<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
Commission file number: 0-5256
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 58-1351398
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 648-5656
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
11,175,919 shares of Common Stock outstanding as of November 1, 1994
<PAGE> 2
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 1994
INDEX
PART I. Financial Information: PAGE NO.
--------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets . . . . . . . . . . . 3
Condensed Consolidated Statements of Income . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . 6
Item 2. Management s Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . 12
PART II. Other Information:
Item 6. Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 19
2
<PAGE> 3
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
---------------- ----------------
(UNAUDITED) (RESTATED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 44.9 $ 79.0
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . 29.5 112.0
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 121.1 117.9
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 66.8 29.3
Net current assets of discontinued operations . . . . . . . . . . . . . 26.7 173.7
------------ ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 289.0 511.9
Investments accounted for by the equity method . . . . . . . . . . . . 69.5 59.7
Loans receivable and real estate, net . . . . . . . . . . . . . . . . 77.0 79.4
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . 162.2 162.7
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301.5 308.2
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . 130.9 87.3
------------ ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,030.1 $ 1,209.2
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Current portion long-term debt. . . . . . . . . . . . . . . . . . . . . $ 32.0 $ 18.4
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.5 50.9
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 78.5 71.9
Litigation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4 34.0
------------ ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 187.4 175.2
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440.4 642.8
Accrued employee benefit obligations . . . . . . . . . . . . . . . . . . . . 57.1 47.9
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 113.9 92.4
------------ ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 798.8 958.3
------------ ----------
Redeemable preferred stock of subsidiary . . . . . . . . . . . . . . . . . . 45.9 43.6
------------ ----------
STOCKHOLDERS' EQUITY:
Preferred stock (5,000,000 shares authorized, none issued) . . . . . . . . . -- --
Common stock, (40,000,000 shares authorized,
12,059,000 issued) . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 195.1 194.8
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 35.5
Pension liability adjustment, net. . . . . . . . . . . . . . . . . . . . . . (4.6) (4.6)
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . (3.0) (5.0)
Common stock in treasury, at cost . . . . . . . . . . . . . . . . . . . . (13.3) (13.5)
----------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . 185.4 207.3
----------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . $ 1,030.1 $ 1,209.2
=========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ------------------------
1994 1993 1994 1993
------ ---- ----- ----
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Net sales and revenues. . . . . . . . . . . . . . . . . . . $ 254.6 $ 209.5 $ 709.5 $ 588.6
-------- --------- --------- ----------
Operating expenses:
Cost of goods and services sold . . . . . . . . . . . 198.7 161.1 547.9 452.0
Selling and administrative . . . . . . . . . . . . . . 31.5 29.9 101.0 91.5
Goodwill amortization . . . . . . . . . . . . . . . . 2.3 2.2 6.7 6.8
Other charges . . . . . . . . . . . . . . . . . . . . 0.4 12.6 1.2 18.1
-------- --------- --------- ----------
Total operating expenses . . . . . . . . . . . . . . . . . 232.9 205.8 656.8 568.4
-------- --------- --------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . . 21.7 3.7 52.7 20.2
Earnings accounted for by the equity method . . . . . . . . 1.7 1.6 16.3 17.6
Gains on sales of securities . . . . . . . . . . . . . . . -- 51.8 -- 51.8
Net interest expense . . . . . . . . . . . . . . . . . . . (8.0) (14.3) (28.6) (48.2)
-------- --------- --------- ----------
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . 15.4 42.8 40.4 41.4
Income tax expense from continuing operations . . . . . . . 5.0 9.4 15.2 9.2
-------- --------- --------- ----------
Income from continuing operations . . . . . . . . . . . . . 10.4 33.4 25.2 32.2
Discontinued Operations:
Income (loss) from discontinued operations, net of
income tax benefits of $0.3 and $0.7 for the quarter
and nine months ended September 1994, respectively,
and $2.3 and $2.7 for the quarter and nine months
ended September 1993, respectively . . . . . . . . 0.3 (20.4) (3.8) (21.7)
Income (loss) on disposal of businesses, net of income
tax benefits of $3.9 and $7.9 for the quarter and
nine months ended September 1994, respectively, and
$1.3 for the quarter and nine months ended
September 30, 1993 . . . . . . . . . . . . . . . . 3.9 (27.1) (27.2) (27.1)
-------- --------- --------- ----------
Income (loss) before extraordinary item . . . . . . . . . 14.6 (14.1) (5.8) (16.6)
Extraordinary gain (loss) from early retirement of debt, net
of income tax benefit of $4.5 and $9.2 for the
quarter and nine months ended September 1994,
respectively, and $3.1 for the quarter and nine
months ended September 30, 1993 . . . . . . . . . 5.0 (10.9) (16.3) (10.9)
-------- --------- --------- ----------
Income (loss) before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . 19.6 (25.0) (22.1) (27.5)
Cumulative effect of change in accounting principle . . . . -- -- -- 8.1
-------- --------- --------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . 19.6 (25.0) (22.1) (19.4)
Dividends accrued on subsidiary preferred stock . . . . . (0.8) (0.7) (2.3) (2.1)
-------- --------- --------- ----------
Net income (loss) to common stockholders . . . . . . . . . $ 18.8 $ (25.7) $ (24.4) $ (21.5)
======== ========= ======== =========
Weighted average common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . . 11.2 11.1 11.2 11.1
======== ========= ======== =========
Income (loss) per common share:
Continuing operations . . . . . . . . . . . . . . . . $ 0.86 $ 2.94 $ 2.04 $ 2.71
Discontinued operations . . . . . . . . . . . . . . . 0.37 (4.28) (2.77) (4.40)
Extraordinary item . . . . . . . . . . . . . . . . . . 0.45 (0.98) (1.45) (0.98)
Cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . -- -- -- 0.73
-------- --------- --------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . $ 1.68 $ (2.32) $ (2.18) $ (1.94)
======== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1994 1993
------------- ---------------
(RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . $ 25.2 $ 32.2
Adjustments to reconcile income from continuing operations to net
cash flow from operations:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.9 17.7
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7 11.6
Undistributed earnings of investments accounted for under
the equity method . . . . . . . . . . . . . . . . . . . . . . . (12.9) (12.9)
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . -- 8.4
Gains on sale of securities . . . . . . . . . . . . . . . . . . . . -- (51.8)
Accretion of discount on senior subordinated notes . . . . . . . . 15.7 4.3
Proceeds from sale of accounts receivable . . . . . . . . . . . . . 110.3 --
Litigation settlement . . . . . . . . . . . . . . . . . . . . . . . (24.6) --
Cash effects of changes in other working capital
balances, accrued employee benefit obligations, and
other long-term liabilities (excluding the effects
of dispositions of businesses) . . . . . . . . . . . . . . . . 16.0 (1.1)
---------- ---------
Net cash flow provided by continuing operating activities 157.3 8.4
Net cash flow (used by) discontinued operations . . . . . (23.9) (10.9)
---------- ---------
Net cash flow provided by (used by) operations . . . . . . 133.4 (2.5)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from the sales of securities . . . . . . . . . . . . . . . . (0.7) 82.5
Proceeds from sales of businesses . . . . . . . . . . . . . . . . . . . . 71.7 22.5
Loan principal repayments and proceeds from sale of real estate . . . . . 7.1 19.8
Loan disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) --
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . (18.4) (13.6)
Other (11.7) 1.2
---------- ---------
Net cash flow provided by investing activities 47.5 112.4
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325.0 184.0
Net reduction of debt . . . . . . . . . . . . . . . . . . . . . . . . . . (540.5) (220.8)
Exercise of options . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 --
---------- ---------
Net cash flow (used by) financing activities . . . . . . . . . . . (215.0) (36.8)
---------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . (34.1) 73.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD. . . . . . . . . . . . . . 79.0 29.2
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 44.9 $ 102.3
========== =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The accompanying unaudited Condensed Consolidated Financial Statements
of Great American Management and Investment, Inc. (the "Company" or
"GAMI") have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto included in the Company's Annual Report for the year ended
December 31, 1993. The following notes to the Condensed Consolidated
Financial Statements highlight significant changes to the notes
included in the Annual Report and such interim disclosures as required
by the SEC. The accompanying Condensed Consolidated Financial
Statements reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the interim financial statements.
All such adjustments are of a normal and recurring nature, except as
otherwise described herein. Operating results for the interim periods
presented are not necessarily indicative of results that may be
expected for the full year.
Certain amounts in the 1993 Condensed Consolidated Financial
Statements have been reclassified to conform with the classifications
presented in the 1994 Condensed Consolidated Financial Statements.
The historical financial statements of the Company have been restated
for companies being reported as discontinued operations.
(2) DISCONTINUED OPERATIONS
During the second quarter of 1994, the Company decided to pursue the
sales of certain of the businesses in the Industrial Products Group
and the Specialty Products Group. As a result of this decision, the
Company has reflected the net assets and results of operations of
Pfaudler, Inc. (worldwide operations) ("Pfaudler"), Chemineer, Inc.
("Chemineer"), Hill Refrigeration, Inc. ("Hill"), Caron International,
Inc. ("Caron") and Gerry Sportswear, Inc. ("Gerry") as discontinued
operations. The Company recorded a pretax provision of $53.2 million
and applicable tax benefits of $12.9 million for estimated losses from
operations and the ultimate disposition of Hill, Caron and Gerry. In
addition, the Company recorded a pretax provision of $6.8 million and
applicable tax benefits of $2.5 million, related to Lapp Insulator
Company ("Lapp") which has been previously reported as a discontinued
operation. The Company also recorded pretax charges of $5.8 million
and applicable tax benefits of $2.3 million to establish additional
self-insurance reserves for businesses previously sold by the Company.
In September 1994, Eagle Industries, Inc. ("Eagle"), a wholly
owned subsidiary of the Company, sold certain assets of Caron to a
subsidiary of National Spinning Co. for cash proceeds of $3.0 million
and a $4.0 million note. In August 1994, Eagle completed the sale of
certain assets and liabilities of Hill to an indirect subsidiary of
Dover Corporation for cash proceeds of $8.8 million. In June 1994,
Eagle sold the stock of Pfaudler and Chemineer to Robbins & Myers,
Inc. ("Robbins"). Eagle received cash proceeds of $59.9 million and a
$50.0 million, 5.5%, subordinated note (which Eagle recorded at a
discounted value of $40.0 million). In addition, Eagle received stock
appreciation rights with respect to 2.0 million shares of common stock
of Robbins. The Company recorded a pretax gain of $30.7 million, and
applicable taxes of $9.8 million with respect to the sale of Pfaudler
and Chemineer.
6
<PAGE> 7
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
(UNAUDITED)
The following table summarizes key financial data related to the discontinued
operations of Lapp (1993), Chemineer, Pfaudler, Caron, Gerry and Hill (in
millions):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1994 1993
------- -------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 162.9 $ 340.5
Operating loss . . . . . . . . . . . . . . . . (3.0) (16.5)
Allocated interest expense . . . . . . . . . . 1.5 8.4
Income tax (benefit) applicable to discontinued
businesses . . . . . . . . . . . . . . . (0.7) (2.7)
Change in accounting principle. . . . . . . . . -- 0.5
(Loss) from operations of discontinued
businesses, net of applicable income taxes (3.8) (21.7)
</TABLE>
The net current assets of discontinued operations included in the Condensed
Consolidated Balance Sheet at September 30, 1994 and December 31, 1993 amounted
to $26.7 million and $173.7 million, respectively, and consisted primarily of
inventories and property, plant and equipment net of trade payables, accrued
liabilities and accrued employee benefit obligations. These amounts have all
been classified as current based on the intent to dispose of them within one
year.
(3) INVENTORIES
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
-------------- ------------
(Unaudited ) (Restated)
<S> <C> <C>
Raw materials and supplies . . . . . . $ 38.6 $ 37.7
Work in process . . . . . . . . . . . 26.5 25.2
Finished goods . . . . . . . . . . . . 56.0 55.0
------------- -----------
$ 121.1 $ 117.9
============= ===========
</TABLE>
(4) LONG-TERM DEBT
Components of long-term debt were as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
Senior Debt:
GAMI . . . . . . . . . . . . . . . . $ 6.1 $ 0.2
Eagle . . . . . . . . . . . . . . . . 259.3 224.0
-------- -------
265.4 224.2
-------- -------
Subordinated Debt:
Eagle . . . . . . . . . . . . . . . . 198.9 421.6
-------- -------
Other:
GAMI . . . . . . . . . . . . . . . . 1.6 4.3
Eagle . . . . . . . . . . . . . . . . 6.5 11.1
-------- -------
8.1 15.4
-------- -------
Total debt . . . . . . . . . . . . . . . 472.4 661.2
Less current portion . . . . . . . . . . (32.0) (18.4)
-------- -------
Total long-term debt . . . . . . . . . . $ 440.4 $ 642.8
======== =======
</TABLE>
Refer to the Company's Annual Report for the year ended December 31,
1993 for a more detailed description of all the Company's short-term and
long-term debt.
7
<PAGE> 8
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
(UNAUDITED)
During the first quarter of 1994, Eagle consummated a refinancing,
involving the repayment and redemption of all of its then existing
senior bank credit facilities (the "Senior Facilities"), its 13%
Senior Subordinated Notes due October 1998 (the "13% Notes") and its
13.75% Senior Subordinated Notes due March 1998 (the "13.75% Notes")
(collectively, the "Refinancing"). In January 1994, the Senior
Facilities were fully repaid and the agreements terminated. The 13%
Notes were redeemed on February 27, 1994 at 104% of their principal
amount plus accrued interest. The 13.75% Notes were redeemed on March
15, 1994 at 105.5% of their principal amount plus accrued interest.
The Company recorded a pretax extraordinary charge of $26.0 million in
connection with the Refinancing.
A portion of the proceeds to consummate the Refinancing were derived
from a new $425.0 million senior bank credit facility (the "Credit
Facility") made available to Eagle Industrial Products Corporation,
("Eagle Industrial"), a newly formed wholly owned subsidiary of Eagle,
which owns all of the operating subsidiaries of Eagle. As a result of
the sale of Pfaudler and Chemineer, Eagle made a principal payment of
$18.0 million and the Credit Facility was amended. The Credit
Facility, as amended, consists of: (1) a $204.5 million term loan due
in quarterly installments, commencing with the quarter ended September
30, 1994, increasing from $5.9 million per quarter during 1994 to
$13.8 million per quarter in 1999; (2) a $60.8 million term loan due
in equal quarterly installments aggregating $0.3 million per year in
1994, $0.5 million in 1995, $0.9 million per year from 1996 through
1999 and $56.3 million in 2000; and (3) a $135.0 million revolving
credit facility (subject to borrowing base availability) that expires
in 1999, which may be extended through 2000.
Borrowings under the Credit Facility bear interest at alternative
floating rate structures, at management's option (6.73% at September
30, 1994), and are secured by substantially all domestic property,
plant, equipment, inventory and certain receivables of Eagle
Industrial and its subsidiaries. The Credit Facility requires an
annual commitment fee of 0.5% on the average daily unused amount of
the revolving portion of the Credit Facility. At September 30, 1994,
no amounts were outstanding under the revolving credit portion and
$259.3 million was outstanding under the term loan portion of the
Credit Facility. Additionally, the Credit Facility provides for a
letter of credit facility of up to $50.0 million. Borrowing
availability under the revolving portion of the Credit Facility is
reduced by the outstanding amount of letters of credit. At September
30, 1994, an additional $36.1 million was available to borrow under
the Credit Facility.
The Credit Facility contains various financial covenants, the more
restrictive requirements of which being: the maintenance of minimum
levels of net worth; limitations on incurring additional indebtedness;
restrictions on the payments of dividends or the making of loans to
Eagle; maintenance of certain ratios of cash flow to interest expense
and indebtedness; maintenance of a minimum level of cash flow to fixed
charges; and a prohibition on payments to Eagle for management
services in excess of $3.0 million per year. Eagle has provided a
guarantee as to the repayment of amounts outstanding under the Credit
Facility. Additionally, the Credit Facility requires that the
Company's majority stockholder and affiliates directly or indirectly
maintain at least 30% of the voting power to elect members of the
board of directors of Eagle and that Eagle directly owns 100% of Eagle
Industrial. As a result of the Falcon IPO, hereinafter defined, $52.0
million of outstanding amounts under the Credit Facility were repaid
and the Credit Facility was amended. See Note 10 Subsequent Events -
Falcon IPO.
Refer to Note 5 for a further discussion of other sources of proceeds
utilized to complete the Refinancing.
In July 1994, Eagle retired $22.0 million face value ($14.6 million
accreted value) of its Senior Deferred Coupon Notes due July 2003. In
conjunction with this retirement, the Company recorded an
extraordinary pretax gain of $0.5 million.
On September 30, 1994, GAMI's two senior credit facilities matured.
One facility, with an outstanding principal balance of $7.1 million
was repaid in full. The other facility, with an outstanding balance
of $6.1 million, was extended to October 15, 1994. The outstanding
balance of $6.1 million was repaid on
8
<PAGE> 9
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
(UNAUDITED)
October 13, 1994 in connection with a refinancing. See Note 10
Subsequent Events - Senior Credit Facility for a description of the
refinancing.
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at September 30, 1994.
(5) SECURITIZATION AND CAPITAL CONTRIBUTION
As discussed in Note 4, during the first quarter of 1994, Eagle
consummated the Refinancing. In addition to the establishment of the
Credit Facility, proceeds for the Refinancing were derived from an
asset securitization program (the "Securitization") whereby Eagle sold
certain of its accounts receivable for $110.3 million plus a residual
interest in a trust. Eagle also received a $50.0 million capital
contribution (the "Capital Contribution") from GAMI. Aggregate
proceeds from the Credit Facility, the Securitization and the Capital
Contribution amounted to $485.0 million.
