UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-12906
RICHARDSON ELECTRONICS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-2096643
(State of incorporation) (I.R.S. Employer Identification No.)
40W267 Keslinger Road, LaFox, Illinois 60147
(Address of principal executive offices and zip code)
(630) 208-2200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
As of March 23, 1998 there were outstanding 8,971,591 shares of Common Stock,
$.05 par value, and 3,242,240 shares of Class B Common Stock, $.05 par value,
which are convertible into Common Stock on a share-for-share basis.
This Quarterly Report on Form 10-Q contains 154 pages. An exhibit index is at
page 13.
Page 1
RICHARDSON ELECTRONICS, LTD. AND SUBSIDIARIES
FORM 10-Q
For the Three- and Nine- Month Periods Ended February 28, 1998
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Income 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II - OTHER INFORMATION 13
(2)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
February 28 May 31
1998 1997
--------- ---------
(Unaudited)(Audited)
ASSETS
- -------
Current assets:
Cash and equivalents $ 6,886 $ 10,012
Receivables, less allowance of
$1,775 and $2,102 58,786 53,333
Inventories 93,777 92,194
Other 9,998 10,497
--------- ---------
Total current assets 169,447 166,036
Investments 2,776 2,152
Property, plant and equipment 48,785 45,969
Less accumulated depreciation (30,645) (28,443)
--------- ---------
Property, plant and equipment, net 18,140 17,526
Other assets 9,291 6,800
--------- ---------
Total assets $199,654 $192,514
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------
Current liabilities:
Accounts payable $ 18,037 $ 12,766
Accrued expenses 10,183 12,449
--------- ---------
Total current liabilities 28,220 25,215
Long-term debt 105,623 107,275
Deferred income taxes 1,600 434
Stockholders' equity:
Common stock, $.05 par value; issued 8,968 at
February 28, 1998 and 8,721 at May 31, 1997 449 437
Class B common stock, convertible, $.05 par
value; issued 3,242 at February 28, 1998
and May 31, 1997 162 162
Additional paid-in capital 55,549 53,512
Retained earnings 14,396 9,082
Foreign currency translation adjustment (6,345) (3,603)
--------- ---------
Total stockholders' equity 64,211 59,590
--------- ---------
Total liabilities and stockholders' equity $199,654 $192,514
========= =========
See notes to consolidated condensed financial statements.
(3)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Income
For the Three- and Nine-Month Periods Ended February 28, 1998 and 1997
(unaudited)
(in thousands, except per share amounts)
Three Months Nine Months
------------------ -------------------
1998 1997 1998 1997
-------- -------- --------- ---------
(Unaudited) (Unaudited)
Net sales $73,196 $64,163 $223,442 $183,874
Cost of products sold 52,336 52,992 159,596 137,182
-------- -------- --------- ---------
Gross margin 20,860 11,171 63,846 46,692
Selling, general and
administrative expenses 16,009 19,123 48,525 46,508
-------- -------- --------- ---------
Operating income (loss) 4,851 (7,952) 15,321 184
Other (income) expense:
Interest expense 2,009 1,869 6,218 5,588
Investment income (255) (82) (534) (249)
Other, net 5 264 27 173
-------- -------- --------- ---------
1,759 2,051 5,711 5,512
-------- -------- --------- ---------
Income (loss) before
Income taxes and
extraordinary item 3,092 (10,003) 9,610 (5,328)
Income taxes (benefit) 910 (3,950) 2,880 (2,500)
-------- -------- --------- ---------
Net income (loss) before
extraordinary item 2,182 (6,053) 6,730 (2,828)
Extraordinary loss, net
of income taxes of $312 - (488) - (488)
-------- -------- --------- ---------
Net income (loss) $ 2,182 $(6,541) $ 6,730 $ (3,316)
======== ======== ========= =========
Net income (loss) per
share - basic:
Before extraordinary item $ .18 $ (.51) $ .56 $ (.24)
Extraordinary loss, net
of income taxes of $312 - (.04) - (.04)
-------- -------- --------- ---------
Net income (loss)
per share $ .18 $ (.55) $ .56 $ (.28)
======== ======== ========= =========
Average shares outstanding 12,198 11,908 12,096 11,886
======== ======== ========= =========
Net income (loss) per
share - diluted:
Before extraordinary item $ .17 $ (.51) $ .54 $ (.24)
Extraordinary loss, net
of income taxes of $312 - (.04) (.04)
-------- -------- --------- ---------
Net income (loss)
per share $ .17 $ (.55) $ .54 $ (.28)
======== ======== ========= =========
Average shares outstanding 12,626 11,908 12,476 11,886
======== ======== ========= =========
Dividends per common share $ .04 $ .04 $ .12 $ .12
======== ======== ========= =========
See notes to consolidated condensed financial statements.
(4)
Richardson Electronics, Ltd. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
For the Nine-Month Periods Ended February 28, 1998 and 1997 (unaudited)
(in thousands)
1998 1997
-------- --------
Operating Activities:
Net income (loss) $6,730 $(3,316)
Non-cash charges to income:
Depreciation 2,606 1,973
Amortization of intangibles and financing
costs 366 1,091
Deferred income taxes 1,508 (3,026)
Contribution to employee stock ownership plan 285 800
Special charges - 11,000
-------- --------
Total non-cash charges 4,765 11,838
-------- --------
Changes in working capital, net of effects
of currency translation and business
acquisitions:
Accounts receivable (4,758) (3,549)
Inventories (862) (922)
Other current assets 68 (845)
Accounts payable 5,504 (974)
Other liabilities (2,460) (600)
-------- --------
Net changes in working capital (2,508) (6,890)
-------- --------
Net cash provided by operating activities 8,987 1,632
-------- --------
Financing Activities:
Proceeds from borrowings 14,531 56,918
Payments on debt (15,943) (40,123)
Proceeds from sale of common stock 1,765 218
Cash dividends (1,416) (1,389)
Net cash (used in) provided by financing -------- --------
activities (1,063) 15,624
-------- --------
Investing Activities:
Sales of investments 3,003 3,141
Purchases of investments (3,432) (3,181)
Business acquisitions (6,262) (9,409)
Capital expenditures (3,201) (2,947)
Other (1,158) (99)
-------- --------
Net cash used in investing activities (11,050) (12,495)
-------- --------
(Decrease) increase in cash and equivalents (3,126) 4,761
Cash and equivalents at beginning of year 10,012 6,784
-------- --------
Cash and equivalents at end of period $6,886 $11,545
======== ========
See notes to consolidated condensed financial statements.
(5)
Note A -- Basis of Presentation
The accompanying unaudited Consolidated Condensed Financial Statements
(Statements) have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q. In the opinion of management, all adjustments necessary for a fair
presentation of the results of operations for the periods covered have been
reflected in the Statements. Certain information and footnotes necessary for a
fair presentation of the financial position and results of operations in
conformity with generally accepted accounting principles have been omitted in
accordance with the aforementioned instructions. It is suggested that the
Statements be read in conjunction with the Financial Statements and Notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
May 31, 1997.
The marketing and sales operations of the Company are organized in four
strategic business units (SBUs): Electronic Device Group (EDG), Solid State and
Components (SSC), Display Products Group (DPG) and Security Systems Division
(SSD). References hereinafter are to the acronyms noted parenthetically.
Note B -- Income Taxes
The income tax provision for the nine-month period ended February 28, 1998 is
based on the estimated annual effective tax rate of 30%. The estimated
effective tax rate is lower than the statutory rate of 34% as a result of U.S.
foreign sales corporation benefits, partially offset by expected state income
taxes.
The income tax benefit on pre-tax losses for the nine-month period ended
February 28, 1997 is based on the estimated effective tax rate of 47% for
fiscal 1997 results. This rate exceeds the statutory rate of 34% due to state
income taxes, the utilization of previously unrecognized foreign net operating
loss carryforwards, and U.S. foreign sales corporation tax benefits.
Note C - Security Service International, Inc. Acquisition
Effective August 14, 1997, the Company acquired the assets and liabilities of
Security Service International, Inc. (SSI), a Canadian distributor of security
systems with annual sales of $20.0 million. The acquisition was accounted for
by the purchase method, and accordingly, the results of operations of SSI since
the date of acquisition have been included in the Consolidated Condensed
Statement of Operations.
(6)
Note D - Earnings per Share
Net income (loss) per share amounts and average shares outstanding for all
periods presented have been computed in accordance with Financial Accounting
Standards Board Statement (SFAS) No. 128, Earnings per Share. SFAS No. 128
established new guidelines effective December 1997 for the calculation and
presentation of earnings per share (EPS) data. Under SFAS 128, net income per
share is reported in two disclosures: basic earnings per share, which excludes
all common stock equivalents, and diluted earnings per share, which includes
all dilutive common stock equivalents. Net income (loss) per share amounts as
previously reported have been restated to comply with SFAS No. 128. The effect
of this restatement was not material. The per share amounts presented in the
Statement of Operations were based on the following data:
Three Months Nine Months
------------------ -----------------
1998 1997 1998 1997
-------- -------- -------- --------
Numerator for basic
and diluted EPS:
Net income (loss) before
extraordinary item $ 2,182 $(6,053) $ 6,730 $(2,828)
Extraordinary loss, net
of income taxes - (488) - (488)
-------- -------- -------- --------
Net income (loss) $ 2,182 $(6,541) $ 6,730 $(3,316)
======== ======== ======== ========
Denominator for basic EPS:
Shares outstanding at
beginning of period 12,106 11,898 11,964 11,806
Additional shares for
options exercised 92 10 132 80
------- -------- ------- -------
Weighted average
shares outstanding 12,198 11,908 12,096 11,886
======= ======== ======= =======
Denominator for diluted EPS:
Weighted average shares
Outstanding 12,198 11,908 12,096 11,886
Effect of dilutive stock
Options 428 - 380 -
------- -------- ------- -------
Adjusted average
shares outstanding 12,626 11,908 12,476 11,886
======= ======== ======= =======
Out-of-the-money (exercise price higher than market price) stock options and
the Company's 8 1/4% and 7 1/4% convertible debentures were excluded from the
calculation because they were anti-dilutive. In-the-money stock options were
excluded from the calculation for the fiscal 1997 third quarter and nine-month
periods because the Company had a net loss.
(7)
Results of Operations
Net sales for the third quarter of fiscal 1998 were $73.2 million, up 14.1%
from last year's third quarter of $64.2 million. Sales for the nine-month
period were $223.4 million, a 21.5% increase from $183.9 million in the prior
year. Sales gains include the effect of recent acquisitions, which added $5.4
million to the quarter and $21.4 million to the nine-month results.
Sales, percentage change from the prior year, gross margins and gross margin
percent of sales by SBU are summarized in the following table. Gross margins
for each SBU include provisions for returns and overstock. Provisions for LIFO,
manufacturing charges and other costs are included under the caption
"Corporate" (in thousands).
Sales Gross Margin
------------------------- ------------------------------
FY 1998 FY 1997 % FY 1998 GM% FY 1997 GM%
-------- -------- ------ -------- ----- -------- -----
Third Quarter (see note)
EDG $ 28,115 $ 28,467 -1.2% $ 8,893 31.6% $ 5,998 21.1%
SSC 21,427 19,438 10.2% 5,932 27.7% 3,405 17.5%
DPG 7,394 6,560 12.7% 2,565 34.7% 561 8.6%
SSD 16,260 9,698 67.7% 3,721 22.9% 2,140 22.1%
Corporate - - (251) (933)
-------- -------- ------ -------- ----- -------- -----
Total $ 73,196 $ 64,163 14.1% $20,860 28.5% $11,171 17.4%
======== ======== ======== ========
Nine Months
EDG $ 86,823 $ 84,647 2.6% $27,360 31.5% $22,585 26.7%
SSC 64,484 53,201 21.2% 18,459 28.6% 13,835 26.0%
DPG 22,617 21,737 4.0% 7,633 33.7% 5,875 27.0%
SSD 49,518 24,289 103.9% 11,457 23.1% 5,151 21.2%
Corporate - - (1,063) (754)
-------- -------- ------ -------- ----- -------- -----
Total $223,442 $183,874 21.5% $63,846 28.6% $46,692 25.4%
======== ======== ======== ========
Note: In the third quarter of fiscal 1997, the Company re-evaluated
its reserve estimates for inventory and accounts receivable in light
of changed market conditions and provided for severance and other
costs associated with a Corporate reorganization. The special charge
included in cost of sales was $7.2 million, which reduced gross margin
for EDG by $2.8 million, SSC by $2.4 million, DPG by $1.9 million and
SSD by $100,000.
Sales growth was led by SSD, with gains of 67.7% for the third quarter and
103.9% for the first nine months. SSD's sales growth includes the acquisition
of Burtek Systems Inc. in February 1997 and Security Service International,
(8)
Inc. in August 1997. Without the contribution from these acquisitions, SSD's
internally generated sales growth was 12.3% in the third quarter and 26.3% in
the nine-month period. Gross margins as a percent of sales in the third quarter
and nine-month period were 22.9% and 23.1%, respectively compared to the prior
year's third quarter and nine-month period of 23.1% and 21.6%, excluding the
special charges for overstock. Margin improvement results from higher margins
on proprietary and franchise product lines obtained with the acquisitions of
Burtek and SSI.
SSC sales increased 10.2% in the third quarter and 21.2% for the nine-month
period. SSC gross margin as a percent of sales were 27.7% for the quarter and
28.6% for the nine-month period, down from the prior third quarter and nine-
month period gross margin of 30.1% and 30.6%, respectively, excluding the
special charges. The margin change is primarily due to product mix and
competitive pressures.
EDG's sales decreased 1.2% for the third quarter and increased 2.6% for the
first nine months. EDG's gross margins as a percent of sales were 31.6% for the
quarter and 31.5% for nine-month period which increased compared to the prior
third quarter and nine-month period rates of 30.9% and 30.0%, respectively,
excluding the special charges. Gross margins improved as a result of changes in
pricing policies and higher efficiencies in x-ray tube loading operations.
DPG sales increased 12.7% for the quarter and 4.0% for the nine-month period.
Gross margins as a percent of sales declined to 34.7 % from 36.8% for the
quarter and to 33.7% from 35.6% for the nine-month period, excluding the
special charge. The sales gain and margin change both reflect the resumption of
sales to a major European customer.
Overall gross margins as a percent of sales in the third quarter and nine-month
period were 28.5% and 28.6%, respectively compared to 28.6% in the prior year
third quarter and 29.3% in the nine-month period, excluding the effect of the
special charges. Year-to-date margin comparisons are effected by changes in
product mix, as SSD with lower margins, contributed a proportionately greater
percentage to total sales.
On a geographic basis, the Company achieved sales growth of 27.2% in North
America, 18.5% in Europe, and 6.8% in the Rest of World for the nine-month
period. Excluding the effect of the aforementioned acquisitions, North America
achieved internally generated sales growth of 7.6% for the nine-month period.
Economic weakness in the Asia Pacific region during the third quarter of fiscal
1998 resulted in lower sales in that region compared to the same period in the
prior year.
(9)
Sales, percentage change from the prior year, gross margins and gross margin
percent of sales by area are summarized in the following table. Provisions for
LIFO, manufacturing charges and other costs are included under the caption
"Corporate" (in thousands).
Sales Gross Margin
------------------------ ----------------------------------
FY 1998 FY 1997 % FY 1998 GM% FY 1997 GM%
-------- --------- ---- --------- ----- -------- -----
(see note)
North America $ 46,209 $ 39,546 16.8% $12,928 28.0% $ 7,462 18.9%
Europe 16,336 13,499 21.0% 5,072 31.0% 2,870 21.3%
Rest of World 10,651 11,118 -4.2% 3,111 29.2% 1,772 15.9%
Corporate (251) (933)
-------- -------- ----- -------- ----- -------- -----
Total $ 73,196 $ 64,163 14.1% $20,860 28.5% $11,171 17.4%
======== ======== ======== ========
North America $139,128 $109,398 27.2% $39,446 28.4% $27,798 25.4%
Europe 48,498 40,929 18.5% 14,932 30.8% 11,568 28.3%
Rest of World 35,816 33,547 6.8% 10,531 29.4% 8,080 24.1%
Corporate (1,063) (754)
-------- -------- ---- -------- ----- -------- -----
Total $223,442 $183,874 21.5% $63,846 28.6% $46,692 25.4%
======== ======== ======= ========
Note. The special charge In the third quarter of fiscal 1997 included
in cost of sales reduced gross margins for North America by $4.1
million, Europe by $1.7 million and ROW by $1.4 million.
North America gross margins as a percent of sales were 28.0% for the quarter
and 28.4% for the nine-month period, down from the prior third quarter and
nine-month period gross margins of 29.1%, excluding the special charges. Gross
margins as a percent of sales for Europe were 31.0% for the quarter and 30.8%
for the nine-month period compared to 33.8% in the third quarter of the prior
year and 32.4% in the nine-month period in the prior year, excluding the
effects of the special charges. Rest of World gross margins as a percent of
sales were 29.2% for the quarter and 29.4% for the nine-month period compared
to 29.0% in the third quarter of the prior year and 28.4% in the nine-month
period in the prior year, excluding the effects of the special charges. The
margin comparisons reflect the higher contribution from SSD sales and
competitive pressures affecting SSC margins.
Selling, general and administrative (S,G&A) expenses for the third quarter
decreased to $16,009 compared with $19,123 in the prior year. The prior year
(10)
third quarter S,G&A included special charges of $3.8 million for accounts
receivable provisions, severance and other costs associated with a corporate
reorganization. As a percentage of sales, S,G&A was 21.9% for the quarter.
S,G&A as a percent of sales decreased to 21.7% for the nine-month period
compared to 23.2% in the prior year, excluding the effects of the special
charges.
Non-operating expenses for the third quarter decreased by $292,000, as gains
from investments offset higher interest expense. Higher interest expense
reflects increased borrowing levels due to business acquisitions. Investment
income was $255,000, compared to $82,000 in the prior year, reflecting realized
capital gains. Non-operating expenses for the first nine months increased
$199,000, due to higher interest expense.
Collectively, special charges effecting net income before extraordinary item in
the third quarter of fiscal 1997 amounted to $11.0 million pre-tax or $6.7
million, net of tax, reducing earnings per share by $.56. The Company also
recorded an $800,000 extraordinary charge for the write-off of unamortized debt
issuance costs attributable to the 7% convertible debentures, which were
exchanged for a new issue during the quarter. Net of tax, the charge was
$488,000, or $.04 per share.
Net income for the third quarter was $2.2 million or $.17 per share (diluted),
compared to a net loss of $6.5 million or $.55 per share in the prior year. Net
income for the nine-month period was $6.7 million, or $.54 per share, compared
to a net loss of $3.3 million, or $.28 per share in the prior year.
Liquidity and Capital Resources
Cash provided by operations for the nine-month period was $9.0 million in
fiscal 1998, compared to $1.6 million in 1997. Working capital increases
reduced cash by $2.5 million, compared to $6.9 million last year. Accounts
payable increased $5.5 million in 1998 and declined $1.0 million in 1997,
reflecting the timing of inventory purchases. Accounts receivable increased
$4.8 million in the current year, as a result of higher sales levels. Business
acquisitions, capital expenditures and dividend payments were funded primarily
by cash generated by operations and increases in borrowings. Interest payments
for the nine-month period were $7.5 million in fiscal 1998 and $6.5 million in
1997.
(11)
In August 1997, the Company acquired substantially all of the assets of SSI, a
Canadian distributor of security products. To complete the acquisition, the
Company's Canadian subsidiary amended its revolving credit and term loan
agreement from $6.0 million to $12.4 million.
Effective March 1, 1998, the Company replaced its $35.0 million floating-rate
bank term loan with a new $50.0 million floating-rate credit facility maturing
March 1, 2001. The Company's Canadian subsidiary revolving credit and term loan
agreement was amended to mature on the same date.
The Company's loan agreements contain various financial and operating covenants
which place restrictions on dividends and set benchmark levels for tangible net
worth, debt / tangible net worth ratio and annual debt service coverage. The
Company was in compliance with these covenants at February 28, 1998. The new
floating-rate credit facility contains restrictions relating to the purchase by
the Company of treasury stock or the payment of cash dividends. At March 1,
1998, $10.0 million was free of such restrictions. The Company's policy
regarding payment of dividends is reviewed periodically by the Board of
Directors in light of the Company's operating needs and capital structure.
Cash reserves, investments, funds from operations and credit lines are expected
to be adequate to meet the operational needs and future dividends of the
Company.
(12)
ITEM 1. LEGAL PROCEEDINGS
No material developments have occurred in the matters
reported under the category "Legal Proceedings" in the
Registrant's Report on Form 10-K for the fiscal year
ended May 31, 1997.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10(a) - Loan Agreement dated as of
March 1, 1998 among Richardson Electronics, Ltd.,
various lending institutions and American National
Bank and Trust Company of Chicago as Agent,
establishing a $50,000,000 Credit Facility.
Exhibit 10(b) - Amended and Restated Credit
Agreement made as of March 1, 1998 between
Burtek Systems Inc. as Borrower and First
Chicago NBD Bank, Canada as Lender and
Richardson Electronics, Ltd. and Guarantor.
Exhibit 10(c) - Employment Agreement dated as of
January 26, 1998 between the Company and Norman
Hilgendorf.
(13)
Exhibit 10(d) - Employment contract dated May 10,
1993 as amended March 23, 1998 between the Company
and Pierluigi Calderone.
Exhibit 27 - Financial Data Schedule
Financial Data Schedules restated for SFAS 128:
Exhibit 27.1 - May 31, 1995
Exhibit 27.2 - May 31, 1996
Exhibit 27.3 - May 31, 1997
Exhibit 27.4 - August 31, 1996
Exhibit 27.5 - August 31, 1997
Exhibit 27.6 - November 30, 1996
Exhibit 27.7 - November 30, 1997
Exhibit 27.8 - February 28, 1997
(b) Reports on Form 8-K - None
SIGNATURE
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 thereunto duly authorized.
RICHARDSON ELECTRONICS, LTD.
Date March 30, 1998 By /s/
William J. Garry
Vice President and
Chief Financial Officer
(14)
EXHIBIT 10(a)
LOAN AGREEMENT
Dated as of March 1, 1998
among
RICHARDSON ELECTRONICS, LTD.,
VARIOUS LENDING INSTITUTIONS,
and
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
AS AGENT
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . .-1-
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . -15-
2.1 Description of Facility. . . . . . . . . . . . . . -15-
2.2 Advances . . . . . . . . . . . . . . . . . . . . . -15-
2.2.1 Commitment . . . . . . . . . . . . . . . -15-
2.2.2 Termination. . . . . . . . . . . . . . . -16-
2.2.3 Ratable Loans. . . . . . . . . . . . . . -16-
2.2.4 Types of Advances. . . . . . . . . . . . -16-
2.2.5 Minimum Amount of Each Advance . . . . . -16-
2.2.6 Method of Selecting Types and Interest
Periods for New Advances. . . . . . . . . . . -16-
2.2.7 Conversion and Continuation of
Outstanding Advances. . . . . . . . . . . . . -17-
2.3 Facility Letters of Credit . . . . . . . . . . . . -17-
2.3.1 Obligation to Issue. . . . . . . . . . . -17-
2.3.2 Types and Amounts. . . . . . . . . . . . -17-
2.3.3 Conditions . . . . . . . . . . . . . . . -18-
2.3.4 Procedure for Issuance of Facility
Letters of Credit . . . . . . . . . . . . . . -18-
2.3.5 Reimbursement Obligations. . . . . . . . -19-
2.3.6 Participation. . . . . . . . . . . . . . -20-
2.3.7 Payment of Reimbursement Obligations . . -21-
2.4 General Facility Terms . . . . . . . . . . . . . . -22-
2.4.1 Fees . . . . . . . . . . . . . . . . . . -22-
2.4.1.2 Reductions in Aggregate Commitments . . . -22-
2.4.2 Optional Principal Payments; Mandatory
Principal Payments. . . . . . . . . . . . . . -23-
2.4.3 Applicable Margin. . . . . . . . . . . . -24-
2.4.4 Changes in Interest Rate, etc. . . . . . -24-
2.4.5 Rates Applicable After Default . . . . . -25-
2.4.6 Method of Payment. . . . . . . . . . . . -25-
2.4.7 Notes; Telephonic Notices. . . . . . . . -26-
2.4.8 Interest Payment Dates; Interest and Fee
Basis . . . . . . . . . . . . . . . . . . . . -26-
2.4.9 Notification of Advances, Interest
Rates, and
Prepayments . . . . . . . . . . . . . . . . . -26-
2.4.10 Lending Installations . . . . . . . . . . -26-
2.4.11 Non-Receipt of Funds by the Agent . . . . -27-
2.4.12 Withholding Tax Exemption . . . . . . . . -27-
ARTICLE III CHANGE IN CIRCUMSTANCES . . . . . . . . . . . -28-
3.1 Yield Protection . . . . . . . . . . . . . . . . . -28-
3.2 Changes in Capital Adequacy Regulations. . . . . . -28-
3.3 Availability of Types of Advances. . . . . . . . . -29-
3.4 Funding Indemnification. . . . . . . . . . . . . . -29-
3.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . -29-
3.6 Lender Statements; Survival of Indemnity . . . . . -30-
ARTICLE IV CONDITIONS PRECEDENT. . . . . . . . . . . . . -31-
4.1 Initial Advance and Facility Letter of Credit. . . -31-
4.2 Each Advance and Facility Letter of Credit . . . . -32-
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . -33-
5.1 Corporate Existence and Standing . . . . . . . . . -33-
5.2 Authorization and Validity . . . . . . . . . . . . -33-
5.3 No Conflict; Government Consent. . . . . . . . . . -33-
5.4 Financial Statements . . . . . . . . . . . . . . . -34-
5.5 Material Adverse Change. . . . . . . . . . . . . . -34-
5.6 Taxes. . . . . . . . . . . . . . . . . . . . . . . -34-
5.7 Litigation and Contingent Obligations. . . . . . . -34-
5.8 Subsidiaries . . . . . . . . . . . . . . . . . . . -35-
5.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . -35-
5.10 Accuracy of Information. . . . . . . . . . . . . . -35-
5.11 Regulation U . . . . . . . . . . . . . . . . . . . -35-
5.12 Material Agreements. . . . . . . . . . . . . . . . -35-
5.13 Compliance With Laws . . . . . . . . . . . . . . . -35-
5.14 Ownership of Properties. . . . . . . . . . . . . . -36-
5.15 Environmental Matters. . . . . . . . . . . . . . . -36-
5.16 Investment Company Act . . . . . . . . . . . . . . -36-
5.17 Public Utility Holding Company Act . . . . . . . . -36-
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . -36-
6.1 Financial Reporting. . . . . . . . . . . . . . . . -36-
6.2 Use of Proceeds. . . . . . . . . . . . . . . . . . -39-
6.3 Notice of Default. . . . . . . . . . . . . . . . . -39-
6.4 Conduct of Business. . . . . . . . . . . . . . . . -39-
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . -39-
6.6 Insurance. . . . . . . . . . . . . . . . . . . . . -39-
6.7 Compliance with Laws . . . . . . . . . . . . . . . -39-
6.8 Maintenance of Properties. . . . . . . . . . . . . -39-
6.9 Inspection . . . . . . . . . . . . . . . . . . . . -40-
6.10 Financial Covenants. . . . . . . . . . . . . . . . -40-
6.10.1 Consolidated Tangible Net Worth. . . . . . -40-
6.10.2 Senior Funded Debt to Cash Flow Ratio. . . -40-
6.10.3 Adjusted Interest Coverage Ratio . . . . . -41-
6.11 Intentionally Omitted. . . . . . . . . . . . . . . -41-
6.12 Indebtedness . . . . . . . . . . . . . . . . . . . -41-
6.13 Merger . . . . . . . . . . . . . . . . . . . . . . -42-
6.14 Sale of Assets . . . . . . . . . . . . . . . . . . -42-
6.15 Investments and Acquisitions . . . . . . . . . . . -42-
6.16 Liens. . . . . . . . . . . . . . . . . . . . . . . -43-
6.17 Prohibition of Negative Pledge.. . . . . . . . . . -44-
6.18 Affiliates . . . . . . . . . . . . . . . . . . . . -44-
6.19 Amendments to Agreements . . . . . . . . . . . . . -44-
6.20 Sale of Accounts . . . . . . . . . . . . . . . . . -45-
6.21 Limit on Senior Funded Debt. . . . . . . . . . . . -45-
6.22 Fiscal Year. . . . . . . . . . . . . . . . . . . . -45-
6.23 Limitation on the Creation of Subsidiaries . . . . -45-
6.24 Subsidiary Dividends . . . . . . . . . . . . . . . -45-
6.25 Repayment of Subordinated Debt . . . . . . . . . . -45-
ARTICLE VII DEFAULTS. . . . . . . . . . . . . . . . . . . -46-
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES -49-
8.1 Acceleration . . . . . . . . . . . . . . . . . . . -49-
8.2 Amendments . . . . . . . . . . . . . . . . . . . . -49-
8.3 Preservation of Rights . . . . . . . . . . . . . . -50-
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . -50-
9.1 Survival of Representations. . . . . . . . . . . . -50-
9.2 Governmental Regulation. . . . . . . . . . . . . . -50-
9.3 Taxes. . . . . . . . . . . . . . . . . . . . . . . -50-
9.4 Headings . . . . . . . . . . . . . . . . . . . . . -51-
9.5 Entire Agreement . . . . . . . . . . . . . . . . . -51-
9.6 Several Obligations; Benefits of this Agreement. . -51-
9.7 Expenses; Indemnification. . . . . . . . . . . . . -51-
9.8 Numbers of Documents . . . . . . . . . . . . . . . -51-
9.9 Accounting . . . . . . . . . . . . . . . . . . . . -52-
9.10 Severability of Provisions . . . . . . . . . . . . -52-
9.11 Nonliability of Lenders. . . . . . . . . . . . . . -52-
9.12 Confidentiality. . . . . . . . . . . . . . . . . . -52-
9.13 Nonreliance. . . . . . . . . . . . . . . . . . . . -52-
<PAGE>
ARTICLE X THE AGENT . . . . . . . . . . . . . . . . . . -53-
10.1 Appointment; Nature of Relationship. . . . . . . . -53-
10.2 Powers . . . . . . . . . . . . . . . . . . . . . . -53-
10.3 General Immunity . . . . . . . . . . . . . . . . . -53-
10.4 No Responsibility for Loans, Recitals, etc.. . . . -53-
10.5 Action on Instructions of Lenders. . . . . . . . . -54-
10.6 Employment of Agents and Counsel . . . . . . . . . -54-
10.7 Reliance on Documents; Counsel . . . . . . . . . . -54-
10.8 Agent's Reimbursement and Indemnification. . . . . -54-
10.9 Notice of Default. . . . . . . . . . . . . . . . . -55-
10.10 Rights as a Lender. . . . . . . . . . . . . . -55-
10.11 Lender Credit Decision. . . . . . . . . . . . -55-
10.12 Successor Agent . . . . . . . . . . . . . . . -55-
ARTICLE XI SETOFF; RATABLE PAYMENTS. . . . . . . . . . . -56-
11.1 Setoff . . . . . . . . . . . . . . . . . . . . . . -56-
11.2 Ratable Payments . . . . . . . . . . . . . . . . . -56-
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS;
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . -57-
12.1 Successors and Assigns . . . . . . . . . . . . . . -57-
12.2 Participation. . . . . . . . . . . . . . . . . . . -57-
12.2.1 Permitted Participants; Effect . . . . . . -57-
12.2.2 Voting Rights. . . . . . . . . . . . . . . -58-
12.2.3 Benefit of Setoff. . . . . . . . . . . . . -58-
12.3 Assignments. . . . . . . . . . . . . . . . . . . . -58-
12.3.1 Permitted Assignments. . . . . . . . . . . -58-
12.3.2 Effect; Effective Date . . . . . . . . . . -59-
12.4 Dissemination of Information . . . . . . . . . . . -59-
12.5 Tax Treatment. . . . . . . . . . . . . . . . . . . -59-
ARTICLE XIII NOTICES. . . . . . . . . . . . . . . . . . . . -60-
13.1 Notices. . . . . . . . . . . . . . . . . . . . . . -60-
13.2 Change of Address. . . . . . . . . . . . . . . . . -60-
ARTICLE XIV COUNTERPARTS . . . . . . . . . . . . . . . . . -60-
ARTICLE XV CHOICE OF LAW, CONSENT TO JURISDICTION,
WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . -60-
15.1 Choice of Law. . . . . . . . . . . . . . . . . . . -60-
15.2 Consent to Jurisdiction. . . . . . . . . . . . . . -61-
15.3 Waiver of Jury Trial . . . . . . . . . . . . . . . -61-
SCHEDULE 1 Lenders and Commitments
SCHEDULE 2 Lender Addresses
SCHEDULE 5.5 Material Adverse Changes since August 31,
1997
SCHEDULE 5.6 Exceptions to Tax Representations
SCHEDULE 5.7 Pending Litigation
SCHEDULE 5.8 Borrower's Subsidiaries
SCHEDULE 5.9 Exceptions to ERISA Representation with
respect to Plan Withdrawals
SCHEDULE 5.14 Exceptions to Representation Concerning
Ownership of Properties
SCHEDULE 5.15 Exceptions to Representation Concerning
Environmental Matters
SCHEDULE 6.12 Permitted Indebtedness
SCHEDULE 6.15(viii) Description of Existing
Investments
SCHEDULE 6.16 Description of Existing Liens
EXHIBIT A Form of Compliance Certificate
EXHIBIT B Form of Note
EXHIBIT C [Intentionally Omitted]
EXHIBIT D Form of Facility Letter of Credit Request
EXHIBIT E Form of Opinion of Outside Counsel For
Borrower
EXHIBIT F Form of Written Money Transfer Instructions
EXHIBIT G Form of Assignment and Assumption Agreement
LOAN AGREEMENT
This Loan Agreement (this "Agreement"), dated as of March 1,
1998, is among RICHARDSON ELECTRONICS, LTD., a Delaware
corporation (the "Borrower"), the lenders listed from time to
time on Schedule I hereto (each a "Lender" and, collectively, the
"Lenders"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, as Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have
the meanings herein specified unless the context otherwise
requires:
"Acquisition" means any transaction, or any series of
related transactions, consummated on or after the date of this
Agreement, by which the Borrower or any of its Subsidiaries (i)
acquires any going concern business or all or substantially all
of the assets of any firm, corporation or division thereof,
whether through the purchase of assets, merger or otherwise or
(ii) directly or indirectly acquires (in one transaction or as
the most recent transaction in a series of transactions) at least
a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason
of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding partnership interests of a
partnership or membership interests in a limited liability
company.
"Adjusted Cash Flow" means, as at any date of determination
thereof, Total Cash Flow less Capital Expenditures.
"Adjusted Interest Coverage Ratio" means, as at any date of
determination thereof, the quotient of (i) Adjusted Cash Flow
over (ii) Interest Expense, in each case calculated for the
period of the trailing four consecutive fiscal quarters ending on
or most recently ended prior to such date of determination.
"Advance" means a borrowing hereunder (or, in the case of a
Eurodollar Advance, the conversion or continuation thereof)
consisting of the aggregate amount of the several Loans made by
some or all of the Lenders to the Borrower on the same Borrowing
Date (or date of conversion or continuation), of the same Type
and, in the case of a Eurodollar Advance, for the same Interest
Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control
with such Person. A Person shall be deemed to control another
Person if the controlling Person owns 10% or more of any class of
voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power
to direct or cause the direction of the management or policies of
the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Agent" means American National Bank and Trust Company of
Chicago in its capacity as agent for the Lenders pursuant to
Article X, and not in its individual capacity as a Lender, and
any successor Agent appointed pursuant to Article X.
