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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.............FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-5989
ITEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-1658138
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2 NORTH RIVERSIDE PLAZA
SUITE 1900
CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 902-1515
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
------------------------
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the shares of Registrant's Common Stock, $1 par
value, held by nonaffiliates of Registrant was approximately $670,000,000 as of
March 25, 1994.
At March 25, 1994, 33,257,000 shares of Registrant's Common Stock, $1 par value,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the Registrant's Proxy Statement for the 1994 Annual Meeting
of Stockholders of Itel Corporation are incorporated by reference into Part III.
This document consists of 122 pages. Exhibit List begins on page 42.
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TABLE OF CONTENTS
PART I.
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PAGE
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Item 1. Business of the Company............................................... 3
Item 2. Properties............................................................ 7
Item 3. Legal Proceedings..................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders................... 7
Executive Officers of the Registrant.................................. 8
PART II.
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters............................................................. 9
Item 6. Selected Financial Data............................................... 10
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 11
Item 8. Consolidated Financial Statements and Supplementary Data.............. 18
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................ 18
PART III.
Item 10. Directors and Executive Officers of the Registrant.................... 41
Item 11. Executive Compensation................................................ 41
Item 12. Security Ownership of Certain Beneficial Owners and Management........ 41
Item 13. Certain Relationships and Related Transactions........................ 41
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....... 41
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PART I
ITEM 1. BUSINESS OF THE COMPANY.
GENERAL
Itel Corporation (the "Company" or "Itel"), which was incorporated in
Delaware in 1967, is engaged in (i) the distribution of wiring systems products
for voice, data and video networks and electrical power applications by Anixter
Inc. and its subsidiaries (collectively "Anixter"), (ii) the development and
distribution of products used in the cable television industry by ANTEC
Corporation and its subsidiaries (collectively "ANTEC"), and (iii) rail car
leasing by Itel Rail Corporation and its subsidiaries (collectively "Rail") (see
discussion below of the 1992 rail car transaction for the limited nature of the
Company's continuing interest in this business). In 1993, ANTEC was changed from
a division of Anixter to a subsidiary of the Company and the Company's interest
in ANTEC was later reduced to 53% following a public offering of ANTEC common
stock. In 1993 and 1992, the Company sold substantially all of its other
transportation services assets, except for one short-line railroad which is
currently being held for sale. In 1991, the Company sold the distribution
services business previously conducted by Itel Distribution Systems, Inc. ("Itel
Distribution") and all the stock of Great Lakes International, Inc. which
together with its subsidiaries (collectively "Great Lakes") was engaged in heavy
marine construction, primarily dredging. At the end of 1990, the Company sold
substantially all of its intermodal container leasing assets. For information
about these sales see Item 7 -- Financial Liquidity and Capital Resources --
Asset Sales and Other Dispositions and Note 3 of the Notes to the Consolidated
Financial Statements.
At December 31, 1993, the Company also had investments in securities of
other companies, including approximately 9% of the common stock of Santa Fe
Energy Resources, Inc. ("Energy") and approximately 9% of the common stock of
Catellus Development Corporation ("Real Estate"). In 1991, the Company sold its
15% investment in the common stock of Santa Fe Pacific Corporation ("Santa Fe")
and its 21% investment in the common stock of American President Companies, Ltd.
("APC"). The financing operations of Signal Capital Corporation and its
subsidiaries (collectively "Signal Capital") and certain remaining other
transportation services assets are being held for sale. See Note 3 of the Notes
to the Consolidated Financial Statements.
As of December 31, 1993, the Company had cumulative net operating loss
("NOL") carryforwards for Federal income tax purposes of approximately $345
million expiring primarily in 1995 through 2007, and investment tax credit
("ITC") carryforwards of approximately $16 million that expire between 1994 and
2001. Certain of these carryforwards have not been examined by the Internal
Revenue Service ("IRS") and, therefore, may be subject to adjustment. The
availability of tax benefits of NOL and ITC carryforwards to reduce the
Company's future Federal income tax liability is subject to various limitations
under the Internal Revenue Code of 1986, as amended. These carryforwards are not
applicable to ANTEC's results after September 1993. In addition, at December 31,
1993, various foreign subsidiaries of Itel had aggregate cumulative NOL
carryforwards for foreign income tax purposes of approximately $50 million which
are subject to various tax provisions of each respective country and expire
primarily between 1995 and 2003.