In connection with the Securitization, Eagle entered into a receivable
sale agreement whereby it will sell, with limited recourse, on a
continuous basis, an undivided interest in certain of its accounts
receivable. Under the agreement, which expires in June 1999, the
maximum amount of proceeds which may be accessed through this
agreement at any one time is $145.0 million and is subject to change
based on the level of eligible receivables and restrictions on
concentrations of receivables. At September 30, 1994, uncollected
accounts receivable sold under the agreement amounted to $136.0
million. Total cash proceeds since the inception of the
Securitization (January 31, 1994) through September 30, 1994 of $837.2
million (including the initial proceeds of $110.3 million) were
reported as a component of cash flows from operating activities. The
loss on the sale of accounts receivable under this program was $1.3
million and $3.4 million for the quarter and nine months ended
September 30, 1994, respectively, and was included in selling and
administrative expenses. The difference between the amount of
receivables sold and proceeds received at September 30, 1994 (the
"Residual Interest") was $33.3 million. This Residual Interest was
reflected in other current assets.
(6) COMMITMENTS, CONTINGENCIES AND LITIGATION
Madison Management Group, Inc. ("Madison"), a non-consolidated
subsidiary of GAMI, is currently under the protection of Chapter 7 of
the United States Bankruptcy Code. On December 31, 1992, the court
appointed trustee for Madison filed a complaint (the "Complaint")
against the Company, a subsidiary and certain present and former
officers and directors of the Company and Madison. In May 1994, the
Company entered into an agreement (the "Agreement") with substantially
all of the pipe claimants in the Madison bankruptcy to acquire $457.0
million of claims against Madison for approximately $24.6 million.
The Agreement was not subject to bankruptcy court approval. The
funding of this transaction occurred in the third quarter of 1994.
These claims represent, in face amount, approximately 94% of all
noncontingent claims filed against Madison in its bankruptcy. At
September 30, 1994, the Company had reserves amounting to $9.4 million
associated with the Madison bankruptcy. Refer to GAMI's Annual Report
for the year ended December 31, 1993 for additional information
related to Madison and the Complaint.
9
<PAGE> 10
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
(UNAUDITED)
(7) INCOME TAXES
During the quarter ended September 30, 1994, the Company determined
that it will realize certain income tax benefits on losses previously
recognized in 1994. Accordingly, during the quarter ended
September 30, 1994, the Company recorded income tax benefits from
discontinued operations, disposals of businesses and early retirement
of debt of $0.3 million, $3.9 million and $4.7 million, respectively.
(8) STOCK OPTIONS
During the nine months ended Setpember 30, 1994, options to acquire
17,331 shares of the Company's common stock were exercised, with total
proceeds of $0.5 million realized.
(9) OTHER
In June 1994, the Company recorded pretax charges of $6.0 million to
establish additional self-insurance reserves related to continuing
operations. In addition, as discussed in Note 2, the Company recorded
pretax charges of $5.8 million and applicable tax benefits of $2.3
million to establish additional self-insurance reserves for businesses
previously sold by the Company. These revisions in estimated
self-insurance reserves for workers' compensation, product liability
and general liability were the result of a comprehensive review of
existing self-insurance reserves related to continuing operations and
retained liabilities related to previously owned businesses.
(10) SUBSEQUENT EVENTS
SENIOR CREDIT FACILITY
On October 13, 1994, GAMI entered into a $25.0 million revolving
credit facility (the "Revolver") with the Bank of America Illinois.
The Revolver bears interest, at management's option, at
LIBOR plus 2.0% or the bank's base floating rate. Principal
amortization payments of $2.5 million are due on August 15, 1995,
February 15, 1996, May 15, 1996 and August 15, 1996 with the balance
due at the maturity date which is September 30, 1996. The Revolver is
secured by 1.6 million shares of the Company's holdings of the common
stock of The Vigoro Corporation. The Revolver contains restrictive
covenants, including, but not limited to, the incurrence of additional
debt, maintenance of minimum levels of net worth, liquidity
requirements and limitations on the disposition of the Company's
ownership of Eagle and The Vigoro Corporation stock.
FALCON IPO
On November 9, 1994, Falcon Building Products, Inc. ("Falcon"), an
indirect, wholly owned subsidiary of the Company, completed an initial
public offering of 6,000,000 shares (30%) of its common stock (the
"Falcon IPO") including 196,500 shares sold to Falcon management. The
offering price of $12.00 per share is expected to generate net
proceeds of approximately $65.0 million consisting of approximately
$63.0 million in cash and approximately $2.0 million in notes.
Substantially all of the cash proceeds were used to reduce the
Company's outstanding indebtedness. The Company expects to record a
net gain of approximately $40.0 million in conjunction with the Falcon
IPO. Falcon is a domestic manufacturer and distributor of products
for the residential and commercial construction and home improvement
markets and is comprised of the businesses in the Company's Building
Products Group.
10
<PAGE> 11
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
(UNAUDITED)
As a result of the Falcon IPO, the Credit Facility was bifurcated into
two separate bank credit facilities, including a $165.0 million
facility for Falcon (the "Falcon Credit Facility") and an amended and
restated facility for Eagle Industrial (the "Eagle Industrial Credit
Facility"). The Falcon Credit Facility consists of a $115.0 million
term loan due in quarterly installments increasing from $2.5 million
per quarter beginning December 31, 1994 to $6.3 million per quarter
beginning in December 1998 and a $50.0 million revolving credit
facility. The Falcon Credit Facility contains a $25.0 million letter
of credit facility.
The Eagle Industrial Credit Facility consists of a $92.0 million term
loan due in quarterly installments increasing from $2.5 million per
quarter beginning December 31, 1994 to $5.5 million per quarter
beginning in December 1999 and an $85.0 million revolving credit
facility. The Eagle Industrial Credit Facility contains a $50.0
million letter of credit facility.
Each of the credit facilities will terminate in 2000, unless extended
for an additional year. The covenants contained in each of these
credit facilities are consistent with those contained in the Credit
Facility described in Note 4.
11
<PAGE> 12
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1994
Capitalized terms not defined herein, are defined in the Notes to Condensed
Consolidated Financial Statements.
The following discusses the results of operations and financial condition for
the quarter and nine months ended September 30, 1994 to the comparable periods
of 1993. This section should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
audited Consolidated Financial Statements included in the Company's Annual
Report for the year ended December 31, 1993.
As discussed in Note 2 to the Condensed Consolidated Financial Statements, the
Company decided to pursue the sales of certain businesses in the Specialty
Products Group and the Industrial Products Group. As a result, the Company's
continuing operations are comprised of 10 manufacturing and distribution
businesses in three reportable segments and a financial services business. In
addition, the operations of Burns Aerospace Corporation and Equality
Specialties are now combined in Corporate and Other. The following is a list of
the primary manufacturing and distribution companies or divisions owned by the
Company and its subsidiaries:
<TABLE>
<CAPTION>
COMPANY/DIVISION DESCRIPTION OF PRODUCT PRIMARY INDUSTRY(IES)
------------------------------------------ ------------------------------- ------------------------------
<S> <C> <C>
BUILDING PRODUCTS GROUP
Hart & Cooley, Inc. ("Hart & Heating, Ventilation and Air Residential and Commercial
Cooley") Conditioning Accessories Construction
Mansfield Plumbing Products, Inc. Bathroom Fixtures & Plumbing Residential Construction
("Mansfield") Fittings
DeVilbiss Air Power Company Light Duty Air Compressors Home Improvement
("DeVilbiss Air Power")
ELECTRICAL PRODUCTS GROUP
Elastimold Underground Medium-and Electric Utility
High-Voltage Cable
Accessories
Hendrix Wire and Cable ("Hendrix") Power Cables and Cable Electric Utility
Accessories
Industrial Electrical Products Interconnect, Control and Electrical/Electronic
("IEP") Timing Devices; Airport
Lighting Transformers; and
Electrical Connectors
AUTOMOTIVE PRODUCTS GROUP
Mighty Distributing Systems of Auto Parts Distribution Automobile Aftermarket
America, Inc.
The Parts House, Inc. Auto Parts Distribution Automobile Aftermarket
Denman Tire Corporation ("Denman") Specialty Pneumatic Tires Aftermarket Tires
Clevaflex Multi-ply, Flexible Tubing Automotive OEM
CORPORATE AND OTHER
Equality Specialties Decorative Wrappings for Retail Accessories
Packaging Gifts
Burns Aerospace Corporation Commercial Aircraft Seating Commercial Aviation
("Burns")
</TABLE>
12
<PAGE> 13
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1994 AS COMPARED TO THE QUARTER ENDED SEPTEMBER 30,
1993
The following table shows net sales and revenues and operating income
by business group (in millions):
<TABLE>
<CAPTION>
NET SALES AND REVENUES OPERATING INCOME
---------------------------- ---------------------------
QUARTER ENDED SEPTEMBER 30, QUARTER ENDED SEPTEMBER 30,
---------------------------- ---------------------------
1994 1993 1994 1993
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Building Products Group . . . $ 117.9 $ 97.4 $ 15.2 $ 12.7
Electrical Products Group . . 51.8 45.4 7.1 4.4
Automotive Products Group . . 48.8 44.2 2.5 2.3
Corporate and Other . . . . . 32.2 17.8 (4.4) (3.3)
Financial Services Group . . 3.9 4.7 1.7 0.2
Other Charges . . . . . . . -- -- (0.4) (12.6)
------------- ----------- ----------- ------------
Total . . . . . . . . . $ 254.6 $ 209.5 $ 21.7 $ 3.7
============= =========== =========== ============
</TABLE>
NET SALES AND REVENUES
Net sales of $254.6 million for the third quarter of 1994 were $45.1 million or
21.5% higher than net sales for the third quarter of 1993. This increase was
primarily due to increased volume in most of the Company's businesses.
Net sales of $117.9 million for the Building Products Group were $20.5 million
or 21.0% higher than net sales for the 1993 period. This increase was due to
increased volume at Hart & Cooley primarily in its flexible duct product line
due to increased market penetration, the improved construction market and to a
lesser extent improved pricing, increased sales to Sears Roebuck and Co.
("Sears") by DeVilbiss Air Power and increased sales of ultra-low-flush toilets
by Mansfield.
Net sales of $51.8 million for the Electrical Products Group were $6.4 million
or 14.1% higher than net sales for the 1993 period. This increase was
primarily due to increased volume at Hendrix and Elastimold due to an
improvement in the economy and a product line acquisition at Elastimold in
1993. In addition, an improvement in pricing at Elastimold also contributed to
the increase. These increases were partially offset by decreased volume at
other businesses within this group.
Net sales of $48.8 million for the Automotive Products Group were $4.6 million
or 10.4% higher than net sales for the 1993 period. This increase was
primarily due to increased volume at the automotive parts distribution
businesses as a result of increased market penetration, as well as increased
volume due to improved availability of product at Denman.
Other net sales of $32.2 million were $14.4 million or 80.9% higher than net
sales for the 1993 period. This increase was primarily due to shipments under
a major order at Burns.
Revenues of $3.9 million for the Financial Services Group were $0.8 million or
17.0% lower than revenues for the 1993 period. The decrease was primarily due
to the effect of the sale of three properties partially offset by the effect of
the foreclosure of a loan receivable during the periods under comparison. In
addition, decreased interest income on the Company's loan portfolio resulted
from loan payoffs and various principal reductions throughout the periods under
comparison.
OPERATING INCOME
Operating income of $21.7 million for the third quarter of 1994 was $18.0
million higher than operating income for the comparable period in 1993. The
increase was due primarily to reserves recorded in 1993 related to the Madison
bankruptcy case. Also contributing to the increase were increases in the
Building Products Group and the Electrical Products Group partially offset by
increased corporate expenses and other.
13
<PAGE> 14
Operating income of $15.2 million for the Building Products Group was $2.5
million or 19.7% higher than in the 1993 period. This increase was due to the
increased volume at all of the Company's businesses within this group.
Improved pricing at Hart & Cooley and the increased sales of higher margin
ultra-low-flush toilets at Mansfield also contributed to the increase in
operating income.
Operating income of $7.1 million for the Electrical Products Group was $2.7
million or 61.4% higher than in the 1993 period. This increase was primarily
due to the increased volume at Elastimold and Hendrix and to a lesser extent
improved pricing at Elastimold.
Operating income of $2.5 million for the Automotive Products Group was $0.2
million or 8.7% higher than in the 1993 period. This increase was primarily
due to increased volume at all businesses within this group.
Corporate expenses and other of the $4.4 million were $1.1 million higher than
in the 1993 period. This increase was primarily due to $1.3 million of
expenses associated with the Company's asset securitization program in 1994.
Despite increased sales at Burns, operating losses increased slightly due to an
inventory reserve adjustment.
Operating income for the Financial Services Group was $1.7 million compared to
$0.2 million in the 1993 period. This increase was primarily due to improved
operations at the Company's hotels due to the renovation of one hotel and an
overall improvement in the local economy of the other hotel prior to its sale
in August 1994. Offsetting the increase were decreases in interest income on
the Company's decreasing loan portfolio.
Other charges decreased by $12.2 million to $0.4 million for the 1994 period
primarily as a result of the Company's recording of an increase in 1993 in the
reserve for various costs related to the Madison bankruptcy case.
EARNINGS ACCOUNTED FOR BY THE EQUITY METHOD
Earnings accounted for by the equity method were $1.7 million and $1.6 million
for the quarters ended September 30, 1994 and 1993, respectively. The
Company's share of earnings from The Vigoro Corporation ("Vigoro") increased
$0.2 million despite the Company's decrease in ownership of Vigoro's
outstanding common stock from 47% to 30% in such periods. An increase in
potash sales, primarily due to improved sales volumes and prices, both
domestically and internationally, contributed to a significant increase in
Vigoro's operating income. Partially offsetting this increase were increased
operating losses for the nitrogen-based fertilizers business primarily due to
the acquisition of the Mid-Ohio Chemical Company which further intensified the
impact of seasonality on Vigoro's nitrogen-based business. The Company's share
of earnings from The Commodore Corporation ("Commodore") were relatively
unchanged.
INTEREST EXPENSE
Net interest expense was $8.0 million for the quarter ended September 30, 1994
compared to $14.3 million for the comparable 1993 period. This decrease was
primarily due to the overall decrease in the level of debt coupled with a
decrease in interest rates associated with the Refinancing, which was completed
on January 31, 1994.
14
<PAGE> 15
PROVISION FOR INCOME TAXES
The effective tax rate for the third quarter of 1994 and 1993 reflected the
effect of non-deductible expenses, primarily goodwill amortization, the
tax-free portion of dividends received from investments accounted for by the
equity method, and foreign and state income taxes.
NINE MONTHS ENDED SEPTEMBER 30, 1994 AS COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1993
The following table shows net sales and revenues and operating income by
business group (in millions):
<TABLE>
<CAPTION>
NET SALES AND REVENUES OPERATING INCOME
------------------------------- ---------------------------------
NINE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- ---------------------------------
1994 1993 1994 1993
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Building Products Group . . . $ 330.5 $ 261.8 $ 39.8 $ 33.8
Electrical Products Group . . 148.3 127.5 16.2 11.5
Automotive Products Group . . 136.3 122.2 6.2 5.3
Corporate and Other . . . . . 82.5 62.7 (12.1) (5.9)
Financial Services Group . . 11.9 14.4 3.8 (6.4)
Other Charges . . . . . . . . -- -- (1.2) (18.1)
----------- ----------- ---------- ---------
Total . . . . . . . . . $ 709.5 $ 588.6 $ 52.7 $ 20.2
=========== =========== ========== =========
</TABLE>
NET SALES AND REVENUES
Net sales of $709.5 million for the nine months ended September 30, 1994 were
$120.9 million or 20.5% higher than net sales for the comparable period in
1993. This increase was primarily due to increased volume at most of the
Company's businesses with the most significant increases in the Building
Products Group.
Net sales of $330.5 million for the Building Products Group were $68.7 million
or 26.2% higher for the first nine months of 1994 compared to the first nine
months of 1993. This increase was primarily due to increased volume at Hart &
Cooley primarily in its flexible duct product line due to increased market
penetration and the improved construction market, increased sales to Sears by
DeVilbiss Air Power and increased sales of ultra-low-flush toilets by
Mansfield. Improved pricing at Hart & Cooley also contributed to the increase.
Net sales of $148.3 million for the Electrical Products Group were $20.8
million or 16.3% higher in the first nine months of 1994 compared to the first
nine months of 1993. This increase was primarily due to increased volume, and
to a lesser extent, improved pricing at Hendrix and Elastimold as a result of
an improvement in the economy and the acquisition of a product line at
Elastimold in 1993. IEP also had higher volume levels.
Net sales of $136.3 million for the Automotive Products Group were $14.1
million or 11.5% higher in the first nine months of 1994 compared to the first
nine months of 1993. This increase was primarily due to increased volume at
the automotive parts distribution businesses as a result of new distribution
channels and increased market penetration. Denman also had increased volume as
a result of improved availability of product.
Other net sales increased $19.8 million or 31.6% compared to 1993. This
increase was primarily due to shipments under a major order at Burns.
Revenues of $11.9 million for the Financial Services Group were $2.5 million or
17.4% lower than revenues for the 1993 period. The decrease was primarily due
to the effect of the sale of two properties in 1993 and one property in the
third quarter of 1994. In addition, interest income on the Company's loan
portfolio decreased as a result of loan payoffs and various principal
repayments during the periods under comparison. The decrease was partially
offset by the effect of the foreclosure of a loan receivable during 1993.
15
<PAGE> 16
OPERATING INCOME
Operating income of $52.7 million for the nine months ended September 30, 1994
was $32.5 million or 160.9% higher than operating income for the comparable
period in 1993. This increase was due primarily to loan receivable valuation
reserves and costs related to the Madison bankruptcy recorded in 1993. In
addition, most of the Company's businesses showed increases, which were
partially offset by increased corporate expenses due primarily to $6.9 million
of charges recorded to establish self-insurance reserves.