"Aggregate Available Loan Commitment" means, at any date of
determination thereof, the Aggregate Commitment minus the sum of
(i) the Facility Letter of Credit Obligations then outstanding
and (ii) the aggregate principal amount of all Advances then
outstanding.
"Aggregate Commitment" means the aggregate of the
Commitments of all the Lenders, as reduced from time to time
pursuant to the terms hereof.
"Agreement" means this loan agreement, as it may be amended
or modified and in effect from time to time.
"Alternate Base Rate" means, for any day, a rate of interest
per annum equal to the higher of (i) the Base Rate for such day
and (ii) the sum of the Federal Funds Effective Rate for such day
plus 1/2% per annum.
"ANB" means American National Bank and Trust Company of
Chicago in its individual capacity, and its successors.
"Applicable Margin" means, at any date of determination
thereof, the rate per annum calculated in accordance with Section
2.4.3.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Authorized Officer" means any of the Chairman, President,
Executive Vice President, Vice President and Chief Financial
Officer, Secretary and Treasurer of the Borrower, or any other
senior officer of the Borrower designated as such in writing to
the Agent by the Borrower, in each case acting singly.
"Base Rate" means a rate per annum equal to the base rate of
interest announced by ANB from time to time, changing when and as
said base rate changes. The Base Rate is a reference rate and
does not necessarily represent the lowest or best rate actually
charged to any customer. ANB may make commercial loans or other
loans at rates of interest at, above or below the Base Rate.
"Benefit Plan" means each employee benefit plan as defined
in Section 3(3) of ERISA.
"Borrower" means Richardson Electronics, Ltd., a Delaware
corporation, and, subject to Section 8.2 herein, its successors
and assigns.
"Borrowing Date" means a date on which an Advance is made
hereunder.
"Business Day" means (i) with respect to any borrowing,
payment or rate selection of Eurodollar Advances, a day (other
than a Saturday or Sunday) on which banks generally are open in
Chicago and New York for the conduct of substantially all of
their commercial lending activities and on which dealings in
United States dollars are carried on in the London interbank
market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in Chicago
for the conduct of substantially all of their commercial lending
activities.
"Borrowing Notice" is defined in Section 2.2.6.
"Canadian Borrower" shall mean Burtek Systems, Inc., a
Canadian corporation.
"Canadian Credit Agreement" means that certain Credit
Agreement made as of February 18, 1997, between Richardson
Electronics Acquisition Corp. and First Chicago NBD Bank, Canada,
as the same has been amended by (i) First Amending Agreement made
as of August 14, 1997 among Burtek Systems, Inc., First Chicago
NBD Bank, Canada and Richardson Electronics, Ltd., (ii) Second
Amending Agreement made as of August 22, 1997, among Burtek
Systems, Inc., First Chicago NBD Bank, Canada, and Richardson
Electronics, Ltd., and Third Amending Agreement made as of March
1, 1998 among Burtek Systems, Inc., First Chicago NBD Bank,
Canada and Richardson Electronics, Ltd., and as the same may be
further amended or modified and in effect from time to time.
"Canadian Dollars" means lawful money of Canada.
"Canadian Guaranty" means that certain Guaranty originally
dated February 28, 1997, as amended, restated and delivered as of
March 1, 1998, executed by the Borrower in favor of First Chicago
NBD Bank, Canada, as the same may be amended or modified and in
effect from time to time.
"Canadian Lender" means First Chicago NBD Bank, Canada, and
its successors and assigns.
"Canadian Loan Documents" has the meaning attributed to the
term "Documents" in the Canadian Credit Agreement.
"Canadian Loans" has the meaning attributed to the term
"Loans" in the Canadian Credit Agreement.
"Capital Expenditures" means, without duplication, any
expenditures for any purchase or other acquisition of any asset
which would be classified as a fixed or capital asset on a
consolidated balance sheet of the Borrower and its Subsidiaries
prepared in accordance with GAAP.
"Capitalized Lease" of a Person means any lease of Property
by such Person as lessee which would be capitalized on a balance
sheet of such Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" of a Person means the amount
of the obligations of such Person under Capitalized Leases which
would be shown as a liability on a balance sheet of such Person
prepared in accordance with GAAP.
"Change" means (i) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (ii) any
adoption of or change in any other law, governmental or quasi-governmental
rule, regulation, policy, guideline, interpretation,
or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender.
"Change in Control" means Edward J. Richardson shall cease
to own (beneficially or of record), free and clear of any
prohibition or restriction on the transfer or exercise of any
voting rights in respect thereof other than such restrictions in
favor of the Agent and/or the Lenders, in the aggregate at least
the minimum number of outstanding shares of voting stock of the
Borrower required to elect a majority of the Borrower's Board of
Directors and control any amendment of the Borrower's bylaws in
an election in which all outstanding shares entitled to vote are
in fact voted.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Commercial Letter of Credit" means any Facility Letter of
Credit that is a commercial or trade Letter of Credit.
"Commitment" means, for each Lender, the obligation of such
Lender to make Loans and purchase participation in Facility
Letters of Credit in an aggregate amount not exceeding the amount
set forth opposite its name on Schedule 1 hereto or as set forth
in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 12.3.2, as such amount may
be modified from time to time pursuant to the terms hereof.
"Compliance Certificate" means a compliance certificate,
substantially in the form of Exhibit A hereto, signed by the
Chief Financial Officer or Treasurer of the Borrower, showing the
calculations necessary to determine compliance with this
Agreement and stating that no Default or Unmatured Default
exists, or if any Default or Unmatured Default exists, stating
the nature and status thereof.
"Condemnation" is defined in Section 7.8.
"Consolidated Tangible Net Worth" means, as at any date of
determination thereof, the consolidated stockholders' equity of
the Borrower and its Subsidiaries, plus Subordinated Debt and
less the sum of the consolidated Intangible Assets of the
Borrower and its Subsidiaries, all determined as of such date in
accordance with GAAP.
"Contingent Obligation" of a Person means, without
duplication, any agreement, undertaking or arrangement by which
such Person directly or indirectly assumes guarantees, endorses,
contingently agrees to purchase or provide funds for the payment
of, or otherwise becomes or is contingently liable upon, the
obligation or liability of any other Person, or agrees to
maintain the net worth or working capital or other financial
condition of any other Person, or otherwise assures any creditor
of such other Person against loss, including, without limitation,
any operating agreement, comfort letter, take-or-pay contract or
application or reimbursement agreement for a Letter of Credit but
excluding any endorsement of instruments for deposit or
collection in the ordinary course of business.
"Controlled Group" means all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower or any of its Subsidiaries, are treated as a single
employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section
2.2.7.
"Credit Party" means the Borrower and each Subsidiary
Guarantor.
"Debentures" means the Borrower's 7-1/4% Convertible
Subordinated Debentures due December 15, 2006 and 8-1/4%
Convertible Senior Subordinated Debentures due June 15, 2006.
"Default" means an event described in Article VII.
"Designated Accounts" means accounts not over 60 days past
due owing by a Person (i) residing, located or having its
principal activities or place of business in the United States of
America or any province of Canada other than Quebec, and (ii)
subject to service of process within the continental United
States of America or any province of Canada other than Quebec;
provided that the amount of Designated Accounts owed from all
Persons located in Canada shall not exceed $8 million in Canadian
Dollars at any one time.
"Designated Inventory" means inventory located within the
continental United States of America or any province of Canada
other than Quebec; provided that the aggregate amount of
Designated Inventory located in Canada shall not exceed $4
million in Canadian Dollars (valued at cost) at any one time.
"Dollars", "U.S. Dollars" and "$" mean dollars in lawful
currency of the United States of America.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, injunctions,
permits, grants, franchises, licenses, agreements and other
governmental restrictions relating to (i) the protection of the
environment, (ii) the effect of the environment on human health,
(iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water,
ground water or land, or (iv) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation
issued thereunder.
"Eurodollar Advance" means an Advance which bears interest
at a Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar
Advance for the relevant Eurodollar Interest Period, the rate
determined by the Agent to be the rate at which deposits in U.S.
Dollars are offered by ANB to first-class banks in the London
interbank market at approximately 11 a.m. (London time) two
Business Days prior to the first day of such Eurodollar Interest
Period, in the approximate amount of ANB's relevant Eurodollar
Loan.
"Eurodollar Interest Period" means, with respect to a
Eurodollar Advance, a period of one, two, three or six months
commencing on a Business Day selected by the Borrower pursuant to
this Agreement. Such Eurodollar Interest Period shall end on
(but exclude) the day which corresponds numerically to such date
one, two, three or six months thereafter, provided, however, that
if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Eurodollar Interest
Period shall end on the last Business Day of such next, second,
third or sixth succeeding month. If a Eurodollar Interest Period
would otherwise end on a day which is not a Business Day, such
Eurodollar Interest Period shall end on the next succeeding
Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Eurodollar
Interest Period shall end on the immediately preceding Business
Day. "Eurodollar Interest Period" may be amended by the written
consent of all of the Lenders and Borrower to include such other
periods not otherwise included above.
"Eurodollar Loan" means a Loan which bears interest at a
Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar
Advance for the relevant Eurodollar Interest Period:
(A) for the period from March 1, 1998 to and including May
30, 1998, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar
Interest Period, over (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such
Eurodollar Interest Period, plus (ii) one and one-quarter percent
(1.25%);
(B) for the period from May 31, 1998 until the last
Business Day on which a Eurodollar Interest Period may
commence hereunder, the sum of (i) the quotient of (a)
the Eurodollar Base Rate applicable to such Eurodollar
Interest Period, over (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such
Eurodollar Interest Period, plus (ii) the Applicable
Margin in effect two Business Days prior to the first
day of such Eurodollar Interest Period.
In all circumstances, the Eurodollar Rate shall be rounded to the
next higher multiple of 1/16 of 1% if the rate is not such a
multiple.
"Excluded Taxes" means, in the case of each Lender or
applicable Lending Installation and the Agent, taxes imposed on
its overall net income, and franchise taxes imposed on it, by (i)
the jurisdiction under the laws of which such Lender or the Agent
is incorporated or organized, or (ii) the jurisdiction in which
the Agent's or such Lender's principal executive office or such
Lender's applicable Lending Installation is located.
"Facility Letter of Credit Obligations" means, at any date
of determination thereof, all liabilities, whether actual or
contingent, of the Borrower in respect of the Facility Letters of
Credit, including, without limitation, the sum of (i)
Reimbursement Obligations and (ii) the aggregate undrawn face
amount of any outstanding Facility Letters of Credit.
"Facility Letter of Credit Request" is defined in Section
2.3.4.
"Facility Letters of Credit" means, collectively, the
Letters of Credit issued by the Issuer pursuant to Section 2.3.
"Facility Termination Date" means March 1, 2001 or any
earlier date on which the Aggregate Commitment is reduced to zero
or otherwise terminated pursuant to the terms hereof.
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such
day, as published for such day (or, if such day is not a Business
Day, for the immediately 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 at approximately 10 a.m. (Chicago time) on such day on
such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by the Agent in its sole
discretion.
"Fiscal Year" means, with respect to the Borrower or any of
its Subsidiaries, the fiscal period beginning on June 1 and
ending on May 31 of each calendar year.
"Floating Rate" means the Alternate Base Rate, changing when
and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears
interest at the Floating Rate.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time; it being
understood and agreed that determinations in accordance with GAAP
for purposes of Sections 2.4.3 and 6.10, including defined terms
as used therein, shall utilize accounting principles and policies
in effect at the time of the preparation of, and in conformity
with those used to prepare, the historical financial statements
delivered to the Lenders pursuant to Section 6.1.
"Gross Up Event" means the occurrence of any of the events
stated in Sections 3.1 or 3.2 hereof.
"Indebtedness" of a Person means such Person's (i)
obligations for borrowed money, (ii) obligations representing the
deferred purchase price of Property or services (other than
accounts payable arising in the ordinary course of such Person's
business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens other than
Liens for inventory purchases arising in the normal course of
business which Liens are not evidenced by any filings (under the
UCC or otherwise) and do not secure an amount exceeding
$2,500,000 in the aggregate at any one time outstanding, or
payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, (iv) obligations
which are evidenced by notes, acceptances, or other instruments,
(v) Capitalized Lease Obligations, (vi) Rate Hedging Obligations,
(vii) Contingent Obligations and (viii) Subordinated Debt.
"Intangible Assets" means the amount (to the extent
reflected in determining consolidated stockholders' equity) of
(i) all write-ups in the book value of any asset owned or
acquired by the Borrower or a Subsidiary, (ii) all goodwill,
covenants not to compete, prepayments, deferred charges,
franchises, patents, trademarks, service marks, trade names,
brand names and copyrights, (iii) all deferred financing costs
(including, but not limited to, unamortized debt discount and
expense, organization expense and experimental and development
expenses, but excluding prepaid expenses), and (iv) leasehold
improvements not recoverable at the expiration of a lease.
"Interest Expense" means, for any period of calculation, all
interest expense on Indebtedness, calculated for such period for
the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Interest Period" means a Eurodollar Interest Period.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers, employees
and sales agents made in the ordinary course of business),
extension of credit (other than accounts receivable arising in
the ordinary course of business on terms customary in the trade)
or contribution of capital by such Person, stocks, bonds, mutual
funds, partnership interests, notes, debentures or other
securities owned by such Person.
"Issuance Date" means, with respect to any Facility Letter
of Credit, the date on which such Facility Letter of Credit is
issued hereunder.
"Issuance Fee" means, with respect to any Facility Letter of
Credit on the Issuance Date thereof, such issuance fee as the
Borrower and the Issuer of such Facility Letter of Credit shall
have agreed upon in writing.
"Issuer" is defined in Section 2.3.1.
"Lender" is defined in the preamble to this Agreement.
"Lending Installation" means, with respect to a Lender or
the Agent, any office, branch, subsidiary or affiliate of such
Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or
similar instrument which is issued upon the application of such
Person or upon which such Person is an account party or for which
such Person is in any way liable.
"Level I Status" exists at any date if the Senior Funded
Debt to Cash Flow Ratio is greater than or equal to 2.01:1.00.
"Level II Status" exists at any date if the Senior Funded
Debt to Cash Flow Ratio is greater than or equal to 1.51:1.0 but
less than 2.01:1.00.
"Level III Status" exists at any date if the Senior Funded
Debt to Cash Flow Ratio is greater than or equal to 1.00:1.00 but
less than 1.51:1.00.
"Level IV Status" exists at any date if none of Level I
Status, Level II Status, or Level III Status exists at such date.
"Lien" means any lien (statutory or other), mortgage,
pledge, hypothecation, filed financing statement, assignment,
encumbrance or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other
title retention agreement).
"Loan" means, with respect to a Lender, a loan made by such
Lender pursuant to Article II (or any conversion or continuation
thereof).
"Loan Documents" means this Agreement, the Notes, and any
other documents and agreements contemplated hereby and executed
by the Borrower or a Subsidiary in favor of the Agent or any
Lender.
"Material Adverse Effect" means a material adverse effect on
(i) the business, Property, financial condition or results of
operations of the Borrower or any of its Subsidiaries, (ii) the
ability of the Borrower to perform its respective obligations
under any of the Loan Documents, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or
remedies of the Agent or the Lenders thereunder.
"Material Indebtedness" is defined in Section 7.5.
"Multiemployer Plan" means a Plan defined in Section 3(37)
of ERISA to which the Borrower or any member of the Controlled
Group may have any liability.
"Net Income" shall mean, for any period, the net income (or
loss), after provision for taxes, of the Borrower and its
Subsidiaries on a consolidated basis for such period taken as a
single accounting period but excluding any unrealized losses and
gains for such period resulting from mark-to-market of Rate
Hedging Agreements.
"Note" means a promissory note, substantially in the form of
Exhibit B hereto, with appropriate insertions, duly executed and
delivered to the Agent by the Borrower for the account of a
Lender and payable to the order of such Lender in the amount of
its Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Loans, all accrued and unpaid fees arising
under the Loan Documents, all Facility Letter of Credit
Obligations, and all expenses, reimbursements, indemnities and
other obligations of the Borrower to the Lenders or to any
Lender, the Agent or any indemnified party hereunder arising
under the Loan Documents.
"Other Taxes" is defined in Section 3.5(ii).
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last Business Day of each of
February, May, August and November.
"Permitted Acquisition" means, at any time of determination,
any Acquisition by the Borrower or any Subsidiary of a business
or entity in substantially the same field of enterprise as the
Borrower or such Subsidiary with respect to which each of the
following requirements is then met:
(i) Such Acquisition has been approved and recommended
by the board of directors of the entity to be
acquired.
(ii) The Borrower or such Subsidiary shall have given
the Agent notice of such Acquisition within ten
(10) days prior to or following the consummation
thereof.
(iii) The aggregate consideration (including, without
limitation, the purchase price therefor and any
assumption of debt (other than accounts payable
and deferred revenue obligations arising in the
ordinary course of business)) for such Acquisition
(singly or together with a group of related
Acquisitions), less the amount of cash received by
the Borrower or such Subsidiary from the entity
being acquired in connection with such
Acquisition, does not exceed $15 million during
the Borrower's rolling four consecutive trailing
fiscal quarters.
(iv) Prior to and after giving effect to such
Acquisition, no Default or Unmatured Default shall
exist.
"Person" means any natural person, corporation, limited
liability company, firm, joint venture, partnership, association,
enterprise, trust or other entity or organization, or any
government or political subdivision or any agency, department or
instrumentality thereof.
"PBGC means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Plan" means an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 302 of ERISA or Section 412 of the Code
as to which the Borrower or any member of the Controlled Group
may have any liability.
"Pro Rata Share" means, with respect to each Lender at any
time, the ratio such Lender's Commitment bears to the Aggregate
Commitment.
"Property" of a Person means any and all property, whether
real, personal, tangible, intangible, or mixed, of such Person,
or other assets owned, leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Agreement" means an agreement, device or
arrangement providing for payments which are related to
fluctuations of interest rates, exchange rates or forward rates.
including, but not limited to, dollar-denominated or cross-currency
interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts
and warrants.
"Rate Hedging Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all Rate Hedging
Agreements, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Hedging
Agreement.
"Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor thereto or other regulation or official
interpretation of said Board of Governors relating to reserve
requirements applicable to member banks of the Federal Reserve
System.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by
banks for the purpose of purchasing or carrying margin stocks
applicable to member banks of the Federal Reserve System.
"Reimbursement Obligations" means, at any time, the
aggregate of the obligations of the Borrower to the Issuer and
the Lenders in respect of all unreimbursed payments or
disbursements made by the Issuer and the Lenders under or in
respect of drawings under the Facility Letters of Credit.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such
section, with respect to a Plan, excluding, however, such events
as to which the PBGC by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure
to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event
regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Required Lenders" means, at any time, Lenders in the
aggregate having at least 66-2/3% of the Aggregate Commitment or,
subsequent to the Facility Termination Date, Lenders in the
aggregate holding at least 66-2/3% of the sum of (i) the
aggregate unpaid principal amount of the outstanding Advances and
(ii) the Facility Letter of Credit Obligations.
"Reserve Requirement" means, with respect to a Eurodollar
Interest Period, the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on Eurocurrency liabilities.
"Risk-Based Capital Guidelines" means (i) the risk-based
capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and
Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition
rules, and any amendments to such regulations adopted prior to
the date of this Agreement.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Senior Funded Debt" means the sum of all Indebtedness that
(i) is not Subordinated Debt and (ii) by its terms is or will
become interest bearing, including, but not limited to,
Capitalized Lease Obligations and the Obligations hereunder.
"Senior Funded Debt to Cash Flow Ratio" means, as at any
date of determination thereof, the ratio of (i) Senior Funded
Debt outstanding at the end of the fiscal quarter ending on or
most recently ended prior to such date of determination to (ii)
Total Cash Flow, in each case calculated as at such date of
determination for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP, and with respect to
Total Cash Flow calculated for the period of four consecutive
fiscal quarters ending on or most recently ended prior to such
date of determination.
"Single Employer Plan" means a Plan maintained by the
Borrower or any member of the Controlled Group for employees of
the Borrower or any member of the Controlled Group.
"Standby Letter of Credit" means any Facility Letter of
Credit that is an irrevocable standby Letter of Credit.
"Status" means, at any date of determination, whichever of
Level I Status, Level II Status, Level III Status or Level IV
Status exists at such time.
"Subordinated Debt" means the Debentures and any unsecured
Indebtedness of the Borrower (a) no part of the principal of
which is stated to be payable or is required to be paid (whether
by way of mandatory sinking fund, mandatory redemption, mandatory
prepayment or otherwise) prior to the Facility Termination Date,
and the payment of the principal of and interest on which and
other obligations of the Borrower in respect thereof are
subordinated to the prior payment in full of principal of and
interest (including post-petition interest) on the Notes and all
other obligations and liabilities of the Borrower to the Agent
and the Lenders hereunder on terms and conditions first approved
in writing by the Required Lenders and (b) otherwise containing
terms, covenants and conditions satisfactory in form and
substance to the Required Lenders, as evidenced by their prior
written approval thereof.
"Subsidiary" of any Person means (i) any corporation more
than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at
the time stock of any class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership,
association (including business trusts), joint venture, limited
liability company or other entity in which such Person directly
or indirectly through Subsidiaries, has more than 50% voting or
equity interest at the time.
"Substantial Portion" means, with respect to the Property of
the Borrower and its Subsidiaries, Property which (i) represents
more than five percent (5%) of the consolidated assets of the
Borrower and its Subsidiaries as at the last day of the calendar
month ending on or most recently ended prior to the date on which
such determination is made, or (ii) is responsible for more than
five percent (5%) of the consolidated net sales or of the
consolidated net income of the Borrower and its Subsidiaries for
the period of twelve complete consecutive calendar months ending
on or most recently ended prior to the date on which such
determination is made.
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and any and
all liabilities with respect to the foregoing, but excluding
Excluded Taxes.
"Total Cash Flow" means, as at any date of determination
thereof, the sum of Net Income, Interest Expense, taxes,
depreciation and amortization in each case calculated as at such
date of determination for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP. Neither cash nor
non-cash charges reflecting extraordinary terms, unusual items,
or one time charges will be added back for the purpose of Total
Cash Flow calculation.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a
Eurodollar Advance or a Floating Rate Advance.
"Unfunded Liabilities" means the amount (if any) by which
the present value of all vested and unvested accrued benefits
under all Single Employer Plans exceeds the fair market value of
all such Plan assets allocable to such benefits, all determined
as of the then most recent valuation date for such Plans as if
such Plans were terminating on such date under Section 4041 of
ERISA.
"Unmatured Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
"Wholly-Owned Subsidiary" of a Person means (i) any
Subsidiary all of the outstanding voting securities of which
shall at the time be owned or controlled, directly or indirectly,
by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership,
association, joint venture or similar business organization 100%
of the ownership interests having ordinary voting power of which
shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1 Description of Facility. Upon the terms and subject to
the conditions set forth in this Agreement, the Lenders hereby
grant to the Borrower a revolving credit facility pursuant to
which: (i) each Lender severally agrees to make Loans to the
Borrower in accordance with Section 2.2; and (ii) each Lender
severally agrees to purchase participation in Facility Letters of
Credit in accordance with Section 2.3; provided, however, that in
no event may the sum of (1) the aggregate principal amount of all
outstanding Advances and (2) the Facility Letter of Credit
Obligations exceed the Aggregate Commitment.
2.2 Advances.
2.2.1 Commitment. From and including the date of
this Agreement and prior to the Facility Termination Date, each
Lender severally agrees, on the terms and conditions set forth in
this Agreement, to make Loans to the Borrower from time to time
in amounts not to exceed in the aggregate at any one time
outstanding (after giving effect to the intended use of proceeds
of any Loan used to repay any outstanding Reimbursement
Obligations) the amount of its Commitment. Subject to the terms
of this Agreement, the Borrower may borrow, repay, and reborrow
from each Lender at any time prior to the Facility Termination
Date. The Commitment of each Lender to lend hereunder shall
expire on the Facility Termination Date.
2.2.2 Termination. All outstanding Advances and
all other unpaid Obligations owing to each Lender shall be paid
in full by the Borrower on the Facility Termination Date.
2.2.3 Ratable Loans. Each Advance hereunder shall
consist of Loans made from the several Lenders ratably in
proportion to their respective Pro Rata Share.
2.2.4 Types of Advances. The Advances may be
Eurodollar Advances, Floating Rate Advances or a combination
thereof, selected by the Borrower in accordance with Sections
2.2.6 and 2.2.7.
2.2.5 Minimum Amount of Each Advance. Each
Eurodollar Advance shall be in the minimum amount of $1,000,000
(and in multiples of $100,000 if in excess thereof), and each
Floating Rate Advance shall be in the minimum amount of $300,000
(and in multiples of $100,000 if in excess thereof); provided,
however, that any Floating Rate Advance may be in the amount of
the unused Aggregate Available Loan Commitment should the
Aggregate Available Loan Commitment be less than $300,000.
2.2.6 Method of Selecting Types and Interest
Periods for New Advances. The Borrower shall select the Type of
Advance and, in the case of each Eurodollar Advance, the
Eurodollar Interest Period applicable to each such Eurodollar
Advance from time to time. The Borrower shall give the Agent
irrevocable notice (a "Borrowing Notice") not later than 10:00
a.m. (Chicago time) on the Borrowing Date of each Floating Rate
Advance and not later than 12:00 noon (Chicago time) at least
three (3) Business Days before the Borrowing Date for each
Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day,
of such Advance;
(ii) the aggregate amount of such Advance;
(iii) the Type of Advance selected; and
(iv) in the case of each Eurodollar Advance, the
Eurodollar Interest Period applicable thereto
(which may not end after the Facility Termination
Date).
Not later than noon (Chicago time) on each Borrowing Date, each
Lender shall make available its Loan or Loans, in funds
immediately available in Chicago to the Agent at its address
specified pursuant to Article XIII. The Agent will make the
funds so received from the Lenders available to the Borrower at
the Agent's aforesaid address.
2.2.7 Conversion and Continuation of Outstanding
Advances. Floating Rate Advances shall continue as Floating Rate
Advances unless and until such Floating Rate Advances are
converted into Eurodollar Advances. Each Eurodollar Advance
shall continue as a Eurodollar Advance until the end of the then
applicable Eurodollar Interest Period therefor, at which time
such Eurodollar Advance shall be automatically converted into a
Floating Rate Advance unless the Borrower shall have given the
Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Eurodollar Interest Period,
such Eurodollar Advance either continue as a Eurodollar Advance
for the same or another Eurodollar Interest Period or be
converted into a Floating Rate Advance. Subject to the terms of
Section 2.2.5, the Borrower may elect from time to time to
convert all or any part of an Advance of either Type into the
other Type of Advance; provided that any conversion of any
Eurodollar Advance shall be made on, and only on, the last day of
the Eurodollar Interest Period applicable thereto. The Borrower
shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an
Advance or continuation of a Eurodollar Advance not later than
12:00 noon (Chicago time) (a) in the case of a conversion into a
Floating Rate Advance, at least one Business Day before the date
of the requested conversion, and (b) in the case of a conversion
into or continuation of a Eurodollar Advance, at least three
Business Days prior to the date of the requested conversion or
continuation, specifying:
(i) the requested date (which shall be a Business
Day) of such conversion or continuation;
(ii) the aggregate amount and Type of Advance(s)
which is to be converted or continued; and
(iii) the amount and Type(s) of Advance(s) into
which such Advance is to be converted or continued and, in
the case of a conversion into or continuation of a
Eurodollar Advance, the duration of the Eurodollar Interest
Period applicable thereto (which may not end after the
Facility Termination Date).
2.3 Facility Letters of Credit.
2.3.1 Obligation to Issue. From and including the
date of this Agreement and prior to the Business Day prior to the
Facility Termination Date, the Agent agrees, on the terms and
conditions set forth in this Agreement and on behalf of each of
the Lenders, to issue for the account of the Borrower one or more
Facility Letters of Credit in accordance with this Section 2.3
(the Agent in such capacity is referred to as the "Issuer").
2.3.2 Types and Amounts. The Issuer shall not have
any obligation to and shall not:
(i) issue any Facility Letter of Credit if the
aggregate maximum amount then available for drawing under
Letters of Credit issued by the Issuer, after giving effect
to the Facility Letter of Credit requested hereunder, shall
exceed any limit imposed by law or regulation upon the
Issuer;
(ii) issue any Facility Letter of Credit if, after
giving effect thereto, the sum of (a) the Facility Letter of
Credit Obligations and (b) the aggregate unpaid principal
balance of the Advances would exceed the Aggregate
Commitment;
(iii) issue any Facility Letter of Credit which has
an expiry date (a) later than twelve months after the
Issuance Date thereof or (b) after the Facility Termination
Date; or
(iv) issue any Facility Letter of Credit if, after
giving effect to such Facility Letter of Credit requested
hereunder, the Facility Letter of Credit Obligations would
exceed $5,000,000 in the aggregate.
2.3.3 Conditions. In addition to being subject to
the satisfaction of the conditions contained in Sections 4.1 and
4.2, the obligation of the Issuer to issue any Facility Letter of
Credit is subject to the satisfaction in full of each of the
following conditions:
(i) the Borrower shall have delivered to the
Issuer at such times and in such manner as the Issuer may
reasonably prescribe such documents and materials as may be
required pursuant to the terms of the requested Facility
Letter of Credit (it being understood that if any
inconsistency exists between the Issuer's Letter of Credit
documents and the Loan Documents, the terms of the Loan
Documents shall govern and control) and the requested
Facility Letter of Credit shall be reasonably satisfactory
to the Issuer as to form and content; and
(ii) as of the Issuance Date, no order, judgment
or decree of any court, arbitrator or governmental authority
shall purport by its terms to enjoin or restrain the Issuer
from issuing the requested Facility Letter of Credit and no
law, rule or regulation applicable to the Issuer and no
request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over
the Issuer shall prohibit or request that the Issuer refrain
from the issuance of Letters of Credit generally or the
issuance of such requested Facility Letter of Credit in
particular.
2.3.4 Procedure for Issuance of Facility Letters of
Credit.
(a) The Borrower shall give the Issuer written notice
not later than noon (Chicago time) at least three Business
Days before the Issuance Date of any requested Facility
Letter of Credit (each a "Facility Letter of Credit
Request") (except that, in lieu of such written notice, the
Borrower may give the Issuer notice of such request by
tested telex or other tested arrangement satisfactory to the
Issuer). Such Facility Letter of Credit Request shall be
irrevocable and shall specify:
(1) the stated amount of such requested Facility
Letter of Credit;
(2) the Issuance Date (which day shall be a Business
Day);
(3) the date on which such requested Facility Letter
of Credit is to expire (which date shall be a
Business Day and shall in no event be later than
the Facility Termination Date);
(4) the purpose for which such Facility Letter of
Credit is to be issued;
(5) the Person for whose benefit the requested
Facility Letter of Credit is to be issued; and
(6) whether the requested Facility Letter of Credit
will be a Commercial Letter of Credit or a Standby
Letter of Credit.
Prior to the issuance of the requested Facility Letter of
Credit, the Borrower shall provide the Issuer with a copy of
the form of the Facility Letter of Credit it is requesting
be issued. The Issuer will notify each Lender within a
reasonable time following the issuance of each Facility
Letter of Credit.
(b) Subject to the terms and conditions of this
Section 2.3.4 and provided that the applicable conditions
set forth in Sections 4.1 (in the case of the initial
Facility Letter of Credit), 4.2 and 2.3.3 have been
satisfied, the Issuer shall, on the applicable Issuance
Date, issue a Facility Letter of Credit on behalf of the
Borrower in accordance with the Issuer's usual and customary
business practices.
(c) The Issuer shall not extend or amend any Facility
Letter of Credit unless the requirements of Sections 2.3.2
and 2.3.4 are met.
2.3.5 Reimbursement Obligations.
(a) (i) The Issuer shall promptly notify the Borrower
of any draw under such Facility Letter of Credit. The
Borrower shall reimburse the Issuer for drawings under
Standby Letters of Credit (including the Issuer's issuing
costs) no later than the Business Day after the payment in
respect of such Standby Letter of Credit by the Issuer,
together with interest thereon at the Alternate Base Rate
from the date of payment on such Standby Letter of Credit by
the Issuer to and including the date on which the Issuer is
reimbursed for such payment by the Borrower. The Borrower
shall reimburse the Issuer for drawings under Commercial
Letters of Credit (including the Issuer's issuing costs) no
later than the Business Day after the payment in respect of
such Commercial Letter of Credit by the Issuer, together
with interest thereon at the Alternate Base Rate from the
date of payment on such Commercial Letter of Credit by the
Issuer to and including the date on which the Issuer is
reimbursed for such payment by the Borrower; and
(ii) Any Reimbursement Obligation with
respect to any Facility Letter of Credit which is not paid
on the date when due in accordance with Section 2.3.5(a)(i)
shall (A) if there is availability for such an Advance
pursuant to Section 2.2, be automatically converted on such
date into a Floating Rate Advance and shall bear interest at
the Floating Rate or (B) if there is no availability for an
Advance pursuant to Section 2.2, be payable on demand and
bear interest until paid at a rate per annum equal to the
sum of (a) the Floating Rate plus (b) 2% per annum.
(b) Any action taken or omitted to be taken by the
Issuer under or in connection with any Facility Letter of
Credit, if taken or omitted in the absence of willful
misconduct or gross negligence, shall not put the Issuer
under any resulting liability to any Lender or, assuming
that the Issuer has complied with the procedures specified
in Section 2.3.4(b) and such Lender has not given a notice
contemplated by Section 2.3.6(a) that continues in full
force and effect, relieve such Lender of its obligations
hereunder to the Issuer. In determining whether to pay
under any Facility Letter of Credit, the Issuer shall have
no obligation relative to the Lenders or the Borrower other
than to confirm that any documents required to be delivered
under such Facility Letter of Credit appear to comply on
their face with the requirements of such Facility Letter of
Credit.
2.3.6 Participation.
(a) Immediately upon issuance by the Issuer of any
Facility Letter of Credit in accordance with the procedures
set forth in Section 2.3.4, each Lender shall be deemed to
have irrevocably and unconditionally purchased and received
from the Issuer, without recourse or warranty, an undivided
interest and participation equal to its Pro Rata Share in
such Facility Letter of Credit (including, without
limitation, all obligations of the Borrower with respect
thereto) and any security therefor or guaranty pertaining
thereto; provided, that a Letter of Credit issued by the
Issuer shall not be deemed to be a Facility Letter of Credit
for purposes of this Section 2.3.6 if the Issuer shall have
received written notice from any Lender on or before 10:00
a.m. (Chicago time) on the Issuance Date of such Letter of
Credit that one or more of the conditions contained in
Section 4.2 is not then satisfied, and, in the event the
Issuer receives such a notice, it shall have no further
obligation to issue any Facility Letter of Credit until such
notice is withdrawn by such Lender or such condition has
been satisfied or has been effectively waived in accordance
with the provisions of this Agreement.
(b) In the event that the Issuer makes any payment
under any Facility Letter of Credit and the Borrower shall
not have repaid such amount to the Issuer pursuant to
Section 2.3.5, the Issuer shall promptly notify each Lender
of such failure, and each Lender shall promptly and
unconditionally pay to the Issuer for the Issuer's account
the amount of such Lender's Pro Rata Share of the
unreimbursed amount of any such payment. The failure of any
Lender to make available to the Issuer its Pro Rata Share of
the unreimbursed amount of any such payment shall not
relieve any other Lender of its obligation hereunder to make
available to the Issuer its Pro Rata Share of the
unreimbursed amount of any payment on the date such payment
is to be made, but no Lender shall be responsible for the
failure of any other Lender to make available to the Issuer
its Pro Rata Share of the unreimbursed amount of any payment
on the date such payment is to be made.
(c) Whenever the Issuer receives a payment on account
of a Reimbursement Obligation, including any interest
thereon, it shall promptly pay to the account of each Lender
which has funded its participating interest therein, in
immediately available funds, an amount equal to each such
Lender's Pro Rata Share thereof.