At December 31, 1993, the Company and its subsidiaries employed
approximately 4,600 persons. For information on segment and geographic data see
Note 14 of the Notes to the Consolidated Financial Statements.
ANIXTER
Anixter is a leading supplier of wiring systems, networking and
internetworking products for voice, data and video networks and electrical power
applications in the United States, Canada, Europe and parts of Asia. Anixter
stocks and sells a full line of these products from a network of 87 locations in
the United States, 21 in Canada, 20 in the United Kingdom, 23 in Continental
Europe, 2 in Mexico, 2 in Australia and single locations in Singapore, Hong Kong
and Ireland. Anixter sells approximately 80,000 products to over 60,000 active
customers and works with over 2,000 suppliers. Its customers include
international, national, regional and local companies that are end users of
these products and engage in manufacturing, communications, finance,
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education, health care, transportation, utilities and government. Also, Anixter
sells products to resellers such as contractors, installers, system integrators,
value added resellers, architects, engineers and wholesale distributors. The
average order size is about $1,000.
The products sold by Anixter fall into two broad categories. The first
category is communication (voice, data and video) products used to connect
personal computers, peripheral equipment, mainframe equipment and various
networks to each other. The products include an assortment of transmission media
(copper and fiber optic cable) and components, such as adapters, outlets, cable
assemblies, crossconnect systems, connectors, terminals, tools, test equipment
and power protection devices. Active data components for networking applications
include concentrators, intelligent hubs, multiplexers, transceivers, routers and
servers. Anixter sells products that are incorporated in local area networks
("LANs"), the internetworking of LANs to form wide area networks ("WANs") and
the increased use of fiber optic products in private networks, including factory
environments. It is expected that these markets will continue to grow at double
digit rates, with international growth somewhat outpacing U.S. growth. Anixter
has followed a strategy of regularly expanding its product lines and the
services that it provides to its customers. During 1993, Anixter began selling
and providing technological support for internetworking products, including
routers, as well as video-conferencing and network access products.
The second major product category is electrical wiring systems products
used for the transmission of electrical energy and control/monitoring of
industrial processes. These products include power cables, high temperature or
other critical environment cables, armored and control cable, instrumentation
and thermalcouple cable, portable power cable, shielded electronic process
cables and accessory products. Anixter is not a significant distributor to the
residential or commercial construction industries.
Prior to 1989, Anixter's operations were limited to the United States,
Canada, the United Kingdom and Belgium. In 1989, Anixter made a major commitment
to expand its operations into the international voice, data and video
communications markets. Since then, Anixter has opened businesses in France,
Germany, Italy, Norway, Spain, Sweden, Switzerland, Australia, Mexico, Portugal,
Singapore, The Netherlands, Austria and Hong Kong. Anixter also has resident
salespersons in Greece and Malaysia along with technical representatives in the
Czech Republic, Hungary and Poland. While several of these expansion businesses
achieved an operating profit in 1993 and 1992, the international expansion
program is still considered to be in the startup mode. Since 1988, Anixter has
experienced operating losses relating to the expansion program totalling
approximately $33 million.
An important element of Anixter's business strategy is to develop and
maintain close relationships with its key suppliers, which include the world's
leading manufacturers of networking and electrical wiring systems products. Such
relationships stress joint product planning, inventory management, technical
support, advertising and marketing. In support of this strategy, Anixter does
not compete with its suppliers in product design or manufacturing activities.
Anixter has developed a competitive advantage through its proprietary
computer system which connects all of its warehouses and sales offices
throughout the world. The system is designed for sales support, order entry,
inventory status, order tracking, credit review and material management. This
fully integrated system connects Anixter's 158 worldwide service centers through
more than 2,600 terminals. The computer system enables the sales staff to locate
products at any location and ship them within 24 hours. Anixter provides a high
level of customer service while maintaining a reasonable level of investment in
inventory and facilities.
Anixter competes with distributors and manufacturers who sell products
directly or through existing distribution channels to end users or other
resellers. In addition, Anixter's future performance could be subject to
economic downturns and possibly rapid changes in applicable technologies. To
guard against inventory obsolescence, Anixter has negotiated various return and
price protection agreements with its key suppliers. Although Anixter's
relationships with its suppliers are good, the loss of a major supplier could
have a temporary adverse effect on Anixter's business but would not have a
lasting impact since such products are available from alternate sources.