Operating income of $39.8 million for the Building Products Group was $6.0
million or 17.8% higher than in the 1993 period. This increase was primarily
due to increased volume at all of the Company's businesses within this group as
well as improved pricing at Hart & Cooley. The contribution of increased sales
of higher margin ultra-low-flush toilets at Mansfield was partially offset by
competitive pricing. These increases were partially offset by $3.9 million of
charges to establish self-insurance reserves.
Operating income of $16.2 million for the Electrical Products Group was $4.7
million or 40.9% higher than in the 1993 period. This increase was primarily
due to increased volume at most of the businesses within this group and, to a
lesser extent, improved pricing at Elastimold and Hendrix partially offset by
charges of $0.9 million recorded in 1994 to establish self-insurance reserves.
Operating income of $6.2 million for the Automotive Products Group was $0.9
million or 17.0% higher than in the 1993 period. This increase was due to
increased volume at all the businesses within this group partially offset by
charges of $0.5 million recorded in 1994 to establish self-insurance reserves.
Corporate expenses and other of the $12.1 million were $6.2 million higher
than in the 1993 period. This increase was primarily due to $1.6 million of
charges recorded to establish self-insurance reserves and $3.4 million of
expenses associated with the Company's asset securitization program. In
addition, in 1993, the Company recorded a one time curtailment gain associated
with a pension plan as well as a gain on the sale of equity securities which
totaled $1.7 million. Despite increased sales at Burns, operating losses
increased slightly due to an inventory reserve adjustment.
Operating income was $3.8 million in the 1994 period for the Financial
Services Group as compared to an operating loss of $6.4 million in the 1993
period. This increase was primarily due to $8.4 million of loan receivable
valuation reserves recorded in 1993.
Other charges decreased by $16.9 million to $1.2 million in the 1994 period
primarily as a result of the Company's recording of an increase in 1993 in the
reserve for various costs related to the Madison bankruptcy case.
EARNINGS ACCOUNTED FOR BY THE EQUITY METHOD
Earnings accounted for by the equity method were $16.3 million and $17.6
million for the nine months ended September 30, 1994 and 1993, respectively. A
decrease in the Company's share of earnings from Vigoro of $1.1 million was
primarily caused by the Company's decrease in ownership of Vigoro's outstanding
common stock from 47% to 30% in such periods. Offsetting the decrease in
ownership was Vigoro's record earnings for the first nine months of 1994
primarily due to the effect of Vigoro's acquisition of Mid-Ohio Chemical
Company in April 1994, favorable spring weather conditions, an increase in the
number of acres planted, an increase in fertilizer application rates in
nitrogen-based sales and increased domestic volumes in potash, partially offset
by decreased potash export sales. An increase in the Company's share of
earnings from Commodore of $0.2 million was a result of favorable margins on
increased volume.
INTEREST EXPENSE
Net interest expense was $28.6 million for the nine months ended September 30,
1994 compared to $48.2 million for the comparable 1993 period. This decrease
was primarily due to the overall decrease in the level of debt coupled with the
decrease in interest rates associated with the Refinancing which was completed
on January 31, 1994.
16
<PAGE> 17
PROVISION FOR INCOME TAXES
The effective tax rate for the nine months ended September 30, 1994 and 1993
reflected the effect of non-deductible expenses, primarily goodwill
amortization, the tax-free portion of dividends received from investments
accounted for by the equity method, and foreign and state income taxes.
DISCONTINUED OPERATIONS
During the quarter ended June 30, 1994, the Company decided to pursue the sales
of certain of the businesses comprising the Industrial Products Group and the
Specialty Products Group. As a result of this decision, the Company has
reflected the net assets and results of operations of Pfaudler, Chemineer,
Hill, Caron and Gerry as discontinued operations. The Company recorded a
pretax provision of $53.2 million and applicable tax benefits of $12.9 million
for estimated losses from operations and the ultimate disposition of Hill,
Caron and Gerry. Net losses recorded by these businesses were $3.8 million in
1994. In addition, the Company recorded a pretax provision of $6.8 million and
applicable tax benefits of $2.5 million, related to Lapp Insulator Company
("Lapp") which had been previously reported as a discontinued operation. The
Company also recorded pretax charges of $5.8 million and applicable tax
benefits of $2.3 million to establish additional self-insurance reserves for
businesses previously sold by the Company. These revisions in estimated
self-insurance reserves for workers' compensation, product liability and
general liability were the result of a comprehensive review of existing
self-insurance reserves related to continuing operations and retained
liabilities related to previously owned businesses.
In June 1994, Eagle sold the stock of Pfaudler and Chemineer to Robbins &
Myers, Inc. ("Robbins"). Eagle received cash proceeds of $59.9 million and a
$50.0 million, 5.5%, subordinated note (which is recorded at a discounted value
of $40.0 million). In addition, Eagle received stock appreciation rights with
respect to 2.0 million shares of common stock of Robbins. The Company recorded
a pretax gain of $30.7 million, and applicable taxes of $9.8 million with
respect to the sale of these businesses. In August 1994, Eagle completed the
sale of certain assets of Hill to an indirect subsidiary of Dover Corporation
for cash proceeds of approximately $8.8 million. In September 1994, Eagle sold
certain assets of Caron to a subsidiary of National Spinning Co. for cash
proceeds of $3.0 million and a $4.0 million note. The Company is pursuing the
sales of Gerry and Lapp.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash flow
and external financing. Cash flow from continuing operating activities was
$157.3 million for the nine months ended September 30, 1994, compared to $8.4
million in the comparable 1993 period. This increase was primarily due to
proceeds from the sale of accounts receivable in connection with the
Securitization (see Note 5 to the Condensed Consolidated Financial Statements).
Excluding the effects of these proceeds, cash flow provided by continuing
operations was $47.0 million for the nine months ended September 30, 1994 or
$38.6 million greater than the comparable period of 1993. This increase was
primarily due to the increased level of operating income, improved working
capital management and a reduction in the amount of interest paid as a result
of the Refinancing as described in Note 4 to the Condensed Consolidated
Financial Statements. Partially offsetting this increase was the payment of
$24.6 million related to the Madison bankruptcy as described in Note 6 to the
Condensed Consolidated Financial Statements.
In January 1994, Eagle's senior bank credit facilities were refinanced and a
new Credit Facility was entered into (the "Credit Facility"). At September 30,
1994, the Credit Facility consisted of : (1) a $204.5 million term loan due in
quarterly installments, commencing with the quarter ending September 30, 1994,
increasing from $5.9 million per quarter during 1994 to $13.8 million per
quarter in 1999; (2) a $60.8 million term loan due in equal quarterly
installments aggregating $0.3 million in 1994, $0.5 million in 1995, $0.9
million per year in 1996 through 1999 and $56.3 million in 2000; and (3) a
$135.0 million revolving credit facility (subject to borrowing base
availability) that expires in 1999, which may be extended through 2000.
Borrowings under the Credit Facility bear interest at alternative floating rate
structures, at management's option (6.73% at September 30, 1994), and are
secured by substantially all domestic property, plant, equipment, inventory and
certain receivables of Eagle Industrial and its subsidiaries. At September 30,
1994, no amounts were outstanding under the revolving credit portion and $259.3
million was outstanding under the term loan portion of the Credit Facility.
Additionally, the Credit Facility provides for a letter of credit facility of
up to $50.0 million. Borrowing availability under the revolving portion of the
Credit Facility is reduced by the outstanding amount of letters of credit. At
September 30, 1994, Eagle had an additional $36.1 million of borrowing
availability under the Credit Facility.
17
<PAGE> 18
In July 1994, Eagle retired $22.0 million face value ($14.6 million accreted
value) of its Senior Deferred Coupon Notes.
On September 30, 1994, GAMI's two senior credit facilities matured. One
facility, with an outstanding principal balance of $7.1 million was repaid in
full. The other facility, with an outstanding balance of $6.1 million, was
extended to October 15, 1994. On October 13, 1994, GAMI entered into a $25.0
million revolving credit facility (the "Revolver") with the Bank of America
Illinois. Proceeds from the initial draw on the Revolver were utilized to
repay the $6.1 million outstanding balance referred to above. The Revolver
bears interest, at management s option, of LIBOR plus 2.0% or the bank's base
floating rate. Principal amortization payments of $2.5 million are due on
August 15, 1995, February 15, 1996, May 15, 1996 and August 15, 1996 with the
balance due at maturity on September 30, 1996. The Revolver is secured by 1.6
million shares of the Company's holdings of Vigoro common stock. At October
13, 1994, GAMI had $20.1 million of borrowing availability under the Revolver.
On November 9, 1994, Falcon Building Products, Inc. ("Falcon"), an indirect,
wholly owned subsidiary of the Company, completed an initial public offering of
6,000,000 shares (30%) of its common stock (the "Falcon IPO"). The offering
price of $12.0 per share is expected to generate net proceeds of approximately
$65.0 million consisting of approximately $63.0 million in cash and
approximately $2.0 million in notes. Substantially all of the cash proceeds
were used to reduce the Company's outstanding indebtedness. Falcon is a
domestic manufacturer and distributor of products for the residential and
commercial construction and home improvement markets and is comprised of the
businesses in the Company's Building Products Group.
In connection with the Falcon IPO, the Credit Facility was bifurcated into two
separate bank credit facilities, including a $165.0 million facility for Falcon
(the "Falcon Credit Facility") and an amended and restated facility for Eagle
Industrial (the "Eagle Industrial Credit Facility"). The Falcon Credit
Facility consists of a $115.0 million term loan due in quarterly installments
increasing from $2.5 million per quarter beginning December 31, 1994 to $6.3
million per quarter beginning in December 1998 and a $50.0 million revolving
credit facility. The Falcon Credit Facility contains a $25.0 million letter of
credit facility.
The Eagle Industrial Credit Facility consists of a $92.0 million term loan due
in quarterly installments increasing from $2.5 million per quarter beginning
December 31, 1994 to $5.5 million per quarter beginning in December 1999 and an
$85.0 million revolving credit facility. The Eagle Industrial Credit Facility
contains a $50.0 million letter of credit facility.
Each of the credit facilities will terminate in 2000, unless extended for an
additional year. The covenants contained in each of these credit facilities
are consistent with those contained in the Credit Facility described in Note 4
to the Condensed Consolidated Financial Statements.
Management believes that its current cash balance, cash flow from continuing
operations and availability under its credit facilities will be sufficient to
pay interest on outstanding debt, meet current debt maturities, pay income
taxes, fund capital expenditures and meet other operating needs.
18
<PAGE> 19
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
10.0 Credit Agreement for $25,000,000 dated as of
October 13, 1994 between Great American Management
and Investment, Inc. and Bank of America Illinois
b. Reports on Form 8-K:
Current Report on Form 8-K dated September 2, 1994 regarding
the sale of Caron International, Inc. to a subsidiary of
National Spinning Co..
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By: _______________________________
Arthur A. Greenberg
Executive Vice President and Chief
Financial Officer (Principal
Financial Officer)
By: _______________________________
Norman M. Field
Vice President and Treasurer
(Principal Accounting Officer)
Dated: November 14, 1994
20
<PAGE> 1
EXHIBIT 10
U.S. $25,000,000
CREDIT AGREEMENT,
dated as of October 13, 1994,
between
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.,
as the Borrower,
and
BANK OF AMERICA ILLINOIS,
as the Lender.
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ARTICLE I ----
DEFINITIONS AND ACCOUNTING TERMS
<S> <C> <C>
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.3 Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.4 Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
COMMITMENT, BORROWING PROCEDURES AND NOTE
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.1 Commitment To Make Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.2 Lender Not Permitted or Required To Make
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Reduction of Commitment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2.1 Optional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2.2 Mandatory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2.3 Other Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Continuation and Conversion Elections . . . . . . . . . . . . . . . . . . . . . . . 15
2.5 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1 Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Interest Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2.1 Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2.2 Post-Maturity Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2.3 Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3.1 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3.2 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
CERTAIN INTERBANK RATE AND OTHER PROVISIONS
4.1 Interbank Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Increased Interbank Rate Loan Costs, etc . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 Payments, Computations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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4.8 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
CONDITIONS TO BORROWING
5.1 Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1.1 Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1.2 Delivery of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1.3 Payment of Outstanding Indebtedness, etc. . . . . . . . . . . . . . . . . . . 24
5.1.4 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.6 Closing Fees, Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2.1 Compliance with Warranties, No Default,
etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2.2 Borrowing Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2.3 Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Organization, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2 Due Authorization, Non-Contravention, etc. . . . . . . . . . . . . . . . . . . . . . 27
6.3 Government Approval, Regulation, etc. . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Validity, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Litigation, Labor Controversies, etc. . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.10 Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.11 Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.12 Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.13 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VII
COVENANTS
7.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1.1 Financial Information, Reports, Notices,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1.2 Compliance with Laws, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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7.1.6 Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2.4 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2.5 Take or Pay Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2.6 Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2.7 Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2.9 Negative Pledges, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1.1 Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1.2 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1.3 Non-Performance of Certain Covenants and
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1.4 Non-Performance of Other Covenants and
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1.5 Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1.6 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1.7 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1.8 Control of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1.9 Bankruptcy, Insolvency, etc . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1.10 Impairment of Security, etc . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.2 Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.8 Execution in Counterparts, Effectiveness, etc . . . . . . . . . . . . . . . . . . . 43
9.9 Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.11 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.12 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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9.13 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.14 Forum Selection and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . 46
9.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
SCHEDULE I - Disclosure Schedule
EXHIBIT A - Form of Note
EXHIBIT B - Form of Borrowing Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Opinion of Counsel to the Borrower
[EXHIBIT E - Form of Certificate of __________________]
EXHIBIT F - Form of Pledge Agreement
EXHIBIT I - Form of Copy of the by-laws of ____________________
EXHIBIT II - Form of Resolutions of the Board of Directors of
__________________________
EXHIBIT III -
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 13, 1994, between GREAT
AMERICAN MANAGEMENT AND INVESTMENT, INC., a Delaware corporation (the
"Borrower"), and BANK OF AMERICA ILLINOIS (the "Lender"),
W I T N E S S E T H:
WHEREAS, the Borrower desires to obtain a Commitment from the Lender
pursuant to which Loans, in a maximum aggregate principal amount not to exceed
$25,000,000 may be made to the Borrower prior to the Commitment Termination
Date; and
WHEREAS, the Lender is willing, on the terms and subject to the
conditions hereinafter set forth (including, without limitations, Article V),
to extend the Commitment and make Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used for general corporate
purposes and working capital purposes of the Borrower and its Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of
directors or managing general partners; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
<PAGE> 7
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently established by the
Lender at its Domestic Office as its base rate; and
(b) the Federal Funds Rate most recently determined by
the Lender plus .5%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Lender in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Lender will give notice promptly to the Borrower of changes in
the Alternate Base Rate.
"Assessment Rate" is defined in Section 3.2.1.
"Assignment Agreement" is defined in Section 9.12.
"Assignee Lender" is defined in Section 9.12.
"Authorized Officer" means, relative to the Borrower, those of its
officers whose signatures and incumbency shall have been certified to the
Lender pursuant to Section 5.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrowing" means the Loans of the same type and, in the case of
Interbank Rate Loans, having the same Interest Period made by the Lender on the
same Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B hereto.
"Business Day" means
2
<PAGE> 8
(a) any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed
in Chicago; and
(b) relative to the making, continuing, prepaying or
repaying of any Interbank Rate Loans, any day on which dealings in
Dollars are carried on in the interbank eurodollar market.
"Capital Expenditures" means, for any period, the sum of
(a) the aggregate amount of all expenditures of the
Borrower and its Subsidiaries for fixed or capital assets made during
such period which, in accordance with GAAP, would be classified as
capital expenditures; and
(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than
one year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than nine months
from the date of issue, which is issued by
(i) a corporation (other than an Affiliate of the
Borrower) organized under the laws of any state of the United
States or of the District of Columbia and rated A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors
Service, Inc., or
(ii) the Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance,
maturing not more than one year after such time, which is issued by
either
3
<PAGE> 9
(i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$500,000,000, or
(ii) the Lender; or
(d) any repurchase agreement entered into with the Lender
(or other commercial banking institution of the stature referred to
in clause (c)(i)) which
(i) is secured by a fully perfected security
interest in any obligation of the type described in any of
clauses (a) through (c); and
(ii) has a market value at the time such
repurchase agreement is entered into of not less than 100% of
the repurchase obligation of the Lender (or other commercial
banking institution) thereunder.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means the failure of EHL and its Affiliates to own
at least 30% of the outstanding shares of voting stock of the Borrower on a
fully diluted basis provided, however, that no other shareholder and its
Affiliates shall own an aggregate of 50% or more of the voting stock of the
Borrower on a fully diluted basis.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Collateral" means the collateral defined in and pledged to Lender
pursuant to Section 2 of the Pledge Agreement.
"Commitment" means the Lender's obligation to make Loans pursuant to
Section 2.1.1.
"Commitment Amount" means, on any date, $25,000,000, as such amount
may be reduced from time to time pursuant to Section 2.2.
"Commitment Termination Date" means the earliest of
(a) September 30, 1996
4
<PAGE> 10
(b) the date on which the Commitment Amount is terminated
in full or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (b) or (c), the Commitment
shall terminate automatically and without any further action.
"Commitment Termination Event" means
(a) the occurrence of any Default described in clauses
(a) through (d) of Section 8.1.9 with respect to the Borrower or any
Subsidiary; or
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
(ii) in the absence of such declaration, the
giving of notice by the Lender to the Borrower that the
Commitment has been terminated.
"Commodore" means The Commodore Corporation, a Delaware corporation.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
5
<PAGE> 11
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA.
"Debt" means the consolidated Indebtedness of the Borrower and its
Subsidiaries.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Lender.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means the office of the Lender designated as such
below its signature hereto or such other office of the Lender within the United
States as may be designated from time to time by notice from the Lender to the
Borrower. The Lender may have separate Domestic Offices for purposes of
making, maintaining or continuing Base Rate Loans.
"Eagle" means Eagle Industries, Inc., a Delaware corporation.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 9.8.