(d) The obligations of a Lender to make payments to
the Issuer with respect to a Facility Letter of Credit shall
be absolute, unconditional and irrevocable, not subject to
any counterclaim, set-off, qualification or exception
whatsoever and shall be made in accordance with the terms
and conditions of this Agreement under all circumstances.
Nothing contained in this Section 2.3.6(d) shall impair or
adversely affect any claim any Lender may have against the
Issuer or any other Lender with respect to any gross
negligence or willful misconduct of the Issuer or such other
Lender in respect of any Facility Letter of Credit.
2.3.7 Payment of Reimbursement Obligations.
(a) The Borrower agrees to pay to the Issuer the
amount of all Reimbursement Obligations, interest and other
amounts payable to the Issuer under or in connection with
each Facility Letter of Credit immediately when due,
irrespective of any claim, set-off, defense or other right
which the Borrower or any Subsidiary may have at any time
against the Issuer, the Agent or any other Person, under all
circumstances, including without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability
of this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff,
defense or other right which the Borrower or any Subsidiary
may have at any time against a beneficiary named in a
Facility Letter of Credit or any transferee of any Facility
Letter of Credit (or any Person for whom any such transferee
may be acting), the Issuer, any Lender, or any other Person,
whether in connection with this Agreement, any Facility
Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying
transactions between the Borrower or any Subsidiary and the
beneficiary named in any Facility Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Facility Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any
security for the performance or observance of any of the
terms of any of the Loan Documents;
(v) the occurrence of any Default or
Unmatured Default.
(b) In the event any payment by the Borrower or any
Subsidiary received by the Issuer with respect to a Facility
Letter of Credit and distributed to the Lenders on account
of their participation is thereafter set aside, avoided or
recovered from the Agent in connection with any
receivership, liquidation, reorganization or bankruptcy
proceeding, each Lender which received such distribution
shall, upon demand by the Issuer, contribute such Lender's
Pro Rata Share of the amount set aside, avoided or recovered
together with interest at the rate required to be paid by
the Issuer upon the amount required to be repaid by it.
2.4 General Facility Terms.
2.4.1 Fees; Reductions in Aggregate Commitment.
2.4.1.1 Fees. The Borrower agrees to pay to the
Agent the following fees
(i) Facility Fee. For the account of each
Lender in proportion to such Lender's Pro Rata Share, an
annual facility fee equal to the product of (a) twelve and
one-half (12.5) basis points, and (b) the Aggregate
Commitment, which annual facility fee shall be computed and
earned in its entirety on the date of this Agreement and
each March 1 thereafter prior to the Facility Termination
Date. The annual Facility Fee shall be payable annually in
four equal installments in arrears on May 31, 1998 and on
the last Business Day of each August, November, February and
May thereafter prior to the Facility Termination Date with
the outstanding unpaid balance of such fee due on the
Facility Termination Date. Such facility fee shall in no
circumstances be refundable to the Borrower, provided
however that such Facility Fee shall be prorated for the
actual days of any year (commencing January 1) in which a
Facility Termination Date occurs solely because of
Borrower's irrevocable payoff of all Loans on account of a
breach by Lenders of Section 10.12 hereof or the occurrence
of a Gross Up Event.
(ii) Agent Fees. For the Agent's own
account, such fees as the Borrower and the Agent shall have
agreed upon pursuant to that certain letter agreement dated
December 22, 1997 between the Borrower and the Agent, or as
otherwise agreed upon from time to time.
(iii) Standby Letter of Credit Commission.
For the account of each Lender, a Standby Letter of Credit
Fee payable quarterly on the last Business Day of each
February, May, August and November at a per annum rate equal
to the product of the then Applicable Margin and the average
amount of Standby Letters of Credit outstanding during the
immediately preceding fiscal quarter of the Company.
(iv) Issuance Fee. The Borrower shall pay to
the Issuer on or before the Issuance Date of each Facility
Letter of Credit (or such later date as the Borrower and the
Issuer shall agree upon in writing), solely for the account
of the Issuer, the Issuance Fee in respect of such Facility
Letter of Credit and shall also pay from time to time, upon
written demand from Issuer, the Issuer's reasonable and
customary costs of issuing and servicing such Facility
Letter of Credit.
(v) Canadian Credit Agreement Facility
Participation Fee. For the account of each Lender, in
consideration of each Lender's agreement to participate as
risk participants or otherwise in the Canadian Credit
Agreement, which participation inures to the benefit of the
Borrower, the Borrower will pay the Agent for the ratable
account of the Lenders, a facility participation fee equal
to 0.125% of the Commitment ("Commitment" as defined in the
Canadian Loan Agreement) which fee will be payable in
quarterly installments in arrears on the last Business Day
of each August, November, February, and May. Such facility
participation fee shall in no circumstances be refundable to
the Borrower or the Canadian Borrower.
2.4.1.2 Reductions in Aggregate Commitments.
The Borrower may permanently reduce the Aggregate Commitment
in whole, or in part ratably among the Lenders in integral
multiples of $5,000,000, upon at least three Business Days'
written notice to the Agent, which notice shall specify the
amount of any such reduction, provided, however, that the
amount of the Aggregate Commitment may not be reduced below
an amount equal to the sum of (a) the aggregate principal
amount of the outstanding Advances plus (b) the Facility
Letter of Credit Obligations.
2.4.2 Optional Principal Payments; Mandatory
Principal Payments. The Borrower may from time to time pay all
outstanding Advances, or, pay in a minimum aggregate amount of
$300,000 or any integral multiple of $100,000 in excess thereof,
(i) without penalty or premium, any portion of the outstanding
Floating Rate Advances upon prior notice to the Agent not later
than 10:30 a.m. (Chicago time) at least one (1) Business Day
before the date of such prepayment or (ii) subject to the
indemnity provisions of Section 3.4, any portion of the
outstanding Eurodollar Advances upon prior notice to the Agent
not later than 10:30 a.m. (Chicago time) at least two (2)
Business Days prior to the date of such prepayment. Any
Eurodollar Advance paid prior to the last day of its applicable
Interest Period shall be subject to the indemnity provisions of
Section 3.4. Notwithstanding anything in this Section 2.4.2 to
the contrary, if at any time the sum of the aggregate unpaid
principal balance of the Advances plus the Facility Letter of
Credit Obligations exceeds the Aggregate Commitment, the Borrower
shall, subject to the indemnity provisions of Section 3.4, make
an immediate mandatory payment on the Advances equal to such
excess.
2.4.3 Applicable Margin. The Applicable Margin set
forth below shall be subject to adjustment (upwards or downwards,
as appropriate) based on the Borrower's Status as at the end of
each fiscal quarter in accordance with the table set forth below.
The Borrower's Status as at the last day of each fiscal quarter
shall be determined from the then most recent annual or quarterly
financial statements of the Borrower delivered by the Borrower
pursuant to Section 6.1(i) or 6.1(ii) and the Compliance
Certificate delivered by the Borrower pursuant to Section
6.1(iv). The adjustment, if any, to the Applicable Margin shall
be effective commencing five (5) days after the delivery to the
Lenders of such financial statements and Compliance Certificate.
In the event that the Borrower shall at any time fail to furnish
to the Lenders such financial statements and Compliance
Certificate within the time limitations specified by Section 6.1,
then the maximum Applicable Margin shall apply from the date of
such failure until the fifteenth (15th) day after such financial
statements and Compliance Certificate are so delivered.
Notwithstanding anything to the contrary contained herein, the
Borrower's Status from the date of this Agreement to and
including the later of (i) May 30, 1998 or (ii) five (5) days
after the delivery to the Lender of the May 31, 1998 annual
financial statements of the Borrower accompanied by a current
Compliance Certificate, shall be deemed to be Level II Status.
Applicable Margin Table
Status
Applicable Margin
(basis points)
Level I 150.0
Level II 125.0
Level III 100.0
Level IV 75.0
2.4.4 Changes in Interest Rate, etc. Each Floating
Rate Advance shall bear interest on the outstanding principal
amount thereof, for each day from and including the date such
Floating Rate Advance is made or is converted from a Eurodollar
Advance into a Floating Rate Advance pursuant to Section 2.2.6 to
but excluding the date it becomes due or is converted into a
Eurodollar Advance pursuant to Section 2.2.6 at a rate per annum
equal to the Floating Rate for such day. Changes in the rate of
interest on that portion of any Advance maintained as a Floating
Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurodollar Advance shall bear
interest on the outstanding principal amount thereof from and
including the first day of the Interest Period applicable thereto
to (but not including) the last day of such Interest Period at
the interest rate determined as applicable to such Eurodollar
Advance.
2.4.5 Rates Applicable After Default.
Notwithstanding anything to the contrary contained in Section
2.2.5 or 2.2.6, during the continuance of a Default or Unmatured
Default the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest
rates), declare that no Advance may be made as, converted into or
continued as a Eurodollar Advance. During the continuance of a
Default the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest
rates), declare that (i) each Eurodollar Advance shall bear
interest for the remainder of the applicable Interest Period at
the rate otherwise applicable to such Interest Period plus, to
the extent permitted by law, 2% per annum and (ii) each Floating
Rate Advance shall bear interest at a rate per annum equal to the
Floating Rate otherwise applicable to the Floating Rate Advance
plus, to the extent permitted by law, 2% per annum, provided
that, during the continuance of a Default under Section 7.6 or
7.7 the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Advances without any election or
action on the part of the Agent or any Lender.
2.4.6 Method of Payment. All payments of the
Obligations hereunder shall be made, without setoff, deduction,
or counterclaim, in immediately available funds to the Agent at
the Agent's address specified pursuant to Article XIII, or at any
other Lending Installation of the Agent specified in writing by
the Agent to the Borrower, by noon (local time at the relevant
Lending Installation) on the date when due and the Agent will
promptly distribute to each Lender its ratable share of each such
payment received by the Agent for the account of the Lenders;
provided, however, that if on any date the Borrower shall pay
less than the full amount of Obligations owing on such date, such
payment shall be distributed to the Lenders ratably based upon
the ratio of the aggregate amount of Obligations owing to each
such Lender on such date to the aggregate amount of Obligations
owing to all the Lenders on such date. Each payment delivered to
the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds
that the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender. The Agent is hereby
authorized to charge the account of the Borrower maintained with
ANB for each payment of principal, interest and fees as it
becomes due hereunder.
2.4.7 Notes; Telephonic Notices. Each Lender is
hereby authorized to record the principal amount of each of its
Loans and each repayment on the schedule attached to its
applicable Note(s), and such entries shall be prima facie
evidence of the existence and the amounts of the Obligations
therein recorded; provided, however, that neither the failure to
so record nor any error in such recordation shall affect the
Borrower's obligations under any such Note. The Borrower hereby
authorizes the Lenders and the Agent to extend, convert or
continue Advances, effect selections of Types of Advances and to
transfer funds and issue Facility Letters of Credit in each case
based on telephonic notices made by any Authorized Officer or
Authorized Officers the Agent or any Lender in good faith
believes to be acting on behalf of the Borrower. The Borrower
agrees to deliver promptly to the Agent a written confirmation if
such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the
action taken by the Agent and the Lenders, the records of the
Agent and the Lenders shall govern absent manifest error.
2.4.8 Interest Payment Dates; Interest and Fee
Basis. Interest accrued on each Floating Rate Advance shall be
payable on each Payment Date, commencing with the first such date
to occur after the date hereof, on any date on which such
Floating Rate Advance is prepaid, whether due to acceleration or
otherwise, and at maturity. Interest accrued on that portion of
the outstanding principal amount of any Floating Rate Advance
optionally prepaid or converted into a Eurodollar Advance, in
each case on a day other than a Payment Date, shall be payable on
the Payment Date next succeeding the date of such prepayment or
conversion, as the case may be. Interest accrued on each
Eurodollar Advance shall be payable on the last day of its
applicable Interest Period, on any date on which the Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at
maturity. Interest accrued on each Eurodollar Advance having an
Interest Period longer than three months shall also be payable on
the last day of each three-month interval during such Interest
Period. Interest on all Types of Advances and fees shall be
calculated for actual days elapsed on the basis of a 360-day
year. Interest shall be payable for the day an Advance is made
but not for the day of any payment on the amount paid if payment
is received prior to noon (local time) at the place of payment.
If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the
case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
2.4.9 Notification of Advances, Interest Rates, and
Prepayments. Promptly after receipt thereof, the Agent will
notify each Lender of the contents of each Borrowing Notice,
Facility Letter of Credit Request, Conversion/Continuation Notice
and repayment notice received by it hereunder. The Agent will
notify each Lender of the interest rate applicable to each
Eurodollar Advance promptly upon determination of such interest
rate and will give each Lender notice of each change in the
Alternate Base Rate.
2.4.10 Lending Installations. Each Lender may book
its Loans at any Lending Installation selected by such Lender and
may change its Lending Installation from time to time. All terms
of this Agreement shall apply to any such Lending Installation
and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or
telex notice to the Agent and the Borrower, designate a Lending
Installation through which Loans will be made by it and for whose
account Loan payments are to be made.
2.4.11 Non-Receipt of Funds by the Agent. Unless
the Borrower or a Lender, as the case may be, notifies the Agent
prior to the date on which it is scheduled to make payment to the
Agent of (i) in the case of a Lender, the proceeds of a Loan or
(ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders,
that it does not intend to make such payment, the Agent may
assume that such payment has been made. The Agent may, but shall
not be obligated to, make the amount of such payment available to
the intended recipient in reliance upon such assumption. If such
Lender or the Borrower, as the case may be, has not in fact made
such payment to the Agent, the recipient of such payment shall,
on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of repayment
by a Lender, the Federal Funds Effective Rate for such day or
(ii) in the case of repayment by the Borrower, the interest rate
applicable to the relevant Advance.
2.4.12 Withholding Tax Exemption. At least five
Business Days prior to the first date on which interest or fees
are payable hereunder for the account of any Lender, each Lender
that is not incorporated under the laws of the United States of
America, or a state thereof, agrees that it will deliver to each
of the Borrower and the Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes
to deliver to each of the Borrower and the Agent two additional
copies of such form (or a successor form) on or before the date
that such form expires (currently, three successive calendar
years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a
change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent, in each case
certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of
any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and
such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or
withholding of United States federal income tax.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) adopted,
enacted, modified or otherwise becoming effective after the date
hereof, or any interpretation thereof, or the compliance of any
Lender therewith,
(i) subjects any Lender or any applicable Lending
Installation to any tax, duty, charge or withholding on or
from payments due from the Borrower (excluding federal and
state taxation of the overall net income of any Lender or
applicable Lending Installation), or changes the basis of
taxation of payments to any Lender in respect of its Loans,
the Facility Letters of Credit or other amounts due it
hereunder, or
(ii) imposes or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest
rate applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of
which is to increase the cost to any Lender or any
applicable Lending Installation of making, funding,
maintaining, issuing or participating in loans or Letters of
Credit or reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with loans or
Letters of Credit, or requires any Lender or any applicable
Lending Installation to make any payment calculated by
reference to the amount of loans held, Letters of Credit
issued or participated in or interest received by it, in
each case by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall
pay such Lender that portion of such increased expense incurred
or reduction in an amount received which such Lender reasonably
determines is attributable to making, funding and maintaining its
Loans and its Commitment.
3.2 Changes in Capital Adequacy Regulations. If a Lender
determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such
Lender or any corporation controlling such Lender is increased as
a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary
to compensate for any shortfall in the rate of return on the
portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans or its obligation to
make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy).
3.3 Availability of Types of Advances. If any Lender
reasonably determines that maintenance of its Eurodollar Loans
would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, or if the Required
Lenders determine that (i) deposits of a type and maturity
appropriate to match fund Eurodollar Advances are not available
or (ii) the interest rate applicable to a Eurodollar Advance does
not accurately reflect the cost of making or maintaining such
Eurodollar Advance, then the Agent shall suspend the availability
of the Eurodollar Rate and require any Eurodollar Advances to be
repaid or converted into a Floating Rate Advance, such repayment
or conversion to occur on the last day of the applicable Interest
Period (or such earlier date as may be required to comply with
any applicable law).
3.4 Funding Indemnification. If any payment of a
Eurodollar Advance occurs on a date which is not the last day of
the applicable Interest Period, whether because of acceleration,
prepayment or otherwise, or a Eurodollar Advance is not made on
the date specified by the Borrower for any reason other than
default by the Lenders, the Borrower will indemnify each Lender
for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Eurodollar
Advance.
3.5 Taxes. (i) All payments by the Borrower to or for the
account of any Lender or the Agent hereunder or under any Note
shall be made free and clear of and without deduction for any and
all Taxes. If the Borrower shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, (a) the sum payable shall be increased as
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 3.5) such Lender or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrower shall make such
deductions, (c) the Borrower shall pay the full amount deducted
to the relevant authority in accordance with applicable law and
(d) the Borrower shall furnish to the Agent the original copy of
a receipt evidencing payment thereof within 30 days after such
payment is made.
(ii) In addition, the Borrower hereby agrees to pay any
present or future stamp or
documentary taxes and any other excise or property taxes, charges
or similar levies which
arise from any payment made hereunder or under any Note or from
the execution or delivery
of, or otherwise with respect to, this Agreement or any Note
("Other Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent and
each Lender for the full
amount of Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes
imposed on amounts payable under this Section 3.5) paid by the
Agent or such Lender and
any liability (including penalties, interest and expenses)
arising therefrom or with respect
thereto. Payments due under this indemnification shall be made
within 30 days of the date
the Agent or such Lender makes demand therefor pursuant to
Section 3.6.
(iv) Each Lender that is not incorporated under the laws of
the United States of
America or a state thereof (each a "Non-U.S. Lender") agrees that
it will, not less than ten
Business Days after the date of this Agreement, (i) deliver to
each of the Borrower and the
Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or
4224, certifying in either case that such Lender is entitled to
receive payments under this
Agreement without deduction or withholding of any United States
federal income taxes, and
(ii) deliver to each of the Borrower and the Agent a United
States Internal Revenue Form W-
8 or W-9, as the case may be, and certify that it is entitled to
an exemption from United
States backup withholding tax. Each Non-U.S. Lender further
undertakes to deliver to each
of the Borrower and the Agent (x) renewals or additional copies
of such form (or any
successor form) on or before the date that such form expires or
becomes obsolete, and (y)
after the occurrence of any event requiring a change in the most
recent forms so delivered by
it, such additional forms or amendments thereto as may be
reasonably requested by the
Borrower or the Agent. All forms or amendments described in the
preceding sentence shall
certify that such Lender is entitled to receive payments under
this Agreement without
deduction or withholding of any United States federal income
taxes, unless an event
(including without limitation any change in treaty, law or
regulation) has occurred prior to
the date on which any such delivery would otherwise be required
which renders all such
forms inapplicable or which would prevent such Lender from duly
completing and delivering
any such form or amendment with respect to it and such Lender
advises the Borrower and
the Agent that it is not capable of receiving payments without
any deduction or withholding
of United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed
to provide the
Borrower with an appropriate form pursuant to clause (iv), above
(unless such failure is due
to a change in treaty, law or regulation, or any change in the
interpretation or administration
thereof by any governmental authority, occurring subsequent to
the date on which a form
originally was required to be provided), such Non-U.S. Lender
shall not be entitled to
indemnification under this Section 3.5 with respect to Taxes
imposed by the United States;
provided that, should a Non-U.S. Lender which is otherwise exempt
from or subject to a
reduced rate of withholding tax become subject to Taxes because
of its failure to deliver a
form required under clause (iv), above, the Borrower shall take
such steps as such Non-U.S.
Lender shall reasonably request to assist such Non-U.S. Lender to
recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or
reduction of withholding tax
with respect to payments under this Agreement or any Note
pursuant to the law of any
relevant jurisdiction or any treaty shall deliver to the Borrower
(with a copy to the Agent), at
the time or times prescribed by applicable law, such properly
completed and executed
documentation prescribed by applicable law as will permit such
payments to be made without
withholding or at a reduced rate.
3.6 Lender Statements; Survival of Indemnity. To the
extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurodollar
Loans to reduce any liability of the Borrower to such Lender
under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such
designation is not, in the judgment of such Lender,
disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender to the Borrower (with a copy to
the Agent) as to the amount due, if any, under Section 3.1, 3.2,
3.4 or 3.5. Such written statement shall set forth in reasonable
detail the calculations upon which such Lender determined such
amount and shall be final, conclusive and binding on the
Borrower. Unless otherwise provided herein, the amount specified
in the written statement of any Lender shall be payable on demand
after receipt by the Borrower of such written statement. The
obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall
survive for a period of one year after the later of the payment
in full of the Obligations and the termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Initial Advance and Facility Letter of Credit. The
Lenders shall not be required to make the initial Advance
hereunder and, if the initial Advance shall not have been made,
the Issuer shall not be required to issue the initial Facility
Letter of Credit hereunder unless the Borrower has furnished to
the Agent with sufficient copies for the Lenders the following,
each dated as of the initial Borrowing Date or Issuance Date, as
the case may be (or such earlier date as shall be acceptable to
the Agent):
(i) Copies of the certificate of incorporation of
each Credit Party, together with all amendments thereto, and
certificates of good standing of each Credit Party from each
jurisdiction in which such Credit Party is qualified to do
business, all certified by the appropriate governmental
officers in their respective jurisdiction.
(ii) Copies, certified by the Secretary or an
Assistant Secretary of each Credit Party, of their
respective by-laws and of Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed
necessary by counsel for the Agent) authorizing the
execution of each of the Loan Documents to which such Credit
Party is a party.
(iii) Incumbency certificates, executed by the
Secretary or an Assistant Secretary of each Credit Party,
which shall identify by name and title and bear the
signature of the officers of such Credit Party authorized to
sign the Loan Documents to which it is a party and, with
respect to the Borrower, to make borrowings hereunder, upon
which certificates the Agent and the Lenders shall be
entitled to rely until informed of any change in writing by
the Borrower.
(iv) A certificate, signed by the chief financial
officer of the Borrower, stating that on the initial
Borrowing Date no Default or Unmatured Default has occurred
and is continuing.
(v) A written opinion of Ross & Hardies, outside
counsel to the Credit Parties, addressed to the Agent and
the Lenders in substantially the form of Exhibit E hereto.
(vi) Notes payable to the order of each of the
Lenders.
(vii) Written money transfer instructions, in
substantially the form of Exhibit F hereto addressed to the
Agent and signed by an Authorized Officer, together with
such other related money transfer authorizations as the
Agent may have reasonably requested.
(viii) Evidence satisfactory to the Agent that (a)
the Borrower shall have paid, or concurrently with the
making of the initial Advance or the issuance of the initial
Facility Letter of Credit shall pay, in full, all fees
required to be paid pursuant to Section 2.4.1 on or before
the initial Borrowing Date or Issuance Date, as the case may
be.
(ix) A field audit of the Borrower's La Fox,
Illinois facility to be completed by the Agent which shall
be acceptable to the Agent and all Lenders.
(x) Execution and delivery of the Canadian Credit
Agreement (as amended).
(xi) Consent by the Canadian Borrower to the
Canadian Lender's sale of participations in the Canadian
Credit Agreement to the Lenders.
(xii) Such other documents as any Lender or its
counsel may have reasonably requested.
4.2 Each Advance and Facility Letter of Credit. The
Lenders shall not be required to make any Advance (other than an
Advance that, after giving effect thereto and to the application
of the proceeds thereof, does not increase the aggregate amount
of outstanding Advances) and the Issuer shall not be required to
issue any Facility Letter of Credit, unless on the applicable
Borrowing Date or Issuance Date, as the case may be:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained
in Article V are true and correct as of such Borrowing Date
except to the extent any such representation or warranty is
stated to relate solely to an earlier date, in which case
such representation or warranty shall be true and correct on
and as of such earlier date.
Each Borrowing Notice with respect to each such Advance and each
Facility Letter of Credit Request with respect to each such
Facility Letter of Credit shall constitute a representation and
warranty by the Borrower that the conditions contained in
Sections 4.2(i) and (ii) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1 Corporate Existence and Standing. The Borrower is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and each
Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its respective state of
incorporation; and each of the Borrower and the Subsidiaries is
duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where such
qualification is required because of the nature of its activities
or properties and where the failure to maintain such
qualification would singly or in the aggregate cause a Material
Adverse Effect.
5.2 Authorization and Validity. The Borrower has the
corporate power and authority and legal right to execute and
deliver the Loan Documents to which it is a party and to perform
its obligations thereunder. The execution and delivery by the
Borrower of the Loan Documents and the performance of its
obligations thereunder have been duly authorized by proper
corporate proceedings, and the Loan Documents constitute legal,
valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with the terms thereof, except
as enforceability may be limited by bankruptcy, insolvency or
similar laws or general principles of equity relating to remedies
affecting or relating to the enforcement of creditors' rights
generally.
5.3 No Conflict; Government Consent. Neither the execution
and delivery by the Borrower of the Loan Documents, nor the
consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Borrower or any of its Subsidiaries, or
violate the Borrower's or any Subsidiary's certificate of
incorporation or by-laws or the provisions of any indenture,
instrument or agreement to which the Borrower or any of its
Subsidiaries is a party or is subject, or by which it or its
Property is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien
in, of or on the Property of the Borrower or a Subsidiary
pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, approval, license authorization, or
validation of, or filing, recording or registration with, or
exemption by, or other action in respect of any governmental or
public body or authority, or any subdivision thereof, is required
to authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding
effect of, any of the Loan Documents, except as may be applicable
because of any Lender, the Agent or an Issuer being a party
thereto or except as may be required with respect to particular
Facility Letters of Credit.
5.4 Financial Statements. The August 31, 1997 consolidated
financial statements of the Borrower and its Subsidiaries
heretofore delivered to the Lenders were prepared in accordance
with GAAP in effect on the date such statements were prepared and
fairly present the consolidated financial condition and
operations of the Borrower and its Subsidiaries at such date and
the consolidated results of their operations for the period then
ended.
5.5 Material Adverse Change. Except as set forth as of the
date of this Agreement on Schedule 5.5 hereto, since August 31,
1997, there has been no change in the business, Property,
financial condition or results of operations of the Borrower or
any of its Subsidiaries which could reasonably be expected to
have a Material Adverse Effect.
5.6 Taxes. Except as set forth as of the date of this
Agreement on Schedule 5.6 hereto, the Borrower and its
Subsidiaries have filed all United States federal tax returns and
all other tax returns which are required to be filed and have
paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its Subsidiaries,
except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided in
accordance with GAAP and as to which no Lien exists, except for
failures to file or pay which could not be reasonably expected to
have a Material Adverse Effect. The United States income tax
returns of the Borrower and its Subsidiaries have been audited by
the Internal Revenue Service through the Fiscal Year ended May
31, 1995. No tax liens have been filed and no claims are being
asserted with respect to any such taxes. The charges, accruals
and reserves on the books of the Borrower and its Subsidiaries in
respect of any taxes or other governmental charges are adequate.
5.7 Litigation and Contingent Obligations. Except as set
forth as of the date of this Agreement on Schedule 5.7 hereto,
there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the best knowledge of any of
their officers, threatened against or affecting the Borrower or
any of its Subsidiaries which could be reasonably expected to
have a Material Adverse Effect or which seeks to prevent, enjoin
or delay the making of the Loans or Advances. Other than any
liability incidental to such litigation, arbitration or
proceedings, neither the Borrower nor any Subsidiary has any
material contingent obligations not provided for or disclosed in
the financial statements referred to in Section 5.4.
5.8 Subsidiaries. Except as otherwise disclosed to the
Lenders in writing on or prior to the date hereof, Schedule 5.8
hereto contains an accurate list of all Subsidiaries of the
Borrower as of the date of this Agreement, setting forth their
respective jurisdictions of incorporation and the percentage of
their respective capital stock owned by the Borrower or other
Subsidiaries. All of the issued and outstanding shares of capital
stock of such Subsidiaries have been duly authorized and issued
and those shares which are owned by Borrower or one or more of
its Subsidiaries are fully paid and non-assessable.
5.9 ERISA. The Unfunded Liabilities of all Single Employer
Plans do not in the aggregate exceed $500,000. Neither the
Borrower nor any other member of the Controlled Group has
incurred, or is reasonably expected to incur, any withdrawal
liability to Multiemployer Plans in excess of $500,000 in the
aggregate. Each Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable
Event has occurred with respect to any Plan, neither the Borrower
nor any other members of the Controlled Group has withdrawn from
any Plan, except as set forth as of the date of this Agreement on
Schedule 5.9 hereto, or initiated steps to do so, and no steps
have been taken to reorganize or terminate any Plan. Each
Benefit Plan is in substantial compliance with ERISA and the Code
and neither the Borrower or any Controlled Group member has
received any notice asserting that any Benefit Plan is not in
compliance with either ERISA or the Code.
5.10 Accuracy of Information. No information, exhibit or
report furnished by the Borrower or any of its Subsidiaries to
the Agent or to any Lender in connection with the negotiation of,
or compliance with, the Loan Documents contained any material
misstatement of fact or omitted to state a material fact or any
fact necessary to make the statements contained therein not
misleading.
5.11 Regulation U. Margin stock (as defined in Regulation
U) constitutes less than 25% of those assets of the Borrower and
each of its Subsidiaries which are subject to any limitation on
sale, pledge, or other restriction hereunder.
5.12 Material Agreements. Neither the Borrower nor any
Subsidiary is a party to any agreement or instrument or subject
to any charter or other corporate restriction which could
reasonably be expected to have a Material Adverse Effect. Neither
the Borrower nor any Subsidiary is in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party,
except such default which could not reasonably be expected to
have a Material Adverse Effect.
5.13 Compliance With Laws. The Borrower and each of its
Subsidiaries have complied with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign
government or any instrumentality or agency thereof, having
jurisdiction over the conduct of their respective businesses or
the ownership of their respective Property except for any failure
to comply with any of the foregoing which could not reasonably be
expected to have a Material Adverse Effect.
5.14 Ownership of Properties. Except as set forth on
Schedule 5.14 hereto, on the date of this Agreement, the Borrower
and its Subsidiaries will have good title, free of all Liens
(other than those permitted by Section 6.16), to all of the
Property and assets reflected in the Borrower's most recent
consolidated financial statements provided to the Agent as owned
by it.
5.15 Environmental Matters. Except as set forth as of the
date of this Agreement on Schedule 5.15 hereto, in the ordinary
course of its business, the officers of the Borrower consider the
effect of Environmental Laws on the business of the Borrower and
its Subsidiaries, in the course of which they identify and
evaluate potential risks and liabilities accruing to the Borrower
due to Environmental Laws. On the basis of this consideration,
the Borrower has concluded that Environmental Laws cannot
reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any Subsidiary has any reason to believe
that its operations are not in material compliance with any of
the requirements of applicable Environmental Laws or are the
subject of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release of any
toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to
have a Material Adverse Effect.
5.16 Investment Company Act. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
5.17 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required
Lenders shall otherwise consent in writing:
6.1 Financial Reporting. The Borrower will maintain, for
itself and each Subsidiary, a system of accounting established
and administered in accordance with GAAP, and furnish to the
Lenders:
(i) Within 90 days after the close of each of its
Fiscal Years, (a) an unqualified audit report certified by
independent certified public accountants, reasonably
acceptable to the Agent, prepared in accordance with GAAP on
a consolidated basis for itself and its Subsidiaries,
including balance sheets as of the end of such period,
related profit and loss and reconciliation of surplus
statements, and a statement of cash flows, and accompanied
by a certificate of said accountants that, in the course of
their examination necessary for their certification of the
foregoing, they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist,
stating the nature and status thereof, and (b) the
Borrower's annual 10-K financial statement.
(ii) Within 45 days after the close of each
quarterly period of each of its Fiscal Years, for itself and
its Subsidiaries, (a) consolidated and consolidating
unaudited balance sheets as at the close of each such period
and consolidated and consolidating profit and loss and
reconciliation of surplus statements and a statement of cash
flows for the period from the beginning of such Fiscal Year
to the end of such quarter, all prepared in accordance with
GAAP and certified by the chief financial officer of the
Borrower; and (b) its quarterly 10-Q financial statements.
(iii) Within 45 days after the close of each of the
Canadian Borrower's fiscal quarters, for itself and its
Subsidiaries, consolidated unaudited balance sheets as at
the close of each such period and consolidated profit and
loss and reconciliation of surplus statements and a
statement of cash flows for the period from the beginning of
the Canadian Borrower's fiscal year to the end of such
quarter, all prepared in accordance with GAAP and certified
by the chief financial officer of the Canadian Borrower.
(iv) Together with the financial statements
required under Sections 6.1(i) and (ii), a Compliance
Certificate.
(v) If the Borrower or any member of the
Controlled Group maintains a Single Employer Plan, within
270 days after the close of each Fiscal Year, a statement of
the Unfunded Liabilities of each Single Employer Plan, if
any, certified as correct by a plan administrator enrolled
under ERISA.
(vi) As soon as possible and in any event within
10 days after the Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement, signed
by the chief financial officer of the Borrower, describing
said Reportable Event and the action which the Borrower
proposes to take with respect thereto.
(vii) As soon as possible and in any event within
10 days after the Borrower or any Controlled Group member
withdraws from a Multiemployer Plan.
(viii) As soon as possible and in any event within
10 days after the Borrower or any Controlled Group member
terminates a Single Employer Plan under Section 4041 of
ERISA.
(ix) As soon as possible and in any event within
10 days after receipt by the Borrower that any Benefit Plan
or Borrower or Controlled Group Member has violated the
provisions of ERISA or the Code, which violation could
result in liability to the Borrower in excess of $250,000.
(x) As soon as possible and in any event within
10 days after receipt by the Borrower, a copy of (a) any
notice or claim to the effect that the Borrower or any of
its Subsidiaries is or may be liable to any Person as a
result of the release by the Borrower, any of its
Subsidiaries, or any other Person of any toxic or hazardous
waste or substance into the environment, and (b) any notice
alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the
Borrower or any of its Subsidiaries, which, in either case,
could reasonably be expected to have a Material Adverse
Effect.
(xi) Promptly upon the furnishing thereof to the
shareholders of the Borrower, copies of all financial
statements, reports and proxy statements so furnished.
(xii) Promptly upon the filing thereof, copies of
all registration statements and annual, quarterly, monthly
or other regular reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange
Commission.
(xiii) Concurrently with (and in no event later than
two Business Days after) the delivery thereof to the
Canadian Lender, copies of (i) all financial statements and
other similar information in respect of the Borrower and the
Canadian Borrower and (ii) such other financial information
and reports in respect of the Borrower and the Canadian
Borrower which, in each case, the Borrower or the Canadian
Borrower delivers, or causes to be delivered, to the
Canadian Lender and which have not previously been delivered
to the Lenders pursuant to this Section 6.1 or otherwise.
(xiv) On or before September 30 of each of the
Borrower's Fiscal Years, projected statements of income and
cash flow and a projected balance sheet for the Borrower
covering the period to and including May 31, 2001.
(xv) Within thirty days following delivery to the
Borrower, a copy of each of the Borrower's auditor's
management letters, if prepared.
(xvi) Within forty-five days following the end of
each of the Borrower's fiscal quarters, a report of the
amount of Designated Inventory and Designated Accounts in
form and substance acceptable to the Required Lenders which
report shall contain a calculation showing compliance with
Section 6.21 hereof.
(xvii) Such other information (including non-financial
information) as the Agent or any Lender may from
time to time reasonably request.
6.2 Use of Proceeds. The Borrower will, and will cause
each Subsidiary to, use the proceeds of the Advances and the
Facility Letters of Credit for working capital and for general
corporate purposes. The Borrower will not, nor will it permit
any Subsidiary to, use any of the proceeds of the Advances or the
Facility Letters of Credit to purchase or carry any "margin
stock" (as defined in Regulation U).