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ANTEC
ANTEC is a leading developer and supplier of optical transmission,
construction, rebuild and maintenance equipment for the broadband communications
industry. The ANTEC business was originally formed as a division of Anixter in
1969 and, in 1993, ANTEC became a separate subsidiary of Itel.
ANTEC's role in the development of new products is to identify new product
needs in the broadband communications industry and to work with strategic allies
that generally contribute extensive engineering and design services in
conjunction with ANTEC's engineers and then manufacture the product for sale by
ANTEC. These alliances allow ANTEC to develop innovative products while
minimizing its investment in engineering, facilities and equipment.
ANTEC is one of the leading suppliers to the cable market for fiber optic
products. ANTEC also supplies cable system operators with almost all of the
products required in a cable television system, including headend, distribution,
drop and in-home subscriber products. ANTEC serves its customers through an
efficient delivery network consisting of 23 sales and stocking locations in
North America. ANTEC maintains complete inventories and is able to provide
overnight as well as staged delivery of product on an "as needed" basis.
More than 95% of ANTEC's consolidated sales for the year ended December 31,
1993 came from sales to the cable industry. Demand for these products depends
primarily on capital spending by cable operators for constructing, rebuilding,
maintaining or upgrading their systems. The amount of capital spending and,
therefore, ANTEC's sales and profitability, are affected by a variety of
factors, including general economic conditions, access by cable operators to
financing, government regulation of cable operators, demand for cable services
and technological developments in the broadband communications industry.
Technological developments are occurring rapidly in the communications industry
and, while the effects of such developments are uncertain, they may have a
material adverse effect on the demand for ANTEC products and on the cable
industry as a whole. For example, technologies are being implemented that bypass
existing cable systems and permit the transmission of signals directly into
households.
Cable operators are subject to extensive regulation. For example, pursuant
to the Cable Act of 1992, the Federal Communications Commission (the "FCC") has
adopted regulations that govern cable operators. The regulations generally
provide, among other things, for rate rollbacks for basic tier cable service,
further rate reductions under certain circumstances and limitations on future
rate increases. In addition, the Cable Act of 1992 provides that commercial
broadcasting stations may elect (i) to require cable operators to carry their
stations, or (ii) to bar cable operators from carrying their stations unless the
cable operator agrees to pay to the station a "re-transmission consent fee."
Also in 1992, the FCC issued its "video dialtone" ruling which, among other
things, allows local telephone companies to transmit all types of enhanced
services, including interactive voice, video and data delivery in competition
with cable operators. Additionally, in February 1994, the FCC announced that it
intends to impose another rate cut of 7% for basic services. These regulations,
among others, could limit capital expenditures by cable operators and, thus,
could limit or reduce ANTEC's profitability. Moreover, changes in current
regulation are possible and could have a similar effect.
On August 24, 1993, a Federal district court judge in Alexandria, Virginia
declared unconstitutional, on First Amendment grounds, restrictions, as applied
to Bell Atlantic Corporation and six other regional phone companies, under the
1984 Cable Act that prevent local exchange telephone companies from providing
video programming to subscribers in their own telephone service area. It is
uncertain whether this ruling will be upheld on appeal, and it is unclear what
long-term effect, if any, this decision and related developments may have on the
cable industry in general or ANTEC's business prospects. Similar uncertainty is
created by proposed federal legislation to permit competition among cable
operators, telephone companies and other companies.
Almost all of the products supplied by ANTEC are manufactured for it by
domestic and foreign manufacturers. Approximately 23% of ANTEC's aggregate
purchases in 1993 were of products manufactured by AT&T, and many ANTEC
customers have demonstrated loyalty to AT&T products. In addition, approximately
57% of ANTEC's purchases in 1993 were from its ten largest suppliers. The loss
of a significant manufacturing source, such as AT&T, could adversely affect
ANTEC's business, although management
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believes that any such loss is unlikely to have a lasting impact on its
business, since such products are generally available from alternate sources.