"EHL" means Equity Holdings Limited, a Delaware corporation.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Eurodollar Office" means the office of the Lender designated as such
below its signature hereto or such other office of the Lender as designated
from time to time by notice from the Lender to
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the Borrower, whether or not outside the United States, which shall be making
or maintaining Interbank Rate Loans of the Lender hereunder.
"Eurocurrency Reserve Percentage" is defined in Section 3.2.1.
"Event of Default" is defined in Section 8.1.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Lender from three federal funds brokers
of recognized standing selected by it.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31st; references to a Fiscal Year with a number
corresponding to any calendar year (e.g. the "1988 Fiscal Year") refer to the
Fiscal Year ending on the December 31st occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within the meaning of any
other applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or
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dangerous waste, substance or material, all as amended or hereafter
amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement not in conformity with
the AICPA policy on unqualified opinions; or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Borrower to be in default of any of its
obligations under Section 7.2.3.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and
all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
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(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP, would
be included as liabilities on the liability side of the balance sheet
of such Person as of the date at which Indebtedness is to be
determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and indebtedness
(excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in respect
of any of the foregoing.
"Indemnified Liabilities" is defined in Section 9.4.
"Indemnified Parties" is defined in Section 9.4.
"Interbank Rate" is defined in Section 3.2.1.
"Interbank Rate Loan" means a Loan bearing interest, at all times
during an Interest Period applicable to such Loan, at a fixed rate of interest
determined by reference to the Interbank Rate (Reserve Adjusted).
"Interbank Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"Interest Period" means, relative to any Interbank Rate Loans, the
period beginning on (and including) the date on which such Interbank Rate Loan
is made or continued as, or converted into, a Interbank Rate Loan pursuant to
Section 2.3 or 2.4 and shall end on (but exclude) the day which numerically
corresponds to such date one, two or three months thereafter (or, if such month
has no numerically corresponding day, on the last Business Day of such month),
in either case as the Borrower may select in its relevant notice pursuant to
Section 2.3 or 2.4; provided, however, that
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(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have expiration
dates occurring on more than five different dates;
(b) Interest Periods commencing on the same date for
Loans comprising part of the same Borrowing shall be of the same
duration;
(c) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless, if such Interest Period applies
to Interbank Rate Loans, such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period
shall end on the Business Day next preceding such numerically
corresponding day); and
(d) no Interest Period may end later than the date set
forth in clause (a) of the definition of "Commitment Termination Date".
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person
in any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made
by the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"Lender" is defined in the preamble.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan" is defined in Section 2.1.1.
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"Loan Document" means this Agreement, the Note, the Pledge Agreement
and any other agreement, document or instrument delivered in connection with
this Agreement and the Note.
"Madison Management Litigation" means the litigation set forth in
paragraph 1 of Item 6.7 of the Disclosure Schedule.
"Materially Adverse Effect" means, relative to any occurrence of
whatever nature, a materially adverse effect on the ability of the Borrower to
perform any of its payment or other material obligations under this Agreement,
the Notes or any Loan Document.
"Minimum Liquidity" means the sum of any cash balances in any
unencumbered depository accounts plus the Commitment less any Loans
outstanding.
"Net Worth" means the consolidated net worth of the Borrower and its
Subsidiaries.
"Note" means a promissory note of the Borrower payable to the Lender,
in the form of Exhibit A hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to the Lender resulting from outstanding Loans,
and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement, the Note and each
other Loan Document.
"Organic Document" means, relative to the Borrower, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Participant" is defined in Section 9.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
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"Person" means any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means the Pledge Agreement executed and delivered
pursuant to Section 5.1.3, substantially in the form of Exhibit F hereto, as
amended, supplemented, restated or otherwise modified from time to time.
"Quarterly Payment Date" means the last day of each March, June,
September, and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"Release" means a "release", as such term is defined in CERCLA.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect
from time to time.
"Stated Maturity Date" means September 30, 1996.
"Subordinated Debt" means all unsecured Indebtedness of the Borrower
for money borrowed which is subordinated, upon terms satisfactory to the
Lender, in right of payment to the payment in full in cash of all Obligations.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person.
"Taxes" is defined in Section 4.6.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or an Interbank Rate Loan.
"United States" or "U.S." means the United States of America, its
fifty States and the District of Columbia.
"Vigoro" means The Vigoro Corporation, a Delaware corporation.
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"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
SECTION 1.2 Use of Defined Terms. Unless otherwise defined or
the context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and the
Note and in each Borrowing Request, Continuation/Conversion Notice, Loan
Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3 Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4 Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.3) shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared in accordance with, those generally accepted accounting principles
("GAAP") applied in the preparation of the financial statements referred to in
Section 6.5.
ARTICLE II
COMMITMENT, BORROWING PROCEDURES AND NOTE
SECTION 2.1 Commitment. On the terms and subject to the
conditions of this Agreement (including Article V), the Lender agrees to make
Loans pursuant to the Commitment described in this Section 2.1.
SECTION 2.1.1 Commitment To Make Loans. From time to time on any
Business Day occurring prior to the Commitment Termination Date, the Lender
will make loans of any type (its "Loans") to the Borrower equal to the
aggregate amount of the Borrowing requested by the Borrower to be made on such
day. The commitment of the Lender described in this Section 2.1.1 is herein
referred to as its "Commitment". On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow, prepay and reborrow Loans.
SECTION 2.1.2 Lender Not Permitted or Required To Make Loans. The
Lender shall not be permitted or required to make any
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Loan if, after giving effect thereto, the aggregate outstanding principal
amount of all Loans would exceed the Commitment Amount.
SECTION 2.2 Reduction of Commitment Amount. The Commitment
Amount is subject to reduction from time to time pursuant to this Section 2.2.
SECTION 2.2.1 Optional. The Borrower may, from time to time
on any Business Day occurring after the time of the initial Borrowing
hereunder, voluntarily reduce the Commitment Amount; provided, however, that
all such reductions shall require at least three Business Days' prior notice to
the Lender and be permanent, and any partial reduction of the Commitment Amount
shall be in a minimum amount of $500,000 and in an integral multiple of
$100,000.
SECTION 2.2.2 Mandatory. On each date set forth below, the
Commitment Amount shall, without any further action, automatically and
permanently be reduced by the amount set forth opposite such date:
Date Amount
---- ------
August 15, 1995 $2,500,000
February 15 ,1996 $2,500,000
May 15, 1996 $2,500,000
August 15, 1996 $2,500,000
provided, however, that on the Commitment Termination Date, the Commitment
Amount shall be zero. Voluntary reductions of the Commitment Amount made
pursuant to Section 2.2.1 shall be applied to diminish the amount of scheduled
reductions to the Commitment Amount thereafter becoming effective pursuant to
this Section, in the order of scheduled occurrence.
SECTION 2.2.3 Other Reductions. The Commitment Amount shall,
without any further action, automatically and permanently be concurrently
reduced by an amount equal to ten percent (10%) of any amounts distributed,
lent, advanced, transferred, or paid to any shareholder of the Borrower other
than the Equity Pool Distribution (as hereinafter defined) and reasonable
director and professional fees. The term "Equity Pool Distribution" shall mean
the pro rata distribution, transfer or payment (by dividend or otherwise) to
the shareholders of Borrower of cash in an amount not to exceed three million
dollars and that certain note made by Borrower to Equity Pool No. 1, a Georgia
limited partnership, which note is currently held by GAFGI Holding Company, a
Subsidiary of Borrower (the "Equity Pool Note") with the result that,
immediately after such distribution, transfer or payment, EHL and its
Affiliates which are shareholders of Borrower are the holders of the Equity
Pool Note, and the remaining shareholders of Borrower have received the cash
portion of such distribution, transfer or payment. Reductions of
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the Commitment Amount made pursuant to this Section shall be applied to
diminish the amount of scheduled reductions to the Commitment Amount thereafter
becoming effective pursuant to Section 2.2.2, in the order of scheduled
occurrence.
SECTION 2.3 Borrowing Procedure. By delivering a Borrowing
Request to the Lender at least one Business Day before the requested date of
the making of a Base Rate Loan (provided that the Lender will use its best
efforts to fund Base Rate Loans by 2:00 p.m., Chicago time, on the date of
receipt of such Borrowing Request if such Borrowing Request is received by the
Lender prior to 10:00 a.m. on such date) and on not less than three Business
Day's before the requested date of the making of an Interbank Rate Loan, the
Borrower may from time to time irrevocably request that a Borrowing be made in
a minimum amount of $500,000 and an integral multiple of $100,000, or in the
unused amount of the Commitment. On the terms and subject to the conditions of
this Agreement, each Borrowing shall be comprised of the type of Loans, and
shall be made on the Business Day, specified in such Borrowing Request. On or
before 11:00 a.m. (Chicago time) on such Business Day, the Lender shall make
funds in an amount equal to the requested Borrowing available to the Borrower
by deposit or wire transfer, as applicable, to the accounts the Borrower shall
have specified in its Borrowing Request.
SECTION 2.4 Continuation and Conversion Elections. By delivering
a Continuation/Conversion Notice to the Lender on or before 10:00 a.m., Chicago
time, on a Business Day, the Borrower may from time to time irrevocably elect,
on not less than three nor more than five Business Days' notice that all, or
any portion in an aggregate minimum amount of $500,000 and an integral multiple
of $100,000, of any Loans be, in the case of Base Rate Loans, converted into
Interbank Rate Loans or, in the case of Interbank Rate Loans, be converted into
a Base Rate Loan or continued as a Interbank Rate Loan (in the absence of
delivery of a Continuation/ Conversion Notice with respect to any Interbank
Rate Loan at least three Business Days before the last day of the then current
Interest Period with respect thereto, such Interbank Rate Loan shall, on such
last day, automatically convert to a Base Rate Loan); provided, however, that
no portion of the outstanding principal amount of any Loans may be continued
as, or be converted into, Interbank Rate Loans when any Default has occurred
and is continuing.
SECTION 2.5 Funding. The Lender may, if it so elects, fulfill
its obligation to make, continue or convert Interbank Rate Loans hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by the Lender) to make or maintain such Interbank Rate Loan;
provided, however, that such Interbank Rate Loan shall nonetheless be deemed to
have been made and to be held by the Lender, and the obligation
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of the Borrower to repay such Interbank Rate Loan shall nevertheless be to the
Lender for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Borrower hereby consents and agrees that,
for purposes of any determination to be made for purposes of Sections 4.1, 4.2,
4.3 or 4.4, it shall be conclusively assumed that the Lender elected to fund
all Interbank Rate Loans by purchasing, as the case may be, Dollar certificates
of deposit in the U.S. or Dollar deposits in its Eurodollar Office's interbank
eurodollar market.
SECTION 2.6 Note. The Lender's Loans under its Commitment shall
be evidenced by the Note payable to the order of the Lender in a maximum
principal amount equal to the original Commitment Amount. The Borrower hereby
irrevocably authorizes the Lender to make (or cause to be made) appropriate
notations on the grid attached to the Lender's Note (or on any continuation of
such grid), which notations, if made, shall evidence, inter alia, the date of,
the outstanding principal of, and the interest rate and Interest Period
applicable to the Loans evidenced thereby. Such notations shall be conclusive
and binding on the Borrower absent manifest error; provided, however, that the
failure of the Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 Repayments and Prepayments. The Borrower shall repay
in full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Loans; provided, however, that
(i) no such prepayment of any Interbank Rate Loan
may be made on any day other than the last day of the Interest
Period for such Loan;
(ii) all such voluntary prepayments shall require
at least one Business Day's prior written notice (or three
Business Days' prior written notice with respect to any
Interbank Rate Loan (or portion thereof) being prepaid) to the
Lender; and
(iii) all such voluntary partial prepayments shall
be in an aggregate minimum amount of $500,000 and an integral
multiple of $100,000;
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(b) shall, on each date when any reduction in the
Commitment Amount shall become effective, including pursuant to
Sections 2.2.2 and 2.2.3, make a mandatory prepayment of all Loans
equal to the excess, if any, of the aggregate, outstanding principal
amount of all Loans over the Commitment Amount as so reduced; and
(c) shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans pursuant to Section 8.2 or Section
8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion
of all Loans is so accelerated.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4. No voluntary
prepayment of principal of any Loans shall cause a reduction in the Commitment
Amount.
SECTION 3.2 Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
SECTION 3.2.1 Rates. Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may elect
that Loans comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a
Base Rate Loan, equal to the Alternate Base Rate from time to time in
effect; and
(b) on that portion maintained as an Interbank Rate Loan,
during each Interest Period applicable thereto, equal to the sum of
the Interbank Rate (Reserve Adjusted) for such Interest Period plus a
margin of 2%.
The "Interbank Rate (Reserve Adjusted)" means, relative to any Loan to
be made, continued or maintained as, or converted into, an Interbank Rate Loan
for any Interest Period, a rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) determined pursuant to the following formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) -----------------------------------
1.00 - Eurocurrency Reserve Percentage
The Interbank Rate (Reserve Adjusted) for any Interest Period for
Interbank Rate Loans will be determined by the Lender on the basis of the
Eurocurrency Reserve Percentage in effect two Business Days before the first
day of such Interest Period.
"Interbank Rate" means, relative to any Interest Period for Interbank
Rate Loans, the rate of interest equal to the average
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(rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per
annum at which Dollar deposits in immediately available funds are offered to
the Lender's Eurodollar Office in the interbank eurodollar market as at or
about 10:00 a.m. Chicago time two Business Days prior to the beginning of such
Interest Period by major banks in the interbank eurodollar market for delivery
on the first day of such Interest Period, and in an amount approximately equal
to the amount of the Lender's Interbank Rate Loan and for a period
approximately equal to such Interest Period.
"Eurocurrency Reserve Percentage" means, relative to any Interest
Period for Interbank Rate Loans, the reserve percentage (expressed as a
decimal) equal to the maximum aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
F.R.S. Board and then applicable to assets or liabilities consisting of and
including "Eurocurrency Liabilities", as currently defined in Regulation D of
the F.R.S. Board, having a term approximately equal or comparable to such
Interest Period and actually incurred by Lender.
All Interbank Rate Loans shall bear interest from and including the
first day of the applicable Interest Period to (but not including) the last day
of such Interest Period at the interest rate determined as applicable to such
Interbank Rate Loan.
SECTION 3.2.2 Post-Maturity Rates. After the date any principal
amount of any Loan is due and payable (whether on the Stated Maturity Date,
upon acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the Alternate Base Rate plus a margin
of 2%.
SECTION 3.2.3 Payment Dates. Interest accrued on each Loan shall
be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) with respect to Base Rate Loans, on each Quarterly
Payment Date occurring after the Effective Date;
(c) with respect to Interbank Rate Loans, the last day of
each applicable Interest Period;
(d) with respect to any Base Rate Loans converted into
Interbank Rate Loans on a day when interest would not
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otherwise have been payable pursuant to clause (b), on the next
Quarterly Payment Date; and
(e) on that portion of any Loans the Stated Maturity Date
of which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.3 Fees. The Borrower agrees to pay the fees set forth
in this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1 Commitment Fee. The Borrower agrees to pay to the
Lender, for the period (including any portion thereof when its Commitment is
suspended by reason of the Borrower's inability to satisfy any condition of
Article V) commencing on the Effective Date and continuing through the final
Commitment Termination Date, a commitment fee at the rate of .375% per annum on
the sum of the average daily unused portion of the Commitment Amount. Such
commitment fees shall be payable by the Borrower in arrears on each Quarterly
Payment Date, commencing with the first such day following the Effective Date,
and on the Commitment Termination Date.
SECTION 3.3.2 Facility Fee. The Borrower agrees to pay to the
Lender a facility fee in an amount equal to $150,000.
ARTICLE IV
CERTAIN INTERBANK RATE AND OTHER PROVISIONS
SECTION 4.1 Interbank Rate Lending Unlawful. If the Lender shall
determine (which determination shall, upon notice thereof to the Borrower, be
conclusive and binding on the Borrower) that the introduction of or any change
in or in the interpretation of any law makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful, for the Lender to
make, continue or maintain any Loan as, or to convert any Loan into, a
Interbank Rate Loan of a certain type, the obligations of the Lender to make,
continue, maintain or convert any such Loans shall, upon such determination,
forthwith be suspended until the Lender shall notify the Borrower that the
circumstances causing such suspension no longer exist, and all Interbank Rate
Loans of such type shall automatically convert into Base Rate Loans at the end
of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
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SECTION 4.2 Deposits Unavailable. If the Lender shall have
determined that
(a) Dollar certificates of deposit or Dollar deposits, as
the case may be, in the relevant amount and for the relevant Interest
Period are not available to the Lender in its relevant market; or
(b) by reason of circumstances affecting the Lender's
relevant market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to Interbank Rate Loans,
then, upon notice from the Lender to the Borrower, the obligations of the
Lender under Section 2.3 and Section 2.4 to make or continue any Loans as, or
to convert any Loans into, Interbank Rate Loans shall forthwith be suspended
until the Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist.
SECTION 4.3 Increased Interbank Rate Loan Costs, etc. If, as a
result of the application or adoption of any law, rule, regulation, directive,
interpretation, treaty or guideline, or any change therein or in the
interpretation or administration thereof, occurring during the previous six (6)
month period, whether or not having the force of law, or compliance by Lender
with any request or directive, whether or not having the force of law, issued
during the previous six (6) month period by any court, central bank,
governmental authority, agency or instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to any
Interbank Rate Loan, this Agreement or Lender's obligation to make
Interbank Rate Loans (or any part thereof) is imposed, modified or
deemed applicable, or the basis of taxation of payments to Lender of
the principal of, or interest on, any Interbank Rate Loan (other than
taxes imposed on the overall net income of Lender by the jurisdiction
in which Lender has its principal office) is changed; or
(b) any reserve, special deposit, special assessment or
similar requirement against assets of, deposits with or for the
account of, or credit extended directly or indirectly by, Lender is
imposed, modified or deemed applicable; or
(c) any other condition affecting this Agreement or any
Interbank Rate Loan is imposed on Lender or the interbank eurodollar
market;
and Lender determines that, by reason thereof, the cost to Lender of making,
funding or maintaining a balance hereunder based on an
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Interbank Rate is increased, or the amount of any such receivable by Lender
hereunder in respect of any Interbank Rate Loan is reduced or requires Lender
to make any payment calculated by reference to the amount of interest received
by Lender; then, within ten (10) days after demand by Lender, Borrower shall
pay to Lender upon demand such additional amount or amounts as will compensate
Lender for such additional cost or reduction (provided that Lender has not been
compensated for such additional cost or reduction in the calculation of the
Interbank Rate (Reserve Adjusted)). The determination of any amount to be paid
by Borrower under this Section 4.3 shall take into consideration the policies
of Lender or any person or entity controlling Lender and shall be based upon
any reasonable averaging, attribution and allocation methods.