6.3 Notice of Default. The Borrower will give prompt
notice in writing to the Lenders of the occurrence of (i) any
Default or Unmatured Default and (ii) any other development,
financial or otherwise, which development could reasonably be
expected to have a Material Adverse Effect.
6.4 Conduct of Business. The Borrower will, and will cause
each Subsidiary to, carry on and conduct its business in
substantially the same manner and in substantially the same
fields of enterprise as it is presently conducted and to do all
things necessary to remain duly incorporated, validly existing
and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which
its business is conducted unless failure to maintain such
authority could not reasonably be expected to have a Material
Adverse Effect.
6.5 Taxes. The Borrower will, and will cause each
Subsidiary to, timely file complete and correct United States
federal and applicable foreign, state and local tax returns
required by law and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or
Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate
reserves have been set aside in accordance with GAAP, and except
to the extent that nonpayment could not reasonably be expected to
have a Material Adverse Effect.
6.6 Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable
insurance companies insurance on all their Property in such
amounts and covering such risks as is consistent with sound
business practice, and the Borrower will furnish to any Lender
upon request full information as to the insurance carried.
6.7 Compliance with Laws. The Borrower will, and will
cause each Subsidiary to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject including, without limitation,
all Environmental Laws, except to the extent that noncompliance
could not reasonably be expected to have a Material Adverse
Effect.
6.8 Maintenance of Properties. The Borrower will, and will
cause each Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working
order and condition, and make all necessary and proper repairs,
renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times,
except to the extent that failure to make such repair could not
reasonably be expected to have a Material Adverse Effect.
6.9 Inspection. The Borrower will, and will cause each
Subsidiary to, permit the Agent and any Lender, by their
respective representatives and agents, to inspect any of the
Property, corporate books and financial records of the Borrower
and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each
Subsidiary, and to discuss the affairs, finances and accounts of
the Borrower and each Subsidiary with, and to be advised as to
the same by, their respective officers at such reasonable times
and intervals as the Agent or any Lender may designate.
6.10 Financial Covenants. The financial covenants referred
to in this Section 6.10 shall each be computed at the end of each
fiscal quarter by the Borrower, and such calculations shall be
included in the Compliance Certificate referred to in Section
6.1(iv).
6.10.1 Consolidated Tangible Net Worth. The
Borrower will maintain, at all times during the period set forth
below, a Consolidated Tangible Net Worth of not less than the
amount set forth below opposite each such period:
Period Amount
On or prior to 5/30/98 $115,000,000
From 5/31/98 to and $120,000,000
including 5/30/99
On or after 5/31/99 $130,000,000
6.10.2 Senior Funded Debt to Cash Flow Ratio. The
Borrower will maintain, at all times during the periods set forth
below, a Senior Funded Debt to Cash Flow Ratio of not greater
than the ratio set forth below opposite each such period:
Period Ratio
On or prior to 5/30/98 2.50:1.00
From 5/31/98 to and 2.25:1.00
including 5/30/99
On or after 5/31/99 2.15:1.00
6.10.3 Adjusted Interest Coverage Ratio. The
Borrower will maintain, at all times during the periods set forth
below, an Adjusted Interest Coverage Ratio of not less than the
ratio set forth below opposite each such period:
Period Ratio
On or prior to 5/30/98 1.70:1.00
From 5/31/98 to and 2.10:1.00
including 5/30/99
On or after 5/31/99 2.50:1.00
6.11 [Intentionally Omitted].
6.12 Indebtedness. The Borrower will not, nor will it
permit any Subsidiary to, create, incur or suffer to exist any
Indebtedness, except:
(i) Advances and Facility Letter of Credit
Obligations hereunder.
(ii) The Canadian Loans.
(iii) The Canadian Guaranty.
(iv) Indebtedness which (a) exists on the date
hereof, (b) is described in Schedule 6.12 hereto, and (c)
has been previously approved by the Agent.
(v) Subordinated Debt with terms and conditions
which in the sole opinion of the Required Lenders are no
more restrictive (with respect to Senior Funded Debt) than
Subordinated Debt in existence on the date hereof.
(vi) Indebtedness incurred to refinance existing
Indebtedness permitted pursuant to this Section 6.12;
provided, however, that the maturity date of such new
Indebtedness is no earlier than the maturity date of the
Indebtedness being refinanced and the terms of such new
Indebtedness (including, but not limited to, the amount, the
term, the amount of the annual loan payment or provision for
collateral or additional collateral) are no more
disadvantageous to the Lenders, the Borrower and its
Subsidiaries than the terms of the Indebtedness being
refinanced.
(vii) Contingent Obligations not exceeding $500,000
at any one time outstanding.
(viii) Intercompany Indebtedness permitted under
Section 6.15.
6.13 Merger. The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other
Person, except that (i) a Subsidiary may amalgamate, merge or
consolidate with or into the Borrower or a Wholly-Owned
Subsidiary and (ii) the Borrower or any Subsidiary (other than a
Subsidiary Guarantor) may merge, amalgamate or consolidate with
any other Person pursuant to a Permitted Acquisition, provided
that (a) the Borrower or such Subsidiary shall be the surviving
entity and (b) after giving effect thereto, no Default or
Unmatured Default shall exist.
6.14 Sale of Assets. The Borrower will not, nor will it
permit any Subsidiary to, lease, sell or otherwise dispose of
Property, to any other Person, except:
(i) Sales of inventory in the ordinary course of
business.
(ii) Leases, sales or other dispositions of
Property that, together with all other Property of the
Borrower and its Subsidiaries previously leased, sold or
disposed of (other than inventory in the ordinary course of
business) as permitted by this Section during the
twelve-month period ending with the month in which any such
lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the Property of the Borrower and its
Subsidiaries.
6.15 Investments and Acquisitions. The Borrower will not,
nor will it permit any Subsidiary to, make or suffer to exist any
Investments (including without limitation, loans and advances to,
and other Investments in, Subsidiaries), or commitments therefor,
or to become or remain a partner in any partnership or joint
venture, or member in a limited liability company, or to make any
Acquisition of any Person, except:
(i) Short-term obligations of, or fully
guaranteed by, the United States of America.
(ii) Commercial paper rated A-1 or better by
Standard and Poor's Corporation or P-1 or better by Moody's
Investors Service, Inc.
(iii) Demand deposit accounts maintained in the
ordinary course of business.
(iv) Certificates of deposit issued by and time
deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000.
(v) Investments not to exceed $5 million in the
aggregate at any one time outstanding in the common stock
and investment grade bonds of publicly
held corporations which stock and bonds are traded on the
New York, American or NASDAQ stock exchanges.
(vi) Loans to employees of the Borrower or of any
of its Subsidiaries which do not exceed, in the aggregate
for all such employees at any one time outstanding,
$750,000.
(vii) Permitted Acquisitions.
(viii) Existing Investments which (a) are in
existence on the date hereof, (b) are described in Schedule
6.15 (viii) hereto and (c) have been previously approved by
the Agent and the Lenders.
(ix) Loans and advances to and other Investments
in Borrower's Subsidiaries in the ordinary course of
business not exceeding at any time outstanding for each
Subsidiary, an amount which is the greater of (i) fifteen
percent (15%) greater than the amount of such loans,
advances and other Investments in each such Subsidiary
stated in the Borrower's financial statement dated on or
about the immediately preceding November 30 (the "November
Statement"), or (ii) one million dollars ($1,000,000) plus
the amount of such loans, advances and other Investments in
each such Subsidiary stated in the November Statement;
provided that in no event shall such loans, advances and
other Investments exceed for all of Borrower's Subsidiaries
in the aggregate at any time outstanding $10,000,000 plus
the aggregate amount of such loans, advances and other
Investments stated in the November Statement.
6.16 Liens. The Borrower will not, nor will it permit any
Subsidiary to create, incur, or suffer to exist any Lien in, of
or on the Property of the Borrower or any of its Subsidiaries,
except:
(i) Liens for taxes, assessments or governmental
charges or levies on its Property if the same shall not at
the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves in
accordance with generally accepted principles of accounting
shall have been set aside on its books.
(ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens
arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due and
which are being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been
set aside on its books.
(iii) Liens arising out of pledges or deposits
under worker's compensation laws, unemployment insurance,
old age pensions, or other social security or retirement
benefits, or similar legislation.
(iv) Liens arising from a judgment rendered or
claim filed, not in excess, singly or in the aggregate, of
$250,000 against the Borrower or any of its Subsidiaries
which the Borrower or such Subsidiary shall be contesting
diligently in good faith by proper legal proceedings.
(v) Liens which exist on the date hereof incurred
by Borrower or its Subsidiaries in the ordinary course of
business securing Indebtedness less than $100,000 in the
aggregate.
(vi) Liens securing obligations which are excluded
from Subsection (iii) of the definition of Indebtedness
herein.
(vii) Any extension, renewal or substitution of or
for any of the foregoing Liens described in this Section
6.16, provided in each case that (a) the Indebtedness or
other obligation or liability secured by the applicable Lien
shall not exceed the Indebtedness or other obligation or
liability existing immediately prior to such extension,
renewal or substitution and (b) the Lien securing such
Indebtedness or other obligation or liability shall be
limited to the Property which, immediately prior to such
extension, renewal or substitution, secured such
Indebtedness or other obligation or liability, and
improvements on or additions to such Property.
(viii) A Lien upon Borrower's funds not exceeding $1
million on deposit with the French government to secure the
payment by the Borrower of value added tax owed (if any) to
the French government.
6.17 Prohibition of Negative Pledge. The Borrower will not,
nor will it permit any of its Subsidiaries to agree, covenant,
warrant, represent, pledge or otherwise commit with or to any
entity other than the Agent, to not incur, create, assume or
permit to exist, any mortgage, pledge, lien charge or other
encumbrance of any nature whatsoever on all or any of its assets
now or hereafter owned, except for such pledge made directly in
connection with the purchase of inventory in the ordinary course
of business, with a value of such inventory (valued at the cost
of such inventory) owned by Borrower and its Subsidiaries not
exceeding $2.5 million in the aggregate at any time.
6.18 Affiliates. The Borrower will not, nor will it permit
any Subsidiary to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any Affiliate except in
the ordinary course of business and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary than the Borrower or such Subsidiary would
obtain in a comparable arms-length transaction.
6.19 Amendments to Agreements. The Borrower will not, nor
will it permit any Subsidiary to, amend any term or provision of
the Canadian Credit Agreement, the Canadian Guaranty, any other
Canadian Loan Document or the Debentures except with the consent
of the Required Lenders and all Lenders for the type of
amendments which would require the consent of the Required
Lenders and all Lenders respectively under Section 8.2 hereof.
The Borrower shall deliver to the Agent all amendments to the
Canadian Loan Documents within five (5) days of such amendment.
6.20 Sale of Accounts. The Borrower will not, nor will it
permit any Subsidiary to, sell or otherwise dispose of any notes
receivable or accounts receivable, with or without recourse,
except for accounts which are past due in an aggregate amount not
exceeding $2 million for each of the Company's fiscal years
placed with a collection agent for collection at a commission not
exceeding twenty percent (20%) of the amount of such notes or
accounts recovered.
6.21 Limit on Senior Funded Debt. The Borrower will not
permit at any time the amount of the Borrower's and its
Subsidiaries' consolidated Senior Funded Debt to exceed the sum
of 80% of the value of Designated Accounts plus 50% of the value
of Designated Inventory (valued at the lower of cost or market
value), such Designated Accounts and Designated Inventory as in
existence at the end of the Borrower's most recently completed
fiscal quarter.
6.22 Fiscal Year. The Borrower will not, nor will it permit
any Subsidiary to, change its Fiscal Year.
6.23 Limitation on the Creation of Subsidiaries.
Notwithstanding anything to the contrary contained in this
Agreement, the Borrower will not, and will not permit any of its
Subsidiaries to, establish, create or acquire any Subsidiary;
provided that the Borrower and its Wholly-Owned Subsidiaries
shall be permitted to establish or create Wholly-Owned
Subsidiaries so long as at least 30 days' prior written notice
thereof (or such lesser notice as is acceptable to the Agent in
its sole discretion) is given to the Agent.
6.24 Subsidiary Dividends. The Borrower's Subsidiaries
shall not in any manner either directly or indirectly incur or be
bound by any restrictions on dividends from such Subsidiaries to
the Borrower, other than those restrictions required by
applicable law.
6.25 Repayment of Subordinated Debt. The Borrower's and its
Subsidiaries' amounts of Subordinated Debt which become due and
remain unpaid plus the amount of the Borrower's and its
Subsidiaries' actual payment of Subordinated Debt, shall not
exceed $2.5 million in the aggregate for any immediately
preceding four fiscal quarter trailing period of the Borrower.
<PAGE>
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events
shall constitute a Default:
7.1 Any representation or warranty made (or deemed made
pursuant to Article IV) by or on behalf of the Borrower or any of
its Subsidiaries to the Lenders or the Agent under or in
connection with this Agreement, any Loan, any Facility Letter of
Credit or any certificate or information delivered in connection
with this Agreement or any other Loan Document shall be
materially false on the date as of which made (or deemed made).
7.2 Nonpayment of principal of any Note or of any
Reimbursement Obligation when due (or in the case of any
Reimbursement Obligation due upon demand, upon demand), or
nonpayment of interest upon any Note or of any facility fee,
agent fee, Issuance Fee or other obligations (other than
Reimbursement Obligations which have been converted into Floating
Rate Advances pursuant to Section 2.3.6) under any of the Loan
Documents within five (5) days after the same becomes due.
7.3 The breach by the Borrower of any of the terms or
provisions of Article VI.
7.4 The breach by the Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2 or 7.3) of any of
the terms or provisions of this Agreement which is not remedied
within fifteen (15) days after written notice from the Agent.
7.5 Failure of the Borrower or any of its Subsidiaries to
pay when due any Indebtedness to any of the Lenders or any other
Indebtedness in excess of, singly or in the aggregate, $1,000,000
(any such Indebtedness being herein defined as "Material
Indebtedness"); or the default by the Borrower or any of its
Subsidiaries in the performance of any term, provision or
condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other
event shall occur or condition exist, the effect of which is to
cause, or to permit the holder or holders of such Material
Indebtedness to cause, such Material Indebtedness to become due
prior to its stated maturity; or any Material Indebtedness of the
Borrower or any of its Subsidiaries shall be declared to be due
and payable or required to be prepaid or repurchased (other than
by a regularly scheduled payment) prior to the stated maturity
thereof; or the Borrower or any of its Subsidiaries shall not
pay, or admit in writing its inability to pay, its debts
generally as they become due.
7.6 The Borrower or any of its Subsidiaries shall (i) have
an order for relief entered with respect to it under the Federal
bankruptcy laws or the laws of any other jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors as
now or hereafter in effect, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the Federal
bankruptcy laws or the laws of any other jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors as
now or hereafter in effect or seeking to adjudicate it a bankrupt
or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate action to
authorize or effect any of the foregoing actions set forth in
this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7 Without the application, approval or consent of the
Borrower or any of its Subsidiaries, a receiver, trustee,
examiner, liquidator or similar official shall be appointed for
the Borrower or any of its Subsidiaries or any Substantial
Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its
Subsidiaries and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60
consecutive days.
7.8 Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or
control of (each a "Condemnation"), all or any portion of the
Property of the Borrower and its Subsidiaries which, when taken
together with all other Property of the Borrower and its
Subsidiaries so condemned, seized, appropriated, or taken custody
or control of, during the twelve-month period ending with the
month in which any such Condemnation occurs, constitutes a
Substantial Portion.
7.9 The Borrower or any of its Subsidiaries shall fail
within 60 days to pay, bond or otherwise discharge any judgment
or order for the payment of money in excess of, singly or in the
aggregate, $500,000, which is not stayed on appeal or otherwise
being appropriately contested in good faith.
7.10 The Unfunded Liabilities of all Single Employer Plans
shall exceed in the aggregate $500,000 or any Reportable Event
shall occur in connection with any Plan.
7.11 The Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer
Plan that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all
other amounts required to be paid to Multiemployer Plans by the
Borrower or any other member of the Controlled Group as
withdrawal liability (determined as of the date of such
notification), exceeds $500,000.
7.12 The Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer
Plan that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, if as
a result of such reorganization or termination the aggregate
annual contributions of the Borrower and the other members of the
Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or
will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years of each such
Multiemployer Plan immediately preceding the plan year in which
the reorganization or termination occurs by an amount exceeding
$500,000.
7.13 The Borrower or any other member of the Controlled
Group shall terminate a Single Employer Plan resulting in
Unfunded Liabilities to the Borrower in excess of $500,000.
7.14 The Borrower or any other member of the Controlled
Group shall incur liability for a violation of ERISA or the Code
with respect to any Benefit Plan which exceeds $250,000.
7.15 The Borrower or any of its Subsidiaries shall be the
subject of any proceeding or investigation pertaining to the
release by the Borrower or any of its Subsidiaries, or any other
Person of any toxic or hazardous waste or substance into the
environment, or any violation of any federal, state or local
environmental, health or safety law or regulation, which, in
either case, could have a Material Adverse Effect.
7.16 Any Change in Control shall occur, except such Change
in Control consented to by the Agent and all Lenders.
7.17 Nonpayment by the Borrower or any of its Subsidiaries
of any Rate Hedging Obligation when due or the default or breach
by the Borrower or any of its Subsidiaries of any term, provision
or condition contained in any Rate Hedging Agreement, which
default or breach continues (without being waived) beyond any
period of grace therein provided.
7.18 The occurrence of any "default", as defined in any Loan
Document (other than this Agreement or the Notes) or the breach
of any of the terms or provisions of any Loan Document (other
than this Agreement), which default or breach continues beyond
any period of grace therein provided and has not been waived.
7.19 The occurrence of any "Default", as defined in the
Canadian Credit Agreement, the Canadian Guaranty or any other
Canadian Loan Document or the breach of any of the terms or
provisions of the Canadian Credit Agreement, the Canadian
Guaranty or any other Canadian Loan Document, which default or
breach continues beyond any period of grace therein provided and
has not been waived.
7.20 The occurrence and continuance of any default or Event
of Default as defined in the Debentures.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration. If any Default described in Section 7.6
or 7.7 occurs with respect to the Borrower, the obligations of
the Lenders to make Loans and to participate in Facility Letters
of Credit hereunder, and the obligation of the Issuer to issue
Facility Letters of Credit hereunder, shall automatically
terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Agent,
the Issuer or any Lender. If any other Default occurs, the
Required Lenders (or the Agent with the consent of the Required
Lenders) (i) may terminate or suspend the obligations of the
Lenders to make Loans and to purchase participation in Facility
Letters of Credit hereunder, (ii) may terminate or suspend the
obligations of the Issuer to issue Facility Letters of Credit
hereunder, and/or (iii) declare the Obligations to be due and
payable, whereupon the Obligations shall become immediately due
and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives.
If, within 15 days after (x) acceleration of the maturity of
the Obligations, (y) termination of the obligations of the Issuer
to issue Facility Letters of Credit hereunder or (z) termination
of the obligations of the Lenders to make Loans hereunder as a
result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any
judgment or decree for the payment of the Obligations due shall
have been obtained or entered, the Required Lenders (in their
sole discretion) shall so direct, the Agent shall, by notice to
the Borrower, rescind and annul such acceleration and/or
termination.
8.2 Amendments. Subject to the provisions of this Article
VIII, the Required Lenders (or the Agent with the consent in
writing of the Required Lenders) and the Borrower may enter into
agreements supplemental hereto or to any other Loan Document for
the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or
the Borrower hereunder or thereunder or waiving any Default
hereunder or thereunder; provided, however, that no such
supplemental agreement shall, without the consent of each of the
Lenders:
(i) Extend the maturity of any Loan, or extend
the expiry date of any Facility Letter of Credit beyond the
Facility Termination Date, or forgive all or any portion of
the principal amount of any Loan or Facility Letter of
Credit Obligation, or reduce the rate or extend the time of
payment of Reimbursement Obligations, interest or fees
hereunder, or release any collateral securing the
Obligations or any Subsidiary Guaranty;
(ii) Reduce the percentage specified in the
definition of Required Lenders;
(iii) Extend the Facility Termination Date or
increase the amount of the Commitment of any Lender
hereunder, or permit the Borrower to assign its rights under
this Agreement; or
(iv) Amend this Section 8.2 or the provisions of
any other section of this Agreement which designate a
certain number of Lenders required to consent to or compel
actions.
No amendment of any provision of this Agreement relating to the
Agent shall be effective without the written consent of the
Agent. The Agent may waive payment of the fee required under
Section 2.4.1(ii) or 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3 Preservation of Rights. No delay or omission of the
Lenders, the Issuer or the Agent to exercise any right under the
Loan Documents shall impair such right or be construed to be a
waiver of any Default or an acquiescence therein, and the making
of a Loan or issuance of a Facility Letter of Credit
notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and
no waiver, amendment or other variation of the terms, conditions
or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to
Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be
available to the Agent, the Issuer and the Lenders until the
Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall
survive delivery of the Notes and the making of the Loans and the
issuance of the Facility Letters of Credit herein contemplated.
9.2 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be
obligated to extend credit to the Borrower or participate in
Facility Letters of Credit in violation of any limitation or
prohibition provided by any applicable statute or regulation.
9.3 Taxes. Any taxes (excluding federal income taxes on
the overall net income of any Lender) or other similar
assessments or charges made by any governmental or revenue
authority in respect of the Loan Documents shall be paid by the
Borrower, together with interest and penalties, if any.
9.4 Headings. Section headings in the Loan Documents are
for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
9.5 Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent, the
Issuer, and the Lenders and supersede all prior agreements and
understandings among the Borrower, the Agent, the Issuer and the
Lenders relating to the subject matter thereof.
9.6 Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and
not joint and no Lender shall be the partner or agent of any
other (except to the extent to which the Agent is authorized to
act as such). The failure of any Lender to perform any of its
obligations hereunder shall not relieve any other Lender from any
of its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective
successors and assigns.
9.7 Expenses; Indemnification. The Borrower shall
reimburse the Agent for any costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and
time charges of attorneys for the Agent, which attorneys may be
employees of the Agent) paid or incurred by the Agent in
connection with the preparation, negotiation, execution,
delivery, review, amendment, modification, and administration of
the Loan Documents. The Borrower also agrees to reimburse the
Agent, the Issuer and the Lenders for any costs, internal charges
and out-of-pocket expenses (including reasonable attorneys' fees
and time charges of attorneys for the Agent and the Lenders which
attorneys may be employees of the Agent or the Lenders) paid or
incurred by the Agent, the Issuer or any Lender in connection
with the collection and enforcement of the Loan Documents. The
Borrower further agrees to indemnify the Agent, the Issuer, and
each Lender and their respective directors, officers and
employees against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor
whether or not the Agent, the Issuer or any Lender is a party
thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or thereby or the direct or
indirect application or proposed application of the proceeds of
any Loan or the direct or indirect use or intended use of any
Facility Letter of Credit hereunder except to the extent that
they have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The obligations
of the Borrower under this Section shall survive the termination
of this Agreement.
9.8 Numbers of Documents. All originally executed
statements, notices, closing documents (other than the Notes),
and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each
of the Lenders.
9.9 Accounting. Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance
with GAAP, except that any calculation or determination which is
to be made on a consolidated basis shall be made for the Borrower
and all its Subsidiaries, including those Subsidiaries, if any,
which are unconsolidated on the Borrower's audited financial
statements.
9.10 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or
invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the
remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan
Documents are declared to be severable.
9.11 Nonliability of Lenders. The relationship between the
Borrower and the Lenders shall be solely that of borrower and
lender. Neither the Agent nor any Lender shall have any
fiduciary responsibilities to the Borrower. Neither the Agent
nor any Lender undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with
any phase of the Borrower's business or operations. The Borrower
agrees that none of the Agent, the Issuer or any Lender shall
have liability to the Borrower (whether sounding in tort,
contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by the
Loan Documents, or any act, omission or event occurring in
connection therewith, unless it is determined by a court of
competent jurisdiction in a final and non-appealable order that
such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought.
9.12 Confidentiality. Each Lender agrees to hold any
confidential information which it may receive from the Borrower
pursuant to this Agreement in confidence, except for disclosure
(i) to its Affiliates and to other Lenders and their respective
Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee or
prospective Transferee, (iii) to regulatory officials, (iv) to
any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection
with any legal proceeding to which that Lender is a party, and
(vi) permitted by Section 12.4.
9.13 Nonreliance. Each Lender hereby represents that it is
not relying on or looking to any margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve
System) for the repayment of the Loans provided for herein.
ARTICLE X
THE AGENT
10.1 Appointment; Nature of Relationship. American National
Bank and Trust Company of Chicago is hereby appointed by the
Lenders as the Agent hereunder and under each other Loan
Document, and each of the Lenders irrevocably authorizes the
Agent to act as the contractual representative of such Lender
with the rights and duties expressly set forth herein and in the
other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained
in this Article X. Notwithstanding the use of the defined term
"Agent," it is expressly understood and agreed that the Agent
shall not have any fiduciary responsibilities to any Lender by
reason of this Agreement or any other Loan Document and that the
Agent is merely acting as the representative of the Lenders with
only those duties as are expressly set forth in this Agreement
and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume
any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105 of
the Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement and the
other Loan Documents. Each of the Lenders hereby agrees to
assert no claim against the Agent for breach of fiduciary duty,
all of which claims each Lender hereby waives.
10.2 Powers. The Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to
the Agent by the terms of each thereof, together with such powers
as are reasonably incidental thereto. The Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders
to take any action thereunder except any action specifically
provided by the Loan Documents to be taken by the Agent.
10.3 General Immunity. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the
Borrower, the Lenders or any Lender for any action taken or
omitted to be taken by it or them hereunder or under any other
Loan Document or in connection herewith or therewith except to
the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have
arisen from the gross negligence or willful misconduct of such
Person.
10.4 No Responsibility for Loans, Recitals, etc. Neither
the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire
into, or verify: (i) any statement, warranty or representation
made in connection with any Loan Document or any borrowing or
issuance of a Facility Letter of Credit hereunder; (ii) the
performance or observance of any of the covenants or agreements
of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information
directly to each Lender; (iii) the satisfaction of any condition
specified in Article IV, except receipt of items required to be
delivered to the Agent; (iv) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or
any other instrument or writing furnished in connection
therewith; or (v) the value, sufficiency, creation, perfection or
priority of any interest in any collateral security. The Agent
shall have no duty to disclose to the Lenders information that is
not required to be furnished by the Borrower to the Agent at such
time, but is voluntarily furnished by the Borrower to the Agent
(either in its capacity as Agent or in its individual capacity).
10.5 Action on Instructions of Lenders. The Agent shall in
all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance
with written instructions signed by such of the Lenders as is
required under the terms of this Agreement, and such instructions
and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders and on all holders of Notes. The
Lenders hereby acknowledge that the Agent shall be under no duty
to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement or any other Loan
Document unless it shall be requested in writing to do so by the
Required Lenders. The Agent shall be fully justified in failing
or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to
take any such action.
10.6 Employment of Agents and Counsel. The Agent may
execute any of its duties as Agent hereunder and under any other
Loan Document by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders,
except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Agent
shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder
and under any other Loan Document.
10.7 Reliance on Documents; Counsel. The Agent shall be
entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document
believed by it to be genuine and correct and to have been signed
or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which
counsel may be employees of the Agent.
10.8 Agent's Reimbursement and Indemnification. The Lenders
agree to reimburse and indemnify the Agent ratably in proportion
to their respective Commitments (or, if subsequent to the
Facility Termination Date, in proportion to their Commitments
immediately prior to such date), without relieving the Borrower
of any of its Obligations hereunder, (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to
reimbursement by the Borrower under the Loan Documents, (ii) for
any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii)
for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind and nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered
in connection therewith or the transactions contemplated thereby,
or the enforcement of any of the terms thereof or of any such
other documents, provided that no Lender shall be liable for any
of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of
the Lenders under this Section 10.8 shall survive payment of the
Obligations and termination of this Agreement.
10.9 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Unmatured Default hereunder unless the Agent has received written
notice from a Lender or the Borrower referring to this Agreement
describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the
Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders.
10.10 Rights as a Lender. In the event the Agent is a
Lender, the Agent shall have the same rights and powers hereunder
and under any other Loan Document as any Lender and may exercise
the same as though it were not the Agent, and the term "Lender"
or "Lenders" shall, at any time when the Agent is a Lender,
unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend
money to, and generally engage in any kind of trust, debt, equity
or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of
its Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person.
10.11 Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or
any other Lender and based on the financial statements prepared
by the Borrower and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement and the other Loan Documents. Each
Lender also acknowledges that it will, independently and without
reliance upon the 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 decisions in taking or not
taking action under this Agreement and the other Loan Documents.
10.12 Successor Agent. The Agent may resign at any time
by giving written notice thereof to the Lenders and the Borrower,
such resignation to be effective upon the appointment of a
successor Agent or, if no successor Agent has been appointed,
forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with
or without cause by written notice received by the Agent from the
Required Lenders, such removal to be effective on the date
specified by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint,
with the consent of the Borrower, which consent shall not be
unreasonably withheld or delayed, on behalf of the Borrower and
the Lenders, a successor Agent; provided, however, that if a
Default or Unmatured Default shall have occurred and be
continuing at the time of such resignation or removal, the
consent of the Borrower shall not be so required. If no
successor Agent shall have been so appointed by the Required
Lenders, and, to the extent required pursuant to the immediately
preceding sentence, consented to by the Borrower, and shall have
accepted such appointment, within thirty days after
the resigning Agent's giving notice of its intention to resign,
then the resigning Agent may appoint, on behalf of the Borrower
and the Lenders, a successor Agent. If the Agent has resigned or
been removed and no successor Agent has been appointed, the
Lenders may perform all the duties of the Agent hereunder and the
Borrower shall make all payments in respect of the Obligations to
the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to
be appointed hereunder until such successor Agent has accepted
the appointment. Any such successor Agent shall be a commercial
bank having capital and retained earnings of at least
$50,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the resigning or removed Agent.
Upon the effectiveness of the resignation or removal of the Agent
the resigning or removed Agent shall be discharged from its
duties and obligations hereunder and under the Loan Documents.
After the effectiveness of the resignation or removal of an
Agent, the provisions of this Article X shall continue in effect
for the benefit of such Agent in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent
hereunder and under the other Loan Documents. In the event that
there is a successor to the Agent by merger, or the Agent assigns
its duties and obligations to an Affiliate pursuant to this
Section 10.12, then the term "Corporate Base Rate" as used in
this Agreement shall mean the prime rate, base rate or other
analogous rate of the new Agent.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1 Setoff. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower
becomes insolvent, however evidenced or any Default occurs, any
and all deposits (including all account balances, whether
provisional or final and whether or not collected or available)
and any other Indebtedness at any time held or owing by any
Lender to or for the credit or account of the Borrower may be
offset and applied toward the payment of the Obligations owing to
such Lender, whether or not the Obligations, or any part hereof,
shall then be due.
11.2 Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon the Obligations owing to
it (other than payments received pursuant to Section 3.1, 3.2,
3.4 or 3.5) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Obligations held by the other Lenders
so that after such purchase each Lender will hold its Pro Rata
Share of the Obligations. If any Lender, whether in connection
with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such
Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their outstanding
Obligations. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be
made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATION
12.1 Successors and Assigns. The terms and provisions of
the Loan Documents shall be binding upon and inure to the benefit
of the Borrower, the Agent, and the Lenders and their respective
successors and assigns, except that (i) the Borrower shall not
have the right to assign their respective rights or obligations
under the Loan Documents and (ii) any assignment by any Lender
must be made in compliance with Section 12.3. Notwithstanding
clause (ii) of this Section, any Lender may at any time, without
the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a
Federal Reserve Bank; provided, however, that no such assignment
to a Federal Reserve Bank shall release the transferor Lender
from its obligations hereunder. The Agent may treat the payee of
any Note as the owner thereof for all purposes hereof unless and
until such payee complies with Section 12.3 in the case of an
assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Agent. Any
assignee or transferee of a Note agrees by acceptance thereof to
be bound by all the terms and provisions of the Loan Documents.
Any request, authority or consent of any Person, who at the time
of making such request or giving such authority or consent is the
holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any
Note or Notes issued in exchange therefor.
12.2 Participation.
12.2.1 Permitted Participants; Effect. Any Lender
may subject to the provisions of this Section 12.2.1, in the
ordinary course of its business and in accordance with
applicable law, at any time sell to one or more banks or
other entities ("Participants") participating interests in
any Loan owing to such Lender, any Note held by such Lender,
any Facility Letter of Credit participated in by such
Lender, any Commitment of such Lender or any other interest
of such Lender under the Loan Documents, provided that such
Participants are consented to in advance by the Borrower,
such consent not to be unreasonably withheld or delayed. In
the event of any such sale by a Lender of participating
interests to a Participant, such Participant shall have no
direct rights hereunder, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for
the performance of such obligations, such Lender shall
remain the holder of any such Note for all purposes under
the Loan Documents, all amounts payable by the Borrower
under this Agreement shall be determined as if such Lender
had not sold such participating interests, and the Borrower
and the Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
12.2.2 Voting Rights. Each Lender shall retain the
sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any
provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan, Facility
Letter of Credit or Commitment in which such Participant has
an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable with respect to
any such Loan, Facility Letter of Credit or Commitment,
postpones any date fixed for any regularly-scheduled payment
of principal of, or interest or fees on, any such Loan,
Facility Letter of Credit or Commitment, releases any
guarantor of any such Loan or releases any substantial
portion of collateral, if any, securing any such Loan or
Facility Letter of Credit.
12.2.3 Benefit of Setoff. The Borrower agrees that
each Participant shall be deemed to have the right of setoff
provided in Section 11.1 in respect of its participating
interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan
Documents, provided that each Lender shall retain the right
of setoff provided in Section 11.1 with respect to the
amount of participating interests sold to each Participant.
The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in
Section 11.1, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff,
such amounts to be shared in accordance with Section 11.2 as
if each Participant were a Lender.
12.3 Assignments.
12.3.1 Permitted Assignments. Any Lender may, in
the ordinary course of its business and in accordance with
applicable law, at any time assign to one or more banks or
other entities other than the Borrower or any of its
Affiliates ("Purchasers") all or any part of its rights and
obligations under the Loan Documents. Such assignment shall
be substantially in the form of Exhibit G hereto or in such
other form as may be agreed to by the parties thereto. The
consent of the Borrower, and the Agent shall be required
prior to an assignment becoming effective with respect to a
Purchaser which is not a Lender or an Affiliate thereof;
provided, however, that if a Default has occurred and is
continuing, the consent of the Borrower shall not be
required. Such consents shall not be unreasonably withheld
or delayed. Each such assignment shall be in an amount not
less than the lesser of (i) $5 million, and (ii) the
remaining amount of the assigning Lender's Commitment
(calculated as at the date of such assignment).
12.3.2 Effect; Effective Date. Upon (i) delivery to
the Agent of a notice of assignment, substantially in the
form attached to Exhibit G hereto (a "Notice of
Assignment"), together with any consents required by Section
12.3.1, duly executed by the Purchaser, and (ii) payment by
one or more of the parties to such assignment (other than
the Borrower) of a $3,000 fee to the Agent for processing
such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment.
The Notice of Assignment shall contain a representation by
the Purchaser to the effect that none of the consideration
used to make the purchase of the Commitment and Loans under
the applicable assignment agreement are "plan assets" as
defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan
assets" under ERISA. On and after the effective date of
such assignment, such Purchaser shall for all purposes be a
Lender party to this Agreement and any other Loan Document
executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no
further consent or action by the Borrower, the Lenders or
the Agent shall be required to release the transferor Lender
with respect to the percentage of the Aggregate Commitment,
Loans and interests in Facility Letters of Credit assigned
to such Purchaser. Upon the consummation of any assignment
to a Purchaser pursuant to this Section 12.3.2, the
transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that (i) replacement Notes are
issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such
Purchaser, in each case in principal amounts reflecting
their Commitment, as adjusted pursuant to such assignment
and (ii) Schedule 1 hereto is amended to reflect such
assignment.