There can be no assurance that the technology applications under
development by ANTEC and its strategic partners will be successfully developed
or, if they are successfully developed, that they will be widely used by cable
operators or that ANTEC will otherwise be able to successfully exploit these
technology applications. Furthermore, ANTEC's competitors may develop similar or
alternative new technology applications which, if successful, could have a
material adverse effect on ANTEC. ANTEC relies on strategic alliances with
various manufacturers for the development and production of new technology
applications. These strategic alliances are based on business relationships and
generally are not subject of written agreements expressly providing for the
alliance to continue for a significant period of time. The loss of a strategic
partner could have a material adverse effect on the development of the new
products under development with that partner.
The cable industry is highly concentrated with over 75% of U.S. domestic
subscribers being served by approximately twenty-five major multi-system
operators ("MSO's"). In 1993, approximately 58% of ANTEC's revenues were
obtained from sales to the twenty-five largest MSO's. A significant portion of
ANTEC's revenue is derived from sales to Tele-Communications, Inc. (together
with its affiliates, "TCI") aggregating $146.1 million, $86.7 million and $58.0
million for the years ended December 31, 1993, 1992 and 1991. In October, 1993,
TCI and Bell Atlantic Corporation jointly announced their agreement for the
acquisition of TCI and Bell Atlantic. In February, 1994, TCI and Bell Atlantic
jointly announced the termination of their acquisition agreement. A variety of
factors were identified, including the FCC rate cut, as the reasons for such
termination. In the termination announcement, TCI also indicated that it plans
to suspend its capital expenditure budget for 1994 by one-half pending
clarification of the FCC action. It is not known what effect, if any, the recent
FCC and TCI announcements will have on capital spending increases in general, or
on ANTEC's performance in particular. However, ANTEC believes that while capital
expenditures for some products by some operators may be adversely effected,
capital spending for infrastructure improvements and upgrades will continue and,
therefore, ANTEC does not anticipate a material adverse impact on its
performance as a result of these recent announcements.
All aspects of ANTEC's business are highly competitive. ANTEC competes with
national, regional and local manufacturers, distributors and wholesalers,
including companies larger than ANTEC, such as General Instrument Corporation
and Scientific-Atlanta, Inc. Various manufacturers who are suppliers to ANTEC
sell directly as well as through distributors into the cable marketplace. In
addition, because of the convergence of the cable, telecommunications and
computer industries and rapid technological development, new competitors may
seek to enter the cable market. Many of ANTEC's competitors or potential
competitors are substantially larger and have greater resources than ANTEC. The
principal methods of competition are product differentiation, performance and
quality; price and terms; and service, technical and administrative support.
The future success of ANTEC depends in part on its ability to attract and
retain key executive, marketing and sales personnel. Competition for qualified
personnel in the cable industry is intense, and the loss of certain key
personnel could have a material adverse effect on ANTEC. ANTEC has entered into
employment contracts with its executive officers. ANTEC also has a stock option
program designed to provide substantial incentives for its employees to remain
with ANTEC.
RAIL CAR LEASING
In June 1992, Itel and Rail completed a transaction with General Electric
Capital Corporation and certain of its affiliates ("GECC") pursuant to which
Rail contributed substantially all of its owned rail cars, subject to
approximately $170 million of debt, to a trust (the "Trust") of which Rail is a
99% beneficiary and the Trust contributed these rail cars, subject to the debt,
along with other rail cars the Trust received as a contribution from its 1%
beneficiary, to a partnership (the "Partnership") of which the Trust is a 99%
partner. The Partnership assumed the Rail debt and leased all of these
contributed rail cars, along with other rail cars it received as a contribution
from its other partners, to a subsidiary of GECC (the "Lessee"). These leases
(the "Leases") expire in 2004, with fixed rentals of approximately $153 million
annually. The Leases include the grant to the Lessee of an assignable fixed
price purchase option at the end of the term of the leases for all, but
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not less than all, of the rail cars for approximately $500 million. The Leases
are net leases under which the Lessee is responsible for maintenance and other
expenses of the rail cars and all obligations of the Lessee are unconditionally
guaranteed by GECC. Rail also assigned to GECC, for certain consideration,
substantially all of its contracts to lease rail cars from others.
Prior to the rail car transaction, most of Rail's cars, other than boxcars,
were leased to major railroads and shippers under fixed-rate leases which were
typically one to five years in length. The majority of these leases required
Rail to maintain the cars and provide other administrative services. The
utilization of grain hoppers was affected by, among other things, export demand,
domestic trade policies and weather. Prior to the rail car transaction, most of
Rail's boxcars were leased to small railroads and used primarily for
transportation by the paper and forest product industries. A majority of these
leases were long-term "per diem" leases. Per diem leases did not require fixed
rental payments. Instead, the rental paid by the lessee was a percentage of the
use charges ("car hire") earned by the lessee railroad for the use of the leased
equipment on the tracks of other railroads.