SECTION 4.4 Funding Losses. In the event the Lender shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, an
Interbank Rate Loan) (except for any lost profits Lender may incur due to
Lender's inability to make a loan to any third party as a result of Lender not
being repaid by Borrower hereunder) as a result of
(a) any conversion or repayment or prepayment of the
principal amount of any Interbank Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 3.1 or otherwise;
(b) any Loans not being made as Interbank Rate Loans in
accordance with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into,
Interbank Rate Loans in accordance with the Continuation/Conversion
Notice therefor,
then, upon the written notice of the Lender to the Borrower, the Borrower
shall, within five days of its receipt thereof, pay to the Lender such amount
as will (in the reasonable determination of the Lender) reimburse the Lender
for such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.5 Increased Capital Costs. If Lender reasonably
determines that any change in, or the introduction, adoption, effectiveness,
interpretation, reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of
law) of any court, central bank, regulator or other governmental authority
during the
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previous 6 months increases the amount of capital required or expected to be
maintained by the Lender or any Person controlling the Lender, and such
increase is based upon the existence of the Lender's obligations hereunder that
the rate of return on its or such controlling Person's capital as a consequence
of its Commitment or the Loans made by the Lender is reduced to a level below
that which such Lender or such controlling Person could have achieved but for
the occurrence of any such circumstance, then, in any such case upon notice
from time to time by the Lender to the Borrower, the Borrower shall pay
directly to the Lender additional amounts sufficient to compensate the Lender
or such controlling Person for such reduction in rate of return within 10 days
after demand by Lender. A statement of the Lender as to any such additional
amount or amounts (including calculations thereof in reasonable detail) shall,
in the absence of manifest error or mathematical error, be conclusive and
binding on the Borrower. In determining such amount, the Lender shall take
into consideration the policies of the Lender or any person controlling Lender
with respect to capital adequacy and shall use any reasonable method of
averaging, attribution or allocation.
SECTION 4.6 Taxes. All payments by the Borrower of principal of,
and interest on, the Loans and all other amounts payable hereunder shall be
made free and clear of and without deduction for any present or future income,
excise, stamp or other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, other than franchise
taxes and taxes imposed on or measured by the net income or receipts of Lender
or its corporate parent (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Lender an official receipt or
other documentation satisfactory to the Lender evidencing such payment
to such authority; and
(c) pay to the Lender such additional amount or amounts
as is necessary to ensure that the net amount actually received by the
Lender will equal the full amount the Lender would have received had
no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses)
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as is necessary in order that the net amount received by such person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such person would have received had not such Taxes been
asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes, interest or penalties that may become payable by the Lender
as a result of any such failure.
SECTION 4.7 Payments, Computations, etc. All payments by the
Borrower pursuant to this Agreement, the Note or any other Loan Document shall
be made by the Borrower to the Lender, without setoff, deduction or
counterclaim, not later than 11:00 a.m., Chicago time, on the date due, in same
day or immediately available funds, to such account as the Lender shall specify
from time to time by notice to the Borrower. Funds received after that time
shall be deemed to have been received by the Lender on the next succeeding
Business Day. All interest and fees shall be computed on the basis of the
actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over a
year comprised of 360 days (or, in the case of interest on a Base Rate Loan,
365 days or, if appropriate, 366 days). Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (c) of the definition of the term
"Interest Period" with respect to Interbank Rate Loans) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 4.8 Setoff. The Lender shall, upon the occurrence of any
Default described in clauses (a) through (d) of Section 8.1.9 with respect to
the Borrower or upon the occurrence of any other Event of Default, have the
right to appropriate and apply to the payment of the Obligations owing to it
(whether or not then due), and (as security for such Obligations) the Borrower
hereby grants to the Lender a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with the Lender provided, however, Lender waives such
rights to setoff and application with respect to that certain short term asset
management account (No. 01-40-403-400-1269) and that certain certificate of
deposit (No. 86099207), and any future renewal of such certificate of deposit,
maintained by Borrower with Lender. The Lender agrees promptly to notify the
Borrower after any such setoff and application made by the Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff and application. The
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rights of the Lender under this Section are in addition to other rights and
remedies (including other rights of setoff under applicable law or otherwise)
which the Lender may have.
SECTION 4.9 Use of Proceeds. The Borrower shall apply the
proceeds of each Borrowing in accordance with the third recital; without
limiting the foregoing, no proceeds of any Loan will be used to acquire any
equity security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or any "margin stock", as defined in F.R.S.
Board Regulation U, except for shares of the Borrower as permitted under
applicable law.
ARTICLE V
CONDITIONS TO BORROWING
SECTION 5.1 Initial Borrowing. The obligation of the Lender to
fund the initial Borrowing shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in this Section 5.1.
SECTION 5.1.1 Resolutions, etc. The Lender shall have received
from the Borrower a certificate, dated the date of the initial Borrowing, of
its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and performance
of this Agreement, the Note and each other Loan Document to be
executed by it; and
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement, the Note
and each other Loan Document executed by it,
upon which certificate the Lender may conclusively rely until it shall have
received a further certificate of the Secretary of the Borrower canceling or
amending such prior certificate.
SECTION 5.1.2 Delivery of Note. The Lender shall have received its
Note duly executed and delivered by the Borrower.
SECTION 5.1.3 Payment of Outstanding Indebtedness, etc. All
Indebtedness identified in Item 7.2.1(b) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been paid in
full (including, to the extent necessary, from proceeds of the initial
Borrowing); and all Liens securing payment of any such Indebtedness have been
released and the Lender shall have received all Uniform Commercial Code Form
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UCC-3 termination statements or other instruments as may be suitable or
appropriate in connection therewith.
SECTION 5.1.4 Pledge Agreement. The Lender shall have received
executed counterparts of the Pledge Agreement, dated as of the date hereof,
duly executed by the Borrower, together with the certificates, evidencing all
of the issued and outstanding shares of capital stock pledged pursuant to the
Pledge Agreement, which certificates shall in each case be accompanied by
undated stock powers duly executed in blank, or, if any securities pledged
pursuant to the Pledge Agreement are uncertificated securities, confirmation
and evidence satisfactory to the Lender that the security interest in such
uncertificated securities has been transferred to and perfected by the Lender
in accordance with Section 8-313 and Section 8-321 of the Uniform Commercial
Code, as in effect in the State of Illinois.
SECTION 5.1.5 Opinion of Counsel. The Lender shall have received
an opinion, dated the date of the initial Borrowing and addressed to the
Lender, from Rosenberg & Liebentritt, P.C., counsel to the Borrower,
substantially in the form of Exhibit D hereto.
SECTION 5.1.6 Closing Fees, Expenses, etc. The Lender shall have
received all fees, costs and expenses due and payable pursuant to Sections 3.3
and 9.3, if then invoiced.
SECTION 5.2 All Borrowings. The obligation of the Lender to fund
any Loan on the occasion of any Borrowing (including the initial Borrowing)
shall be subject to the satisfaction of each of the conditions precedent set
forth in this Section 5.2.
SECTION 5.2.1 Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Borrowing (but, if any Default of the
nature referred to in Section 8.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds thereof) the following statements shall be true and
correct
(a) the representations and warranties set forth in
Article VI (excluding, however, those contained in Section 6.7) shall
be true and correct with the same effect as if then made (unless
stated to relate solely to an early date, in which case such
representations and warranties shall be true and correct as of such
earlier date);
(b) except as disclosed by the Borrower to the Lender
pursuant to Section 6.7
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be
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pending or, to the knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries which might
have a Materially Adverse Effect on the Borrower or which
purports to affect the legality, validity or enforceability
of this Agreement, the Note or any other Loan Document; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which might have a Materially Adverse Effect on the Borrower;
and
(c) no Default shall have then occurred and be
continuing, and the Borrower nor any of its Subsidiaries are in
material violation of any law or governmental regulation or court
order or decree.
SECTION 5.2.2 Borrowing Request. The Lender shall have received a
Borrowing Request for such Borrowing. Each of the delivery of a Borrowing
Request and the acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Borrowing (both immediately before and after giving effect to such
Borrowing and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct.
SECTION 5.2.3 Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries shall be satisfactory in form and substance to the Lender and its
counsel; the Lender and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Lender or its counsel may
reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
make Loans hereunder, the Borrower represents and warrants unto the Lender as
set forth in this Article VI.
SECTION 6.1 Organization, etc. The Borrower and each of its
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the State of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification, and
has full power and authority and holds all requisite governmental licenses,
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permits and other approvals to enter into and perform its Obligations under
this Agreement, the Note and each other Loan Document to which it is a party,
and to own and hold under lease its property and to conduct its business
substantially as currently conducted by it (the absence or failure of which,
singly or in the aggregate, would not have or may reasonably be expected not to
have, a Materially Adverse Effect on the Borrower).
SECTION 6.2 Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this Agreement, the Note
and each other Loan Document executed or to be executed by it, are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not
(a) contravene the Borrower's Organic Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower; or
(c) result in, or require the creation or imposition of,
any Lien on any of the Borrower's properties.
SECTION 6.3 Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by the Borrower of this Agreement,
the Note or any other Loan Document (the absence of which, singly or in the
aggregate, would not have or may reasonably be expected not to have, a
Materially Adverse Effect on the Borrower). Neither the Borrower nor any of
its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or 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.
SECTION 6.4 Validity, etc. This Agreement constitutes, and the
Note and each other Loan Document executed by the Borrower will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, subject only to bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and the application of equitable
principles.
SECTION 6.5 Financial Information. The consolidated balance
sheets of the Borrower, including its consolidated Subsidiaries as at June 30,
1994, and the related statements of earnings and cash flow of the Borrower and
each of its consolidated
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Subsidiaries, copies of which have been furnished to the Lender, have been
prepared in accordance with GAAP consistently applied, and present fairly the
consolidated financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods then ended.
SECTION 6.6 No Material Adverse Change. Since the date of the
financial statements described in Section 6.5, there has been no material
adverse change in the financial condition, operations, assets, business,
properties or prospects of the Borrower.
SECTION 6.7 Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of the Borrower, threatened litigation, action,
proceeding or labor controversy affecting the Borrower or any of its
Subsidiaries, or any of their respective properties, assets or revenues, which
may have a Materially Adverse Effect on the Borrower or which purports to
affect the legality, validity or enforceability of this Agreement, the Note or
any other Loan Document, except as disclosed in Item 6.7 ("Litigation") of the
Disclosure Schedule.
SECTION 6.8 Ownership of Properties. The Borrower and each of
its Subsidiaries owns good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and copyrights),
free and clear of all Liens, charges or claims (including infringement claims
with respect to patents, trademarks, copyrights and the like) except as
permitted pursuant to Section 7.2.2 and except where the failure to do so would
not have or may reasonably be expected not to have, a Materially Adverse Effect
on the Borrower.
SECTION 6.9 Taxes. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books and except where the failure to do so
would not have or may reasonably be expected not to have, a Materially Adverse
Effect on the Borrower.
SECTION 6.10 Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Borrowing hereunder, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the
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incurrence by the Borrower or any member of the Controlled Group of any
material liability, fine or penalty. Except as disclosed in the financial
statements described in Section 6.5, neither the Borrower nor any member of the
Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.11 Environmental Warranties. Except in each case where
the failure of any of the following representations to be true and correct
would have, or would reasonably be expected to have, a Materially Adverse
Effect on the Borrower:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased by the
Borrower and its Subsidiaries in material compliance with all
Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries;
(d) the Borrower and its Subsidiaries have been issued
and are in material compliance with all permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters and necessary or desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing
(with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any
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property now or previously owned or leased by the Borrower or any of
its Subsidiaries;
(g) neither Borrower nor any Subsidiary of the Borrower
has directly transported or directly arranged for the transportation
of any Hazardous Material to any location which is listed or proposed
for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural resources
or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower or any Subsidiary; and
(i) no conditions exist at, on or under any property now
or previously owned or leased by the Borrower which, with the passage
of time, or the giving of notice or both, would give rise to liability
under any Environmental Law.
SECTION 6.12 Regulations G, U and X. The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Loans will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 6.13 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Lender for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all other such factual information
hereafter furnished by or on behalf of the Borrower to the Lender will be, true
and accurate in every material respect on the date as of which such information
is dated or certified and as of the date of execution and delivery of this
Agreement by the Lender, and such information is not, or shall not be, as the
case may be, incomplete by omitting to state any material fact necessary to
make such information not misleading.
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ARTICLE VII
COVENANTS
SECTION 7.1 Affirmative Covenants. The Borrower agrees with the
Lender that, until the Commitment has terminated and all Obligations have been
paid and performed in full, the Borrower will perform the obligations set forth
in this Section 7.1.
SECTION 7.1.1 Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to the Lender copies of
the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 50 days
after the end of each of the first three Fiscal Quarters of each
Fiscal Year of the Borrower, consolidated and consolidating balance
sheets of the Borrower and its consolidated Subsidiaries as of the end
of such Fiscal Quarter and consolidated and consolidating statements
of earnings and cash flow of the Borrower and its consolidated
Subsidiaries for such Fiscal Quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such
Fiscal Quarter, certified by the chief financial Authorized Officer of
the Borrower;
(b) as soon as available and in any event within 95 days
after the end of each Fiscal Year of the Borrower, a copy of the
annual audit report for such Fiscal Year for the Borrower and its
consolidated Subsidiaries, including therein consolidated and
consolidating balance sheets of the Borrower and its consolidated
Subsidiaries as of the end of such Fiscal Year and consolidated and
consolidating statements of earnings and cash flow of the Borrower and
its consolidated Subsidiaries for such Fiscal Year, in each case
certified (without any Impermissible Qualification) in a manner
acceptable to the Lender by Arthur Andersen & Co. or other independent
public accountants reasonably acceptable to the Lender, together with
a certificate from such accountants containing a computation of, and
showing compliance with, each of the financial ratios and restrictions
contained in Section 7.2.3 and to the effect that, in making the
examination necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or Event of
Default that has occurred and is continuing, or, if they have become
aware of such Default or Event of Default, describing such Default or
Event of Default and the steps, if any, being taken to cure it;
(c) as soon as available and in any event within 50 days
after the end of each Fiscal Quarter, a certificate, executed
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by the chief financial Authorized Officer of the Borrower, showing (in
reasonable detail and with appropriate calculations and computations
in all respects satisfactory to the Lender) compliance with the
financial covenants set forth inSection 7.2.3.;
(d) as soon as possible and in any event within three
days after the occurrence of each Default, a statement of the chief
financial Authorized Officer of the Borrower setting forth details of
such Default and the action which the Borrower has taken and proposes
to take with respect thereto;
(e) as soon as possible and in any event within three
days after (x) the occurrence of any adverse development with respect
to any litigation, action, proceeding or labor controversy described
in Section 6.7 or (y) the commencement of any labor controversy,
litigation, action or proceeding of the type described in Section 6.7,
notice thereof and copies of all documentation relating thereto;
(f) promptly after the sending or filing thereof, copies
of all reports which the Borrower sends to any of its securityholders,
and all reports and registration statements which the Borrower or any
of its Subsidiaries files with the Securities and Exchange Commission
or any national securities exchange;
(g) immediately upon becoming aware of the institution of
any steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under
section 302(f) of ERISA, or the taking of any action with respect to a
Pension Plan which could result in the requirement that the Borrower
furnish a bond or other security to the PBGC or such Pension Plan, or
the occurrence of any event with respect to any Pension Plan which
could result in the incurrence by the Borrower of any material
liability, fine or penalty, or any material increase in the contingent
liability of the Borrower with respect to any post-retirement Welfare
Plan benefit, notice thereof and copies of all documentation relating
thereto; and
(h) such other information available to the Borrower
respecting the condition or operations, financial or otherwise, of the
Borrower or any of its Subsidiaries as the Lender may from time to
time reasonably request.
SECTION 7.1.2 Compliance with Laws, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
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(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation where the nature
of its business requires such qualification; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 7.1.3 Maintenance of Properties. The Borrower will, and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep
its properties in good repair, working order and condition, and make necessary
and proper repairs, renewals and replacements so that its business carried on
in connection therewith may be properly conducted at all times unless the
Borrower determines in good faith that the continued maintenance of any of its
properties is no longer economically desirable except where the failure to do
so would not have or may reasonably be expected not to have, a Materially
Adverse Effect on the Borrower.
SECTION 7.1.4 Insurance. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts as is customary in the case
of similar businesses except where the failure to do so would not have or may
reasonably be expected not to have, a Materially Adverse Effect on the
Borrower, and will, upon request of the Lender, furnish to the Lender at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
in accordance with this Section.
SECTION 7.1.5 Books and Records. The Borrower will, and will cause
each of its Subsidiaries, other than Commodore (and so long as Commodore is a
Subsidiary it will use its good faith efforts to cause Commodore), to keep
books and records which accurately reflect all of its business affairs and
transactions and permit the Lender or any of its representatives, at reasonable
times and intervals and with reasonable notice, to visit all of its offices, to
discuss its financial matters with its officers and independent public
accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with the Lender or its
representatives whether or not any representative of the Borrower is present)
and to examine (and, at the expense of the Borrower, photocopy extracts from)
any of its books or other corporate records. The Borrower shall pay
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any fees of such independent public accountant incurred in connection with the
Lender's exercise of its rights pursuant to this Section.