12.4 Dissemination of Information. The Borrower authorizes
each Lender to disclose to any Participant or Purchaser or any
other Person acquiring an interest in the Loan Documents by
operation of law (each a "Transferee") and any prospective
Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its
Subsidiaries; provided that each Transferee and prospective
Transferee agrees to be bound by Section 9.12 of this Agreement.
12.5 Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws
of any jurisdiction other than the United States or any State
thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.4.12.
ARTICLE XIII
NOTICES
13.1 Notices. Except as otherwise permitted by Section
2.4.7 with respect to borrowing notices, all notices, requests
and other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or
similar writing) and shall be given to such party: (x) in the
case of the Borrower, at its address, facsimile number or telex
number set forth on the signature pages hereof, (y) in the case
of the Agent or any Lender, at its address, facsimile number or
telex number set forth on Schedule 2 hereto or (z) in the case of
any party, such other address, facsimile number or telex number
as such party may hereafter specify for the purpose by notice to
the Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such
telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given
by facsimile transmission, when transmitted to the facsimile
number specified in this Section and confirmation of receipt is
received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iv) if given by any other
means, when delivered at the address specified in this Section;
provided that notices to the Agent under Article II shall not be
effective until received.
13.2 Change of Address. The Borrower, the Agent and any
Lender may each change the address for service of notice upon it
by a notice in writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
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. This Agreement shall be effective when it has
been executed by the Borrower, the Agent and the Lenders and each
party has notified the Agent by telex or telephone, that it has
taken such action. A complete set of counterparts executed by
all the parties hereto shall be lodged with each of the Borrower
and the Agent.
ARTICLE XV
CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL
15.1 Choice of Law. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2 Consent to Jurisdiction. THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENTS AND THE PARTIES HERETO HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE ANY
OBJECTION ANY OF THEM MAY NOW OR HEREAFTER HAVE AS TO THE VENUE
OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL
PROCEEDING BY THE BORROWER AGAINST THE AGENT, THE ISSUER OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT, THE ISSUER OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
15.3 Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.
IN WITNESS WHEREOF, the Borrower, the Lenders, the Issuer
and the Agent have executed this Agreement as of the date first
above written.
RICHARDSON ELECTRONICS, LTD.
By:
Print Name:
Title:
Address:
Attention:
Telephone No.:
Telecopier No.:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, Individually
and as Agent and as Issuer
By:
Print Name:
Title:
HARRIS TRUST AND SAVINGS BANK
By:
Print Name:
Title:
MELLON BANK
By:
Print Name:
Title:
PROMISSORY NOTE
Amount
Date
Richardson Electronics, Ltd., a Delaware corporation (the
"Borrower"), promises to pay to the order of
(the "Lender") the lesser of the principal sum of
Dollars
($__________) or the aggregate unpaid principal amount of all
Loans made by the Lender to the Borrower pursuant to Section 2.2
of the Loan Agreement (as hereinafter defined), in
immediately available funds at the main office of American
National Bank and Trust Company of Chicago, as Agent, in Chicago,
Illinois, together with interest on the unpaid principal
amount hereof at the rates and on the dates set forth in the Loan
Agreement. The Borrower shall pay the principal of and accrued
and unpaid interest on the Loans in full on the Facility
Termination Date in respect of such Lender (or on such earlier
date as may be required in accordance with the terms of the Loan
Agreement).
The Lender shall, and is hereby authorized to, record on the
schedule attached hereto, or to otherwise record in accordance
with its usual practice, the date and amount of each Loan
and the date and amount of each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is
entitled to the benefits of, the Loan Agreement dated as of March
1, 1998 (which, as it may be amended or modified and in
effect from time to time, is herein called the "Loan Agreement")
among the Borrower, the lenders party thereto, including the
Lender, and American National Bank and Trust Company
of Chicago, as Agent, to which Loan Agreement reference is hereby
made for a statement of the terms and conditions governing this
Note, including the terms and conditions under which
this Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to such terms in the Loan
Agreement.
Richardson Electronics, Ltd.
By:__________________________________
Print
Name:___________________________
Title:________________________________
EXHIBIBIT 10(b)
AMENDED AND RESTATED CREDIT AGREEMENT
Made as of March 1, 1998
Between
BURTEK SYSTEMS INC.
as Borrower
and
FIRST CHICAGO NBD BANK, CANADA
as Lender
and
RICHARDSON ELECTRONICS, LTD.
as Guarantor
TABLE OF CONTENTS
SECTION 1 - INTERPRETATION . . . . . . . . . . . . . . . . Page 2
1.1 Certain Defined Terms . . . . . . . . . . . . . . Page 2
1.2 Headings and Table of Contents . . . . . . . . . . .Page 13
1.3 References . . . . . . . . . . . . . . . . . . . .Page 13
1.4 Number and Gender . . . . . . . . . . . . . . . .Page 13
1.5 Time of Day . . . . . . . . . . . . . . . . . . . .Page 13
1.6 Governing Law . . . . . . . . . . . . . . . . . . .Page 13
1.7 Entire Agreement . . . . . . . . . . . . . . . . . .Page 13
1.8 Conflict . . . . . . . . . . . . . . . . . . . . . .Page 13
1.9 Severability . . . . . . . . . . . . . . . . . . . .Page 14
1.10 Currency . . . . . . . . . . . . . . . . . . . . . .Page 14
1.11 Time . . . . . . . . . . . . . . . . . . . . . . . .Page 14
1.12 GAAP . . . . . . . . . . . . . . . . . . . . . . . .Page 14
1.13 Schedules . . . . . . . . . . . . . . . . . . . . .Page 14
SECTION 2 - REPRESENTATIONS AND WARRANTIES . . .Page 14
2.1 Representations and Warranties . . . . . . . . . .Page 14
2.2 Deemed Repetition . . . . . . . . . . . . . . . .Page 16
SECTION 3 - CREDIT FACILITIES . . . . . . . . . . . . . . .Page 16
3.1 Revolving Credit Facility . . . . . . . . . . . . .Page 16
3.2 Term Credit Facility . . . . . . . . . . . . . . . .Page 17
SECTION 4 - PROVISIONS APPLICABLE TO BORROWINGS. . . . . .Page 17
4.1 Notice of Borrowing . . . . . . . . . . . . . . . .Page 17
4.2 Prime and US Prime Loans . . . . . . . . . . . . . .Page 18
4.3 BA Equivalent Loans . . . . . . . . . . . . . . . .Page 18
4.4 Substitute Basis of Borrowing . . . . . . . . . . .Page 19
4.5 Letters of Credit . . . . . . . . . . . . . .Page 19
4.6 Conversion Option . . . . . . . . . . . . . . . .Page 20
4.7 Reliance on Oral Instructions . . . . . . . . . . .Page 21
4.8 Evidence of Indebtedness . . . . . . . . . . . . . .Page 21
SECTION 5 - INTEREST, FEES AND EXPENSES. . . . . . . . . .Page 21
5.1 Payment of Interest on Prime Loans . . . . . . . . .Page 21
5.2 Payment of Interest on US Prime Rate Loans . . . .Page 21
5.3 Applicable Margin . . . . . . . . . . . . . . . . .Page 22
5.4 BA Equivalent Loans . . . . . . . . . . . . . . .Page 23
5.5 Letters of Credit Fee . . . . . . . . . . . . . . .Page 23
5.6 Payment of Interest on Libor Loans . . . . . . . . .Page 23
5.7 Interest on Overdue Amounts . . . . . . . . . . . .Page 24
5.8 Interest Act . . . . . . . . . . . . . . . . . . . .Page 24
5.9 Arrangement Fee . . . . . . . . . . . . . . . . . .Page 24
5.10 Administration Fee . . . . . . . . . . . . . . . .Page 24
5.11 Facility Fee . . . . . . . . . . . . . . . . . . .Page 24
5.12 Limit on Rate of Interest . . . . . . . . . . . . .Page 24
5.13 Change in Circumstances . . . . . . . . . . . . . .Page 25
5.14 Payment of Portion . . . . . . . . . . . . . . . .Page 26
5.15 Illegality . . . . . . . . . . . . . . . . . . . . .Page 26
5.16 Indemnity . . . . . . . . . . . . . . . . . . . . .Page 27
SECTION 6 - PAYMENTS AND REDUCTIONS OF COMMITMENTS . . . .Page 27
6.1 Payments Generally . . . . . . . . . . . . . . . .Page 27
6.2 No Set-Off . . . . . . . . . . . . . . . . . . . . .Page 28
6.3 Application of Payments Before Exercise of Rights .Page 28
6.4 Application of Payments After Exercise of Rights . .Page 28
6.5 Reduction of Commitment . . . . . . . . . . . . . .Page 29
SECTION 7 - COVENANTS . . . . . . . . . . . . . . . . . . .Page 29
7.1 Covenants of the Borrower . . . . . . . . . . . . .Page 29
7.2 Accounting, Financial Statements and Other Information Page 31
SECTION 8 - ENVIRONMENTAL MATTERS. . . . . . . . . . . . .Page 32
8.1 Representations and Warranties . . . . . . . . . . .Page 32
8.2 Covenants . . . . . . . . . . . . . . . . . . . . .Page 32
8.3 Indemnity . . . . . . . . . . . . . . . . . . . . .Page 33
8.4 Scope of Indemnity . . . . . . . . . . . . . . . .Page 33
8.5 Interest . . . . . . . . . . . . . . . . . . .Page 34
SECTION 9 - DEFAULT AND ENFORCEMENT . . . . . . . . . .Page 34
9.1 Events of Default . . . . . . . . . . . . . . . . .Page 34
9.2 Rights upon Default . . . . . . . . . . . . . . .Page 36
9.3 Waiver of Default . . . . . . . . . . . . . . . . .Page 36
SECTION 10 - REMEDIES . . . . . . . . . . . . . . . . . . .Page 36
10.1 Remedies Cumulative . . . . . . . . . . . . . . . .Page 36
10.2 Remedies Not Limited . . . . . . . . . . . . . . . .Page 37
10.3 Set-Off, etc. . . . . . . . . . . . . . . . . . . .Page 37
10.4 Lender May Perform Covenants . . . . . . . . . . . .Page 37
SECTION 11 - MISCELLANEOUS . . . . . . . . . . . . . . . .Page 37
11.1 Amendments and Waivers . . . . . . . . . . . . . . .Page 37
11.2 Notice . . . . . . . . . . . . . . . . . . . . . .Page 37
11.3 Judgment Currency . . . . . . . . . . . . . . . .Page 38
11.4 Further Assurances . . . . . . . . . . . . . . . .Page 38
11.5 Reimbursement of Expenses . . . . . . . . . . . . .Page 38
11.6 Survival . . . . . . . . . . . . . . . . . . . . . .Page 39
11.7 Attornment . . . . . . . . . . . . . . . . . . . . .Page 39
11.8 Successors and Assigns . . . . . . . . . . . . . . .Page 39
11.9 Counterparts . . . . . . . . . . . . . . . . . . . .Page 39
AMENDED AND RESTATED CREDIT AGREEMENT
This Agreement is made as of March 1, 1998
B E T W E E N:
BURTEK SYSTEMS INC.
as Borrower
and
FIRST CHICAGO NBD BANK, CANADA
as Lender
and
RICHARDSON ELECTRONICS, LTD.
as Guarantor
WHEREAS:
A. First Chicago NBD Bank, Canada (the "Lender") entered
into a credit agreement made as of February 18, 1997 (the "Credit
Agreement") with Richardson Electronics Acquisition Corp., the
partial purpose of which was to finance the acquisition by
Richardson Electronics Acquisition Corp. of all the capital stock
of Burtek Systems Inc. ("Old Burtek")
B. Subsequent to the execution of the Credit Agreement,
Richardson Electronics Acquisition Corp. acquired all the capital
stock of Old Burtek. By articles of Amalgamation filed effective
May 31, 1997, Richardson Electronics Acquisition Corp.
amalgamated with Old Burtek to continue as the Borrower.
C. The Lender and the Borrower entered into a first
amending agreement made as of August 14, 1997 (the "First
Amending Agreement") amending the terms of the Credit Agreement.
D. The Lender and the Borrower entered into a second
amending agreement made as of August 22, 1997 (the "Second
Amending Agreement") further amending the terms of the Credit
Agreement.
E. As further amendments to the Credit Agreement are
required, the Borrower and the Lender have agreed to enter into
this Amended and Restated Credit Agreement to provide for such
further amendments.
NOW THEREFORE, for value received the parties agree as follows:
SECTION 1 - INTERPRETATION
1.1 Certain Defined Terms. The terms defined herein shall have,
for all purposes of this Agreement, the following meanings unless
the context expressly or by necessary implication otherwise
requires:
"Accounts" means the accounts and records established by the
Lender to record the Borrower's liability to the Lender in
respect of the Borrowings made available to the Borrower.
"Additional Compensation" has the meaning ascribed to it in
Section 5.13(c).
"Administration Fee" has the meaning ascribed to in Section
5.10.
"Affected Borrowing" has the meaning ascribed to it in
Section 5.14.
"Affiliate" has the meaning established in the Canada
Business Corporations Act in effect on the date hereof.
"Agreement" means this agreement, including the Schedules,
as the same may be amended, varied, supplemented, restated,
renewed or replaced at any time and from time to time.
"Applicable Law" means, in respect of any Person, property,
transaction or event, all present or future applicable laws,
statutes, regulations, treaties, orders, judgments and decrees
and all applicable official directives, rules, guidelines, orders
and policies of any governmental bodies having authority over any
of the foregoing.
"Applicable Margin" means, at any date of determination
thereof, the rate per annum calculated in accordance with Section
5.3.
"Arrangement Fee" has the meaning ascribed to in Section
5.9.
"Associate" has the meaning established in the Canada
Business Corporations Act in effect on the date hereof.
"Auditors" means Ernst & Young Inc. or such other major
Canadian accountancy firm appointed by the Guarantor.
"Available Asset Value" means the book value of the assets
of the Consolidated Guarantor determined in accordance with GAAP
less the amount of all Indebtedness, other than Subordinated
Claims, secured by Liens against such assets.
"BA Equivalent Loan" means a loan or advance under this
Agreement which is denominated in Canadian Dollars and in respect
of which the Borrower is obligated to pay in accordance with
Section 5.4.
"BA Interest Date" means the last day of each BA Interest
Period.
"BA Interest Period" means, with respect to a BA Equivalent
Loan, the term of days as selected by the Borrower in accordance
with Section 4.3(b), commencing on the Drawdown Date or
Conversion Date, as applicable, of such BA Equivalent Loan and
expiring on a Business Day, which term shall not be less than 30
days or more than 180 days thereafter, in each case subject to
availability.
"BA Rate" means, in respect of any BA Equivalent Loan, the
annual rate of interest which is the rate determined as being the
rate of the Lender applicable to Canadian Dollar bankers'
acceptances for the applicable BA Interest Period.
"Banking Day" means a Business Day on which dealings in US
Dollar deposits by and between banks in the London interbank
market may be conducted.
"Borrower" means Burtek Systems Inc.
"Borrower's Account" means:
(1) for all payments in Canadian Dollars, the
following account maintained by the Borrower
with the Lender at the Branch of Account to
which payments and transfers are to be
effected:
First Chicago NBD Bank, Canada, transit #0012-270,
account #100431-001,
or such other account as the Borrower and the Lender
may agree in writing, and
(2) for all payments in US Dollars, the following
account maintained by the Borrower with the
Lender at the Branch of Account to which
payments and transfers are to be effected:
First Chicago NBD Bank, Canada, transit #0012-270,
account #100431-010,
or such other account as the Borrower and Lender may
agree in writing.
"Borrowings" means an extension of credit hereunder by the
Lender to the Borrower by way of advances of Loans and Letters of
Credit Advances.
"Branch of Account" means, with respect to the Lender, its
branch at BCE Place, 161 Bay Street, Suite 4240, Toronto,
Ontario, M5J 2S1 or such other branch in Canada as the Lender and
Borrower may agree in writing.
"Burtek" means Burtek Systems Inc.
"Business Day" means a day on which the Lender is open for
money market dealings in Toronto, Ontario, but excludes Saturday,
Sunday and any other day which is a statutory holiday in Toronto,
Ontario and with respect to a Libor Loan, such a day is a
Business Day only if it is also a Banking Day.
"Canadian Dollars" and the symbols "CAD" and "$" each means
lawful money of Canada.
"Capitalized Lease" of a Person means any lease of Property
by such Person as lessee which would be capitalized on a balance
sheet of such Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" of a Person means the amount
of the obligations of such Person under Capitalized Leases which
would be shown as a liability on a balance sheet of such Person
prepared in accordance with GAAP.
"Closing Date" means March 2, 1998 or such other date as the
Borrower and the Lender may agree.
"Commercial Letter of Credit" means a commercial letter of
credit issued by the Lender to a beneficiary at the request of
and for the account of the Borrower.
"Commitment" means:
(a) until and including February 28, 1998, the sum of
CAD16,335,610; and
(b) after February 28, 1998, the sum of CAD13,835,310,
or the Equivalent Amount in US Dollars, to the extent not
cancelled, reduced or terminated hereunder.
"Compliance Certificate" means a compliance certificate
signed by the Chief Financial Officer or Treasurer of the
Consolidated Guarantor, substantially in the form attached to the
U.S. Loan Agreement showing the calculations necessary to
determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof.
"Consolidated Guarantor" means the Guarantor as consolidated
with the Borrower in accordance with applicable GAAP.
"Contaminant" means any pollutants, hazardous materials or
contaminants, dangerous, toxic or hazardous substances, waste of
any description whatsoever except non-hazardous waste of the kind
generated by the Borrower in the normal course of its operations,
including any of the foregoing as defined in any Environmental
Law.
"Conversion Date" means the date of which the Lender has
been notified by the Borrower at the Branch of Account as being
the date on which the Borrower has elected to convert a Borrowing
or a portion of a Borrowing pursuant to Section 4.7.
"Credit Facilities" means collectively, the Revolving Credit
Facility and Term Credit Facility and individually, either one of
them.
"Default" means an event, circumstance or omission which
constitutes an Event of Default or which, with the giving of
notice or lapse of time, or both, would constitute an Event of
Default.
"Documents" means this Agreement and all certificates and
other documents delivered or to be delivered to the Lender
pursuant hereto or thereto and, when used in relation to any
Person, the term "Documents" shall mean and refer to those
Documents executed and delivered by such Person.
"Drawdown Date" means a Business Day on which a Borrowing is
to be made by way of Loan.
"Environmental Activity" means any activity, event or
circumstance in respect of a Contaminant, including, without
limitation, its storage, use, holding, collection, purchase,
accumulation, assessment, generation, manufacture, construction,
processing, treatment, stabilization, disposition, handling or
transportation or its Release into the natural environment
including movement through or in the air, soil, subsoil, surface
water or groundwater.
"Environmental Laws" means any and all federal, provincial,
municipal and local statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, grants, licences,
agreements or other governmental restrictions of Canada, its
provinces, and of all applicable municipalities thereof relating
to the environment, health and safety, health protection or any
Environmental Activity.
"Equivalent Amount" of one currency means, on any date, the
amount of a second currency into which the first currency may be
converted at the spot rate at which the Lender would, on such
date at or about 12:00 noon (Toronto time), be prepared to sell
the same amount of such second currency in Toronto, and if such
date is not a Business Day, on the immediately preceding Business
Day, or at such other rate as may have been agreed by the
Borrower and the Lender.
"Event of Default" means any of the events or circumstances
specified in Section 9.1;
"Facility Fee" has the meaning ascribed to it in Section
5.11.
"Facility Termination Date" means March 1, 2001 or any
earlier date on which the Commitment is reduced to zero or
otherwise terminated pursuant to the terms hereof.
"Financial Assistance" by any Person means:
(a) any loan, guarantee, sale with recourse, endorsement
(other than for collection or deposit in the ordinary
course of business) or other obligation (contingent or
other) to pay, purchase, repurchase or otherwise
acquire or become liable upon or in respect of any
Indebtedness of another; and
(b) without limiting the generality of the foregoing, any
obligation (contingent or other) to make a payment on
behalf of another for goods, property of services
regardless of the non-delivery or nonfurnishing
thereof, or to make an investment in another, or to
maintain the capital, working capital, solvency or
general financial condition of another (other than for
the purchase of Marketable Securities), or to indemnify
another Person against and hold such Person harmless
from damage, loss or liability, all under circumstances
intended to enable another to incur or pay any
Indebtedness or to comply with agreement relating
thereto or otherwise to assure or protect creditors
against less in respect of Indebtedness.
The amount of any Financial Assistance shall be the amount
of all Indebtedness of the obligor to which the Financial
Assistance relates, unless the Financial Assistance is
limited to a determinable amount in which case the amount of
such Financial Assistance shall be deemed to be such
determinable amount.
"Fiscal Year" means the fiscal year of the Borrower which
currently runs from June 1 to May 31.
"GAAP" means generally accepted accounting principles in
effect from time to time in Canada applicable to the relevant
Person, applied in a consistent manner from period to period.
"Government Approvals" means, with respect to any Person,
all material licences, permits, consents, authorizations and
approvals from any and all Governmental Authorities required for
the conduct of that Person's business as presently conducted.
"Governmental Authority" means the government of any nation,
state, province, municipality or other political subdivision
thereof, and any entity exercising executive, legislative,
regulatory or administrative functions, and any corporation or
other entity owned or controlled in any manner by any of the
foregoing.
"Guarantor" means Richardson Electronics, Ltd.
"Indebtedness" of a Person means:
(a) any obligation, contingent and other, which should be
classified upon such Person's balance sheet as a
liability in accordance with GAAP,
(b) any obligation secured by any Lien existing on property
owned or acquired by such Person subject to such Lien
whether or not the obligation secured thereby shall
have been assumed,
(c) any debt or liability of such Person representing the
deferred acquisition cost of property or assets created
or arising under any conditional sale agreement or
other title retention agreement even though the rights
and remedies of the seller under such agreement in the
event of default are limited to repossession or sale of
property or assets covered thereby,
(d) any liabilities under indemnities given in respect of
any bankers' acceptance, letter of credit or letter of
guarantee, and
(e) any Financial Assistance by such Person,
and, for greater certainty, does not include equity.
"Interest Determination Date" means: (i) with respect to a
BA Equivalent Loan, the date which is 2 Banking Days prior to the
first day of the BA Interest Period applicable to such BA
Equivalent Loan, (ii) with respect to a Libor Loan, the date
which is 2 Banking Days prior to the first day of the Libor
Interest Period applicable to such Libor Loan.
"Interest Expense" means, for any period of calculation, all
interest expense on Indebtedness calculated for such period for
the Consolidated Guarantor on a consolidated basis in accordance
with GAAP.
"Interest Payment Date" means the last Business Day of each
month.
"Letter of Credit" means a Commercial Letter of Credit and a
Standby Letter of Credit.
"Letter of Credit Advances" means a Borrowing by way of the
issuance of a Letter of Credit pursuant to this Agreement.
"Letters of Credit Agreement" means the agreement entered
into between the Borrower and the Lender whereby the Lender
agrees to issue Letters of Credit upon the application of the
Borrower, including any recitals and schedules to such agreement,
as amended, supplemented or restated from time to time.
"Level I Status" exists at any date if the Senior Funded
Debt to Cash Flow Ratio is greater than or equal to 2.01:1.00.
"Level II Status" exists at any date if the Senior Funded
Debt to Cash Flow Ratio is greater than or equal to 1.51:1.0 but
less than 2.01:1.00.
"Level III Status" exists at any date if the Senior Funded
Debt to Cash Flow Ratio is greater than or equal to 1.00:1.00 but
less than 1.51:1.00.
"Level IV Status" exists at any date if none of Level I
Status, Level II Status or Level III Status exists at such date.
"Libor" means with respect to each Libor Loan the annual
rate of interest for a period approximately equal to the Libor
Interest Period applicable to such Libor Loan displayed on page
3750 of the Telerate service as at approximately 11:00 a.m.
(London time) on the Interest Determination Date; provided,
however, if such rate does not appear on the Telerate screen page
as contemplated, the Libor shall be such other rate or rates as
the parties may agree.
"Libor Interest Date" means the last day of each Libor
Interest Period.
"Libor Interest Period" means, with respect to a Libor Loan,
the initial period (subject to availability) of approximately one
month (or longer whole multiples of 30, 60, 90 or 180 days as
agreed from time to time) commencing with the date on which a
Libor Loan is made and thereafter each successive period of 30
days (or longer whole multiples of 30, 60, 90 or 180 days as
agreed from time to time) commencing on the last day of the
immediately prior Libor Interest Period.
"Libor Loan" means a loan or advance under this Agreement
which is denominated in US Dollars and in respect of which the
Borrower is obliged to pay interest in accordance with Section
5.6.
"Lien" means any mortgage, charge, lien, hypothec, trust,
encumbrance, charge, pledge, assignment, security interest,
financing statement, title retention, or any other security
arrangement of whatsoever nature or kind.
"Loan" means a Prime Loan, US Prime Rate Loan, BA Equivalent
Loan or Libor Loan.
"Material Adverse Effect" means, when used with reference to
any event or circumstance and any Person, an event or
circumstance which has or may have a material adverse effect on
(1) the business, operations, property or financial or other
condition of that Person, (2) the ability of that Person to
perform and discharge its obligations under this Agreement or any
of the other Documents, or (3) the Lender's ability to enforce
its rights under this Agreement or any of the other Documents.
"Net Income" shall mean, for any period, the net income (or
loss), after provision for taxes, of the Consolidated Guarantor
on a consolidated basis for such period taken as a single
accounting period but excluding any unrealized losses and gains
for such period resulting from mark-to-market Rate Hedging
Agreements.
"Notice of Borrowing" has the meaning ascribed to it in
Section 4.1.
"Outstanding Borrowings" means, at any time, the aggregate
of all accrued interest and unpaid fees payable hereunder which
at such time are due and payable, the principal amount of all
Loans and the aggregate amount payable by the Lender to the
holder of all outstanding Letters of Credit.
"Permitted Liens" means, with respect to the Borrower or any
of its subsidiaries, any:
(a) Liens in connection with workers compensation,
unemployment insurance or other social security
obligations in respect of obligations which are not yet
due or which are being contested in good faith;
(b) Liens now or hereafter made or incurred in the ordinary
course of business to secure the performance of bids,
tenders, contracts (other than for the borrowing of
money), leases, statutory obligations or surety and
performance bonds;
(c) mechanics', worker's, materialmen's or other like
Liens, arising in connection with construction or in
the ordinary course of business, in respect of
obligations which are not due or which are being
contested in good faith;
(d) Liens for Taxes not due or being contested in good
faith;
(e) Liens in respect of judgments or awards against the
Borrower with respect to which the Borrower at the time
shall in good faith be processing an appeal or
proceedings for review and with respect to which the
Borrower shall have secured a stay of execution pending
such appeal or review;
(f) Liens now or hereafter created or assumed by the
Borrower on existing assets as permitted or not
prohibited under existing agreements with lenders or,
in connection with the acquisition or construction
subsequent to the date hereof of property, whether real
or personal (other than current assets), purchase money
pledges of or purchase money mortgages or Liens or
security interests created upon such acquired property
to the extent it secures Indebtedness in an amount up
to 100% of the lesser of the cost and fair market value
of the property; and extensions, renewals or
replacements thereof upon such property if the amount
of Indebtedness secured thereby is not increased;
(g) minor imperfections of title and encumbrances, if any
which are not substantial in amount, and do not
materially detract from the value of the properties
subject thereto or materially impair the Borrower's
ability to carry on its business;
(h) licences or leases of patents, trademarks or trade
names made in the ordinary course of business; and
(i) other existing and future Liens incidental to the
conduct of its business or the ownership of its
property and assets.
"Person" means any individual, partnership, limited
partnership, limited liability company, joint venture, syndicate,
sole proprietorship, company or corporation with or without share
capital, unincorporated association, trust, trustee, executor,
administrator or other legal personal representative, regulatory
body or agency, government or governmental agency, authority or
entity however designated or constituted.
"Prime Loan" means a loan or advance made under this
Agreement which is denominated in Canadian Dollars and in respect
of which the Borrower is obliged to pay interest in accordance
with Section 5.1.
"Prime Rate" means the annual rate of interest in effect
from time to time equal to the greater of (i) the annual rate of
interest publicly announced from time to time by the Lender as
being its reference rate then in effect for determining interest
rates on Canadian Dollar denominated commercial loans made by the
Lender in Canada; and (ii) the BA Rate plus 1.00%. Any change in
the Prime Rate shall be effective on the date such change becomes
effective generally.
"Property" of a Person means any and all property, whether
real, personal, tangible, intangible, or mixed, of such Person,
or other assets owned, leased or operated by such Person.
"Rate Hedging Agreement" means an agreement, device or
arrangement providing for payments which are related to
fluctuations of interest rates, exchange rates or forward rates,
including, but not limited to, dollar-denominated or cross-currency
interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts
and warrants.
"Release" means, with respect to any Contaminant, the method
by which such Contaminant comes to be in the environment at large and includes,
without limitation, discharging, spraying, injection,
abandonment, depositing, spilling, leaking, seeping, pouring,
emission, emptying, throwing, dumping, placing and exhausting,
and when used as a noun has a similar meaning.
"Revolving Commitment" means,
(a) until and including February 28, 1998, the sum of
CAD13,400,000; and
(b) after February 28, 1998, the sum of CAD10,900,000
or the Equivalent Amount in US Dollars, to the extent not
cancelled, reduced or terminated hereunder.
"Revolving Credit Facility" means the revolving credit
facility referred in Section 3.1.
"Revolving Credit Facility Maturity Date" means (i) March 1,
2001 or (ii) such other date as may be agreed upon between the
Borrower and the Lender from time to time.
"Senior Funded Debt" means the sum of all Indebtedness of
the Consolidated Guarantor that is (i) not Subordinated Debt and
(ii) interest bearing, including, but not limited to, Capitalized
Lease Obligations and the Outstanding Borrowings hereunder.
"Senior Funded Debt to Cash Flow Ratio" means, as at any
date of determination thereof, the ratio of (i) Senior Funded
Debt to (ii) Total Cash Flow, in each case calculated as at such
date of determination for the Consolidated Guarantor, and in each
case calculated for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date of
determination.
"Standby Letter of Credit" means a standby letter of credit
issued by the Lender to a beneficiary at the request of and for
the account of the Borrower.
"Status" means, at any date of determination, whichever of
Level I Status, Level II Status, Level III Status or Level IV
Status exists at such time.
"Subordinated Claims" means, at any time and from time to
time, all claims of any Person in respect of Indebtedness owing
by the Borrower which rank subordinate to the claims of the
Lender in respect of the Outstanding Borrowings and other
Indebtedness of the Borrower to the Lender hereunder.
"Subordinated Debt" means any unsecured Indebtedness of the
Consolidated Guarantor (a) no part of the principal of which is
required to be paid (whether by way of mandatory sinking fund,
mandatory redemption, mandatory prepayment or otherwise) prior to
the Revolving Credit Facility Maturity Date or Term Credit
Facility Maturity Date and the payment of the principal of and
interest on which and other obligations of the Consolidated
Guarantor in respect thereof are subordinated to the prior
payment in full of principal and interest on all other
obligations and liabilities of the Consolidated Guarantor to the
Lender hereunder on terms and conditions first approved in
writing by the Lender and (b) otherwise containing terms,
covenants and conditions satisfactory in form and substance to
the Lender, as evidenced by their prior written approval thereof.
"Subsidiary" means a subsidiary of the Borrower as defined
in the Canada Business Corporations Act.
"Tax" includes all present and future taxes, levies,
imposts, stamp taxes, duties, charges to tax, fees, deductions,
withholdings and any restrictions or conditions resulting in a
charge to tax and all penalty, interest and other payments on or
in respect thereof.
"Term Commitment" means CAD2,935,310.36 to the extent not
cancelled, reduced or terminated hereunder.
"Term Credit Facility" means the non-revolving term credit
facility referred in Section 3.2.
"Term Credit Facility Maturity Date" means (i) July 31,
2001, or (ii) such other date as may be agreed upon between the
Borrower and the Lender from time to time.
"Total Cash Flow" means, as at any date of determination
thereof, the sum of Net Income, Interest Expense, taxes,
depreciation and amortization in each case calculated as at such
date of determination for the Consolidated Guarantor. Neither
cash nor non-cash charges reflecting extraordinary terms, unusual
items, or one time charges will be added back for the purpose of
Total Cash Flow calculation.
"Unmatured Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
"US Dollars" and the symbol "USD" each means the lawful
money of the United States of America.
"U.S. Guaranty" means that certain Guaranty dated as of
March 1, 1998, executed by the Guarantor in favour of the Lender
with respect to the indebtedness and liability of the Borrower to
the Lender, as the same may be amended or modified and in effect
from time to time.
"U.S. Loan Agreement" means that certain Loan Agreement made
as of March 1, 1998, between Richardson Electronics, Ltd.,
various lending institutions, and American National Bank and
Trust Company of Chicago, as agent, as it may be amended or
modified and in effect from time to time.
"U.S. Loan Documents" has the meaning attributed to the term
"Loan Documents" in the U.S. Loan Agreement.
"US Prime Rate" means, with respect to a US Prime Rate Loan,
the annual rate of interest in effect from time to time equal to
the annual rate of interest publicly announced from time to time
by the Lender as being its reference rate then in effect for
determining rates on US Dollar denominated commercial loans made
by the Lender in Canada. Any change in the US Prime Rate shall
be effective on the date such change becomes effective generally.
"US Prime Rate Loan" means a loan or advance made under this
Agreement which is denominated in US Dollars and in respect of
which the Borrower is obliged to pay interest in accordance with
Section 5.2.
"Written" or "in writing" includes printing, typewriting, or
any electronic means of communication capable of being legibly
reproduced at the point of reception.
1.2 Headings and Table of Contents. The insertion of headings
and the provision of a table of contents are for convenience of
reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 References. Unless otherwise specified, all references to
Sections and Schedules are to Sections of, and Schedules to this
Agreement. The words "hereto", "herein", "hereof", "hereunder"
and similar expressions refer to this Agreement and not to any
particular Section or other provision of this Agreement.
1.4 Number and Gender. Unless otherwise specified, words
importing the singular include the plural and vice versa and
words importing gender include all genders.
1.5 Time of Day. Unless otherwise specified, any reference to a
time of day means local time in Toronto, Ontario.
1.6 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the
Province of Ontario and of Canada applicable therein.
1.7 Entire Agreement. This Agreement, including all Schedules
and all documents contemplated hereby, constitutes the entire
agreement among the parties with respect to the subject matter
and supersedes all prior negotiations, undertakings,
representations and understandings including, without limitation,
the letter agreement dated November 28, 1996 (the "Proposal
Letter") between the Guarantor and the Lender and correspondence
between the parties dated prior to the date hereof.
1.8 Conflict. If there is a conflict or inconsistency between
the provisions of this Agreement and any other document
including, without limitation, the Documents and the agreements
and correspondence between the Lender and the Borrower referred
to in Section 1.7, the provisions of this Agreement shall
prevail.
1.9 Severability. Any provision of this Agreement which is
illegal, invalid or unenforceable in any jurisdiction shall not
affect the legality, validity or enforceability of the remaining
provisions and any such illegality, invalidity or
unenforceability in any jurisdiction shall not affect the
legality, validity or enforceability of such provision in any
other jurisdiction.
1.10 Currency. Unless otherwise specified, all amounts are
stated in Canadian Dollars.
1.11 Time. Time shall be of the essence in all provisions of
this Agreement.