STOCK INVESTMENTS
At December 31, 1993, as the result of September 1988 acquisitions, other
purchases and Santa Fe's 1990 restructuring and related spin-offs of Energy and
Real Estate common stock, the Company owned 8,064,005 shares or approximately 9%
of Energy's common stock and 6,687,575 shares or approximately 9% of Real
Estate's common stock, both of which are listed on the New York Stock Exchange
(the "NYSE"). Energy and Real Estate are subject to the informational filing
requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, are required to file reports and other information with the
Securities and Exchange Commission.
In 1993, 1992 and 1991, the Company wrote down the value of its investments
in marketable equity securities by $25 million, $25 million and $50 million,
respectively.
ASSETS HELD FOR SALE
The principal assets held for sale at December 31, 1993 are those of Signal
Capital. The Company acquired Signal Capital in connection with the purchase of
a major rail car fleet in 1988. The finance business of Signal Capital has been
classified as assets held for sale in the Company's consolidated financial
statements since its acquisition. The finance business is being liquidated and
no material amounts of new loans or investments are being made by Signal
Capital. Since the date of acquisition the portfolio has been reduced from $1.44
billion to $175 million at December 31, 1993, including reductions of $82
million, $82 million and $157 million in 1993, 1992 and 1991, respectively. All
cash proceeds were used to reduce indebtedness.
ITEM 2. PROPERTIES.
See Item 1--Business of the Company--Rail Car Leasing and the Consolidated
Financial Statements. The Company's rail cars have been leased to GECC under the
Leases. Most of Anixter and ANTEC's facilities are leased. Certain of the debt
agreements of the Company's subsidiaries are secured by their assets (see Note 9
of the Notes to the Consolidated Financial Statements).
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company and its subsidiaries became
involved as plaintiffs or defendants in various legal proceedings. The claims
and counterclaims in such litigation, including those for punitive damages,
individually in certain cases and in the aggregate, involve amounts which may be
material. However, it is the opinion of the Company's management, based upon the
advice of its counsel, that the ultimate disposition of pending litigation will
not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of 1993, no matters were submitted to a vote of
the security holders.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the name, age as of March 25, 1994, position,
offices and certain other information with respect to the executive officers of
the Company. The term of office of each executive officer will expire upon the
appointment of his successor by the Board of Directors.
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Kirk Brewer, 38.............. Senior Vice President--Corporate & Investor Relations of Itel
since February 1992; Midwest Officer and Managing Director of
Georgeson & Co. from 1989 to February 1992; Officer and Group
Manager of Burson-Marsteller from 1982 to 1989.
Don Civgin, 32............... Vice President--Treasurer of Itel since December 1993;
Treasurer of Itel from March 1991 to December 1993; Assistant
Treasurer of Itel from 1988 to March 1991.
Rod F. Dammeyer, 53.......... Chief Executive Officer, President and Director of Itel since
January 1993; President and Director of Itel from 1985 to 1993.
Gary M. Hill, 46............. Senior Vice President--Finance of Itel since March 1991; Vice
President-- Finance of Itel from 1987 to March 1991.
James E. Knox, 56............ Senior Vice President, General Counsel and Secretary of Itel
since 1986.
John P. McNicholas Jr., 40... Vice President--Controller of Itel since May 1992; Controller
of Itel from March 1991 to May 1992; Corporate Controller of
Itel from 1987 to March 1991.
Philip F. Meno, 35........... Vice President--Taxes of Itel since May 1993; Director of Taxes
from January 1990 to May 1993; Tax Manager from 1986 to January
1990.
Samuel Zell, 52.............. Chairman of the Board of Directors of Itel since January 1993;
Chairman of the Board of Directors and Chief Executive Officer
of Itel from 1985 to 1993.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
A. MARKET INFORMATION
Itel Corporation's Common Stock is traded on the NYSE.
B. STOCK PRICES
The following table sets forth the high and low sales prices for the Common
Stock on the NYSE.
