, that the failure to give such notice shall not affect the validity
of such transfer);
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for payment
thereon);
(iv) subject to the giving of written notice to the relevant Pledgor
in accordance with (and to the extent required by) clause (ii) of Section 5
hereof, to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (each Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to do
so); and
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion
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<PAGE>
may determine; PROVIDED, that at least 10 days' notice of the time and
place of any such sale shall be given to such Pledgor. Each Pledgor
hereby waives and releases to the fullest extent permitted by law any
right or equity of redemption with respect to the Collateral, whether
before or after sale hereunder, and all rights, if any, of marshalling
the Collateral and any other security for the Obligations or otherwise.
At any such sale, unless prohibited by applicable law, the Pledgee or any
other Secured Creditor may bid for and purchase all or any part of the
Collateral so sold free from any such right or equity of redemption. The
Pledgee shall not be liable for failure to collect or realize upon any or
all of the Collateral or for any delay in so doing nor shall any of them
be under any obligation to take any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Loan Document or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by the Pledgee or any other Secured
Creditor of any one or more of the rights, powers or remedies provided for in
this Agreement or any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise shall not preclude the simultaneous or
later exercise by the Pledgee or any other Secured Creditor of all such other
rights, powers or remedies, and no failure or delay on the part of the Pledgee
or any other Secured Creditor to exercise any such right, power or remedy shall
operate as a waiver thereof. No notice to or demand on any Pledgor in any case
shall entitle it to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Pledgee or any
other Secured Creditor to any other or further action in any circumstances
without notice or demand. The Secured Creditors agree that this Agreement may
be enforced only by the action of the Administrative Agent or the Pledgee, in
each case acting upon the instructions of the Required Lenders, and that no
other Secured Creditor shall have any right individually to seek to enforce or
to enforce this Agreement or to realize upon the security to be granted hereby,
it being understood and agreed that such rights and remedies may be exercised by
the Administrative Agent or the Pledgee, as the case may be, for the benefit of
the Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral, together with all
other moneys received by the Pledgee hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Pledgee of the
type described in clauses (ii) and (iii) of Section 1 of this Agreement;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors as provided in
Section 9(c) hereof with each Secured Creditor receiving an amount equal to
its outstanding Obligations or, if the proceeds are
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<PAGE>
insufficient to pay in full all such Obligations, its Pro Rata Share (as
defined below) of the amount remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), and following the
termination of this Agreement pursuant to Section 18(a) hereof, to the
relevant Pledgor or, to the extent directed by such Pledgor or a court of
competent jurisdiction, to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement, "Pro Rate Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator
of which is the then unpaid amount of such Secured Creditor's Obligations
and the denominator of which is the then outstanding amount of all
Obligations.
(c) All payments required to be made to the Secured Creditors
hereunder shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Section 9, the Pledgee shall be entitled to rely upon the
Administrative Agent under the Credit Agreement for a determination (which
the Administrative Agent and the Secured Creditors agree (or shall agree)
to provide upon request of the Pledgee) of the outstanding Obligations owed
to the Secured Creditors. Unless it has actual knowledge (including by way
of written notice from a Secured Creditor) to the contrary, the
Administrative Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and Pledgee, in acting hereunder, shall
be entitled to assume that no Obligations other than principal, interest
and regularly accruing fees are owing to any Secured Creditor.