1.12 GAAP. Unless otherwise provided, all accounting terms used
in this Agreement shall be interpreted and all financial
information prepared in accordance with GAAP, consistently
applied.
1.13 Schedules. The following Schedules are attached to and form
part of this Agreement:
Schedule 2.1(i) - Litigation
Schedule 4.1 - Notice of Borrowing
Schedule 4.3 (b) - Notice of Rollover of BA Equivalent Loan
Schedule 4.3(c) - Notice of Rollover of Libor Loan
Schedule 4.6 - Notice of Conversion
Schedule 7.1(i)2 - Form of Promissory Notes
Schedule 7.1(i)4 - Form of Guaranty
Schedule 7.1(i)6 - Opinion of legal counsel to the Borrower
Schedule 8.1(d) - Particulars of environmental inquiries
SECTION 2 - REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. The Borrower, represents
and warrants to the Lender, all of which shall survive the
execution and delivery of this Agreement, as follows:
(a) Existence, Power and Conduct of Business. The Borrower is a
corporation duly organized and validly existing under the laws of
Canada, being its jurisdiction of incorporation, except as
disclosed in writing to the Lender, is up to date in all material
filings required under Applicable Laws of relevance to this
transaction and the business conducted by it and the properties
and assets owned or leased by it, has the requisite power and
authority to own and lease its properties and assets and to
conduct its businesses in which it is presently engaged and
except in jurisdictions where failure to register does not
materially affect it or its business or except as disclosed in
writing to the Lender, is duly qualified to conduct its
businesses in all jurisdictions where the nature of its assets or
its businesses makes such qualification necessary.
(b) Power and Authority. The execution, delivery and
performance by the Borrower of this Agreement and all other
Documents are within its powers, have been duly authorized by all
necessary corporate action and do not conflict with, result in a
breach or violation of, or constitute a material default under,
its constating documents, any unanimous shareholders agreement,
any Applicable Law or any agreement or other document to which it
is a party or by which it is bound and do not result in the
creation of any Lien upon any of its assets.
(c) Execution and Delivery and Binding Effect. Each of this
Agreement and all other Documents has been duly executed and
delivered by the Borrower and constitutes a legal, valid and
binding obligation of the Borrower, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting
creditors' rights generally, the fact that specific performance
and injunctive relief may be given at the discretion of the
courts, and the equitable or statutory powers of the courts to
stay proceedings before them and to stay the execution of
judgments.
(d) No Approvals Required. No further registration, order,
permit, filing, consent, licence, decree or approval of, from or
with any Governmental Authority is necessary or advisable in
order to ensure the legality, validity, binding effect and
enforceability of this Agreement or any other Document as against
the Borrower.
(e) Financial Statements. Its most recent annual and quarterly
financial statements, copies of which have been furnished to the
Lender, have been prepared in accordance with GAAP, present
fairly its financial position and the results of its operations
as at the date of such financial statements.
(f) Title to Assets and Liens. Except as disclosed in writing
and consented to by the Lender, it has good and marketable title
to all of its assets and properties free and clear of any Liens
other than Permitted Liens.
(g) No Default. There exists to its knowledge no Event of
Default which has not been waived and no Default of which the
Lender has not previously been notified in writing.
(h) Compliance. The Borrower is in material compliance with its
constating documents, its franchises and licences, and all
Applicable Laws including, without limitation, health, safety and
employment standards and labour codes and, to the best knowledge
of the Borrower, with Environmental Laws of all applicable
Governmental Authorities.
(i) Litigation. Except as set out in Schedule 2.1(i), to
Borrower's knowledge, no material litigation (including, without
limitation, derivative actions), arbitration proceedings,
governmental proceedings or investigations or regulatory
proceedings are pending or threatened against the Borrower
(except as previously disclosed by notice to the Lender), which,
if adversely determined, would have a Material Adverse Effect
upon the Borrower, nor does the Borrower know of any basis for
any of the foregoing. In addition, there are no inquiries,
formal or informal, which might give rise to such actions,
proceedings or investigations.
(j) Full Disclosure. Neither the financial statements referred
to in Section 2.1(e) nor any other statement furnished by the
Borrower or on its behalf to the Lender in connection with the
negotiation of this Agreement contain any untrue statement of a
material fact, or omit a material fact necessary to make such
statements not misleading, and all such statements, taken as a
whole, together with this Agreement, do not contain any untrue
statement of a material fact or omit a material fact necessary to
make such statements not misleading. All expressions of
expectation, intention, belief and opinion were honestly made by
the Borrower on reasonable grounds after due and careful inquiry
by it and any other Person who furnished such material. There is
no fact within the knowledge of the Borrower which has not been
disclosed to the Lender in writing which has or which the
Borrower could reasonably expect to have a Material Adverse
Effect.
(k) Tax Returns. The Borrower has filed or caused to be filed
all tax returns which, to its knowledge are required to have been
filed, and has paid all Taxes shown to be due and payable on such
returns or on any assessments made against it and all other
Taxes, fees or other charges imposed on it by any Governmental
Authority, other than those the amount or validity of which is
currently being contested in good faith by appropriate
proceedings and with respect to which reserves have been provided
in its books. No Liens for Taxes have been filed and, to its
knowledge, no claims are being asserted with respect to any such
Taxes, fees or other charges.
(l) Material Change. Save as disclosed in writing and consented
to by the Lender, there has been no material adverse change in
the financial condition of the Borrower or any material
litigation since the date of the most recent audited or unaudited
financial statements (as the case may be) of the Borrower
delivered under this Agreement.
(m) Liabilities. As of the date of the most recent financial
statements delivered to the Lender under this Agreement, the
Borrower has no debts, liabilities or obligations to any Person,
whether direct or indirect, absolute or contingent, matured or
not, or other obligations for the payment of money which,
according to GAAP, are material and which are not disclosed
(1) in its most recent financial statements delivered to the
Lender under this Agreement and the notes to those financial
statements or (2) in writing to the Lender.
(n) Security Service International SSI Inc. The Borrower has
not assumed any liabilities of Security Service International SSI
Inc. or of Security Service International SSI Group Inc. and all
assets of Security Service International SSI Inc. and Security
Service International SSI Group Inc. have been assumed by the
Borrower free and clear of any Liens. The Borrower has acquired
such assets of Security Service International SSI Inc. and
Security Service International SSI Group Inc. in accordance with
the provisions of the order dated August 21, 1997 of Mr. Justice
Benjamin J. Greenberg of the Superior Court of the District of
Montreal sitting in bankruptcy matters providing for the sale of
such assets to the Borrower.
2.2 Deemed Repetition. The representations and warranties made
in Section 2.1 shall continue in effect until payment and
performance of all debts, liabilities and obligations referred to
in this Agreement and any Document and shall be deemed to be
repeated on each Drawdown Date, Acceptance Date and Conversion
Date as if made on each such date, in each case subject to minor
changes which, individually or in the aggregate, do not have a
material effect.
SECTION 3 - CREDIT FACILITIES
3.1 Revolving Credit Facility.
(a) Establishment. Subject to this Agreement, the Lender hereby
confirms its establishment in favour of the Borrower of a
revolving credit facility in the principal amount of the
Revolving Commitment (the "Revolving Credit Facility") available
to the Borrower by way of advances of Loans and Letter of Credit
Advances (up to an aggregate amount not to exceed a sub-limit of
CAD1,000,000). The parties acknowledge that, as of the date
hereof, the Borrower is indebted to the Lender under the
Revolving Commitment in the amount of CAD10,890,000.
(b) Revolving Nature of Revolving Credit Facility. Subject to
this Agreement, the Borrower may, from time to time, increase or
reduce the amount of its Borrowings under the Revolving Credit
Facility by borrowing, repaying and reborrowing Prime Loans, US
Prime Rate Loans, BA Equivalent Loans and Libor Loans and by the
issuance of Letters of Credit.
(c) Repayment. All Outstanding Borrowings under the Revolving
Credit Facility shall be repayable by the Borrower upon the
earliest of (i) Revolving Credit Facility Maturity Date (ii)
demand at any time by the Lender following the occurrence of an
Event of Default, and (iii) in the event that the Guarantor
arranges financing with another lender to repay the Borrower's
indebtedness under the Revolving Credit Facility.
(d) Purpose. The proceeds of Borrowings under the Revolving
Credit Facility shall be used to (i) refinance the indebtedness
of the Borrower, for the Borrower's general corporate purposes
and the financing of its day to day working capital requirements,
whether directly or indirectly through its subsidiary and (ii) to
acquire certain assets of the security equipment distribution
business operated by Security Service International SSI Inc. and
Security Service International SSI Group Inc.
3.2 Term Credit Facility.
(a) Establishment. Subject to this Agreement, the Lender hereby
confirms its establishment in favour of the Borrower of a term
non-revolving credit facility in the principal amount of the Term
Commitment (the "Term Credit Facility") available to the Borrower
by way of two advances of a Loan. The parties agree that, as of
the date hereof, the Lender has already made the two advances
under the Term Commitment in the aggregate amount of
CAD3,650,000, and no further advances will be made.
(b) Repayment. All Outstanding Borrowings under the Term Credit
Facility shall be repayable by the Borrower upon the earlier of
(i) the Term Credit Facility Maturity Date; (ii) demand at any
time by the Lender following the occurrence of an Event of
Default; provided that prior to any such demand, the Borrower
shall repay the Outstanding Borrowings under the Term Credit
Facility in 48 equal monthly payments of CAD71,592.92 each on
account of principal commencing August 31, 1997 with the balance
due or accruing on the Term Credit Facility Maturity Date; and
(iii) in the event the Guarantor refinances the Borrower's
indebtedness under the Term Credit Facility.
(c) Purpose. The proceeds of Borrowings under the Term Credit
Facility have been used to finance the acquisition of certain
assets of the security equipment distribution business operated
by Security Service International SSI Inc. and Security Service
International SSI Group Inc.
SECTION 4 - PROVISIONS APPLICABLE TO BORROWINGS
4.1 Notice of Borrowing.
Subject to the terms and conditions hereof, the Borrower may
borrow by way of Loans and Letters of Credit Advances upon giving
to the Lender at the Branch of Account:
(1) in the case of Prime Loans and US Prime Rate Loans,
irrevocable telephone notice by 5:00 p.m. two Business
Day prior to the Drawdown Date, and
(2) in the case of BA Equivalent Loans, Libor Loans and
Letters of Credit Advances, irrevocable telephone
notice by 5:00 p.m. three Business Days prior to the
Drawdown Date,
in each case followed by written confirmation on the same day
substantially in the form of Schedule 4.1 (a "Notice of
Borrowing").
4.2 Prime and US Prime Loans.
Amounts of Borrowing. Each Borrowing by way of a Prime Loan
or a US Prime Loan shall be in the minimum amount of CAD or
USD100,000 and thereafter in increments of CAD or USD10,000.
4.3 BA Equivalent Loans and Libor Loans.
(a) Amounts of Borrowing. Each Borrowing by way of a BA
Equivalent Loan shall be in the minimum amount of CAD1,000,000
and thereafter in increments of CAD100,000. Each Borrowing by
way of Libor Loan shall be in the minimum amount of USD1,000,000
and thereafter in increments of USD100,000.
(b) Rollover of BA Equivalent Loan. With respect to each
BA Equivalent Loan which is an outstanding Borrowing, at or
before 5:00 p.m. three Business Days before the applicable
Interest Determination Date, the Borrower shall notify the Lender
at the Branch of Account by irrevocable telephone notice followed
by written confirmation on the same day in form and substance
substantially as attached as Schedule 4.3(b) either of (1) the
next BA Interest Period which it has selected as applicable to
the BA Equivalent Loan, which new BA Interest Period shall
commence on and include the last day of the prior BA Interest
Period, or (2) the intention of the Borrower to repay or convert
such BA Equivalent Loan at the end of the relevant Libor Interest
Period. If the Borrower fails to select and to notify the Lender
at the Branch of Account of the BA Interest Period applicable to
the BA Equivalent Loan, or its intention to repay or convert the
Borrower shall be deemed to have converted the BA Equivalent Loan
into a Prime Rate Loan as of the last day of the applicable BA
Interest Period.
(c) Rollover of Libor Loans. With respect to each Libor
Loan which is an outstanding Borrowing, at or before 5:00 p.m.
three Business Days before the applicable Interest Determination
Date, the Borrower shall notify the Lender at the Branch of
Account by irrevocable telephone notice followed by written
confirmation on the same day in form and substance substantially
as attached as Schedule 4.3(c) either of (1) the next Libor
Interest Period which it has selected as applicable to the Libor
Loan, which new Libor Interest Period shall commence on and
include the last day of the prior Libor Interest Period, or (2)
the intention of the Borrower to repay or convert such Libor Loan
at the end of the relevant Libor Interest Period. If the
Borrower fails to select and to notify the Lender at the Branch
of Account of the Libor Interest Period applicable to the Libor
Loan, or its intention to repay or convert the Borrower shall be
deemed to have converted the Libor Loan into a US Prime Rate Loan
as of the last day of the applicable Libor Interest Period.
4.4 Substitute Basis of Borrowing. If at any time during the
term of this Agreement, the Lender determines in good faith
(which determination shall be final, conclusive and binding upon
the Borrower) that:
(a) adequate and fair means do not exist for ascertaining
the rate of interest on a Libor Loan,
(b) Libor does not accurately reflect the effective cost to
the Lender of making, funding or maintaining a Libor Loan and the
costs to the Lender are increased or the income receivable by the
Lender is reduced in respect of a Libor Loan,
(c) the making or the continuance of a Libor Loan or a
portion of a Libor Loan by the Lender has become impracticable by
reason of circumstances which materially and adversely affect the
London interbank market, or
(d) deposits in US Dollars are not available to the Lender
in the London interbank market in sufficient amounts in the
ordinary course of business for the applicable Libor Interest
Period to make, fund or maintain a Libor Loan during such Libor
Interest Period,
then the Lender shall promptly notify the Borrower in writing of
such determination setting forth the basis of such determination
and each outstanding Libor Loan will automatically be converted
into a US Prime Rate Loan on the expiry of its then current Libor
Interest Period. The Lender will not be obligated to make any
further Libor Loans available pursuant to this Agreement, so long
as the circumstances referred to in this Section 4.4 continue.
4.5 Letters of Credit.
(a) Letter of Credit Period. Letters of Credit shall have
terms of not greater than 365 days and shall mature on a Business
Day but not to extend beyond the Facility Termination Date.
(b) Refusal to Issue. The Lender may refuse to issue
Letters of Credit on the Borrower's behalf at any time in the
Lender's sole discretion.
(c) Letter of Credit Agreement. Each Letter of Credit
shall be governed by the terms and conditions of the Letter of
Credit Agreement or other specific agreement relative to such
instruments between the Borrower and the Lender and each Letter
of Credit shall be governed by the terms and conditions of the
applicable Letter of Credit Agreement in the event of a conflict
with this agreement.
(d) Retirement of Letter of Credit. A Letter of Credit may
only be retired on its maturity date (i) unless and to the extent
it has been honoured or (ii) unless the written consent of the
beneficiary of such instrument has been obtained and the original
Letter of Credit has been returned to the Lender.
(e) Charging of Letter of Credit. Each drawing under a
Letter of Credit shall be charged to the Borrower's Account.
4.6 Conversion Option.
(a) Notice for and Conditions of Conversion. Subject to
this Agreement, the Borrower may, during the term of this
Agreement, effective on any Business Day, convert, in whole or in
part, Outstanding Borrowings into another basis of Borrowing
permitted under the Credit Facilities, upon giving to the Lender
at the Branch of Account prior irrevocable telephone notice at or
before 5:00 p.m. three Business Days in advance, followed by
written confirmation on the same day substantially in the form of
Schedule 4.6, provided that:
(i) no Default has occurred and is continuing,
(ii) each conversion to a Borrowing by way of a Prime
Loan or a US Prime Loan shall be for a minimum
aggregate amount of CAD or USD100,000,
(iii) each conversion to a Borrowing by way of
BA Equivalent Loan shall be for a minimum
aggregate amount of CAD1,000,000,
(iv) each conversion to a Borrowing by way of Libor
Loan shall be for a minimum aggregate amount of
USD1,000,000,
(v) a conversion to a Borrowing by way of Libor Loans
shall only be made to the extent that the
conditions outlined in Section 4.4 shall not exist
on the relevant Conversion Date,
(vi) each conversion of a Borrowing by way of a Libor
Loan may be converted to another basis of
Borrowing only on the last day of the relevant
Libor Interest Period and, provided that, if less
than all of such Libor Loan is converted, then
after such conversion not less than USD1,000,000
(or increments of USD100,000 in excess thereof)
shall remain as a Libor Loan, and
(vii) each conversion of a Borrowing by way of a
BA Equivalent may be converted to another
basis of Borrowings only on the last day
of the relevant BA Interest Period and
provided that, if less than all such BA
Equivalent Loan is converted, then after
such conversion not less than CAD1,000,000
(or increments of CAD100,000 in excess
thereof) shall remain as a BA Equivalent
Loan.
(b) Mandatory Conversion. If an Event of Default, or an
event or circumstance which with notice or lapse of time or both
would constitute an Event of Default, has occurred and is
continuing, the Borrower shall be required to convert (i) its
Borrowings by way of Libor Loans to Borrowings by way of US Prime
Rate Loans on the applicable Libor Interest Date, and (ii) its
Borrowings by way of BA Equivalent to Borrowings by way of Prime
Loans on the applicable BA Interest Date.
(c) Conversion Not Repayment. The conversion of any
Borrowing to another type of Borrowing in an equal amount, as
provided in this Section 4.6, shall not be deemed to constitute a
repayment of any Borrowing or a new advance of funds.
(d) Determination Final. With respect to all matters
referred to in this Section 4.6, the determination by the Lender
shall, prima facie, be final and binding on the Borrower.
4.7 Reliance on Oral Instructions. The Lender shall be entitled
to act upon the oral instructions of any Person who the Lender,
acting reasonably, believes has been identified by the Borrower
in written instructions to the Lender as someone authorized to
give oral instructions regarding the drawdown or issuance of
Borrowings, and the Lender shall not be responsible for any error
or omission in such instructions or in the performance thereof
except in the case of negligence or wilful misconduct by the
Lender or its employees. Any such oral instructions so given
shall be immediately confirmed in writing by the Borrower to the
Lender.
4.8 Evidence of Indebtedness. The Lender shall open and
maintain at the Branch of Account, accounts and records
evidencing the liability of the Borrower to the Lender with
respect to Borrowings and record therein by appropriate entries
all amounts of Indebtedness of the Borrower to the Lender arising
under or in connection with this Agreement and all payments on
account thereof. Such accounts and records will constitute,
prima facie, conclusive evidence of the Indebtedness of the
Borrower to the Lender from time to time, the date each Borrowing
was made and the amounts the Borrower has paid from time to time
on account of such Indebtedness.
SECTION 5 - INTEREST, FEES AND EXPENSES
5.1 Payment of Interest on Prime Loans.
Rate. The Borrower shall pay interest on Prime Loans in
Canadian Dollars at a rate per annum equal to the Prime Rate.
Each change in the fluctuating interest rate for a Prime Loan
will take place simultaneously with the corresponding change in
the Prime Rate.
Calculation. Interest on Prime Loans shall be payable
monthly in arrears on each Interest Payment Date for the period
up to but not including such Interest Payment Date and shall be
calculated on a daily basis on the principal amount of the Prime
Loans remaining unpaid from time to time and on the basis of the
actual number of days elapsed and a year of 365 days or 366 days,
as the case may be.
5.2 Payment of Interest on US Prime Rate Loans.
Rate. The Borrower shall pay interest on US Prime Rate
Loans in US Dollars at a rate per annum equal to the US Prime
Rate. Each change in the fluctuating interest rate for a US
Prime Rate Loan will take place simultaneously with the
corresponding change in the US Prime Rate.
Calculation. Interest on US Prime Rate Loans shall be
payable monthly in arrears on each Interest Payment Date for the
period up to but not including such Interest Payment Date and
shall be calculated on a daily basis on the principal amount of
the US Prime Rate Loans remaining unpaid from time to time and on
the basis of the actual number of days elapsed and a year of 365
days or 366 days, as the case may be.
5.3 Applicable Margin
Calculation. The Applicable Margin shall be subject to
adjustment (upwards or downwards, as appropriate) based on the
Status of the Consolidated Guarantor as at the end of each fiscal
quarter in accordance with the table set forth below. The Status
of the Consolidated Guarantor as at the last day of each fiscal
quarter shall be based on the Senior Funded Debt to Cash Flow
Ratio of the Consolidated Guarantor determined from the then most
recent annual or quarterly financial statements of the
Consolidated Guarantor delivered pursuant to Section 7.2(a) and
the Compliance Certificate delivered pursuant to Section
7.2(b)(ii). Any adjustment to the Applicable Margin shall be
effective commencing five (5) days after the delivery to the
Lender of such financial statements and Compliance Certificate.
In the event that the Consolidated Guarantor shall at any time
fail to furnish to the Lender such financial statements and
Compliance Certificate within the time limitations specified by
Section 7.2(b), then the maximum Applicable Margin shall apply
from the date of such failure until the fifteenth (15th) day
after such financial statements and Compliance Certificate are so
delivered. Notwithstanding anything to the contrary contained
herein, the Status of the Consolidated Guarantor from the date of
this Agreement to and including May 30, 1998, shall be deemed to
be Level II Status. Notwithstanding anything to the contrary
contained herein, the Status of the Consolidated Guarantor from
the date of this Agreement to and including the later of (i) May
30, 1998 and (ii) five (5) days after the delivery to the Lenders
of the May 31, 1998 annual financial statements of the
Consolidated Guarantor accompanied by a current Compliance
Certificate, shall be deemed to be Level II Status.
Applicable Margin Table
Status Applicable Margin
Level I 1.5%
Level II 1.25%
Level III 1.0%
Level IV 0.75%
Changes in Interest Rate, etc. Each Prime Loan or US
Prime Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from and including the date such
Prime Loan or US Prime Rate Loan is made or is converted from a
Libor Loan into a Prime Loan or US Prime Rate Loan pursuant to
Section 4.6 to but excluding the date it becomes due or is
converted into a Libor Loan pursuant to Section 4.6 at a rate per
annum equal to the Prime Rate or US Prime Rate for such day.
Changes in the rate of interest on that portion of any Borrowings
maintained as a Prime Loan or US Prime Rate Loan will take effect
simultaneously with each change in such applicable rate. Each
Libor Loan shall bear interest on the outstanding principal
amount thereof from and including the first day of the Libor
Interest Period applicable thereto to (but not including) the
last day of such Libor Interest Period at the interest rate
determined as applicable to such Libor Loan.
Rates Applicable After Default. During the continuance of
a Default or Unmatured Default the Lender may, at their option,
by notice to the Borrower, declare that no Borrowings may be made
as, converted into or continued as a Libor Loan, declare that (i)
each Libor Loan shall bear interest for the remainder of the
applicable Libor Interest Period at the rate otherwise applicable
to such Libor Interest Period plus, to the extent permitted by
law, 2% per annum and (ii) each Prime Loan or US Prime Rate Loan
shall bear interest at a rate per annum equal to the Prime Rate
or US Prime Rate otherwise applicable to the Prime Loan or US
Prime Loan plus, to the extent permitted by law, 2% per annum,
provided that, during the continuance of a Default under Section
9.1 the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Borrowings without any election or
action on the part of the Lender.
5.4 BA Equivalent Loans.
Rate. The Borrower shall pay interest on each BA Equivalent
Loan in Canadian Dollars for the period commencing on and
including the first day of the BA Interest Period applicable to
such BA Equivalent Loan up to but not including the BA Interest
Date, at the rate per annum determined by the Lender to be equal
to the sum of BA Rate plus the Applicable Margin. Each such
determination of the rate of interest applicable to a BA Interest
Period shall, prima facie, be final, and binding upon the
Borrower. Upon determination of the rate of interest applicable
to a BA Interest Period applicable to a BA Equivalent Loan, the
Lender shall promptly notify the Borrower of such rate.
Calculation. Interest on each BA Equivalent Loan shall be
payable on each BA Interest Date with respect to such BA
Equivalent Loan and shall be calculated on a daily basis and on
the basis of the actual number of days elapsed and a year of 365
days or 366 days, as the case may be; provided however, that in
the event that a relevant BA Interest Period is greater than 90
days, interest shall be due and payable not less frequently than
every 90 days.
5.5 Letters of Credit Fee.
Fees. The Borrower shall pay to the Lender, at the time the
Lender issues (or renews) a Commercial Letter of Credit, an
issuance fee at the Lender's standard rates calculated on the
maximum face amount of each such Commercial Letter of Credit.
The Borrower shall pay to the Lender, at the time the Lender
issues (or renews) a Standby Letter of Credit, an issuance fee
equal to the greater of (i) CAD$300 and (ii) the Applicable
Margin of the maximum face amount of such Standby Letter of
Credit. The calculation of the amount of such annual fees shall
be based on the term of such Letter of Credit (or the term of
such renewal) and shall be based on a 365 or 366 day year, as the
case may be.
5.6 Payment of Interest on Libor Loans.
Rate. The Borrower shall pay interest on each Libor Loan in
US Dollars for the period commencing on and including the first
day of the Libor Interest Period applicable to such Libor Loan up
to but not including the Libor Interest Date, at the rate per
annum determined by the Lender to be equal to the sum of Libor
plus the Applicable Margin. Each such determination of the rate
of interest applicable to a Libor Interest Period shall, prima
facie, be final, and binding upon the Borrower. Upon
determination of the rate of interest applicable to a Libor
Interest Period applicable to a Libor Loan, the Lender shall
promptly notify the Borrower of such rate.
Calculation. Interest on each Libor Loan shall be payable
on each Libor Interest Date with respect to such Libor Loan and
shall be calculated on a daily basis and on the basis of the
actual number of days elapsed and a year of 360 days; provided
however, that in the event that a relevant Libor Interest Period
is greater than 90 days, interest shall be due and payable not
less frequently than every 90 days.
5.7 Interest on Overdue Amounts. Upon a default in the payment
of principal, interest or other amounts due under this Agreement,
the Borrower shall pay interest on such overdue amount both
before and, where permitted by law, after judgment at a rate per
annum equal to the rate of interest as is applicable to the
relevant Borrowing prior to default (calculated on the same
basis) plus 2.0% for so long as such amount remains overdue.
Such interest shall be payable upon demand made by the Lender and
shall be compounded on each Interest Payment Date, BA Interest
Date or Libor Interest Date, as applicable.
5.8 Interest Act. For the purposes of the Interest Act
(Canada), where in this Agreement a rate of interest is to be
calculated on the basis of a year of 360 or 365 days, as
applicable (the "first rate"), the yearly rate of interest to
which the first rate is equivalent is the first rate multiplied
by the actual number of days in the year for which such
calculation is made and divided by 360 or 365 (as applicable).
5.9 Arrangement Fee. The Borrower has paid the Lender
arrangement fees of CAD18,750 and CAD22,500 (the "Arrangement
Fee"), the receipt of which are hereby acknowledged by the
Lender.
5.10 Administration Fee. The Borrower will pay the Lender an
administration fee of CAD1,000 (the "Administration Fee") payable
quarterly in arrears on the last Business Day of each February,
May, August and November, for the daily monitoring and
administration of operating draws and pay downs.
5.11 Facility Fee. The Guarantor will pay to the order of
American National Bank and Trust Company of Chicago as agent for
the Lender, an annual facility fee equal to the product of (a)
one-eighth of one percent (0.125%) and (b) the Commitment,
payable in quarterly installments on the last Business Day of
each February, May, August, and November. Such Facility Fee
shall in no circumstances be refundable to the Borrower or
Guarantor.
5.12 Limit on Rate of Interest.
(a) No Payment shall exceed Lawful Rate. Notwithstanding any
other term of this Agreement, the Borrower shall not be obliged
to pay any interest or other amounts under or in connection with
this Agreement in excess of the amount or rate permitted under or
consistent with Applicable Laws. In particular but without
limiting the generality of the foregoing, the Borrower shall not
be obliged to pay any interest or other amounts which would
result in the receipt by the Lender of interest on credit
advanced at a rate in excess of the rate permitted under the
Criminal Code (Canada). For purposes of this Section, "interest"
and "credit advanced" have the meanings ascribed in the Criminal
Code (Canada), and the "effective annual rate of interest" shall
be calculated in accordance with generally accepted actuarial
principles and practices.
(b) Payment at Highest Lawful Rate. If, as a result of Section
5.13(a), the Borrower is not obliged to make a payment which it
would otherwise be required to make, the Borrower shall make such
payment to the maximum extent permitted by or consistent with
Applicable Law.
5.13 Change in Circumstances.
(a) Reduction in Rate of Return. If at any time the Lender
determines, acting reasonably, that (1) any change in any
Applicable Law or any interpretation thereof after the date of
execution hereof, or (2) compliance by the Lender with any
direction, requirement or request from any regulatory authority
given after the date of execution hereof, whether or not having
the force of law provided that if not having the force of law,
the Lender's decision to comply therewith is reasonable, prudent
and in good faith, has or would have, as a consequence of the
Lender's obligation under this Agreement and taking into
consideration the Lender's policies with respect to capital
adequacy, the effect of reducing the rate of return on the
Lender's capital to a level below that which the Lender could
have achieved but for such change or compliance, then from time
to time, upon demand of the Lender, the Borrower shall pay to the
Lender such additional amounts as may be determined by the Lender
as will compensate the Lender for such reduction provided that
the Lender is similarly requiring payment of compensating amounts
from other Borrowers whose credit facilities with the Lender are
similarly effected.
(b) Taxes, Reserves, Capital Adequacy, etc. If, after the
date of execution hereof, any introduction of any Applicable Law
or any change or introduction of a change in any Applicable Law
(whether or not having the force of law) provided that if not
having the force of law, the Lender's decision to comply
therewith is reasonable, prudent and in good faith or in the
interpretation or application thereof by any court or by any
Governmental Authority, central bank or other authority or entity
charged with the administration thereof or any change in the
compliance of the Lender therewith now or hereafter:
(i) subjects the Lender to, or causes the withdrawal
or termination of a previously granted exemption
with respect to, any Tax or changes the basis of
taxation, or increases any existing Tax, on
payments of principal, interest, fees or other
amounts payable by the Borrower to the Lender
under this Agreement (except for taxes on the
overall net income of the Lender),
(ii) imposes, modifies or deems applicable any reserve,
special deposit, deposit insurance or similar
requirement against assets held by, or deposits in
or for the account of or loans by or any other
acquisition of funds by, an office of the Lender,
or
(iii) imposes on the Lender or expects there to
be maintained by the Lender any capital
adequacy or additional capital requirement
in respect of any Borrowing or any other
condition with respect to this Agreement,
and the result of any of the foregoing, in the sole determination
of the Lender acting reasonably, shall be to increase the cost
to, or reduce the amount received or receivable by, the Lender
hereunder or its effective rate of return hereunder in respect of
making, maintaining or funding a Borrowing hereunder, the Lender
shall, acting reasonably, determine that amount of money which
shall compensate the Lender for such increase in cost or
reduction in income. The Lender shall make reasonable efforts to
limit the incidence of any Additional Compensation, as defined
below.
(c) Payment of Additional Compensation. Upon the Lender
having determined that it is entitled to compensation in
accordance with the provisions of Sections 5.13(a) or 5.13(b)
(herein referred to as "Additional Compensation"), the Lender
shall promptly so notify the Borrower and shall provide to the
Borrower a photocopy of the relevant Applicable Law or direction,
requirement or request, as applicable, and a certificate of a
duly authorized officer of the Lender setting forth the
Additional Compensation and the basis of calculation thereof,
which shall be prima facie evidence of such Additional
Compensation. The Borrower shall pay to the Lender within 30
Business Days of the giving of such notice the Additional
Compensation calculated and accruing from the date of such
notification. The Lender shall be entitled to be paid such
Additional Compensation from time to time to the extent that the
provisions of this Section 5.13 are then applicable
notwithstanding that Lender has previously been paid any
Additional Compensation.
(d) International Settlements Capital Rules. For greater
certainty, the term "Applicable Law" for the purposes of this
Section 5.13 includes any law relating in any way to
international convergence of capital measurement and capital
standards developed by the Bank for International Settlements.
5.14 Payment of Portion. Notwithstanding any other term or
condition of this Agreement, if the Lender gives the notice
provided for in Section 5.13 with respect to any Borrowing (an
"Affected Borrowing"), the Borrower may at its option, upon 10
Business Days notice to that effect given to the Lender (which
notice shall be irrevocable) unless such prepayment causes an
Event of Default hereunder, prepay in full without penalty such
Affected Borrowing outstanding together with accrued and unpaid
interest on the principal amount so prepaid up to the date of
such prepayment and pay such Additional Compensation as may be
applicable to the date of such payment and all costs, losses and
expenses incurred by the Lender by reason of the liquidation or
re-employment of deposits or other funds or for any other reason
whatsoever resulting from the repayment of such Affected
Borrowing or any part thereof. Upon its receipt of such
prepayment, the Lender shall refund a proportionate share of the
Arrangement Fee.
5.15 Illegality. If any Applicable Law, or any change therein or
in the interpretation or application thereof by any court or by
any Governmental Authority or central bank or comparable agency
or any other entity charged with the interpretation or
administration thereof or compliance by the Lender with any
request or direction (whether or not having the force of law
provided that if not having the force of law, the Lender's
decision to comply therewith is reasonable, prudent and in good
faith) of any such Governmental Authority, central bank or
comparable agency or entity, now or hereafter makes it unlawful
or impossible for the Lender to make, fund or maintain a
Borrowing or to perform its obligations under this Agreement, the
Lender may, by written notice thereof to the Borrower terminate
its obligations to make further advances under this Agreement,
and the Borrower, if required by the Lender, shall repay
forthwith (or at the end of such longer period as the Lender at
its discretion has agreed) the principal amount of such Borrowing
together with accrued interest (without penalty or bonus), along
with such Additional Compensation as may be applicable to the
date of such payment and all costs, losses and expenses incurred
by the Lender by reason of the liquidation or re-deployment of
deposits or other funds or for any other reason whatsoever
resulting from the repayment of such Borrowing or any part
thereof. If any such change shall only affect a portion of the
Lender's obligations under this Agreement which is, in the
opinion of the Lender acting reasonably, severable from the
remainder of this Agreement so that the remainder of this
Agreement may be continued in full force and effect without
otherwise affecting any of the obligations of the Lender or the
Borrower hereunder, the Lender shall, after allowing the Borrower
the option to convert its Loan, only declare its obligations
under that portion so terminated.
5.16 Indemnity.
(a) General. The Borrower shall indemnify the Lender
against all losses, reasonable expenses and liabilities which the
Lender may sustain or incur as a consequence of (1) any Default
by the Borrower under this Agreement, (2) any material
misrepresentation by the Borrower contained in any writing
delivered to the Lender in connection with this Agreement, or (3)
any material failure by the Borrower to comply with any
Applicable Law.
(b) Libor Loans. For greater certainty, but without
limitation, if the Borrower repays, prepays or cancels a Libor
Loan on a day other than a Libor Interest Date falling on the
last day of a Libor Interest Period, the Borrower shall indemnify
the Lender for any loss or expense suffered or incurred by the
Lender including, without limitation, any loss or expenses which
the Lender incurs by reason of the liquidation or re-deployment
of deposits or other funds acquired by the Lender to maintain the
Libor Loan and any interest or other charges payable to lenders
of funds borrowed by the Lender in order to maintain the Libor
Loan together with any other charges, costs or expenses incurred
by such Lender relative thereto.