SECTION 7.1.6 Environmental Covenant. Except where the failure to
do so would not have, or would reasonably be expected not to have, a Materially
Adverse Effect on the Borrower, the Borrower will, and will cause each of its
Subsidiaries to,
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Lender and provide copies upon
receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or
compliance with Environmental Laws, and shall promptly cure and have
dismissed with prejudice to the satisfaction of the Lender any actions
and proceedings relating to compliance with Environmental Laws; and
(c) provide such information and certifications which the
Lender may reasonably request from time to time to evidence compliance
with this Section 7.1.6.
SECTION 7.2 Negative Covenants. The Borrower agrees with the
Lender that, until the Commitment has terminated and all Obligations have been
paid and performed in full, the Borrower will perform the obligations set forth
in this Section 7.2.
SECTION 7.2.1 Indebtedness. The Borrower will not create, incur,
assume or suffer to exist or otherwise become or be liable in respect of any
Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) until the date of the initial Borrowing, Indebtedness
identified in Item 7.2.1(b) ("Indebtedness to be Paid") of the
Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date which
is identified in Item 7.2.1(c) ("Ongoing Indebtedness") of the
Disclosure Schedule;
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(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
but excluding Indebtedness incurred through the borrowing of money or
Contingent Liabilities);
(e) other Contingent Liabilities for the indebtedness,
obligation or liabilities of any Subsidiary in an aggregate amount not
to exceed $10,000,000.
(f) other Indebtedness of the Borrower in an aggregate
amount not to exceed $10,000,000;
provided, however, that no Indebtedness otherwise permitted by clause (e) shall
be permitted if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION 7.2.2 Liens. The Borrower will not create, incur, assume
or suffer to exist any Lien upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) Until the date of the initial borrowing, liens
securing payment of Indebtedness of the type permitted and described
in clause (b) of Section 7.2.1;
(c) Liens granted prior to the Effective Date to secure
payment of Indebtedness of the type permitted and described in clause
(c) of Section 7.2.1;
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of business
for sums not overdue or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to
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secure performance of tenders, statutory obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;
(g) judgment Liens in existence less than 30 days after
the entry thereof or with respect to which execution has been stayed
or the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with responsible insurance
companies; and
(h) Liens securing payment of Indebtedness of the type
permitted and described in clauses (e) and (f) of Section 7.2.1.
SECTION 7.2.3 Financial Condition. The Borrower will not permit:
(a) Its Net Worth to be less than $160 million plus eighty
percent (80%) of the sum of (i) any tax benefits relating to prior
year tax accruals recognized during the Fiscal Quarters ended
September 30, 1994 and December 31, 1994 and (ii) tax benefits
resulting from discontinued operations recognized during the Fiscal
Quarters ended September 30, 1994 and December 31, 1994;
(b) Its Minimum Liquidity to be less than $5,000,000.
(c) The Loans outstanding to exceed fifty percent (50%)
of the then Market Value, as defined in the Pledge Agreement, of the
Pledged Shares, as defined in the Pledge Agreement (the "Total
Value"), and the Borrower shall not have (within 5 Business Days of
written notice from the Bank), at its option, either (y) prepaid the
amount of outstanding principal of such Loans, and/or pledged to the
Bank (as additional "Pledged Shares" pursuant to all of the terms and
conditions of the Pledge Agreement) a first security interest in the
Borrower's right, title and interest to that number of shares of
common stock of Vigoro, such that the Loans outstanding after such
principal payment and/or additional pledge of shares, does not exceed
fifty percent of the Total Value.
SECTION 7.2.4 Investments. The Borrower will not make, incur,
assume or suffer to exist any Investment in any other Person, except:
(a) Investments existing on the Effective Date as
disclosed in the financial statements described in Section 6.5;
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(b) Cash Equivalent Investments; or
(c) Notes made by the purchaser of any Subsidiary of
Commodore or Equality Specialties, Inc. (the "Seller Notes") in an
aggregate amount not to exceed $10,000,000.
provided, however, any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment" may
continue to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements; provided, further however, that the
Borrower may make additional Investments (except for Seller Notes except as
permitted by paragraph (c) above) provided that no Event of Default has
occurred and is continuing.
SECTION 7.2.5 Take or Pay Contracts. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into or be a party to any
arrangement for the purchase of materials, supplies, other property or services
if such arrangement by its express terms requires that payment be made by the
Borrower or such Subsidiary regardless of whether such materials, supplies,
other property or services are delivered or furnished to it.
SECTION 7.2.6 Consolidation, Merger, etc. The Borrower will not
liquidate or dissolve, consolidate with, or merge into or with, any other
corporation, or purchase or otherwise acquire all or substantially all of the
assets of any Person (or of any division thereof) except that so long as no
Default has occurred and is continuing or would occur after giving effect
thereto, the Borrower may purchase all or substantially all of the assets of
any Person, or acquire such Person by merger not to exceed an aggregate of
$10,000,000.
SECTION 7.2.7 Asset Dispositions, etc. The Borrower will not sell,
transfer, contribute or otherwise convey, or grant options, warrants or other
rights with respect to its investment in Vigoro or more than 49% of its
investment or interest in Eagle.
SECTION 7.2.8 Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Borrower or
such Subsidiary and is an arrangement or contract of the kind which would be
entered into by a prudent Person in the position of the Borrower or such
Subsidiary with a Person which is not one of its Affiliates.
SECTION 7.2.9 Negative Pledges, etc. The Borrower may enter into
agreements prohibiting the creation or assumption of any Lien upon the shares
of Vigoro owned by the Borrower only so long
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as the shares of Vigoro pledged pursuant to the Pledge Agreement, together with
such additional shares of Vigoro then owned by Borrower having at such time a
Market Value (as defined in the Pledge Agreement) of at least $50,000,000, are
not subject to such prohibition.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
SECTION 8.1.1 Non-Payment of Obligations. The Borrower shall
default in the payment or prepayment when due of any principal of or interest
on any Loan or in the payment when due of any commitment fee or of any other
Obligation (and such default shall continue unremedied for a period of five
days after written notice thereof from Lender to Borrower).
SECTION 8.1.2 Breach of Warranty. Any representation or warranty
of the Borrower made or deemed to be made hereunder or in any other Loan
Document or any other writing or certificate furnished by or on behalf of the
Borrower to the Lender for the purposes of or in connection with this Agreement
or any such other Loan Document (including any certificates delivered pursuant
to Article V) is or shall be incorrect when made in any material respect.
SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.2, and such default shall continue unremedied for a
period of 15 days after notice thereof shall have been given to the Borrower by
the Lender.
SECTION 8.1.4 Non-Performance of Other Covenants and Obligations.
The Borrower shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document, and such default
shall continue unremedied for a period of 30 days after notice thereof shall
have been given to the Borrower by the Lender.
SECTION 8.1.5 Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower having a principal amount,
individually or in the aggregate, in excess of $10,000,000, or a default shall
occur in the performance or observance of any obligation or condition with
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respect to such Indebtedness if the effect of such default is to accelerate the
maturity of any such Indebtedness or such default shall continue unremedied for
any applicable period of time sufficient to permit the holder or holders of
such Indebtedness, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity.
SECTION 8.1.6 Judgments. Any judgment or order for the payment of
money in excess of $3,000,000 (in addition to any payments made not in excess
of $12,000,000 with respect to the Madison Management Litigation) shall be
rendered against the Borrower and either
(a) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order which proceeding is not
dismissed or which judgment or order is not satisfied within 60 days;
or
(b) there shall be any period of 30 consecutive days
during which such judgment is not paid or satisfied or a stay of
enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect.
SECTION 8.1.7 Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any
member of its Controlled Group or any other Person to terminate a
Pension Plan if, as a result of such termination, the Borrower could
reasonably be expected to be required to make a contribution to such
Pension Plan, or could reasonably expect to incur a liability or
obligation to such Pension Plan, in excess of $3,000,000; or
(b) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA.
SECTION 8.1.8 Control of the Borrower. Any Change in Control shall
occur.
SECTION 8.1.9 Bankruptcy, Insolvency, etc. The Borrower or any of
its Subsidiaries shall
(a) become insolvent or generally fail to pay, or admit
in writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or any of its Subsidiaries or any
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property of any thereof, or make a general assignment for the benefit
of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days, provided that the Borrower and
each Subsidiary hereby expressly authorizes the Lender to appear in
any court conducting any relevant proceeding during such 60-day period
to preserve, protect and defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or
any of its Subsidiaries , and, if any such case or proceeding is not
commenced by the Borrower or such Subsidiary, such case or proceeding
shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall result in the entry of an order for relief or
shall remain for 60 days undismissed, provided that the Borrower, each
Subsidiary hereby expressly authorizes the Lender to appear in any
court conducting any such case or proceeding during such 60-day period
to preserve, protect and defend its rights under the Loan Documents;
or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 8.1.10 Impairment of Security, etc. Any Lien granted under
any Loan Document shall (except in accordance with its terms), in whole or in
part, terminate or cease to be a perfected first Lien, cease to be effective or
cease to be the legally valid, binding and enforceable obligation of any party
thereto which failure shall continue for a period of 5 days after written
notice of such failure is given by Lender to the Borrower.
SECTION 8.2 Action if Bankruptcy. If any Event of Default
described in clauses (a) through (d) of Section 8.1.9 shall occur with respect
to the Borrower or any Subsidiary, the Commitment (if not theretofore
terminated) shall automatically terminate and the outstanding principal amount
of all outstanding Loans and all other Obligations shall automatically be and
become immediately due and payable, without notice or demand.
SECTION 8.3 Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in
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clauses (a) through (d) of Section 8.1.9 with respect to the Borrower or any
Subsidiary) shall occur for any reason, whether voluntary or involuntary, and
be continuing, the Lender shall by notice to the Borrower declare all or any
portion of the outstanding principal amount of the Loans and other Obligations
to be due and payable and/or the Commitment (if not theretofore terminated) to
be terminated, whereupon the full unpaid amount of such Loans and other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitment shall terminate.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Lender. No failure or delay on the part
of the Lender or the holder of the Note in exercising any power or right under
this Agreement or any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. No notice to or demand on the Borrower in any case shall entitle it to
any notice or demand in similar or other circumstances. No waiver or approval
by the Lender or the holder of the Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
SECTION 9.2 Notices. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by facsimile and addressed, delivered or transmitted to
such party at its address or facsimile number set forth below its signature
(with a copy to any other party indicated below such signature) hereto or at
such other address or facsimile number as may be designated by such party in a
notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when received.
SECTION 9.3 Payment of Costs and Expenses. The Borrower agrees
to pay on demand all expenses of the Lender (including the fees and
out-of-pocket expenses of counsel to the Lender and of
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local counsel, if any, who may be retained by counsel to the Lender) in
connection with
(a) the negotiation, preparation, execution and delivery
of this Agreement and of each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Loan Document as
may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated; and
(b) the preparation and review of the form of any
document or instrument relevant to this Agreement or any other Loan
Document.
The Borrower also agrees to reimburse the Lender upon demand for all reasonable
out-of-pocket expenses (including attorneys' fees and legal expenses) incurred
by the Lender in connection with (x) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 9.4 Indemnification. In consideration of the execution
and delivery of this Agreement by the Lender and the extension of the
Commitment, the Borrower hereby indemnifies, exonerates and holds the Lender
and each of its officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan;
(b) any action brought by or on behalf of the Borrower as
the result of any determination by the Lender pursuant to Article V
not to fund any Borrowing;
(c) any investigation, litigation or proceeding related
to any acquisition or proposed acquisition by the Borrower or any of
its Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Lender is party thereto;
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(d) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the Release by the
Borrower or any of its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
SECTION 9.5 Survival. The obligations of the Borrower under
Sections 4.3, 4.4, 4.5, 4.6, 9.3 and 9.4 shall in each case survive any
termination of this Agreement, the payment in full of all Obligations and the
termination of all Commitments. The representations and warranties made by the
Borrower in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan Document.
SECTION 9.6 Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 9.7 Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 9.8 Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the
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same agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and the Lender (or notice thereof
satisfactory to the Lender) shall have been received by the Lender and notice
thereof shall have been given by the Lender to the Borrower.
SECTION 9.9 Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTE AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This
Agreement, the Note and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 9.10 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Borrower may not
assign or transfer its rights or obligations hereunder without the prior
written consent of the Lender and Lender shall not assign or transfer its
rights or obligations except in compliance with Section 9.12 below.
SECTION 9.11 Participations. The Lender may at any time after
prior written notice to Borrower sell to one or more commercial banks or other
Persons (each of such commercial banks and other Persons being herein called a
"Participant") participating interests in any of the Loans, its Commitment, or
other interests of the Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 9.11
shall relieve the Lender from its Commitment or its other obligations
hereunder or under any other Loan Document,
(b) the Lender shall remain solely responsible for the
performance of its Commitment and such other obligations,
(c) the Borrower shall continue to deal solely and
directly with the Lender in connection with the Lender's rights and
obligations under this Agreement and each of the other Loan Documents,
(d) no Participant, unless such Participant is an
Affiliate of such Lender, shall be entitled to require the Lender to
take or refrain from taking any action hereunder or under any other
Loan Document, except that the Lender may agree with any Participant
that the Lender will not, without such Participant's consent, take any
of the following actions: (i) increase the Commitment Amount, reduce
any fees described in Article III, change the schedule of reductions to
the Commitment provided for in Sections 2.2.2 and 2.2.3 or extend
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the Commitment Termination Date, or (ii) extend the due date for, or
reduce the amount of, any scheduled repayment or prepayment of
principal of or interest on any Loan (or reduce the principal amount
of or rate of interest on any Loan), and
(e) the Borrower shall not be required to pay any amount
under Section 4.6 that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for
purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 9.3 and 9.4, shall be
considered a Lender.
9.12 Assignments. The Lender, with the written consent of the
Borrower (which consents shall not be unreasonably delayed or withheld) may at
any time assign and delegate to one or more commercial banks or other financial
institutions, and with notice to the Borrower, but without the consent of the
Borrower, may assign and delegate to any of its Affiliates (each Person
described in either of the foregoing clauses as being the Person to whom such
assignment and delegation is to be made, being hereinafter referred to as an
"Assignee Lender"), all or any fraction of such Lender's total Commitment
(which assignment and delegation shall be of a constant, and not a varying,
percentage of all the assigning Lender's Commitment) in a minimum aggregate
amount of $5,000,000; provided, however, that, the Borrower shall be entitled
to continue to deal solely and directly with such assigning Lender in
connection with the interests so assigned and delegated to an Assignee Lender
until (i) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to such
Assignee Lender, shall have been given to the Borrower by the Lender and such
Assignee Lender, and (ii) such Assignee Lender shall have executed and
delivered to the Borrower an Assignment and Assumption Agreement (the
"Assignment Agreement").
From and after the date that the Borrower accepts such Assignment Agreement,
(x) the Assignee Lender thereunder shall be deemed automatically to have become
a party hereto and to the extent that rights and obligations hereunder have
been assigned and delegated to such Assignee Lender in connection with such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (y) the assignor Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection with
such Assignment Agreement, shall be released from its obligations hereunder and
under the other related documents. Within five Business Days after its receipt
of notice that the Lender has received an executed Assignment Agreement, the
Borrower shall execute and deliver to the Lender new Notes evidencing such
Assignee Lender's assigned Loans and, if the assignor Lender has
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retained Loans hereunder, replacement Notes in the principal amount of the
Loans retained by the assignor Lender hereunder (such Notes to be in exchange
for, but not in payment of, those Notes then held by such assignor Lender).
Each such Note shall be dated the date of the predecessor Notes. The assignor
Lender shall mark the predecessor Notes "exchanged" and deliver them to the
Borrower. Accrued interest on that part of the predecessor Notes evidenced by
the new Notes, and accrued fees, shall be paid as provided in the Assignment
Agreement. Accrued interest on that part of the predecessor Notes evidenced by
the replacement Notes shall be paid to the assignor Lender. Accrued interest
and accrued fees shall be paid at the same time or times provided in the
predecessor Notes and in this Agreement. Any attempted assignment and
delegation not made in accordance with this Section shall be null and void.
The Borrower acknowledges and agrees that each Assignee Lender, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 9.3 and 9.4, shall be considered a Lender.
SECTION 9.13 Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE
BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHER DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
46
<PAGE> 52
SECTION 9.14 Waiver of Jury Trial. THE LENDER AND THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS
A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By /s/ G. A. Spector
----------------------------
Title: Vice President
Address: Two North Riverside Plaza
Suite 600
Chicago, IL 60606
Facsimile No.: 312-454-0470
Attention: Norman M. Field
Vice President & Treasurer
With a copy to:
ROSENBERG & LIEBENTRITT, P.C.
Two North Riverside Plaza
Suite 1600
Chicago, Illinois 60606
Facsimile No.: (312) 454-0335
Attention: James M. Phipps
47
<PAGE> 53
BANK OF AMERICA ILLINOIS
By /s/ John Compernolle
------------------------------
Title:
Address: 231 South LaSalle Street
Chicago, IL 60697
Facsimile No.: 312-828-1974
Attention: John Compernolle
Domestic
Office: 231 South LaSalle Street
Chicago, IL 60697
Facsimile No.: 312-828-1974
Attention: John Compernolle
Eurodollar
Office: 231 South LaSalle Street
Chicago, IL 60697
Facsimile No.: 312-828-1974
Attention: John Compernolle
48
<PAGE> 54
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 6.7 Litigation.
Description of Proceeding Action or Claim Sought
ITEM 7.2.1(b) Indebtedness to be Paid.
Creditor Outstanding Principal Amount
ITEM 7.2.1(c) Ongoing Indebtedness.