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1992
First Quarter.......................................... $19 3/8 $16 5/8
Second Quarter......................................... 18 3/8 16 1/8
Third Quarter.......................................... 19 1/4 16
Fourth Quarter......................................... 24 3/8 17 5/8
1993
First Quarter.......................................... $25 7/8 $20 1/4
Second Quarter......................................... 30 1/4 22 7/8
Third Quarter.......................................... 33 5/8 28
Fourth Quarter......................................... 30 5/8 25 1/8
1994
First Quarter (through March 25, 1994)................. $30 $26 5/8
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C. DIVIDENDS ON COMMON STOCK
The Company has not paid dividends on its Common Stock since 1979 and does
not anticipate declaring any such cash dividends in the foreseeable future.
Certain loan agreements and indentures require that the Company maintain a
minimum net worth or otherwise limit the Company's ability to declare dividends
or make any distribution to holders of any shares of capital stock, or redeem or
otherwise acquire such shares of the Company. Approximately $30 million is
available for such distributions under the most restrictive of these covenants.
D. NUMBER OF HOLDERS OF COMMON STOCK
There were approximately 6,000 holders of record of the Common Stock as of
March 25, 1994.
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ITEM 6. SELECTED FINANCIAL DATA.
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YEARS ENDED DECEMBER 31,
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1993 1992 1991 1990 1989
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(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
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Results of operations:
Revenues............................. $1,909.2 $1,682.1 $1,591.1 $1,617.4 $1,540.4
Operating income(a).................. 157.9 126.9 165.3 168.2 186.0
Interest expense and other, net...... (151.1) (181.7) (179.7) (174.7) (177.8)
Non-recurring items, net(b)(c)....... 64.0 -- -- -- --
Write-down of marketable equity
securities(d)..................... (25.0) (25.0) (79.4) (31.7) --
Income (loss) from continuing
operations........................ 16.1 (59.8) (57.7) (32.4) 1.8
Income (loss) from discontinued
operations........................ (1.3) (24.1) (6.8) 161.1 32.6
Extraordinary items, net(e).......... (16.0) (20.4) 8.8 -- --
Net income (loss).................... $ (1.2) $ (104.3) $ (55.7) $ 128.7 $ 34.4
Income (loss) per common and common
equivalent share(f):
Continuing operations........... $ .43 $ (2.26) $ (1.85) $ (.82) $ (.09)
Before extraordinary items...... .39 (3.09) (2.05) 2.60 .56
Net income (loss)............... (.14) (3.79) (1.79) 2.60 .56
Financial position at December 31:
Total assets......................... $2,494.4 $2,640.8 $2,829.5 $3,372.9 $3,674.3
Total debt........................... 1,581.5 1,874.4 1,789.6 2,080.4 2,306.2
Senior non-recourse debt --
principally Rail car leasing...... 1,104.7 1,148.8 -- -- --
Stockholders' equity(g)(h)........... 405.3 367.3 563.6 610.1 861.5
Book value per common and common
equivalent share(h)............... $ 12.28 $ 10.10 $ 14.96 $ 13.48 $ 15.64
Weighted average common and common
equivalent shares(f).............. 30,132 29,085 34,440 47,194 50,430
</TABLE>
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Notes:
(a) Operating income in 1992 includes $21.8 million of non-recurring operating
costs relating to severance and transition costs due to the rail car
transaction (see Note 7 of the Notes to the Consolidated Financial
Statements).
(b) Non-recurring items include an $84.5 million pre-tax gain on ANTEC Offering
in 1993 relating to the September 1993 initial public offering of shares of
common stock of ANTEC (see Note 4 of the Notes to the Consolidated
Financial Statements).
(c) The non-recurring pre-tax loss of $20.5 million in 1993 principally relates
to the write-down of miscellaneous investments and certain non-operating
assets to net realizable value.
(d) In 1993, 1992 and 1991, the Company wrote down the value of its investments
in marketable equity securities by $25.0 million, $25.0 million and $50.0
million, respectively. The remaining $29.4 million pre-tax charge in 1991
relates to the loss on sale of the Company's investment in Santa Fe. The
$31.7 million pre-tax charge in 1990 primarily relates to the recognized
loss in market value on other marketable equity securities.
(e) Extraordinary items in 1993, 1992 and 1991 represent the gain/(loss) net of
related income taxes on early extinguishment of senior and subordinated
debt at Itel and its subsidiaries.