(c) Telephone Instructions. The Borrower shall indemnify
the Lender for any loss or expense suffered or incurred by the
Lender as a consequence of the Lender acting in accordance with
prudent banking standards upon instructions given or agreements
made over the telephone or by electronic transmission of any type
with Persons who the Lender, acting reasonably, believes to have
been acting on the Borrower's behalf and who have been identified
in writing by the Borrower as Persons authorized to give such
instructions, provided this indemnity shall not apply to losses
or expenses incurred or suffered by the Lender as a result of its
own gross negligence or wilful misconduct.
(d) Certificate. A certificate of the Lender setting out
the basis for the determination of the amount necessary to
indemnify the Lender pursuant to this Section 5.16 shall be,
prima facie, conclusive evidence of the correctness of such
determination.
SECTION 6 - PAYMENTS AND REDUCTIONS OF COMMITMENTS
6.1 Payments Generally. Each payment to the Lender under this
Agreement shall be paid in the currency in which the relevant
Borrowing is outstanding and all other amounts owing hereunder
shall be paid in Canadian Dollars except as otherwise herein
required or contemplated. Each such payment shall be made for
value at or before 12:00 noon (Toronto time) on the day such
payment is due, provided that, if any such day is not a Business
Day, such payment shall be deemed for all purposes of this
Agreement to be due on the Business Day next following such day
(and any such extension shall be taken into account for purposes
of the computation of interest and fees payable under this
Agreement).
6.2 No Set-Off. All payments to be made by the Borrower shall
be made without set-off or counterclaim and without any deduction
of any kind.
6.3 Application of Payments Before Exercise of Rights. All
payments made by or on behalf of the Borrower under this
Agreement before the exercise by the Lender of any rights arising
under Section 9.2 shall be applied in each instance in the
following order:
(a) firstly, in payment of any amounts due and payable as
and by way of recoverable expenses hereunder;
(b) secondly, in payment of any fees, interest, or default
interest then due and payable on or in respect of the
Borrowings;
(c) thirdly, in repayment of any principal amounts
outstanding on account of the Borrowings; and
(d) fourthly, in payment of any other amounts then due and
payable by the Borrower hereunder.
6.4 Application of Payments After Exercise of Rights. All
payments made by or on behalf of the Borrower under this
Agreement after the exercise by the Lender of any rights arising
under Section 9.2 shall be applied in each instance in the
following order, unless the Lender otherwise determines in its
sole and absolute discretion:
(a) firstly, in payment of the reasonable costs and
expenses of any realization, including the out-of-pocket expenses of
the Lender and the reasonable fees
and out-of-pocket expenses of counsel employed in
connection therewith, and to the payment of all
reasonable funds made available by the Lender for the
account of the Borrower in connection with such
realization and the payment of all reasonable out-of-pocket costs
and expenses incurred by the Lender in
connection with the administration and enforcement of
this Agreement or the other Documents, to the extent
that such funds, costs and expenses shall not have been
reimbursed to the Lender;
(b) secondly, in payment of any unpaid fees payable
hereunder to and including the date of such
application;
(c) thirdly, in payment of principal and then to the
payment of any other Indebtedness (other than on
account of interest) outstanding under this Agreement
and under any other agreement applicable to the
Outstanding Borrowings, and then to the payment of
accrued and unpaid interest thereunder to and including
the date of such application; and
(d) fourthly, in payment of the balance, if any, of such
proceeds to the Borrower or such other person or
persons who may be entitled at law to such proceeds or,
in each case, their respective successors or assigns,
or as a court of competent jurisdiction may otherwise
direct.
6.5 Reduction of Commitment. The Borrower may reduce or cancel
the amount of the Commitment at any time upon not less than five
Business Days prior irrevocable written notice to the Lender
without bonus or penalty; provided that on or prior to the
effective date of such reduction or cancellation all Outstanding
Borrowings in excess of the Commitment, as reduced or cancelled,
together with interest accrued thereon and fees outstanding in
respect thereof is paid in full.
SECTION 7 - COVENANTS
7.1 Covenants of the Borrower. While any amount owing hereunder
remains unpaid or the Lender has any obligations hereunder, the
Borrower covenants with the Lender, that it will:
(a) Corporate Existence and Franchises. except as
otherwise expressly permitted in this Agreement, maintain in full
force and effect its separate existence and all rights, licenses,
leases and franchises reasonably necessary to the conduct of its
business.
(b) Books, Records and Inspections. maintain complete and
accurate books and records, permit the Lender to have reasonable
access to the Borrower's books and records, and permit the Lender
to inspect the Borrower's properties and operations at reasonable
times.
(c) Insurance. maintain insurance to such extent and
against such hazards and liabilities as may be required by law
and as is commonly maintained by companies similarly situated or
as the Lender may reasonably request from time to time.
(d) Taxes and Liabilities. promptly pay when due all
taxes, duties, assessments and other liabilities, except such
taxes, duties, assessments and other liabilities as the Borrower
is diligently contesting in good faith and by appropriate
proceedings or which the failure to pay would not have a Material
Adverse Effect; provided that the Borrower has provided for and
is maintaining adequate reserves with respect thereto in
accordance with GAAP.
(e) Liens. not create or permit to exist any Lien with
respect to any of the properties or assets of the Borrower or any
Subsidiary, whether nor owned or hereafter acquired, including,
without limitation, accounts or inventory now owned or hereafter
acquired, except the following Liens (a) Permitted Liens; (b)
Liens which arise in the ordinary course of business for sums not
due or sums which the Borrower is contesting in good faith and by
appropriate proceedings and with respect to which the Borrower
has provided for and is maintaining adequate reserves in
accordance with GAAP, but which do not involve any deposits or
advances or borrowed money or the deferred purchase price of
property or services; and (c) any other Lien in respect of which
the Lender has provided its prior written consent.
(f) Prohibition of Negative Pledge. not, nor will it permit
any of its Subsidiaries to agree, covenant, warrant, represent,
pledge or otherwise commit with or to any entity other than the
Lender, to not incur, create, assume or permit to exist, any
mortgage, pledge, lien charge or other encumbrance of any nature
whatsoever on all or any of its assets now or hereafter owned,
except for such pledge made directly in connection with the
purchase of inventory in the ordinary course of business, with a
value of such inventory owned by the Borrower and its
Subsidiaries not exceeding $2,500,000.00 in the aggregate at any
time.
(g) Other Agreements. not enter into any agreement which
would have a Material Adverse Effect on the Borrower containing
any provision which would be violated or breached by the
performance of its obligations hereunder or under any instrument
or document delivered or to be delivered by it hereunder or in
connection herewith or which would violate or breach any
provision hereof or of any such instrument or document.
(h) Compliance with Applicable Laws. comply with the
requirements of all Applicable Laws, rules, regulations, and
orders of all Governmental Authorities (Federal, state,
provincial, local or foreign, and including, without limitation,
environmental laws, rules, regulations and orders), except for
failures to comply with such statutes, rules and regulations
which in the aggregate would not materially and adversely affect
the Borrower's business, credit, operations, financial condition
or prospects, except where the Borrower is contesting an alleged
breach in good faith and by proper proceedings and for which the
Borrower is maintaining adequate reserves in accordance with
GAAP.
(i) Delivery of Documents. on or before the Closing Date
(except as otherwise noted), the Borrower shall execute, or cause
to be executed, and delivered to the Lender, in form and
substance satisfactory to it acting reasonably, the following:
1. a certificate of an officer on behalf of the Borrower
dated as of the Closing Date certifying:
(i) the names and specimen signatures of the Persons
authorized to sign the Documents to be executed
and delivered by the Borrower;
(ii) that the constating documents and by-laws of the
Borrower attached thereto are complete and correct
copies, have not been amended, modified or
supplemented except as described in the
certificate and are in full force and effect,
except that, to the extent that the Borrower has
provided the Lender within the previous 8 months
with a copy of its constating documents or by-laws,
instead of providing a new copy it may
provide the Lender with a certificate of one of
its officers to the effect that such documents are
complete and correct copies of the originals
thereof which originals have not been amended,
modified or supplemented and are in full force and
effect;
(iii) that attached thereto is the resolution of
the Borrower and all other authorizations
necessary to authorize the execution and
delivery and performance of the Documents
executed and delivered by it;
2. promissory note(s) given by the Borrower in favour of
the Lender evidencing the Outstanding Borrowings
substantially in the form set out in Schedule 7.1(i)2.
3. Letter of Credit Agreement given by the Borrower in
favour of the Bank with respect to the issuance of
Letters of Credit.
4. unlimited guarantee and postponement of claim given by
the Guarantor in favour of the Lender with respect to
the indebtedness of the Borrower to the Lender
substantially in the form set out in Schedule 7.1(i)4;
5. acknowledgements by the Guarantor and the domestic
senior lenders of the Guarantor that the said guarantee
shall be held by the Lender on a pari passu basis;
6. opinions of legal counsel to the Borrower and the
Guarantor, addressed to the Lender substantially in the
form set out in Schedule 7.1(i)6; and
7. such other documents related to the foregoing as the
Lender may reasonably request.
7.2 Accounting, Financial Statements and Other Information.
General. The Borrower shall maintain a system of accounting
established and administered in accordance with GAAP consistently
applied and shall set aside on its books all proper reserves.
Reports. The Borrower shall provide to the Lender each of
the following:
(a) Audit Report. on or before the 90th day after each of
the Guarantor's fiscal years, a copy of an annual audit
report of the Guarantor prepared in conformity with
GAAP, duly certified by its Auditors, together with a
certificate from such Auditors containing a computation
of, and showing compliance with, each of the financial
ratios and restrictions contained in this Agreement.
(b) Interim Reports. on or before the 45th day after the
end of each of the Borrower's fiscal quarters, (i) a
copy of unaudited financial statements of the Borrower
prepared in a manner consistent with the financial
statements referred to above, signed by a senior
financial officer of the Borrower and consisting of, at
least, balance sheets as at the close of such month and
statements of earnings for such quarter and for the
period from the beginning of such fiscal quarter to the
close of such quarter, and (ii) a Compliance
Certificate of the Chief Financial Officer or Treasurer
of the Consolidated Guarantor substantially in the form
attached to the U.S. Loan Agreement.
(c) Notice of Default and Litigation. forthwith upon
learning of the occurrence of any of the following
written notice thereof which describes the same and the
steps being taken by the Borrower with respect thereto:
(i) the occurrence of an Event of Default or Default,
(ii) the institution of, or any adverse determination
in, any litigation, arbitration proceedings or
governmental proceeding in which any injunctive relief
is sought or in which money damages in excess of
$1,000,000.00 are sought.
(d) Other Information. such other information concerning
the Borrower as the Lender may reasonably request from
time to time.
SECTION 8 - ENVIRONMENTAL MATTERS
8.1 Representations and Warranties. The Borrower represents and
warrants to the Lender, all of which shall survive the execution
and delivery of this Agreement, as follows:
(a) Compliance. Subject to Section 8.1(d) below, to the
best knowledge of the Borrower, the property, assets, activities
and operations of the Borrower and those of any prior owner,
lessee, licensee or other occupant thereof comply in all material
respects with all Environmental Laws and with any authorization,
permit, grant, licence, consent, right, privilege, registration,
filing, commitment, order, approval, judgment, direction,
ordinance or decree issued or granted by law or by any
Governmental Authority and are not subject to any judicial,
governmental, regulatory or other investigations, proceedings,
inquiries or notices; save and except to the extent disclosed in
writing to the Lender and in respect of which, to the extent
possible, adequate remedial action has been undertaken. To the
best knowledge of the Borrower, none of the Borrower, and any
present or prior owner, lessee, licensee or occupant or any
Person having the charge, management or control of any of their
respective properties has filed any notice or report under any
Environmental Law with any Governmental Authority.
(b) Presence of Contaminant. Subject to Section 8.1(d)
below, to the best knowledge of the Borrower, there neither is
nor has been, any Environmental Activity at, upon, under, over,
within or with respect to their properties with the exception of
the handling, use or storage in accordance with Environmental
Laws, of electrical and/or hydraulic equipment that may contain
PCBs or related substances, which equipment is of a kind normally
used in premises similar to the properties of the Borrower.
(c) Liability. Subject to Section 8.1(d) below, to the
best knowledge of the Borrower, none of the Borrower and any
present or prior owner, lessee, licensee or occupant of any of
their respective properties has been, nor is it, involved in any
operations at, or with respect to their properties which could
lead to the imposition of liability on the Borrower or Person who
has or will have the charge, management or control of any such
property or the creation of a Lien thereon under any
Environmental Law; save and except to the extent disclosed in
writing to the Lender and in respect of which to the extent
possible adequate remedial action has been undertaken.
(d) Inquiry. The representations and warranties provided
in Sections 8.1(a)(b) and (c) are given after limited inquiry by
the Borrower, the details of which are provided in Schedule
8.1(d).
8.2 Covenants. While any amount owing hereunder remains unpaid
or the Lender has any obligations hereunder, the Borrower
covenants with the Lender as follows:
(a) Compliance. It shall comply in all material respects
with the requirements of any Environmental Law.
(b) Notification. It shall notify the Lender within 10
days of becoming aware of any Release or within 15 days of any
other discovery of any Contaminant at, upon, under, over, within
or with respect to any of its property or any contiguous real or
immovable property. It shall promptly thereafter forward to the
Lender copies of all orders, notices, permits, applications or
other communications and reports in connection with any
Environmental Law affecting or relating to any of its property or
its operations and activities.
8.3 Indemnity. The Borrower shall at all times indemnify and
hold harmless the Lender from and against any and all claims,
suits, actions, debts, damages, costs, losses, obligations,
judgments, charges, and expenses, of any nature whatsoever (in
this Section 8.3, a "Claim") suffered or incurred by the Lender,
whether upon realization of any security, or as a lender to the
Borrower, or as successor to or assignee of any right or interest
of the Borrower or as a result of any order, investigation or
action by any Governmental Authority relating to the Borrower, or
the business or property of the Borrower as privileged or
hypothecary creditor or mortgagee in possession of property or as
successor or successor-in-interest as a result of any taking of
possession of all or any property or by foreclosure deed or deed
in lieu of foreclosure or by any other means relating to the
Borrower, under or on account of any breach of Environmental Law
(except as a result of the negligence or wilful misconduct of the
Lender), or the assertion of any Lien thereunder, with respect
to:
(a) the Release of a Contaminant, the threat of the Release
of any Contaminant, or the presence of any Contaminant
affecting any of their respective properties,
(b) the Release of a Contaminant owned by, or under the
charge, management or control of, the Borrower,
(c) any costs incurred by any Governmental Authority or any
other Person or damages from injury to, destruction of,
or loss of natural resources in relation to, any such
property or personal property located thereon,
including reasonable costs of assessing such injury,
destruction or loss incurred pursuant to any
Environmental Laws,
(d) liability for personal injury or property damage
arising by reason of any civil law offences or
quasi-offences or under any statutory or common law
tort or similar theory, including, without limitation,
damages assessed for the maintenance of a public or
private nuisance or for the carrying on of a dangerous
activity at, or with respect to its property, and/or
(e) any other environmental matter affecting any property
or the operations and activities of the Borrower within
the jurisdiction of any federal, provincial, municipal
or local environmental agency.
8.4 Scope of Indemnity. The Borrower acknowledges that the
Lender has agreed to make the Credit Facilities available in
reliance upon the representations, warranties, and covenants in
this Section 8.4. For this reason, it is the intention of the
Borrower and the Lender that the provisions of this Section 8
shall supersede any other provisions in this Agreement or in any
Document which in any way limit the liability of the Borrower and
that the Borrower shall be liable for any obligations arising
under this Section 8 even if the amount of the liability incurred
exceeds the amount outstanding under this Agreement. The
obligations arising under this Article are absolute and
unconditional and shall not be affected by any act, omission or
circumstance whatsoever, except in respect of negligence or
wilful misconduct by the Lender. The obligations of the Borrower
arising under this Section 8 shall survive the repayment of the
Borrowings and shall survive the transfer of any or all right,
title and interest in and to any property to any party, whether
or not affiliated with the Borrower.
8.5 Interest. If the Lender incurs any obligations, costs or
expenses under this Section 8 or in respect of any Environmental
Activity covered by this Section 8, the Borrower shall pay the
same to the Lender immediately on demand, and if such payment is
not received within 10 days, such amount will be treated as a
Prime Loan and the Borrower will pay interest thereon on demand,
but otherwise calculated as set out in Section 5.1.
SECTION 9 - DEFAULT AND ENFORCEMENT
9.1 Events of Default. Upon the occurrence of any one or more
of the following events the Lender may, by written notice to the
Borrower, declare an Event of Default:
(a) Non-payment of Principal. The Borrower fails to make when
due, whether by acceleration or otherwise, any payment of
principal required to be made by the Borrower hereunder and such
default continues for more than one (1) Business Day.
(b) Non-payment of Interest, Fees and Other Amounts. The
Borrower fails to make when due, whether by acceleration or
otherwise, any payment of interest, fees or any other payment
hereunder not referred to in Section 9.1(a) and such failure
continues for 5 Days of such due date.
(c) Covenants. The Borrower fails to perform or observe to any
material extent any other term, condition, covenant or
undertaking contained in any Document. Except as regards breaches
of covenants contained in Sections 7.1(a) and 7.2(a) in respect
of which the Lender may immediately declare an Event of Default,
the Borrower shall have 30 days after the occurrence of such
event to remedy such failure. Only if the Borrower does not
remedy such failure within that time shall the Lender become
entitled to declare an Event of Default on the basis of such
failure.
(d) Cross-Defaults. The occurrence of any "Default", as defined
in the U.S. Loan Agreement, the U.S. Guaranty or any other U.S.
Loan Documents or the breach of any of the terms or provision of
the U.S. Loan Agreement, the U.S. Guaranty or any other U.S. Loan
Documents, which default or breach continues beyond any period of
grace therein provided and has not been waived.
(e) Nonpayment of Other Indebtedness. The Borrower or the
Guarantor defaults in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise,
of any other Indebtedness in the principal amount in excess of
$500,000 of, or guaranteed by, the Borrower or the Guarantor or
defaults in the performance or observance of any obligation or
condition with respect to any such other Indebtedness if the
effect of such default is to accelerate the maturity of any such
Indebtedness or to permit the holder or holders thereof, or any
trustee or agent for such holders, to cause such Indebtedness to
become due and payable prior to its expressed maturity, and
continuation thereof after the Lender gives notice to the
Borrower or the Guarantor that such default is an Event of
Default.
(f) Representation and Warranties. Any material representation,
warranty or statement which is made by the Borrower in any
Document or which is contained in any certificate, written
statement or written notice provided under or in connection with
any Document is untrue or incorrect in any material adverse
respect when made and such default continues for 30 days.
(g) Execution. A distress or execution or any similar process
is levied or enforced against any material property or assets of
the Borrower or any of its Subsidiaries with an aggregate fair
market value in excess of an amount equal to 3% of the Borrower's
shareholders equity.
(h) Invalidity and Contestation. This Agreement or any of the
other Documents shall at any time after execution and delivery
and for any reason (other than in accordance with its terms)
cease to be in full force and effect or shall be declared to be
null and void, or the legality, validity, binding nature or
enforceability of this Agreement or any other Document or any
term or provision thereof shall be contested by the Borrower or
any other party thereto, or the Borrower or any other such party
shall deny that it has any or further liabilities or obligations
thereunder.
(i) Government Approval. Any material Government Approval
required to enable the Borrower or any of its Subsidiaries to
conduct its business substantially as presently conducted or to
perform its obligations under any Document is not obtained or is
withdrawn or ceases to be in full force and effect and such
required Government Approval cannot be acquired or reinstated
within 60 days of the date on which the Borrower or such
Subsidiary knew or ought to have known such Government Approval
was required or withdrawn or, if capable of acquisition or
reinstatement within such 60-day period, the Borrower or such
Subsidiary has not proceeded diligently to obtain or reinstate
such Government Approval within such 60-day period.
(j) Voluntary Proceedings. The commencement by or acquiescence
of the Borrower or any of its Subsidiaries of or to proceedings
for substantive relief with respect to the Borrower or a
Subsidiary in any bankruptcy, insolvency, debt restructuring,
reorganization, readjustment of debt, dissolution, liquidation or
other similar proceedings (including, without limitation,
proceedings under the Bankruptcy and Insolvency Act (Canada), the
Winding-up Act (Canada), the Companies' Creditors Arrangement Act
(Canada), or similar legislation in the United States of America,
the corporation statute under which any of them is organized or
other similar legislation) including, without limitation, the
filing of a proposal or plan of arrangement or a notice of
intention to file same, or proceedings for the appointment of a
trustee, interim receiver, receiver, receiver and manager,
custodian, liquidator, provisional liquidator, administrator,
sequestrator or other like official with respect to the Borrower
or any of its Subsidiaries or all or any material part of their
respective assets, or any similar relief.
(k) Involuntary Proceedings. If a petition or any other
proceeding or case shall be filed, instituted or commenced with
respect to the Borrower or any of its Subsidiaries under any
bankruptcy, insolvency, debt restructuring, reorganization,
incorporation, readjustment of debt, dissolution, liquidation,
winding-up or similar law, now or hereafter in effect, seeking
the bankruptcy, liquidation, reorganization, dissolution,
winding-up, composition or readjustment of debts of the Borrower
or any of its Subsidiaries, the appointment of a trustee, interim
receiver, receiver, receiver and manager, custodian, liquidator,
provisional liquidator, administrator, sequestrator or other like
official for the Borrower or any of its Subsidiaries or all or
any material part of their respective assets, or any similar
relief.
(l) Receiver. Any Person including, without limitation, a
receiver, receiver and manager, or other similar official whether
appointed privately or judicially, is appointed for the Borrower
or any of its Subsidiaries or takes possession of the properties
or assets of the Borrower or any of its Subsidiaries with an
aggregate fair market value in excess of an amount equal to 3% of
the Borrower's shareholders equity.
(m) Act of Bankruptcy. The Borrower or any of it Subsidiaries
is unable to pay debts generally as such debts become due, is
adjudged or declared to be bankrupt or commits an act of
bankruptcy.
9.2 Rights upon Default. Upon the occurrence of an Event of
Default, the Lender may, on written notice to the Borrower,
declare that the entire principal amount of the Outstanding
Borrowings, all unpaid accrued interest and all fees and other
amounts required to be paid by the Borrower hereunder are
immediately due and payable without the necessity of presentment
for payment, notice of non-payment and of protest (all of which
are hereby expressly waived to the fullest extent permitted by
Applicable Law) and proceed to exercise any and all rights and
remedies hereunder and under any other Document. From and after
the issuance of any declaration referred to in this Section 9.2,
the Lender shall not be required to honour any cheque or other
instrument presented to it regardless of the date of issue or
presentation. Immediately upon receipt of such declaration, the
Borrower shall pay to the Lender all amounts referred to therein.
9.3 Waiver of Default. No express or implied waiver by the
Lender of any Event of Default shall in any way be or be
construed to be a waiver of any future or subsequent Event of
Default. To the extent permitted by Applicable Law, the Borrower
hereby waives any rights now or hereafter conferred by statute or
otherwise which may limit or modify any of the Lender's rights or
remedies under this Agreement. The Borrower acknowledges and
agrees that the exercise by the Lender of any rights under any
Document without having declared an acceleration shall not in any
way alter, affect or prejudice the right of the Lender to make a
declaration pursuant to the provisions of Section 9.2 at any time
and, without limiting the foregoing, shall not be construed as or
deemed to constitute a waiver of any rights under Section 9.3.
SECTION 10 - REMEDIES
10.1 Remedies Cumulative. For greater certainty, the rights and
remedies of the Lender under this Agreement are cumulative and
are in addition to and not in substitution for any rights or
remedies provided by law. Any single or partial exercise by the
Lender, of any right or remedy for a default or breach of any
term, covenant, condition or agreement herein contained shall not
be deemed to be a waiver of or to alter, affect or prejudice any
other right or remedy or other rights or remedies to which the
Lender may be lawfully entitled for the same default or breach,
and any waiver by the Lender of the strict observance,
performance or compliance with any term, covenant, condition or
agreement herein contained, and any indulgence granted thereby,
shall be deemed not to be a waiver of any subsequent default.
10.2 Remedies Not Limited. The Lender may, to the extent
permitted by Applicable Law, bring suit at law, in equity or
otherwise for any available relief or purpose including but not
limited to (a) the specific performance of any covenant or
agreement contained in this Agreement or in any other Document,
(b) an injunction against a violation of any of the terms of this
Agreement or any other Document, (c) in aid of the exercise of
any power granted by this Agreement or any other Document or by
law, or (d) the recovery of any judgment for any and all amounts
due in respect of the Borrowings or amounts otherwise due
hereunder or under any Document.
10.3 Set-Off, etc. Upon and after the declaration of any Event
of Default pursuant to Section 9.2, the Lender and each of its
branches and offices and any sub-participants are hereby
authorized by the Borrower, at any time and from time to time,
without notice, (a) to set off and apply any and all amounts
owing by the Lender or any such branch or office or any sub-participants
to the Borrower (whether payable in Canadian Dollars
or any other currency, whether matured or unmatured, and in the
case of deposits, whether general or special, time or demand and
however evidenced) against and on account of the obligations and
liabilities of the Borrower due to the Lender and any sub-participants
under this Agreement or any other agreement
delivered under or in connection with this Agreement including,
without limitation, the Documents, (whether such obligations or
liabilities are payable in Canadian Dollars or any other
currency, and whether such obligations or liabilities are
unmatured or contingent), (b) to hold any such amounts owing by
the Lender as collateral to secure the obligations and
liabilities of the Borrower under this Agreement to the extent
such amounts may be required to satisfy any contingent or
unmatured obligations or liabilities of the Borrower to the
Lender or sub-participants hereunder, and (c) to return as unpaid
for insufficient funds any and all cheques and other items drawn
against any deposits so held as the Lender in its sole discretion
may elect.
10.4 Lender May Perform Covenants. If the Borrower shall fail to
perform any of its obligations under any covenant contained in
this Agreement or any other Document, the Lender may (but has no
obligation to), upon notice to the Borrower, if the Lender,
acting reasonably, believes it necessary to do so to protect or
preserve its rights and remedies hereunder perform any such
covenant capable of being performed by it and, if any such
covenant requires the payment or expenditure of money, it may
make such payment or expenditure with its own funds. All amounts
so paid by the Lender hereunder shall be repaid by the Borrower
on demand therefor, and shall bear interest at the rate
applicable to a Prime Loan from and including the date paid by
the Lender hereunder to but excluding the date such amounts are
irrevocably repaid in full by the Borrower.
SECTION 11 - MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or consent to any departure by the
Borrower from any provision of this Agreement will in any event
be effective unless it is in writing and then the amendment,
modification, waiver or consent will be effective only in the
specific instance, for the specific purpose and for the specific
length of time for which it is given by the Lender.
11.2 Notice. Any notice, request or other communication to be
given under this Agreement, except as otherwise specifically
stated, shall be in writing and shall be either delivered
personally or sent by telecopier or by prepaid mail to the
mailing address, or telecopier number applicable, of a party
stated beside the name of the party at the foot of this Agreement
and to the attention of the Person or to such other mailing or
telecopier number as the party may notify to the other from time
to time under this provision. Any such notice, request or other
communication if delivered or mailed, shall be deemed to have
been given when received and, if telecopied before 4:30 p.m. on a
Business Day, shall be deemed to have been received on that day,
and if telecopied after 4:30 p.m. on a Business Day, shall be
deemed to have been received on the Business Day next following
the date of transmission.
11.3 Judgment Currency. If for the purposes of obtaining
judgment in any court in any jurisdiction with respect to this
Agreement, it becomes necessary to convert into the currency of
such jurisdiction ("Judgment Currency") any amount due hereunder
in the currency in which such amount is payable in accordance
with this Agreement (the "Agreed Currency"), then conversion
shall be made at the rate of exchange prevailing on the Business
Day before the day on which judgment is given. For this purpose,
"Rate of Exchange" means the spot rate at which the Lender would,
on the relevant date at or about 12:00 noon (Toronto time), be
prepared to purchase the Judgment Currency with the amount
applicable in the Agreed Currency in Toronto, Ontario. In the
event that there is a change in the rate of exchange prevailing
between the Business Day before the day on which the judgment is
given and the date of payment of the amount due, the Borrower
will, on the date of payment, pay such additional amounts (if
any) or be entitled to receive reimbursement of such amount, if
any, as may be necessary to ensure that the amount paid on such
date is the amount in the Judgment Currency which when converted
at the rate of exchange prevailing on the date of payment is the
amount then due under this Agreement in the Agreed Currency. Any
additional amount due from the Borrower under this Section 11.3
will be due as a separate debt and shall not be affected by
judgment being obtained for any other sums due under or in
respect of this Agreement.
11.4 Further Assurances. The Borrower shall from time to time
promptly upon the reasonable request of the Lender take such
action, and execute and deliver such further documents, as may be
reasonably necessary or appropriate to fully give effect to the
provisions and intent of this Agreement.
11.5 Reimbursement of Expenses. The Borrower shall, on demand,
pay to the Lender all of the reasonable legal fees of the Lender,
out-of-pocket documentation costs and other out-of-pocket
expenses, all reasonably incurred:
(a) in the negotiation, preparation and execution of this
Agreement and the other Documents; and
(b) in connection with the administration of this
Agreement.
In addition, the Borrower shall pay all reasonable legal fees,
and other out-of-pocket expenses reasonably incurred by the
Lender in connection with the determination or preservation of
any rights, or the enforcement of or legal advice in respect of
rights or responsibilities, of the Lender under this Agreement or
the other Documents.
11.6 Survival. Without prejudice to the survival or termination
of any other agreement of the Borrower under this Agreement, the
obligations of the Borrower under Sections 5.16, 8.3 and 11.5
shall survive the repayment of all the Borrowings.
11.7 Attornment. Each of the parties irrevocably attorns to the
non-exclusive jurisdiction of the courts of Ontario.
11.8 Successors and Assigns.
(a) Enurement. This Agreement shall be binding upon and
enure to the benefit of the Borrower, the Lender and their
respective successors and assigns, except that the Borrower may
not assign or transfer all or any part of its rights and
obligations under this Agreement without the Lender's prior
written consent.
(b) Amalgamation. The Lender acknowledges and consents to
the amalgamation of the Borrower with Old Burtek provided that
the Lender receives, in form and substance satisfactory to it,
acknowledgements and confirmations from the Guarantor and the
amalgamated party as to the continued validity, effect and
applicability of the Documents.
(c) Assignment By Lender. The Lender may at any time
assign all or any part of its rights or obligations hereunder to
another Person with the Borrower's prior written consent, which
consent not to be unreasonably withheld or delayed. The Lender
will only assign the Documents to a Person to the extent the
Lender's rights and obligations hereunder have been assigned to
that Person; provided that any such assignment shall be to a
financial institution which is a Canadian resident and the
Borrower shall not be liable for, or obligated to pay any
increased costs, fees, interest or other amounts as a result of
any assignment.
(d) Sub-Participations. The Lender may grant one or more
sub-participations in its rights and obligations hereunder to
another bank or financial institution with the Borrower's prior
written consent, which consent not to be unreasonably withheld or
delayed; provided that following any such sub-participation, the
Borrower shall not be liable for, or obligated to pay any
increased costs, fees, interest or other amounts as a result of
any such sub-participation and the Borrower shall be entitled to
continue to deal with Lender notwithstanding the sub-participation.
(e) Disclosure to Assignee or Sub-Participant. The Lender
may disclose to an assignee or sub-participant or proposed
assignee or sub-participant information in the possession of the
Lender relating to the Borrower or its Subsidiaries and furnished
to it in connection herewith, provided that the Lender shall
require such assignee, sub-participant, proposed assignee or
proposed sub-participant to enter into an agreement in form
satisfactory to the Borrower acting reasonably whereby it agrees
to maintain such information confidential.
11.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
THE BORROWER: BURTEK SYSTEMS INC.
Address: 40W267 Keslinger Rd. By:_________________________
La Fox, Illinois 60147 Name:
U.S.A. Title:
Fax: (630) 208-2950 By:_________________________
Name:
Phone: (630) 208-2200 Title:
THE LENDER: FIRST CHICAGO NBD BANK, CANADA
Address: First Chicago NBD Bank, Canada By:_________________________
161 Bay Street, Suite 4240 Name:
Toronto, Ontario Title:
M5J 2S1
By:_________________________
Name:
Title:
Fax: (416) 363-7574
Phone: (416) 365-5259
The undersigned acknowledges that the undersigned executed a
guarantee dated as of February 28, 1997 (the "Guarantee") in
favour of the Lender with respect to the indebtedness and
liabilities of Richardson Electronics Acquisition Corp. (the
"Original Borrower") to the Lender under a credit agreement dated
as of February 18, 1997 (the "Credit Agreement").
The undersigned further acknowledges that, pursuant to an
amalgamation effective May 31, 1997, the Original Borrower
amalgamated with Old Burtek (Burtek Systems Inc.) to continue as
the Borrower.
The undersigned further acknowledges that the Lender and the
Borrower entered into a first amending agreement made as of
August 14, 1997 amending the terms of the Credit Agreement; and a
second amending agreement made as of August 22, 1997 further
amending the terms of the Credit Agreement.
The undersigned acknowledges and agrees that the Guarantee shall
constitute, and shall be held by the Lender as a general and
continuing guarantee of the payment and fulfilment of all of the
debts, liabilities and obligations, present or future, direct or
indirect, contingent or not, matured or not of the Borrower to
the Lender including, without limitation, pursuant to the Credit
Agreement, as amended or modified.
RICHARDSON ELECTRONICS, LTD.
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
SCHEDULE 7.1(i)2
FORM OF PROMISSORY NOTES
Term CAD
Promissory Note Toronto, Ontario
March 1, 1998
FIRST CHICAGO NBD BANK (CANADA)
First Chicago NBD Bank, Canada
BCE Place, P.O. Box 613
161 Bay Street, Suite 4240
Toronto, Ontario
M5J 2S1
FOR VALUE RECEIVED the undersigned promises to pay to or to the
order of FIRST CHICAGO NBD BANK (CANADA) (the "Bank") at its BCE
Place, P.O. Box 613, 161 Bay Street, Suite 4240, Toronto,
Ontario, M5J 2S1 branch, the amount of principal of TWO MILLION
NINE HUNDRED AND THIRTY FIVE THOUSAND THREE HUNDRED AND TEN
DOLLARS AND THIRTY SIX CENTS (CDN$2,935,310.36) DOLLARS in lawful
money of Canada.
This term note is issued under and subject to the terms of the
Amended and Restated Credit Agreement dated as of March 1, 1998
(the "Credit Agreement") entered into between the Bank and the
undersigned. Unless otherwise defined, capitalized terms used
herein shall have the meaning ascribed thereto in the Credit
Agreement.
The amount of principal is to be repayable as follows:
The undersigned shall pay outstanding
borrowings by way of 48 equal monthly
instalments of CAD$71,592.92 plus interest,
commencing August 31, 1997 with the final
installment due on July 31, 2001, at which
time the entire balance of unpaid principal
plus accrued interest shall be due and
payable immediately.
The undersigned further promises to pay monthly and
contemporaneously with the instalments of the above-mentioned
principal, the accrued interest on the unpaid principal daily
computed at a rate per annum equal to the Bank's Prime Rate per
annum in effect from time to time up to and after maturity and
until complete payment, at the said branch. At the date of this
note, such Prime Rate is 6.5% per annum.
Upon default in payment when due of any installment of principal
or interest, or any other term or condition of the Credit
Agreement, the whole amount of this note shall fall due.
BURTEK SYSTEMS INC.
By:_________________________________C/S
Name:
EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT
EMPLOYMENT, NONDISCLOSURE AND NON-COMPETE AGREEMENT
("Agreement") made and entered into as of this 21st day of January,
1998 by and between RICHARDSON ELECTRONICS, LTD., a Delaware
corporation with its principal place of business located at 40W267
Keslinger Road, LaFox, IL 60147 (the "Employer"), and Norman A.