(e) It is understood and agreed that the Company shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the aggregate amount of the Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
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<PAGE>
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee, each other Secured Creditor and their
respective officers, directors, employees, agents, servants, affiliates,
successors and assigns (each an "Indemnitee") from and against any and all
claims, demands, losses, judgments and liabilities of whatsoever kind or nature,
and (ii) to reimburse each Indemnitee for all costs and expenses, including
reasonable attorneys' fees, growing out of or resulting from this Agreement or
the exercise by the Pledgee of any right or remedy granted to it hereunder or
under any other Loan Document except, with respect to clauses (i) and (ii)
above, for those arising solely from such Indemnitee's gross negligence or
willful misconduct. In no event shall the Pledgee be liable, in the absence of
gross negligence or willful misconduct on its part, for any matter or thing in
connection with this Agreement other than to account for moneys actually
received by it in accordance with the terms hereof. If and to the extent that
the obligations of the Pledgors under this Section 11 are unenforceable for any
reason, each Pledgor hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the applicable Uniform Commercial Code in any
jurisdiction such financing statements, continuation statements and other
documents in such offices as the Pledgee may deem necessary or appropriate and
wherever required or permitted by law in order to perfect and preserve the
Pledgee's security interest in the Collateral and hereby authorizes the Pledgee
to file financing statements and amendments thereto relative to all or any part
of the Collateral without the signature of such Pledgor where permitted by law,
and agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instruments as
the Pledgee may reasonably require or deem advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's 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 after the occurrence and
during the continuance of an Event of Default, in the Pledgee's discretion to
take any action and to execute any instrument which the Pledgee may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement and in the Credit Agreement. The Pledgee
shall act hereunder on the terms and conditions set forth herein and in
Section 8 of the Credit Agreement.
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<PAGE>
14. TRANSFER BY PLEDGORS. (a) The Company will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral owned by it or any interest therein except as
otherwise permitted by the Credit Agreement.
(b) LMC and Boyle Fleming will not sell, assign, transfer, or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral owned by them or any interest therein
except pursuant to this Agreement or with the prior written consent of the
Required Lenders or all of the Lenders to the extent required by Section 9.6 of
the Credit Agreement, provided, however, LMC shall have the right to transfer
shares of the capital stock of the Company owned by it to Lynch so long as (i)
at least ten days prior written notice thereof is given by LMC to the Pledgee
and (ii) Lynch shall have executed a counterpart of this Agreement and delivered
the same to the Pledgee pursuant to which Lynch shall become a "Pledgor"
hereunder with respect to the shares of capital stock of the Company so
transferred to it and Lynch shall assume all obligations and liabilities of a
"Pledgor" hereunder and shall duly pledge and deliver to the Pledgee the shares
of capital stock of the Company so transferred to it accompanied by undated
stock powers duly executed in blank.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each
Pledgor represents, warrants and covenants as to itself that (i) it is the
legal, record and beneficial owner of, and has good and marketable title to, all
Securities pledged by it hereunder, subject to no pledge, lien, mortgage,
hypothecation, security interest, charge, option or other encumbrance
whatsoever, except (x) the liens and security interests created by this
Agreement; (y) the liens and security interests created by the Existing Brown
Bridge Credit Agreement in the shares of capital stock of Brown Bridge; and (z)
the liens and security interests created by the Existing Entoleter Credit
Agreement in the shares of capital stock of Entoleter; (ii) it has full power,
authority and legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding obligation
of such Pledgor enforceable in accordance with its terms, except to the extent
that the enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by equitable principles (regardless of whether
enforcement is sought in equity or at law); (iv) except to the extent already
obtained or made no consent of any other party (including, without limitation,
any stockholder or creditor of such Pledgor or any of its Subsidiaries) and no
consent, license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required to be obtained by such Pledgor in connection with the
execution, delivery or performance of this Agreement, or in connection with the
exercise of its rights and remedies pursuant to this Agreement, except as may be
required in connection with the disposition of the Securities by laws affecting
the offering and sale of securities generally; (v) the execution, delivery and
performance of this Agreement by such Pledgor does not violate any provision of
any applicable law or regulation or of any order, judgment, writ,
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<PAGE>
award or decree of any court, arbitrator or governmental authority, domestic
or foreign, or of the Certificate or Articles of Incorporation or By-Laws of
such Pledgor or any of its Subsidiaries or of any securities issued by such
Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease,
deed of trust, agreement, instrument or undertaking to which such Pledgor or
any of its Subsidiaries is a party or which purports to be binding upon such
Pledgor or any of its Subsidiaries or upon any of their respective assets and
will not result in the creation or imposition (or the obligation to create or
impose) of any lien or encumbrance on any of the assets of such Pledgor or
any of its Subsidiaries except as contemplated by this Agreement; (vi) all
the shares of the Stock have been duly and validly issued, are fully paid and
nonassessable and are subject to no options to purchase or similar rights;
(vii) each of the Pledged Notes constitutes, or when executed by the obligor
thereof will constitute, the legal, valid and binding obligation of such
obligor, enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); and (viii) the pledge and
assignment of the Securities pursuant to this Agreement, together with the
delivery of the Securities pursuant to this Agreement (which delivery has
been made), creates a valid and perfected first security interest in such
Securities and the proceeds thereof (or (x) in the case of the shares of
capital stock of Brown Bridge and the proceeds thereof, a valid and perfected
second security interest so long as the shares of Brown Bridge remain subject
to the pledge under the Existing Brown Bridge Credit Agreement and (y) in the
case of the shares of capital stock of Entoleter and the proceeds thereof, a
valid and perfected second security interest so long as the shares of
Entoleter remain subject to the pledge under the Existing Entoleter Credit
Agreement) subject to no prior lien or encumbrance or to any agreement
purporting to grant to any third party a lien or encumbrance on the property
or assets of such Pledgor which would include the Securities (other than as
set forth above). Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever;
and such Pledgor covenants and agrees that it will have like title to and
right to pledge any other property at any time hereafter pledged to the
Pledgee as Collateral hereunder and will likewise defend the right thereto
and security interest therein of the Pledgee.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement 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, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Loan Document or any other instrument or agreement referred to therein,
or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any
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<PAGE>
invalidity or unenforceability, in whole or in part, of any such instrument
or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to such Pledgor or any Subsidiary of such Pledgor,
or any action taken with respect to this Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not such
Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the Pledgee
a written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, such Pledgor
as soon as practicable and at its expense will use its best efforts to cause
such registration to be effected (and be kept effective) and will use its best
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation, registration
under the Securities Act of 1933 as then in effect (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements; PROVIDED, that the Pledgee and each other Secured Creditor shall
furnish to such Pledgor such information regarding the Pledgee or such other
Secured Creditor as such Pledgor may request in writing and as shall be required
in connection with any such registration, qualification or compliance. Such
Pledgor will cause the Pledgee to be kept advised in writing as to the progress
of each such registration, qualification or compliance and as to the completion
thereof, will furnish to the Pledgee such number of prospectuses, offering
circulars or other documents incident thereto as the Pledgee from time to time
may reasonably request, and will indemnify the Pledgee and each other Secured
Creditor and all others participating in the distribution of the Pledged Stock
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to such Pledgor by the Pledgee or
such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion: (i) may proceed to make such
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<PAGE>
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed
under such Securities Act; (ii) may approach and negotiate with a single
possible purchaser to effect such sale; and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for
its own account, for investment, and not with a view to the distribution or
sale of such Pledged Securities or part thereof. In the event of any such
sale, the Pledgee shall incur no responsibility or liability for selling all
or any part of the Pledged Securities at a price which the Pledgee, in its
sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher
price might be realized if the sale were deferred until after registration as
aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 11 hereof, shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
moneys at the time held by the Pledgee hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which no Note (as defined in the
Credit Agreement) is outstanding and the Loans and all other Obligations have
been paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by Section 6.6 of the Credit Agreement or is
otherwise released at the direction of the Required Lenders (or all the Lenders
if required by Section 9.6 of the Credit Agreement), the Pledgee, at the request
and expense of such Pledgor, will duly assign, transfer and deliver to such
Pledgor (without recourse and without any representation or warranty) such of
the Collateral as is then being (or has been) so sold or released and as may be
in possession of the Pledgee and has not heretofore been released pursuant to
this Agreement.