(f) Weighted average common and common equivalent shares outstanding decreased
substantially from 1989 to 1992 primarily as a result of Itel's large
treasury stock purchases in 1992, 1991 and 1990. Consequently, the loss per
share in 1992 and 1991 was adversely impacted. In 1993, weighted average
common and common equivalent shares increased slightly due primarily to the
conversion of Series C convertible preferred stock into approximately 3.8
million shares of Common Stock in August 1993.
(g) Stockholders' equity reflects treasury stock purchases of $.3 million,
$114.3 million, $147.4 million, $187.6 million and $6.5 million in 1993,
1992, 1991, 1990 and 1989, respectively. No dividends on common stock were
declared or paid during any of the periods shown.
(h) Stockholders' equity includes unrealized losses on marketable equity
securities available-for-sale, net of deferred income tax benefit of $23.7
million, $49.1 million, $47.8 million, $112.9 million and $24.9 million at
December 31, 1993, 1992, 1991, 1990 and 1989, respectively.
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Asset Sales and Other Dispositions
Recapitalization Program: In 1990, the Company began a program of modifying
its capital structure by reducing certain senior and subordinated debt at Itel
and its subsidiaries and purchasing Common Stock. Over the last several years,
the Company also implemented a program of selling or otherwise monetizing
certain assets to fund the recapitalization program. Since the program began,
the Company has used proceeds to substantially reduce debt at the holding
company and subsidiary level and to repurchase approximately $450 million of
outstanding Common Stock. The financial liquidity and capital resources in 1993
and 1992 reflect the impact of Itel's recapitalization program.
ANTEC Separation: In July 1993, ANTEC, formerly a business division of
Anixter, was established as a separate and independent corporation through
Anixter's contribution of assets and liabilities of its ANTEC business division
to ANTEC and Anixter's distribution of 100% of the outstanding common stock of
ANTEC to Itel. In September 1993, Itel and ANTEC completed a public offering
(the "Offering") of shares of common stock of ANTEC. Net proceeds from the
Offering were approximately $157 million of which Itel, after considering the
redemption by ANTEC of preferred shares owned by Itel, received approximately
$97 million. Proceeds were used to reduce indebtedness. As a result of the
Offering, Itel's ownership of ANTEC common stock was reduced to 53%.
Liquidation of Signal Capital: Signal Capital has been classified as assets
held for sale since acquisition in connection with the purchase of a major rail
car fleet in 1988. The finance business is being liquidated and no material
amounts of new loans or investments are being made by Signal Capital. Since the
date of acquisition the portfolio has been reduced from $1.44 billion to $175
million at December 31, 1993, including reductions of $82 million, $82 million
and $157 million in 1993, 1992 and 1991, respectively.
Rail Car Transaction: In June 1992, Itel and Rail completed a transaction
with GECC pursuant to which Rail contributed substantially all of its owned rail
cars, subject to approximately $170 million of debt, to a Trust of which Rail is
a 99% beneficiary and the Trust contributed these rail cars, subject to the
debt, along with other rail cars the Trust received as a contribution from its
1% beneficiary, to a partnership (the "Partnership") of which the Trust is a 99%
partner. The Partnership assumed the Rail debt and leased all of these
contributed rail cars, along with other rail cars it received as a contribution
from its other partners, to a subsidiary of GECC (the "Lessee"). The Leases
expire in 2004, with fixed rentals of approximately $153 million annually. The
Leases include the grant to the Lessee of an assignable fixed price purchase
option at the end of the term of the Leases for all, but not less than all, of
the rail cars for approximately $500 million. The Leases are net leases under
which the Lessee is responsible for maintenance and other expenses of the rail
cars and all obligations of the Lessee are unconditionally guaranteed by GECC.
Rail also assigned to GECC, for certain consideration, substantially all of its
contracts to lease rail cars from others.
In June 1992, the Trust issued $998 million of 7 3/4% Notes (the "Trust
Notes") secured by the Trust's ownership interest in the Partnership. The net
proceeds were used to repay certain debt of Rail and Itel. The Trust Notes are
non-recourse to Itel.