Hilgendorf, an individual whose current residence is located at 388
Arlington, Elmhurst, IL 60126 ("Employee").
RECITALS
WHEREAS, the Employer desires to employ Employee as its Vice
President and General Manager, Solid State and Components Division
upon the terms and conditions stated herein; and
WHEREAS, Employee desires to be so employed by the Employer at
the salary and benefits provided for herein; and
WHEREAS, Employee acknowledges and understands that during the
course of his employment, Employee has and will become familiar with
certain confidential information of the Employer which provides
Employer with a competitive advantage in the marketplace in which
it competes, is exceptionally valuable to the Employer, and is vital
to the success of the Employer's business; and
WHEREAS, the Employer and Employee desire to protect such
confidential information from disclosure to third parties or its use
to the detriment of the Employer; and
WHEREAS, the Employee acknowledges that the likelihood of
disclosure of such confidential information would be substantially
reduced, and that legitimate business interests of the Employer
would be protected, if Employee refrains from competing with the
Employer and from soliciting its customers and employees during and
following the term of the Agreement, and Employee is willing to
covenant that he will refrain from such actions.
NOW THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter set forth, the parties
hereto acknowledge and agree as follows:
ARTICLE ONE
NATURE AND TERM OF EMPLOYMENT
1.01 Employment. The Employer hereby agrees to employ Employee
and Employee hereby accepts employment as the Employer's Vice
President and General Manager, Solid State and Components Division.
1.02 Term of Employment. Employee's employment pursuant to
this Agreement shall commence on January 26, 1998, or such earlier
date as may be agreed upon by Employee and the Employer and, subject
to the other provisions of this Agreement, the term of such
employment (the "Employment Term") shall continue indefinitely on
an "at will" basis.
1.03 Duties. Employee shall perform such managerial duties and
responsibilities in connection with the Company's Solid State and
Components Division or its successor, and such other duties and
responsibilities as may be assigned by the President/COO, or such
other person as the Employer may designate from time to time and
Employee will adhere to the policies and procedures of the Employer,
including, without limitation, its Code of Conduct, and will follow
the supervision and direction of Employer's President/COO or such
other person as the Employer may designate from time to time in the
performance of such duties. Employee agrees to devote his full
working time, attention and energies to the diligent and
satisfactory performance of his duties hereunder and to developing
and improving the business and best interests of the Company.
Employee will use all reasonable efforts to promote and protect the
good name of the Company and will comply with all of his
obligations, undertakings, promises, covenants and agreements as set
forth in this Agreement. Employee will not, during the Employment
Term or during any period during which Employee is receiving
payments pursuant to Article 2 and/or Section 5.04, engage in any
activity which would have, or reasonably be expected to have, an
adverse affect on the Employer's reputation, goodwill or business
relationships or which would result, or reasonably be expected to
result, in economic harm to the Employer.
ARTICLE TWO
COMPENSATION AND BENEFITS
For all services to be rendered by Employee in any capacity
hereunder (including as an officer, director, committee member or
otherwise of the Employer or any parent or subsidiary thereof or any
division of any thereof) on behalf of the Employer, the Employer
agrees to pay Employee so long as he is employed hereunder, and the
Employee agrees to accept, the compensation set forth below.
2.01 Base Salary. During the term of Employee's employment
hereunder, the Employer shall pay to Employee an annual base salary
("Base Salary") of One Hundred Fifteen Thousand and 00/100 Dollars
($115,000.00), payable in installments as are customary under the
Employer's payroll practices from time to time. The Employer at its
sole discretion may, but is not required to, review and adjust the
Employee's Base Salary from year to year; provided, however, that,
except as may be expressly consented otherwise in writing by
Employee, Employer may not decrease Employee's Base Salary. No
additional compensation shall be payable to Employee by reason of
the number of hours worked or by reason of hours worked on
Saturdays, Sundays, holidays or otherwise.
2.02 Incentive Plan. During the term of the Employee's
employment hereunder, the Employee shall be a participant in the SBU
Incentive Plan, as modified from time to time (the "Annual Incentive
Plan"). The Employee's "target bonus percentage" for purposes of
the Annual Incentive Plan shall be fifty percent (50%) for calendar
year 1998 (as if paid for a full year). Such bonus shall be paid
strictly in accordance with the Annual Incentive Plan. For calendar
year 1999 and thereafter, Employee's bonus shall be determined and
paid strictly in accordance with the Annual Incentive Plan as
modified or reduced by Employer at its discretion, and for any
partial fiscal year the bonus shall be computed and paid only for
the portion of the fiscal year Employee is employed hereunder.
2.03 Other Benefits. Employer will provide Employee such
benefits (other than bonus, severance and incentive compensation
benefits) as are generally provided by the Employer to its other
employees, including but not limited to, health/major medical
insurance, dental insurance, disability insurance, life insurance,
sick days and other employee benefits (collectively "Other
Benefits"), all in accordance with the terms and conditions of the
applicable Other Benefits Plan. Nothing in this Agreement shall
require the Employer to maintain any benefit plan nor prohibit the
Employer from modifying any such plan as it sees fit from time to
time. It is only intended that Employee shall be entitled to
participate in any such plan offered for which he may qualify under
the terms of any such plan as it may from time to time exist, in
accordance with the terms thereof.
2.04 Disability. Any compensation Employee receives under any
disability benefit plan provided by Employer during any period of
disability, injury or illness shall be in lieu of the compensation
which Employee would otherwise receive under Article Two during such
period of disability, injury or sickness.
2.05 Withholding. All salary, bonus and other payments
described in this Agreement shall be subject to withholding for
federal, state or local taxes, amounts withheld under applicable
benefit policies or programs, and any other amounts that may be
required to be withheld by law, judicial order or otherwise.
ARTICLE THREE
CONFIDENTIAL INFORMATION
RECORDS AND
REPUTATION
3.01 Definition of Confidential Information. For purposes of
this Agreement, the term "Confidential Information" shall mean all
of the following materials and information (whether or not reduced
to writing and whether or not patentable) to which Employee receives
or has received access or develops or has developed in whole or in
part as a direct or indirect result of his employment with Employer
or through the use of any of Employer's facilities or resources:
(1) Marketing techniques, practices, methods, plans, systems,
processes, purchasing information, price lists, pricing
policies, quoting procedures, financial information,
customer names, contacts and requirements, customer
information and data, product information, supplier
names, contacts and capabilities, supplier information
and data, and other materials or information relating to
the manner in which Employer, its customers and/or
suppliers do business;
(2) Discoveries, concepts and ideas, whether patentable or
not, or copyrightable or not, including without
limitation the nature and results of research and
development activities, processes, formulas, techniques,
"know-how," designs, drawings and specifications;
(3) Any other materials or information related to the
business or activities of Employer which are not
generally known to others engaged in similar businesses
or activities or which could not be gathered or obtained
without significant expenditure of time, effort and
money; and
(4) All inventions and ideas which are derived from or relate
to Employee's access to or knowledge of any of the above
enumerated materials and information.
The Confidential Information shall not include any materials or
information of the types specified above to the extent that such
materials or information are publicly known or generally utilized
by others engaged in the same business or activities in the course
of which Employer utilized, developed or otherwise acquired such
information or materials and which Employee has gathered or obtained
(other than on behalf of the Employer) after termination of his
employment with the Employer from such other public sources by his
own expenditure of significant time, effort and money after
termination of his employment with the Employer. Failure to mark
any of the Confidential Information as confidential shall not affect
its status as part of the Confidential Information under the terms
of this Agreement.
3.02 Ownership of Confidential Information. Employee agrees
that the Confidential Information is and shall at all times remain
the sole and exclusive property of Employer. Employee agrees
immediately to disclose to Employer all Confidential Information
developed in whole or part by him during the term of his
employment with Employer and to assign to Employer any right, title
or interest he or she may have in such Confidential Information.
Without limiting the generality of the foregoing, every invention,
improvement, product, process, apparatus, or design which Employee
may take, make, devise or conceive, individually or jointly with
others, during the period of his employment by the Employer,
whether during business hours or otherwise, which relates in any
manner to the business of the Employer either now or at any time
during the period of his employment), or which may be related to
the Employer in connection with its business (hereinafter
collectively referred to as "Invention") shall belong to and be the
exclusive property of the Employer and Employee will make full and
prompt disclosure to the Employer of every Invention. Employee will
assign to the Employer, or its nominee, every Invention and Employee
will execute all assignments and other instruments or documents and
do all other things necessary and proper to confirm the Employer's
right and title in and to every Invention; and Employee will perform
all proper acts within his power necessary or desired by the
Employer to obtain letters patent in the name of the Employer (at
the Employer's expense) for every Invention in whatever countries
the Employer may desire, without payment by the Employer to Employee
of any royalty, license fee, price or additional compensation.
3.03. Non Disclosure of Confidential Information. Except
as required in the faithful performance of Employee's duties
hereunder (or as required by law), during the term of his
employment with Employer and for a period after the termination of
such employment until the Confidential Information no longer meets
the definition set forth above of Confidential Information with
respect to Employee, Employee agrees not to directly or indirectly
reveal, report, publish, disseminate, disclose or transfer any of
the Confidential Information to any person or entity, or utilize for
himself or any other person or entity any of the Confidential
Information for any purpose (including, without limitation, in the
solicitation of existing Employer customers or suppliers), except
in the course of performing duties assigned to him by Employer.
Employee further agrees to use his best endeavors to prevent the
use for himself or others, or dissemination, publication, revealing,
reporting or disclosure of, any Confidential Information.
3.04 Protection of Reputation. Employee agrees that he or she
will at no time, either during his employment with the Employer or
at any time after termination of such employment, engage in conduct
which injures, harms, corrupts, demeans, defames, disparages,
libels, slanders, destroys or diminishes in any way the reputation
or goodwill of the Employer, its subsidiaries, or their respective
shareholders, directors, officers, employees, or agents, or the
services provided by the Employer or the products sold by the
Employer, or its other properties or assets, including, without
limitation, its computer systems hardware and software and its data
or the integrity and accuracy thereof.
3.05 Records and Use of Employer Facilities. All notes, data,
reference materials, memoranda and records, including, without
limitation, data on the Employer's computer system, computer
reports, products, customers and suppliers lists and copies of
invoices, in any way relating to any of the Confidential Information
or Employer's business shall belong exclusively to Employer, and
Employee agrees to maintain them in a manner so as to secure their
confidentiality and to turn over to Employer all copies of such
materials (in whole or in part) in his possession or control at the
request of Employer or, in the absence of such a request, upon the
termination of Employee's employment with Employer. Upon
termination of Employee's employment with Employer, Employee shall
immediately refrain from seeking access to Employer's (a) telephonic
voice mail, E-mail or message systems, (b) computer system and (c)
computer data bases and software. The foregoing shall not prohibit
Employee from using Employer's public Internet (not intranet) site.
ARTICLE FOUR
NON-COMPETE AND NON-SOLICITATION COVENANTS
4.01 Non-Competition and Non-Solicitation. Employee
acknowledges that it may be very difficult for him to avoid using
or disclosing the Confidential Information in violation of Article
Three above in the event that he or she is employed by any person
or entity other than the Employer in a capacity similar or related
to the capacity in which he or she is employed by the Employer.
Accordingly, Employee agrees that he or she will not, during the
term of employment with Employer and for a period of one (1) year
after the termination of such employment, irrespective of the time,
manner or cause of such termination, directly or indirectly (whether
or not for compensation or profit):
(1) Engage in any business or enterprise the nature of which
is directly competitive with that of the Employer (a
"Prohibited Business"); or
(2) Participate as an officer, director, creditor, promoter,
proprietor, associate, agent, employee, partner,
consultant, sales representative or otherwise, or promote
or assist, financially or otherwise, or directly or
indirectly own any interest in any person or entity
involved in any Prohibited Business; or
(3) Canvas, call upon, solicit, entice, persuade, induce,
respond to, or otherwise deal with, directly or
indirectly, any individual or entity which, during
Employee's term of employment with the Employer, was or
is a customer or supplier, or proposed customer or
supplier, of the Employer whom Employee called upon or
dealt with, or whose account Employee supervised, for the
following:
(a) to purchase (with respect to customers) or sell
(with respect to suppliers) products of the types or
kinds sold by the Employer or which could be
substituted for (including, but not limited to,
rebuilt products), or which serve the same purpose
or function as, products sold by the Employer (all
of which products are herein sometimes referred to,
jointly and severally, as "Prohibited Products"), or
(b) to request or advise any such customer or supplier
to withdraw, curtail or cancel its business with the
Employer; or
(4) For himself or for or through any other individual or
entity call upon, solicit, entice, persuade, induce or
offer any individual who, during Employee's term of
employment with the Employer, was an employee or sales
representative or distributor of the Employer, employment
by, or representation as sales agent or distributor for,
any one other than the Employer, or request or advise any
such employee or sales agent or distributor to cease
employment with or representation of the Employer, and
Employee shall not approach, respond to, or otherwise
deal with any such employee or sales representative or
distributor of Employer for any such purpose, or
authorize or knowingly cooperate with the taking of any
such actions by any other individual or entity.
4.02 Obligation independent Each obligation of each
subparagraph and provision of Section 4.01 shall be independent of
any obligation under any other subparagraph or provision hereof or
thereof.
4.03 Public Stock Nothing in Section 4.01, however, shall
prohibit Employee from owning (directly or indirectly through a
parent, spouse, child or other relative or person living in the same
household with Employee or any of the foregoing), as a passive
investment, up to 1% of the issued and outstanding shares of any
class of stock of any publicly traded company.
4.04 Business Limitation If, at the termination of Employee's
employment and for the entire period of twelve (12) months prior
thereto his duties and responsibilities are limited by the Employer
so that he or she is specifically assigned to, or responsible for,
one or more divisions, subsidiaries or business units of the
Employer, then subparagraphs (1) through (3) of Section 4.01 shall
apply only to any business which competes with the business of such
divisions, subsidiaries or business units.
4.05 Area Limitation If at the termination of Employee's
employment and for the entire period of twelve (12) months prior
thereto he or she has responsibility for only a designated
geographic area, then subparagraphs (1) through (3) of Section 4.01
shall apply only within such area.
ARTICLE FIVE
TERMINATION
5.01 Termination of Employee for Cause. The Employer shall
have the right to terminate Employee's employment at any time for
"cause." Prior to such termination, the Employer shall provide
Employee with written notification of any and all allegations
constituting "cause" and the Employee shall be given five (5)
working days after receipt of such written notification to respond
to those allegations in writing. Upon receipt of the Employee's
response, the Employer shall meet with the Employee to discuss the
allegations.
For purposes hereof, "cause" shall mean (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in
personal enrichment of the Employee, (ii) material violations by the
Employee of the Employee's obligations or duties under, or any terms
of, this Agreement, which are not remedied in a reasonable period
(not to exceed ten (10) days) after receipt of written notice
thereof from the Employer, (iii) any violation by the Employee of
any of the provisions of Articles Three, or Four, or (iv) Employee
being charged, indicted or convicted (by trial, guilty or no contest
plea or otherwise) of (a) a felony, (b) any other crime involving
moral turpitude, or (c) any violation of law which would impair the
ability of the Employer or any affiliate to obtain any license or
authority to do any business deemed necessary or desirable for the
conduct of its actual or proposed business.
5.02 Termination of Employee Because of Employee's Disability,
Injury or Illness. The Employer shall have the right to terminate
Employee's employment if Employee is unable to perform the duties
assigned to him by the Employer because of Employee's disability,
injury or illness, provided however, such inability must have
existed for a total of one hundred eighty (180) consecutive days
before such termination can be made effective. Any compensation
Employee receives under any disability benefit plan provided by
Employer during any period of disability, injury or illness shall
be in lieu of the compensation which Employee would otherwise
receive under Article Two during such period of disability, injury
or sickness.
5.03 Termination as a Result of Employee's Death. The
obligations of the Employer to Employee pursuant to this Agreement
shall automatically terminate upon Employee's death.
5.04 Termination of Employee for any Other Reason. The
Employer shall have the right to terminate Employee's employment at
any time at will for any reason upon ten (10) days prior written
notice to Employee. If Employee's employment is terminated by the
Employer during the Employment Term for any reason other than the
reason set forth in Sections 5.01, 5.02 or 5.03 above, the Employer
shall continue to pay to Employee for a period of six (6) months,
an amount equal to one hundred percent (100%) of his then current
Base Salary in installments on the same dates as the Employer make
payroll payments under its customary practice. Employee shall only
be entitled to receive the bonus pursuant to the Annual Incentive
Plan for the year in which such termination occurs prorated and
accrued to the date of termination. In such case Employee shall not
be entitled to receive, unless otherwise required by law, any
subsequent Other Benefits.
5.05 Termination by Employee. Subject to the provisions of
Articles Three and Four above, Employee may terminate his
employment by the Employer at any time by written notice to
Employer. If Employee's employment is so terminated, the Employer
shall be obligated to continue to pay to Employee his then current
Base Salary and Other Benefits accrued up to and including the date
on which Employee's employment is so terminated, however, Employee
and the Employer acknowledge and agree to the fullest extent
permitted by law, that Employee shall forfeit, and the Employer
shall not be responsible to pay or fund, directly or indirectly, any
accrued but unpaid bonus or award (howsoever described including the
Annual Incentive Plan); accumulated but unpaid sick leave;
accumulated but unpaid vacation time; deferred compensation;
severance pay or benefits; any and all benefits which are accrued
but not vested under any pension, profit sharing or other qualified
retirement plan and all service credits under each such plan
(subject to any reinstatement of such credits upon future
reemployment with the Employer in accordance with federal law); and
right to post-employment coverage under any health, insurance or
other welfare benefit plan, including rights arising under Title X
of COBRA or any similar federal or state law (except that
continuation coverage rights of Employee's spouse and other
dependents, if any, under such plans or laws shall be forfeited only
with their consent); or any Other Benefits, if any, provided to
Employee under any policy, program or plan of the Employer not
specifically described above, after the date of termination to which
Employee might otherwise be entitled under this Agreement but for
his resignation.
ARTICLE SIX
REMEDIES
6.01 Employee acknowledges that the restrictions contained in
this Agreement will not prevent him from obtaining such other
gainful employment he or she may desire to obtain or cause him any
undue hardship and are reasonable and necessary in order to protect
the legitimate interests of Employer and that violation thereof
would result in irreparable injury to Employer. Employee therefor
acknowledges and agrees that in the event of a breach or threatened
breach by Employee of the provisions of Article Three or Article
Four or Section 1.03, Employer shall be entitled to an injunction
restraining Employee from such breach or threatened breach and
Employee shall lose all rights to receive any payments under Section
5.04. Nothing herein shall be construed as prohibiting or limiting
Employer from pursuing any other remedies available to Employer for
such breach or threatened breach, the rights hereinabove mentioned
being in addition to and not in substitution of such other rights
and remedies. The period of restriction specified in Article Four
shall abate during the time of any violation thereof, and the
portion of such period remaining at the commencement of the
violation shall not begin to run until the violation is cured.
6.02 Survival. The provisions of this Article Six and of
Articles Three and Four shall survive the termination or expiration
of this Agreement.
ARTICLE SEVEN
MISCELLANEOUS
7.01 Assignment. Employee and Employer acknowledge and agree
that the covenants, terms and provisions contained in this Agreement
constitute a personal employment contract and the rights and
obligations of the parties thereunder cannot be transferred, sold,
assigned, pledged or hypothecated, excepting that the rights and
obligations of the Employer under this Agreement may be assigned or
transferred pursuant to a sale of the business, merger,
consolidation, share exchange, sale of substantially all of the
Employer's assets, or other reorganization described in Section 368
of the Code, or through liquidation, dissolution or otherwise,
whether or not the Employer is the continuing entity, provided that
the assignee, or transferee is the successor to all or substantially
all of the assets of the Employer and such assignee or transferee
assumes the rights and duties of the Employer, if any, as contained
in this Agreement, either contractually or as a matter of law.
7.02 Severability. Should any of Employee's obligations under
this Agreement or the application of the terms or provisions of this
Agreement to any person or circumstances, to any extent, be found
illegal, invalid or unenforceable in any respect, such illegality,
invalidity or unenforceability shall not affect the other provisions
of this Agreement, all of which shall remain enforceable in
accordance with their terms, or the application of such terms or
provisions to persons or circumstances other than those to which it
is held illegal, invalid or unenforceable. Despite the preceding
sentence, should any of Employee's obligations under this Agreement
be found illegal, invalid or unenforceable because it is too broad
with respect to duration, geographical or other scope, or subject
matter, such obligation shall be deemed and construed to be reduced
to the maximum duration, geographical or other scope, and subject
matter allowable under applicable law.
The covenants of Employee in Articles Three and Four and each
subparagraph of Section 4.01 are of the essence of this Agreement;
they shall be construed as independent of any other provision of
this Agreement; and the existence of any claim or cause of action
of Employee against the Employer, whether predicated on the
Agreement or otherwise shall not constitute a defense to enforcement
by the Employer of any of these covenants. The covenants of
Employee shall be applicable irrespective of whether termination of
employment hereunder shall be by the Employer or by Employee,
whether voluntary or involuntary, or whether for cause or without
cause.
7.03 Notices. Any notice, request or other communication
required to be given pursuant to the provisions hereof shall be in
writing and shall be deemed to have been given when delivered in
person or three (3) days after being deposited in the United States
mail, certified or registered, postage prepaid, return receipt
requested and addressed to the party at its or his last known
addresses. The address of any party may be changed by notice in
writing to the other parties duly served in accordance herewith.
7.04 Waiver. The waiver by the Employer or Employee of any
breach of any term or condition of this Agreement shall not be
deemed to constitute the waiver of any other breach of the same or
any other term or condition hereof. Failure by any party to claim
any breach or violation of any provision of this Agreement shall not
constitute a precedent or be construed as a waiver of any subsequent
breaches hereof.
7.05 Continuing Obligation. The obligations, duties and
liabilities of Employee pursuant to Articles Three and Four of this
Agreement are continuing, absolute and unconditional and shall
remain in full force and effect as provided herein and survive the
termination of this Agreement.
7.06 No Conflicting Obligations or Use. Employer does not
desire to acquire from Employee any secret or confidential know-how
or information which he may have acquired from others nor does it
wish to cause a breach of any non compete or similar agreement to
which Employee may be subject. Employee represents and warrants
that (i) other than for this Agreement, he is not subject to or
bound by any confidentiality agreement or non disclosure or non
compete agreement or any other agreement having a similar intent,
effect or purpose, and (ii) he is free to use and divulge to
Employer, without any obligation to or violation of any right of
others, any and all information, data, plans, ideas, concepts,
practices or techniques which he will use, describe, demonstrate,
divulge, or in any other manner make known to Employer during the
performance of services
7.07 Attorneys Fees. In the event that Employee has been found
to have violated any of the terms of Articles Three or Four of this
Agreement either after a preliminary injunction hearing or a trial
on the merits or otherwise, Employee shall pay to the Employer the
Employer's costs and expenses, including attorneys fees, in
enforcing the terms of Articles Three or Four of this Agreement.
7.08 Advise New Employers. During Employee's employment with
the Employer and for one (1) year thereafter, Employee will
communicate the contents of Articles Three and Four to any
individual or entity which Employee intends to be employed by,
associated with, or represent which is engaged in a business which
is competitive to the business of Employer.
7.09 Captions. The captions of Articles and Sections this
Agreement are inserted for convenience only and are not to be
construed as forming a part of this Agreement.
EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS READ AND FULLY UNDERSTANDS
EACH AND EVERY PROVISION OF THE FOREGOING AND DOES HEREBY ACCEPT AND
AGREE TO THE SAME.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
EMPLOYEE EMPLOYER
/s/ Norman Hilgendorf /s/ Bruce W. Johnson
President & COO<PAGE>
Exhibit 10(d)
RICHARDSON ELECTRONICS ITALY SRL
TRANSLATION
Mr. Pierluigi Calderone
Corporate Offices
Sesto Fiorentino
May 10, 1993
Dear Mr. Calderone,
We confirm that you are presently employed by our company as
"dirigente" (manager) having been promoted to said position
starting from March 1, 1991 and having been originally hired as
"quadro" (intermediate manager) starting from July 23, 1990.
Your employment relationship is governed by the Collective
National Labor Agreement for the Employees of Commercial Firms
presently in force, by the provisions of this letter and by the
provisions of the law.
1. Your employment relationship is for an indefinite time.
Your work location is Sesto Fiorentino, but in relation to the
requirements of the performance of your activities and discharge
of your duties, it is agreed that you will work frequently away
from the corporate offices.
2. In your capacity as Regional Sales Manager of our company
you are responsible of the planning, direction and control of all
sales activities and related activities and of the accomplishment
of the budgeted financial objectives of the company. You will
report to the Chairman of our company.
In consideration of the close working relationships existing
with our parent company Richardson Electronics, Ltd., it is
agreed that you give, to the necessary extent, full collaboration
also to the offices of the same and to the executives who are in
charge of them, to facilitate the cooperation with them.
3. During your entire relationship with our company, you agree,
without prejudice to the provisions on noncompetition for the
time following the end of your relationship with us, to perform
your activities only for our company, to the exclusion of any
other activity on your own or on behalf of third parties, of any
nature whatsoever, whether as a business entrepreneur, employee,
or professional consultant, or even just by assuming a financial
or corporate interest, except with the written consent of our
company.
4. You agree, even after the end of your relationship with us,
not to divulge, or in any manner make known, to third parties the
information of which you may acquire knowledge in connection with
the rendition of your services for us. In particular you agree,
under sanction of damages, to keep strictly confidential all
information, including without limitation that of a commercial,
technical, administrative and manufacturing nature, concerning
our company, Richardson Electronics, Ltd. and the affiliates with
which they may have a contractual or business relationship. You
agree to insure the same secrecy on all documents and files that
may come in your possession in connection with the performance of
your services. Said documents and files remain always the
property of our company and their displacement shall be
immediately reported to your superior.
5. Your gross monthly salary, which compensates all activities
rendered to us and includes all indemnities, excluding only the
family allowances, if due, is paid to you in 14 monthly
instalments each year under deduction of the amounts to be
withheld by law, as follows:
base contractual salary 5,280,000
seniority increases 250,000
contractual add-on 745,779
salary exceeding base 1,927,790
Total gross monthly salary 8,203,569
The amount of salary exceeding base shall be considered as
an advance on any increases that may be granted pursuant to
collective or shop agreements, which increases shall be set-off
against said salary exceeding base.
You have also the opportunity to earn an additional amount
of compensation in accordance with the rules contained in the "FY
1993 Sales Incentive Compensation Plan" which is attached to this
letter as Exhibit "A", and is written in English, which you
represent to understand perfectly and to accept. Your target, in
accordance with said Plan, is for the year 1993 the target
indicated in Exhibit "B", which is written in English and which
you represent to understand perfectly and to accept. The target
for the following years shall be communicated to you from time to
time.
You are also entitled to the reimbursement of the expenses
incurred by you, provided that they are strictly pertinent to the
discharge of your duties and duly documented.
6. You agree for a period of one year starting from the date of
termination of your relationship with our company not to perform
any activity, on your own, or on behalf of third parties, whether
as an entrepreneur, an employee or a professional, directly or
indirectly, in any industrial or commercial enterprise which
operates in the same sector in which our company operates. The
above indicated noncompetition agreement concerns the performance
of activities, directly or indirectly, in the territory of the
Italian Republic, except Sicily and Sardinia.
By way of compensation of the noncompetition commitment
indicated above, our company will pay to you an indemnity, for
the year to which the noncompetition agreement pertains, equal to
your last gross yearly salary in effect at the time of
termination of your employment, subject to any withholding
required by law. Said indemnity will be paid to you in 13
monthly instalments in arrears, under deduction of any income
earned by you through the performance of activities permitted
under this noncompetition agreement during the year to which the
agreement pertains. It is agreed that our company can waive at
any time, by written communication to you, your noncompetition
commitment under this agreement. In such a case, as well as in
the case of violation on your part of the non competition
commitment, any obligation to pay the above indicated indemnity
to you, as compensation for the noncompetition commitment on your
part, will immediately end. Furthermore, in case of your
violation of the noncompetition commitment, in addition to
repaying to us the amount of indemnity already collected by you,
you will pay to us liquidated damages in the amount of 100
million lire, without prejudice to any additional damages that we
may suffer.
7. You have the right to use a company car owned by our company
to perform your activity, and you will be permitted to use same
for the discharge of your duties. The use of said car is
regulated by the provisions known as "Corporate Automobile
Policy" attached to this letter as Exhibit "C", which are written
in English, and which you represent to understand perfectly and
accept.
8. It is agreed that the contractual provisions contained in
this letter supersede and cancel any prior agreement between the
parties, including our letter-offer dated June 21, 1990 and the
letter-offer of June 29, 1990 of Richardson Electronics, Ltd.,
both accepted by you on July 16, 1990. With respect to said
letter of June 29, 1990, you agree that no employment or other
relationship exists between you and Richardson Electronics, Ltd.
since said letter related to the same employment relationship
with us which is covered by this letter. Therefore you declare
to release Richardson Electronics, Ltd. from any obligations
towards you in relation to said letter and the performance of
your employment services.
If you accept the foregoing, please return to us duly signed
by you the copy of this letter that is attached.
Very truly yours,
/s/ Leonard R. Prange
GEB-Richardson Electronics Italy s.r.l.
The Chairman
For acceptance:
/s/ Pierluigi Calderone
The undersigned in accordance and for the purposes of
Article 1341 of the Civil Code, declares to have carefully read
and to approve expressly the following provisions:
3. Prohibition to perform any other activity during employment;
6. Noncompetition agreement;
8. Release from liability
/s/ Pierluigi Calderone
March 23, 1998
Dear Mr. Calderone:
with reference to the letter dated May 10, 1993 which at
present regulates your employment relationship with our Company,
we wish to inform you of the changes to said letter which are
necessary pursuant to your promotion, starting from April 1,
1998, to the position of "Managing Director, European
Operations". In your capacity as "dirigente" of our Company,
your employment relationship is governed by the Collective
National Labor Agreement for the Managers of Commercial Firms
presently in force, by the provisions of this letter and of the
letter dated May 10, 1993, to the extent that they are not
modified hereby, and by the provisions of the law.
The other changes to the letter dated May 10, 1993, which at
present regulates your employment relationship, are the
following:
A. Paragraph 1 is deleted and replaced with the following:
1. Your employment relationship is for an indefinite time.
Your work location is Sesto Fiorentino, but in relation to the
requirements of the performance of your activities and discharge
of your duties, it is agreed that you will work frequently away
from the corporate offices. Your work location can be
transferred elsewhere in Italy, possibly to Rome, taking into
account also the strategies which will be submitted by you to the
Board of Directors and which will be approved by same.
B. Paragraph 2 is deleted and replaced with following:
2. In your capacity as "Managing Director, European
Operations" of our Company you are responsible of the planning,
direction and control of all sales activities and related
activities concerning the companies affiliated with the
Richardson Group in Italy, France, Germany, England, The
Netherlands and Spain, and of the accomplishment of the budgeted
financial objectives in all the territory assigned to you.
However, a detailed job description is set forth in Exhibit "A"
hereto, which is written in English and which you represent to
understand perfectly and to accept. In order to facilitate your
activities outside of Italy, you will be appointed a Director of
the Richardson affiliates mentioned above, and a Vice President
of our parent company Richardson Electronics, Ltd. of LaFox,
Illinois (U.S.A.).
You will report to the Chairman of the Board of Directors of
our Company.
C. Paragraph 3 is deleted and replaced with following:
3. During your entire relationship with our Company, you
agree, without prejudice to the provisions on non-competition
for the time following the end of your relationship with us, to
perform your activity only for our Company and for the other
companies of the Richardson Group mentioned above at Paragraph 2,
to the exclusion of any other activity on your own or on behalf
of third parties, of any nature whatsoever, whether as a
business entrepreneur, employee, or professional consultant, or
even just by assuming a financial or corporate interest, except
with the written consent of our Company.
D. Paragraph 4 is deleted and replaced with following:
4. You agree, even after the end of your relationship with
us, not to divulge, or in any manner make known, to third
parties the information of which you may acquire knowledge in
connection with the rendition of your services for us or for the
other companies of the Richardson Group mentioned above at
Paragraph 2. In particular you agree, under sanction of damages,
to keep strictly confidential all information, including without
limitation that of a commercial, technical, administrative and
manufacturing nature, concerning our Company, the other companies
of the Richardson Group mentioned above at Paragraph 2, and the
other affiliates of the Richardson Group with which they may have
a contractual or business relationship. You agree to insure the
same secrecy on all documents and files that may come in your
possession in connection with the performance of your services.
Said documents and files remain always the property of the
company owning same at the time in which they come in your
possession and their displacement shall be immediately reported
to the Chairman of the Board of Directors of our Company.
E. The first two paragraphs of Paragraph 5 are deleted and
replaced with the following:
5. Your gross monthly salary shall be paid as compensation
for all your activities, whether in our favor or in favor of the
other companies of the Richardson Group mentioned above at
Paragraph 2, of which you will be appointed a Director and,
respectively, a Vice President. Said salary, which includes all
indemnities, excluding only the family allowances, shall be paid
to you in 14 monthly instalments each year, under deduction of
the amounts to be withheld by law, as follows:
base contractual salary L.
seniority increases L.
contractual add-on L.
salary exceeding base L.
Total gross monthly salary L. $9,286 (USD)
The amount of salary exceeding base shall be considered as
paid on account, or as an advance, of future contractual pay
increases that may be granted pursuant to collective or shop
agreements, which increases shall be set-off against said salary
exceeding base.
[The third and fourth paragraph of Paragraph 5 remain unchanged]
F. Paragraph 6 is deleted and replaced with the following:
6. You agree, for a period of one year starting from the
date of termination of your relationship with our Company, not to
perform any activity, directly or indirectly, on your own, or on
behalf of third parties, whether as an entrepreneur, an employee
or a professional, in any industrial or commercial enterprise
which operates in the same sector in which our Company operates.
In consideration of the geographic extension of the
responsibilities now entrusted to you, as well as of your
appointment as a Director of the Richardson affiliates located in
the countries mentioned above at Paragraph 2, the above indicated
non-competition agreement concerns the performance, directly or
indirectly, of the above mentioned activities in the territory of
Italy, France, Germany, England, The Netherlands and Spain.
By way of compensation of the non-competition commitment
indicated above, our company will pay to you an indemnity, for
the year to which the non-competition agreement pertains, equal
to your last gross yearly salary in effect at the time of
termination of your employment, subject to any withholding
required by law. Said indemnity will be paid to you in 13
monthly instalments in arrears, under deduction of any income
earned by you through the performance of activities permitted
under this non-competition agreement during the year to which the
agreement pertains. In case of violation on your part of the
non-competition commitment, any obligation to pay the above
indicated indemnity to you, as compensation for the non--competition
commitment on your part, will immediately end.
Furthermore, in case of your violation of the non-competition
commitment, in addition to repaying to us the amount of indemnity
already collected by you, you will pay to us liquidated damages
in the amount of 100 million lire, without prejudice to any
additional damages that we may suffer.
The foregoing does not prejudice any other non-competition
agreement that may be entered into between you and our parent
company Richardson Electronics, Ltd., or between you and the
companies of which you may become a Director, as contemplated
above at Paragraph 2.
The other provisions of the letter dated May 10, 1993, which
are not expressly modified hereby, remain unchanged.
If you accept the foregoing, please return to us duly signed
by you the copy of this letter that is attached.
Very truly yours,
/s/ William J. Garry, Director
Richardson Electronics Italy s.r.l.
For acceptance:
/s/ Pierluigi Calderone
The undersigned, in accordance with, and for the purposes
of, Article 1341 of the Civil Code, declares to have carefully
read and to approve expressly the following provisions in their
new version stated above:
3. Prohibition to perform any other activity during employment;
6. Non-competition agreement.
/s/ Pierluigi Calderone
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