(c) Notwithstanding anything to the contrary contained above, upon
the presentment of satisfactory evidence to the Pledgee in its sole discretion
that all obligations evidenced by any Pledged Note have been repaid in full, and
that any payments received by the relevant Pledgor were permitted to be received
by such Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon the
request and at the expense of such Pledgor, duly assign, transfer and deliver to
such Pledgor (without recourse and without any representation or warranty) such
Pledged Note if same is then in the possession of the Pledgee and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement.
(d) Notwithstanding anything to the contrary contained above, upon
the exercise by Boyle Fleming of any A Warrants (or any portion thereof) (as
defined in the Boyle
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<PAGE>
Fleming Warrant Exercise Agreement), the Pledgee shall duly assign, transfer
and deliver to Boyle Fleming (without recourse and without any representation
or Warranty) the A Warrants (or portion thereof) so exercised so long as any
A Warrants still held by Boyle Fleming (and any capital stock of the Company
issued upon the exercise of the A Warrants so exercised) shall be pledged and
deposited with the Pledgee as provided herein.
(e) At any time that a Pledgor desires that Collateral be released as
provided in the foregoing Section 18(a), (b), (c) or (d), it shall deliver to
the Pledgee a certificate signed by a principal executive officer of such
Pledgor stating that the release of the respective Collateral is permitted
pursuant to Section 18(a), (b), (c) or (d).
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to any Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.:(212) 250-9094
Telecopier No.:(212) 250-7218
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of the Required Lenders or all of the Lenders
to the extent required by Section 9.6 of the Credit Agreement).
21. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of the
Secured Creditors and their respective successors and assigns. THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. The headings in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
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<PAGE>
22. RECOURSE. (a) This Agreement is made with full recourse to the
Company and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Company contained herein, in the other Loan
Documents and otherwise in writing in connection herewith or therewith.
(b) The Pledgee and each other Secured Creditor hereby acknowledge
and agree that Boyle Fleming and LMC shall not be personally liable for the
payment of any sums now or hereafter owing to the Secured Creditors in respect
of the Obligations owing by the Borrower to the Secured Creditors pursuant to
the Credit Agreement and the Notes. Upon the occurrence and during the
continuance of an Event of Default, the Pledgee's and the other Secured
Creditors' rights against Boyle Fleming and LMC in respect of such Obligations
shall be limited to the foreclosure of the Lien created hereunder in the
Securities pledged by Boyle Fleming and LMC.
23. ACKNOWLEDGEMENT. The Secured Creditors acknowledge and agree
that the security interest in the capital stock of Brown Bridge and Entoleter
and the ability to exercise remedies with respect to such capital stock are
subject to the Lien and security interest of the lenders under the Existing
Brown Bridge Credit Agreement and the Existing Entoleter Credit Agreement, as
the case may be.
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<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address: LYNCH MANUFACTURING
CORPORATION, as a Pledgor
8 Sound Shore Drive
Suite 290
Greenwich, Connecticut 06830 By /s/ Robert A. Hurwich
Attention: Robert A. Hurwich ------------------------------------
Title: President
Address: SPINNAKER INDUSTRIES, INC., as a
Pledgor
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 By /s/ Ned N. Fleming III
Attention: Mark R. Matteson ------------------------------------
Title: President
Address: BOYLE, FLEMING, GEORGE & CO. INC.,
as a Pledgor
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 By: /s/ Ned N. Fleming III
Attention: Ned N. Fleming, III -----------------------------------
Title:
BANKERS TRUST COMPANY,
as Pledgee
By /s/ Mary Kay Coyle
------------------------------------
Title: President
<PAGE>
ANNEX A
to
PLEDGE AGREEMENT
LIST OF STOCKS
[To be provided by Pledgor]
<PAGE>
ANNEX B
to
PLEDGE AGREEMENT
LIST OF NOTES
[To be provided by Pledgor]