Creditor Outstanding Principal Amount
<PAGE> 55
EXHIBIT A
NOTE
$25,000,000 October 13, 1994
FOR VALUE RECEIVED, the undersigned, GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC., a Delaware corporation (the "Borrower"), promises to pay to
the order of BANK OF AMERICA ILLINOIS (the "Lender") on September 30, 1994 the
principal sum of TWENTY-FIVE MILLION AND 00/100 DOLLARS ($25,000,000) or, if
less, the aggregate unpaid principal amount of all Loans shown on the schedule
attached hereto (and any continuation thereof) made by the Lender pursuant to
that certain Credit Agreement, dated as of October 13, 1994 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Credit Agreement"), between the Borrower and the Lender.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in same day or immediately available funds to
the account designated by the Lender pursuant to the Credit Agreement.
This Note is the Note referred to in, and evidences Indebtedness
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be immediately due and payable.
Unless otherwise defined, terms used herein have the meanings provided in the
Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
<PAGE> 56
THIS NOTE HAS BEEN DELIVERED IN CHICAGO, ILLINOIS AND SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By /s/ G. A. Spector
-------------------------
Title: Vice President
2
<PAGE> 57
LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Principal
Loan Made Repaid Balance
Alt. Inter- Interest Alt. Inter- Alt. Inter-
Base bank Period (if Base Bank Base Bank Notation
Date Rate Rate applicable) Rate Rate Rate Rate Total Made By
- - ---- ---- ---- ----------- ---- ---- ---- ---- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 58
EXHIBIT B
BORROWING REQUEST
Bank of American Illinois
231 South LaSalle Street
Chicago, IL 60697
Attention: [Name]
[Title]
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section 2.3 of
the Credit Agreement, dated as of October 13, 1994 (together with all
amendments, if any, from time to time made thereto, the "Credit Agreement"),
between Great American Management and Investment, Inc., a Delaware corporation
(the "Borrower"), and you. Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that a Loan be made in the aggregate
principal amount of $_____________ on ________________, 19___ as a [Interbank
Rate Loan having an Interest Period of ___________ months] [Base Rate Loan].
The Borrower hereby acknowledges that, pursuant to Section 5.2.2 of the
Credit Agreement, each of the delivery of this Borrowing Request and the
acceptance by the Borrower of the proceeds of the Loans requested hereby
constitute a representation and warranty by the Borrower that, on the date of
such Loans, and before and after giving effect thereto and to the application
of the proceeds therefrom, all statements set forth in Section 5.2.1 are true
and correct in all material respects.
The Borrower agrees that if prior to the time of the Borrowing
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify you.
Except to the extent, if any, that prior to the time of the Borrowing requested
hereby you shall receive written notice to the contrary from the Borrower, each
matter certified to
<PAGE> 59
herein shall be deemed once again to be certified as true and correct at the
date of such Borrowing as if then made.
Please wire transfer the proceeds of the borrowing to the accounts of
the following persons at the financial institutions indicated respectively:
<TABLE>
<CAPTION>
Person to be Paid
Amount to be -------------------------- Name, Address, etc.
Transferred Name Account No. of Transferee Lender
- - ----------- ---- ----------- --------------------
<S> <C> <C> <C>
$
----------- ------------ ---------- --------------------
--------------------
Attention:
---------
$
----------- ------------ ----------- --------------------
--------------------
Attention:
---------
Balance of The Borrower ----------- --------------------
such proceeds --------------------
Attention:
---------
</TABLE>
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
its duly Authorized Officer this _____ day of ________________, 19____.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By _________________________________
Title:
2
<PAGE> 60
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
Bank of America Illinois
231 South LaSalle Street
Chicago, IL 60697
Attention: [Name]
[Title]
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to
Section 2.4 of the Credit Agreement, dated as of October 13, 1994 (together
with all amendments, if any, from time to time made thereto, the "Credit
Agreement"), between Great American Management and Investment, Inc., a Delaware
corporation (the "Borrower"), and you. Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.
The Borrower hereby requests that on __________________, 19____,
(1) $___________ of the presently outstanding principal
amount of the Loans originally made on ________________, 19__ [and
$_________ of the presently outstanding principal amount of the Loans
originally made on _________________, 19_____],
(2) and all presently being maintained as [Base Rate
Loans] [Interbank Rate Loans],
(3) be [converted into] [continued as],
(4) [Interbank Rate Loans having an Interest Period of
_________ months] [Base Rate Loans].
The Borrower hereby:
<PAGE> 61
(a) certifies and warrants that no Default has occurred
and is continuing; and
(b) agrees that if prior to the time of such continuation
or conversion any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify
you.
Except to the extent, if any, that prior to the time of the continuation or
conversion requested hereby you shall receive written notice to the contrary
from the Borrower, each matter certified to herein shall be deemed to be
certified at the date of such continuation or conversion as if then made.
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered, and the certification and warranties contained herein
to be made, by its Authorized Officer this ________ day of ________________,
19____.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By _____________________________
Title:
2
<PAGE> 62
EXHIBIT D
PLEDGE AGREEMENT
dated as of October 13, 1994
by and between
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
as the Pledgor
and
BANK OF AMERICA ILLINOIS, as the Bank
<PAGE> 63
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of October 13, 1994 is by
and between GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC., a Delaware
corporation (the "Pledgor"), and BANK OF AMERICA, ILLINOIS, an Illinois banking
association having its principal office at 231 South LaSalle Street, Chicago,
Illinois 60697 (the "Bank").
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of October 13, 1994
(together with all amendments and other modifications, from time to time
thereafter made thereto, the "Loan Agreement"), among Pledgor and the Bank, the
Bank has extended a commitment to make a Loan, as defined in the Loan
Agreement, to the Pledgor;
WHEREAS, Pledgor is the sole legal and beneficial owner of One Million Six
Hundred Thousand (1,600,000) shares (the "Pledged Shares") of the common stock
of The Vigoro Corporation, a Delaware corporation ("Issuer"), as such shares
are further described on Exhibit A attached hereto and made a part hereof; and
WHEREAS, as a condition precedent to the effectiveness of the Loan Agreement,
the Pledgor is required to execute and deliver this Pledge Agreement and to
grant to the Bank a first security interest in the Collateral (as defined
below) pledged herein.
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in order to induce the Bank to enter into the Loan
Agreement, the Pledgor agrees as follows:
SECTION 1. Definitions and Interpretation. Unless the context clearly
indicates to the contrary, terms defined in the Loan Agreement shall have the
meanings which the Loan Agreement assigns to such terms, notwithstanding any
termination of the Loan Agreement. Terms not otherwise defined herein or in
the Loan Agreement shall have the meanings, if any, ascribed to them under the
UCC. When used herein, unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
"Applicable Law" with respect to any Person or matter means any law, rule,
regulation, order, decree or other requirement, having the force of law
relating to such Person or matter.
"Cash Collateral" is defined in Section 2(c).
<PAGE> 64
"Collateral" is defined in Section 2.
"Event of Default" means those events of default as defined in Section 8.1 of
the Loan Agreement.
"Market Value" means, with respect to any Pledged Shares, the closing price
for such Pledged Shares on the Banking Day immediately preceding the Valuation
Date for such Pledged Shares, as determined by the Bank by reference to The
Wall Street Journal on the date of valuation or, if Bank is unable to obtain
the required information from The Wall Street Journal on any date of valuation,
the computer pricing service utilized by Bank, which shall be a pricing service
generally recognized by dealers in the market for such Pledged Shares, or the
price determined by the Bank in good faith as the mean of the bid prices quoted
to the Bank by at least three dealers of such Pledged Shares on the date of
valuation. The Bank does not assume and shall have no responsibility for
determining the accuracy of the reported prices as shown on the computer
pricing service, The Wall Street Journal, or as reported by dealers in such
market and may act in reliance upon and shall be fully protected in relying
upon the bid and asked prices as so reported.
"Obligations" means all obligations (monetary or otherwise) of the Pledgor,
however created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, which arise out
of or in conjunction with the Loan Agreement, the Note, this Pledge Agreement,
or any other Loan Document.
"Permitted Action" is defined in Section 12.
"Pledged Collateral" is defined in Section 2.1.
"Pledged Property" means all Pledged Shares, and all other pledged shares of
capital stock, including, without limitation, any Additional Shares, or
promissory notes, and all other securities and instruments which may from time
to time hereafter be delivered by the Pledgor to the Bank for the purpose of
pledge under this Agreement or any other Loan Document, and all proceeds of any
of the foregoing.
"Pledged Shares" means all shares of capital stock of the Issuer which are
delivered by the Pledgor to the Bank as Collateral hereunder.
"Pledgor" is defined in the Preamble.
"Secured Obligations" is defined in Section 3.
-2-
<PAGE> 65
"Security Interest" when used with respect to any Person means any interest
in any real or personal property, asset or other right owned or being purchased
or acquired by such Person for its own use, consumption or enjoyment in its
business which secures payment or performance of any obligation and shall
include any mortgage, Lien, pledge, encumbrance, charge or other security
interest of any kind, whether arising under a security agreement, mortgage,
deed of trust, chattel mortgage, assignment, pledge, financing or similar
statement or notice or as a matter of law, judicial process or otherwise.
"Unmatured Insolvency Default" means any unmatured Event of Default under
Section 8.1.9 of the Loan Agreement.
"UCC" means the Uniform Commercial Code as in effect in the State of Illinois.
"Valuation Date" means the last Banking Day of each month.
SECTION 2. Grant of Security. The Pledgor hereby pledges, hypothecates,
assigns and transfers to the Bank, and hereby grants to the Bank a lien and
security interest in, all of the following, whether now or hereafter existing
or acquired (the "Collateral"):
(a) the issued and outstanding shares of capital stock as set forth in
Exhibit A hereto;
(b) all dividends, distributions, interest, and other payments and
rights with respect to any Pledged Property;
(c) upon the occurrence and continuance of an Unmatured Insolvency
Default or an Event of Default, all funds that are pledged to the Bank
pursuant to Section 4 and all funds that are received or retained by the Bank
as other proceeds of the Collateral or as an amount equal to such other
proceeds and, upon such events, Pledgor shall establish account(s) with the
Bank (the "Collateral Account") and Pledgor shall deposit all such funds or
proceeds in the Collateral Account, including (i) any and all amounts and
moneys at any time and from time to time credited to or deposited in the
Collateral Account, (ii) any and all property which may be acquired directly
or indirectly using the proceeds (or any part thereof) of any of the
foregoing and/or any interest or other income on or with respect to any of
the foregoing, and (iii) any and all substitutions for any of the foregoing
(all of the foregoing is collectively referred to as the "Cash Collateral");
(d) all other Pledged Property, whether now or hereafter delivered to
the Bank in connection with this Agreement; and
-3-
<PAGE> 66
(e) All proceeds of and from any and all of the foregoing Collateral.
The foregoing items of Collateral are sometimes herein referred to as
the "Pledged Collateral";
SECTION 3. Security for Obligations. This Agreement secures the payment
in full of all Obligations now or hereafter existing, whether for principal,
interest, costs, fees, expenses or otherwise (the "Secured Obligations").
SECTION 4. Delivery of Pledged Property.
(a) All certificates or instruments representing or evidencing any
Collateral, including 1,600,000 Pledged Shares and any Cash Collateral, shall
be delivered to and held by or on behalf of the Bank pursuant hereto, shall
be in suitable form for transfer by delivery, and shall be accompanied by all
necessary instruments of transfer or assignment, duly executed in blank.
(b) If at any time, the Loans outstanding exceed fifty percent (50%)
of the then Market Value of the Pledge Shares (the "Total Value"), then the
Pledgor shall promptly, without notice or demand from the Bank (and in any
event within 5 Business Days of written notice from the Bank), at its option,
either (y) prepay the amount of outstanding principal under the Loan
Agreement, and/or (z) pledge to the Bank (as additional "Pledged Shares"
pursuant to all of the terms and conditions hereof) a first security interest
in the Pledgor's right, title and interest to that number of shares of common
stock of the Issuer, such that the Loans outstanding after such principal
prepayment and/or additional pledge of shares, does not exceed fifty percent
(50%) of the Total Value.
(c) If at any time the Loans outstanding do not exceed fifty (50%) of
the Total Value for that date, then upon written request from the Pledgor
(provided that the Pledgor may make only four such requests in any Fiscal
Year), the Bank agrees to reassign and redeliver to the Pledgor, without
warranty by or recourse to the Bank, within five (5) Business Days after
receipt of such request, those certificates representing Pledged Shares which
have not previously been sold, disposed of or applied by the Bank in
accordance with the terms hereof and the Market Value of which is equal to or
less than the difference between (y) the Total Value and (z) the product of
two hundred (200%) multiplied by the Loans outstanding. The Pledgor agrees
to pay any and all costs and expenses (including, without limitation,
reasonable attorney's fees) incurred by the Bank in connection with such
-4-
<PAGE> 67
reassignment and redelivery and to pay all costs and expenses of filing
applicable thereto.
SECTION 5. Dividends on Pledged Shares. In the event that any dividend
or distribution is to be paid on any Pledged Share at a time when (a) no
Unmatured Insolvency Default has occurred and is continuing, and (b) no Event
of Default has occurred and is continuing, such dividend or payment may be paid
directly to the Pledgor free and clear of the security interest granted
hereunder. If any such Unmatured Insolvency Default or Event of Default has
occurred and is continuing, then any such dividend or distribution shall be
paid directly to the Bank.
SECTION 6. Continuing Security Interest; Transfer of Notes. This
Agreement creates a continuing security interest in the Collateral and shall:
(a) remain in full force and effect until payment in full of all
Secured Obligations;
(b) be binding upon the Pledgor, its successors, transferees and
assigns; and
(c) inure, together with the rights and remedies of the Bank
hereunder, to the benefit of the Bank and its successors, transferees and
assigns subject to the terms and conditions of Section 9.12 of the Loan
Agreement.
Without limiting the generality of the foregoing clause (c), the Bank
may assign or otherwise transfer (in whole or in part) the Note or any
Obligation to any other Person, and such other Person shall thereupon become
vested with all the rights and benefits in respect thereof granted to the
Bank under any Loan Document (including this Agreement) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer
and in Section 9.12 of the Loan Agreement. Upon the payment in full of all
Secured Obligations, the security interest granted herein shall terminate and
all rights to the Collateral shall revert to the Pledgor. Upon any such
termination, the Bank will, at the Pledgor's sole expense, deliver to the
Pledgor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Shares, together with all other Collateral held by the Bank
hereunder, and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.
SECTION 7. Pledgor to Remain Liable. The Pledgor hereby expressly agrees
that, anything herein to the contrary notwithstanding, Pledgor shall remain
liable under each contract,
-5-
<PAGE> 68
agreement, interest or obligation constituting Collateral hereunder and shall
observe and perform all of the conditions and obligations to be observed and
performed by the Pledgor thereunder, all in accordance with and pursuant to the
terms and provisions thereof. The exercise by the Bank of any of the rights
assigned hereunder shall not release the Pledgor from any of its duties or
obligations under any such contract, agreement, interest or obligation. The
Bank shall not have any duty, responsibility, obligation or liability under any
such contract, agreement, interest or obligation by reason of or arising out of
the assignment thereof to the Bank or the granting to the Bank of a Security
Interest therein or the receipt by the Bank of any payment relating to any such
contract, agreement, interest or obligation pursuant hereto, nor shall the Bank
be required or obligated by virtue of the grant of the Security Interest to the
Bank in any manner to perform or fulfill any of the obligations of the Pledgor
thereunder or pursuant thereto, or to make any payment, or to make any inquiry
as to the nature or sufficiency of any payment received by it or the
sufficiency of any performance of any party under any such contract, agreement,
interest or obligation, or to present or file any claim, or to take any action
to collect or enforce any performance or the payment of any amounts which may
have been assigned to it, in which it may have been granted a Security Interest
or to which it may be entitled at any time or times.
SECTION 8. Subrogation, etc. So long as this Pledge Agreement is in effect,
the Pledgor will not have and will not exercise any rights which it may acquire
by reason of any payment made hereunder, whether by way of subrogation,
reimbursement or otherwise and the Pledgor hereby irrevocably waives all such
rights.
SECTION 9. Representations and Warranties and Agreements. The Pledgor
represents and warrants to, and covenants and agrees with, the Bank that:
(a) this Agreement is a legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, subject only to
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and the application of equitable principles;
(b) no currently effective UCC financing statement (other than any which may
have been filed on behalf of the Bank or which has been, or in connection with
the execution and delivery hereof is being, terminated) covering any of the
Collateral is on file in any public office;
(c) the Pledgor has held the Pledged Shares for not less than three (3)
years and is the sole lawful owner of the Collateral and the Additional Shares,
except as provided otherwise in the Loan
-6-
<PAGE> 69
Agreement, free of all Security Interests whatsoever, other than the Security
Interest applicable to the Pledged Shares created hereby, with full power and
authority to execute this Agreement, to perform the Pledgor's obligations
hereunder, and to subject the Collateral to the assignment and Security
Interest created hereby;
(d) all information with respect to the Collateral set forth in any exhibit,
schedule or certificate at any time heretofore or hereafter furnished by the
Pledgor to the Bank pursuant to this Agreement or any other Loan Document is
and will be (except as otherwise expressly stated therein by the Pledgor) true
and correct in all material respects as of the date furnished and does not and
will not omit any material fact necessary to make the statements contained
therein not misleading; and
(e) all filings, registrations, recordings and transfers necessary or
appropriate to create, preserve and perfect, as of the date hereof the Security
Interest granted by the Pledgor to the Bank pursuant to this Security Agreement
have been accomplished and the Security Interests granted to the Bank pursuant
to this Agreement in and to the Collateral constitute perfected Security
Interests therein which are prior in right to all other Security Interests.
SECTION 10. [Intentionally Deleted]
SECTION 11. Agreements of the Pledgor.
11.1 As to Pledged Collateral.
(a) Stock Powers, etc. The Pledgor will deliver executed undated blank
stock powers, or other equivalent instruments of transfer acceptable to the
Bank, for all Pledged Shares (and all other shares of capital stock
constituting Pledged Collateral) delivered by the Pledgor pursuant to this
Agreement. The Pledgor will, from time to time upon the request of the Bank,
promptly deliver to the Bank such stock powers, endorsements, instruments, and
similar documents, in form and substance satisfactory to the Bank, with respect
to the Pledged Collateral as the Bank may reasonably request in order to
perfect its security interest in the Pledge Shares to exercise its remedies
pursuant to Section 13.
(b) Continuous Pledge. Subject to any contrary provisions in this
Agreement, the Pledgor will keep pledged to the Bank pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Pledged
Collateral, all dividends and distributions with respect thereto (subject to
the provisions of Section 5 above), and all other Pledged Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to the Pledgor in respect of any Pledged Collateral.
-7-
<PAGE> 70
(c) Voting Rights; Dividends, etc. The Pledgor agrees
(1) to deliver (properly endorsed where required hereby or requested
by the Bank) to the Bank, after any Unmatured Insolvency Default or any Event
of Default shall have occurred and be continuing, promptly upon receipt
thereof by the Pledgor and without any request therefor by the Bank, all
dividends, all distributions, all interest, all principal, all other cash
payments, and all proceeds of the Pledged Collateral, all of which shall be
held by the Bank as additional Pledged Collateral; and
(2) that after any Unmatured Insolvency Default or any Event of Default
shall have occurred and be continuing and the Bank has notified the Pledgor
of the Bank's intention to exercise its voting power under this clause (c)(2)
(i) the Bank may exercise (to the exclusion of the Pledgor)
the voting power and all other incidental rights of ownership with
respect to any Pledged Shares or other shares of capital stock
constituting Pledged Collateral and the Pledgor hereby grants the Bank
an irrevocable proxy, exercisable under such circumstances, to vote the
Pledged Shares and such other Pledged Collateral, and
(ii) the Pledgor shall promptly deliver to the Bank such
additional proxies and other documents as may be necessary to allow the
Bank to exercise such voting power.
All dividends, distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor
but which the Pledgor is then obligated to deliver to the Bank, shall, until
delivery to the Bank, be held by the Pledgor separate and apart from its
other property in trust for the Bank. The Bank agrees that, unless an
Unmatured Insolvency Default or any Event of Default shall have occurred and
be continuing and, with respect to the voting power relating to the Pledged
Shares, the Bank shall have given the notice referred to in clause (c)(2),
the Pledgor shall be entitled to any dividend or distribution paid on any
Pledged Shares and have the exclusive voting power with respect to any shares
of capital stock (including any of the Pledged Shares) constituting Pledged
Collateral and the Bank shall, upon the written request of the Pledgor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are necessary to allow the Pledgor
to exercise voting power with respect to any such share of capital stock
(including any of the Pledged Shares) constituting Pledged Collateral;
provided, however, that no vote shall be cast, or consent, waiver, or
-8-
<PAGE> 71
ratification given, or action taken by the Pledgor that would impair any
Collateral or be inconsistent with or violate any provision of the Loan
Agreement or any other Loan Document (including this Agreement).
11.2 Information. The Pledgor will furnish the Bank with such information
concerning the Collateral as the Bank may from time to time reasonably request.
11.3 Claim and Demands. The Pledgor will defend the Pledgor's title to the
Collateral against all Persons and against all claims and demands whatsoever.
11.4 Protect Collateral. The Pledgor will do all acts reasonably necessary
to maintain, preserve and protect all Collateral.
11.5 Inspection. The Pledgor will, upon request of the Bank, deliver to the
Bank all such records and papers which pertain to the Collateral.
11.6 Disposal of Assets. The Pledgor will not sell, lease, assign, license,
sublicense, abandon or otherwise dispose of, or create or permit to exist any
Security Interest on any Collateral to or in favor of anyone other than the
Bank for the benefit of the Bank, except as expressly permitted by the terms of
the Loan Agreement.
11.7 Expenses. The Pledgor will reimburse the Bank for all reasonable
expenses, including reasonable attorneys' fees and legal expenses (including
such fees and legal expenses of local counsel), which are incurred by the Bank
in seeking to collect or enforce any rights under or with respect to the
Collateral and in enforcing its rights hereunder, together with interest
thereon from the date which is ten (10) Business Days after the Pledgor
receives written notice of such expenses until reimbursed by the Pledgor at a
rate per annum equal to the Alternate Base Rate plus two percent.
11.8 Title of Property. The Pledgor will, at the Bank's request, after the
occurrence and during the continuance of an Event of Default, if and to the
extent permitted by Applicable Law, consent to the transfer of all or any part
of the Collateral into the name of the Bank or its nominee for the benefit of
the Bank with or without disclosing that such Collateral is subject to the
Security Interest hereunder.
11.9 Applicable Laws. The Pledgor will at all times comply with the
requirements of all Applicable Laws, rules, regulations and orders of every
governmental authority, the non-compliance with which, as the Bank determines
in its reasonable discretion, has a
-9-
<PAGE> 72
reasonable likelihood of materially and adversely affecting the value of the
Collateral.
SECTION 12. Renewals, Amendments and Other Security; Partial Releases. If
at any time the Bank, without notice to the Pledgor, takes any or all of the
Permitted Actions (as hereinafter defined; it being understood that such
actions may be taken only to the extent allowed by the Loan Agreement), whether
such actions are taken before or after any of the Secured Obligations shall
become due and payable, such actions shall not affect the enforceability of
this Agreement, the Loan Agreement or any of the other Loan Documents or
Secured Obligations. The Bank shall have taken a "Permitted Action" if it
shall: (i) retain or obtain a Security Interest in any property to secure
payment and performance of any of the Secured Obligations, (ii) retain or
obtain the primary or secondary liability of any Person, in addition to the
Pledgor, with respect to any of the Secured Obligations, (iii) create, extend
or renew for any period (whether or not longer than the original period) or
alter or exchange any of the Secured Obligations or release or compromise any
obligation of any nature of any Person with respect thereto, (iv) release or
fail to perfect its Security Interest in, or surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the Secured Obligations, or create, extend or renew for any period (whether or
not longer than the original period) or release, compromise, alter or exchange
any obligations of any nature of any Person with respect to any such property,
and (v) upon an Event of Default, resort to the Collateral for payment of any
of the Secured Obligations whether or not it (A) shall have resorted to any
other property securing payment and performance of the Secured Obligations or
(B) shall have proceeded against any Person primarily or secondarily liable on
any of the Secured Obligations (all of the actions referred to in preceding
clauses (A) and (B) being hereby expressly waived by the Pledgor).
SECTION 13. Event of Default.
Following the occurrence and during the continuance of any Event of Default
or Unmatured Insolvency Default, the provisions of this Section 13 shall apply.
(a) (1) The Bank may exercise from time to time any rights and remedies
available to it hereunder, under the Loan Agreement and under the UCC or
otherwise available to it under Applicable Law. The Pledgor hereby expressly
waives, to the fullest extent permitted by Applicable Law, any and all notices,
advertisements or hearings (except as otherwise expressly provided for in the
Loan Documents) in connection with the exercise by the Bank of any of its
rights and remedies after an Event of Default or Unmatured Insolvency Default
occurs.
-10-
<PAGE> 73
(2) To the fullest extent permitted by Applicable Law, the Pledgor hereby
waives the right to object to the manner or sufficiency of advertising,
refurbishing of the Collateral, or solicitation of bids in connection with any
sales or other disposition of the Collateral. Any sale by the Bank may be made
at any broker's board or public or private sale, with or without notice or
advertisement, for cash or credit, and for present or future delivery. At any
such public or private sale or other disposition of Collateral, the Bank may,
to the extent permissible under Applicable Law, purchase the whole or any part
of any Collateral sold, or may sell or dispose of the Collateral to any other
Person, free from any and all claims of the Pledgor or of any other Person
claiming by, through, or under the Pledgor. The Pledgor hereby expressly
waives and releases, to the fullest extent permitted by Applicable Law, any
right of redemption, appraisal, valuation, stay, extension or moratorium now or
hereafter enforced under any Applicable Law in order to prevent or delay the
enforcement of this Agreement on the part of the Pledgor. The Bank agrees to
give notice of any intended disposition of any of the Collateral by the Bank,
not less than ten (10) days before such disposition, mailed postage prepaid,
addressed to the Pledgor at the address shown on the signature pages hereto, or
at any other address specified thereby from time to time in writing. Any
proceeds of any Collateral, or of the disposition by the Bank of any of the
Collateral will be applied by the Bank:
First, toward payment of any and all expenses incurred by the Bank in
retaking, holding, preparing for sale, selling and the like with regard to
the Collateral, including attorneys' fees and legal expenses (including such
reasonable fees and legal expenses of local counsel) incurred by the Bank in
connection therewith;
Second, toward payment of all costs, expenses, reimbursement and
indemnification to which the Bank is then entitled pursuant to the Loan
Documents;
Third, toward payment of the Obligations, until the Obligations shall have
been paid in full; and
Fourth, if all obligations and commitments of the Pledgor under or in
connection with the Loan Agreement and the other Loan Documents shall have
terminated and all Obligations shall have been paid in full, to the Pledgor
for its own account.
(b) The Pledgor agrees that, in any sale of any of the Collateral, the Bank
is authorized to comply with any limitation or restriction in connection with
such sale as counsel may advise the Bank is reasonably necessary in order to
avoid any violation of Applicable Law or in order to obtain any required
approval of the sale or of the purchaser by any governmental or regulatory
-11-
<PAGE> 74
authority or official, and the Pledgor further agrees that such compliance
shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall the Bank be liable or
accountable to the Pledgor for any discount allowed by reason of the fact that
such Collateral was sold in compliance with any such limitation or restriction.
(c) If the sums realized upon any disposition of the Collateral are
insufficient to pay all Obligations and any expenses of such disposition,
including reasonable attorneys' fees and legal expenses (including such fees
and legal expenses of local counsel), the Pledgor hereby promises to pay
immediately any resulting deficiency.
SECTION 14. Authority of the Bank.
(a) The Bank shall have, and shall be entitled to exercise, all powers
hereunder as are specifically delegated to the Bank by the terms hereof,
together with such powers as are incidental thereto. The Bank may execute any
of its duties hereunder by or through agents or employees and shall be entitled
to retain counsel and to act in reliance upon the advice of such counsel
concerning all matters pertaining to its duties hereunder. Neither the Bank
nor any director, officer or employee thereof, shall be liable for any action
taken or omitted to be taken in the absence of bad faith by it or any of them
hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct. The Pledgor agrees to reimburse the Bank, on
demand, for all costs and expenses incurred by the Bank in connection with the
administration and enforcement of this Agreement (including costs and expenses
incurred by any agent employed by the Bank) and agrees to indemnify (which
indemnification shall survive any termination of this Agreement) and hold
harmless the Bank (and any such agent thereof) from and against any and all
liability incurred by the Bank, or any agent thereof, in connection with the
enforcement of this Agreement, unless such liability shall be due to gross
negligence or willful misconduct on the part of the Bank or such agent, as the
case may be.
(b) The Bank, at its option, may from time to time, without notice to the
Pledgor, perform any obligation to be performed by the Pledgor hereunder which
shall not have been performed within any applicable cure or grace period and
take any other action which the Bank deems necessary for the maintenance or
preservation of any of the Collateral or its security interest in the
Collateral. All moneys advanced by the Bank in connection with the foregoing
shall, whether or not there are then outstanding any Loans made under the Loan
Agreement and whether or not the Loan Agreement is then in effect, bear
interest at the Alternate Base Rate plus two percent (or such lower maximum
rate as shall be legal under Applicable Law), and shall be repaid together with
such interest by the
-12-
<PAGE> 75
Pledgor to the Bank, upon the Bank's demand, and shall be secured hereby prior
to any other indebtedness or obligation secured hereby, but the making of any
such advance by the Bank shall not relieve the Pledgor of any default hereunder
or thereunder.
(c) The Bank is required to exercise the same standard of care in the
custody and preservation of any of the Collateral in its possession as it uses
in the custody and preservation of similar property owned by the Bank;
provided, however, the Bank shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if the Bank takes such action
for that purpose as the Pledgor requests in writing, but failure of the Bank to
comply with any such request shall not of itself be deemed a failure to
exercise reasonable care.
SECTION 15. Miscellaneous Provisions.
15.1 Notices. All notices or other communications hereunder shall be given
in the same manner as specified under Section 9.2 of the Loan Agreement,
whether or not then in effect.
15.2 No Waiver of Rights. No delay on the part of the Bank in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by the Bank of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
15.3 Amendment. No amendment to, modification or waiver of, or consent with
respect to, any provision of this Agreement shall in any event be effective
unless the same shall be in writing and signed and delivered by the parties
hereto, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
15.4 Governing Law. This Agreement shall be a contract made under and
governed by the internal laws of the State of Illinois.
15.5 Successors. The rights and privileges of the Bank hereunder shall inure
to the benefit of its successors and permitted assigns. This Agreement shall
be binding upon the Pledgor and his successors and permitted assigns.
15.6 Financing Statement. At the option of the Bank, this Agreement, or a
carbon, photographic or other reproduction of this Agreement or of any UCC
financing statement covering the Collateral or any portion thereof, shall be
sufficient as a UCC financing statement and may be filed as such.
-13-
<PAGE> 76
15.7 Headings. The Section headings in this Agreement are provided for
convenience of reference and shall not be considered a part of this Agreement
or used in its interpretation.
15.8 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each
such counterpart shall for all purposes be deemed an original, but all such
counterparts shall together constitute but one and the same Agreement. The
Pledgor hereby acknowledges receipt of a true, correct and complete counterpart
of this Agreement.
15.9 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE BANK OR THE PLEDGOR SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE BANK'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE PLEDGOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE PLEDGOR HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
THE PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
15.10 Waiver of Jury Trial. THE PLEDGOR AND THE BANK WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (I)
UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
(II) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A COURT AND NOT BEFORE A JURY.
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<PAGE> 77
15.11 Waivers by Pledgor. The Pledgor hereby expressly waives to the
fullest extent permitted by Applicable Law (i) notice of the acceptance by the
Bank of this Agreement, (ii) notice of the existence or creation or non-payment
of all or any of the Secured Obligations, (iii) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever, and (iv) so long as the
Bank acts in a commercially reasonable manner, all diligence in collection or
protection of or realization upon the Secured Obligations or any thereof, any
obligation hereunder, or any security for or guaranty of any of the foregoing.
15.12 Assignment. The Bank is the current holder of all Obligations but,
subject to Section 9.12 of the Loan Agreement, may in the future transfer,
assign or sell certain Obligations pursuant to the terms of the Loan Agreement.
15.13 No Conditions. The Pledgor hereby acknowledges that there are no
conditions to the effectiveness of this Agreement.
15.14 Conflicts with Loan Agreement. In case of conflict between any
provision of this Agreement and any provision of the Loan Agreement, the
provisions of the Loan Agreement shall control to the extent of such
inconsistency.
15.15 Waiver of Defenses. The Pledgor hereby waives, to the fullest extent
it may do so under Applicable Law, any defense arising by reason of any claim
or defense based upon an election of remedies by any Bank and/or the Bank which
in any manner impairs, affects, reduces, releases, destroys and/or extinguishes
any rights of the Pledgor to proceed against any guarantor or against any other
Person or security.
15.16 Interest. No provision of this Agreement or of any other Loan
Document shall require the payment or permit the collection of interest which
is in excess of the maximum permitted by law or is otherwise contrary to law.
If any such excess interest is provided for herein or in the Note, or shall be
adjudicated to be so provided for herein or in the other Loan Documents, the
Pledgor shall not be obligated to pay such excess.
-15-
<PAGE> 78
IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of the undersigned as of the day and year first
written above.
GREAT AMERICAN MANAGEMENT
AND INVESTMENT, INC.
Address:
Two North Riverside Plaza By /s/ G.A. Spector
Suite 600 -----------------------------
Chicago, IL 60606 Name
Printed: Gerald A. Spector
----------------------
Title: Vice President
-------------------------
Telecopier No.: 312-454-0470
Telephone No: 312-466-3838
BANK OF AMERICA ILLINOIS
Address:
231 South LaSalle Street
Chicago, Illinois 60697 By /s/ John Compernolle
-----------------------------
Attention: Name: John Compernolle
Title: Vice President
Facsimile No.: 312-828-1974
Telephone No.: 312-828-2345
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<PAGE> 79
EXHIBIT A
DESCRIPTION OF PLEDGED SHARES
<TABLE>
<CAPTION>
Types of Certificate Number of Percentage of
Shares No. Shares Outstanding
-------- -------- --------- Shares of
Issuer
----------------
<S> <C> <C> <C> <C>
Pledged Common VC 606 1,000,000 5%
Shares VC 607 600,000* 3%
</TABLE>
________________________________
*/ Borrower previously has delivered 2,000,000 shares of Pledged Stock to the
Bank. Pursuant to the Borrower's request, Stock certificate number VC 607 will
be sent to the transfer agent to be divided into certificates representing
smaller quantities of shares in order that the Bank may return to the Borrower
400,000 of the 1,000,000 shares currently represented by certificate VC 607.
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 44,900
<SECURITIES> 0
<RECEIVABLES> 29,500
<ALLOWANCES> 0
<INVENTORY> 121,100
<CURRENT-ASSETS> 289,000
<PP&E> 274,200
<DEPRECIATION> (112,000)
<TOTAL-ASSETS> 1,030,100
<CURRENT-LIABILITIES> 187,400
<BONDS> 440,400
<COMMON> 100
45,900
0
<OTHER-SE> 185,300
<TOTAL-LIABILITY-AND-EQUITY> 1,030,100
<SALES> 697,600
<TOTAL-REVENUES> 709,500
<CGS> 547,900
<TOTAL-COSTS> 553,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,600
<INCOME-PRETAX> 40,400
<INCOME-TAX> 15,200
<INCOME-CONTINUING> 25,200
<DISCONTINUED> (31,000)
<EXTRAORDINARY> (16,300)
<CHANGES> 0
<NET-INCOME> (22,100)
<EPS-PRIMARY> (1.97)
<EPS-DILUTED> 0
</TABLE>