Other Dispositions: In 1993 and 1992, the Company sold substantially all
of its other transportation services assets, except for one short-line railroad
which is currently being held for sale. In 1991, the Company sold its
investments in American President Companies, Ltd. ("APC"), its third party
distribution business, Great Lakes International, Inc. ("Great Lakes") and Santa
Fe for aggregate cash proceeds in excess of $500 million. Proceeds from the
sales were used to reduce debt or to purchase Common Stock.
Cash Flow
Consolidated net cash provided (used) by continuing operating activities
was $21.3 million for the year ended December 31, 1993 compared to ($5.5)
million in 1992. Cash provided (used) by continuing operating activities
increased due to higher operating income and lower interest costs caused by debt
reductions somewhat offset by higher investment in net working capital
attributable to Anixter and ANTEC sales volume
11
<PAGE> 12
increases. Consolidated cash provided (used) by net investing activities was
$11.7 million in 1993 versus ($18.7) million in 1992. Consolidated investing
activities in 1993 primarily reflect net receipts from Itel's investment in
Q-TEL (formerly Quadrum) of $23.7 million and proceeds from the sale of
miscellaneous marketable securities and other investments somewhat offset by two
ANTEC acquisitions aggregating $9.9 million and capital expenditures required at
Anixter and ANTEC. Consolidated cash used for net financing activities was
($141.4) million for the year ended 1993 in comparison to ($50.4) million for
the year ended 1992. The 1993 period includes approximately $156.6 million of
proceeds from the Offering and the paydown of a substantial amount of
subordinated debt. Consolidated net financing activities in 1992 reflect the
issuance of $998 million of Trust Notes and subsequent paydown of substantial
amounts of other debt. Cash from discontinued operations, net was $117.4 million
in 1993 versus $68.0 million in 1992. Discontinued operations in 1993 and 1992
include net proceeds from the sale of most of the Company's other transportation
services assets of $46 million and $8 million, respectively, and cash received
from the reduction of assets at Signal Capital of $82 million in both years.
Consolidated net cash provided (used) by continuing operating activities
was ($5.5) million for the year ended December 31, 1992 compared to $34.4
million in 1991. This decrease was due primarily to higher investment in net
working capital attributable to Anixter and ANTEC sales volume increases and
severance and transition payments due to the rail car transaction. Consolidated
cash provided (used) by net investing activities was ($18.7) million in 1992
versus $209.4 million in 1991. Consolidated cash provided from net investing
activities in 1991 reflects significant proceeds from marketable securities
sales, primarily Santa Fe. Consolidated investing activities in 1992 reflect
significantly lower purchases of rail equipment due to the rail car transaction.
Consolidated cash used for net financing activities was ($50.4) million for the
year ended 1992 in comparison to ($442.0) million for the year ended 1991.
Consolidated net financing activities in 1992 reflect the issuance of $998
million of Trust Notes and subsequent paydown of substantial amounts of other
debt. Cash used for net financing activities in 1991 reflects the use of
proceeds from significant asset sales to repay debt. The consolidated cash used
for net financing activities in both years reflects large purchases of treasury
stock, principally from Henley. Cash from discontinued operations, net was $68.0
million in 1992 versus $170.7 million in 1991. Discontinued operations in 1992
includes net proceeds from the sale of certain of the Company's other
transportation services assets and cash received from the reduction of assets at
Signal Capital. Discontinued operations in 1991 include net proceeds from the
sales of the Company's investments in Great Lakes, APC and the third party
distribution business aggregating $183 million and cash received from the
reduction of assets at Signal Capital of $157 million.
Based upon discussions with financial analysts and similar disclosures
provided by competitors of Itel's businesses, the Company considers operating
income before amortization of goodwill and operating income plus depreciation
and amortization of goodwill ("cash flow") to be meaningful and readily
comparable measures of Itel's relative performance. However, with the completion
of the rail car transaction in June 1992, the ongoing fixed cash flow of Rail
car leasing is available only to service interest and principal on the debt of
the Trust and the Partnership. Cash flow by the Company's major business
segments is presented in the following table. The decline in 1992 is due to the
rail car transaction.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Anixter........................................................ $ 69.5 $ 53.0 $ 50.3
ANTEC.......................................................... 27.2 16.4 11.6
All other...................................................... (8.9) (8.3) (10.2)
------ ------ ------
87.8 61.1 51.7
Rail car leasing............................................... 152.1 141.7 181.1
------ ------ ------
$239.9 $202.8 $232.8
------ ------ ------
------ ------ ------
</TABLE>
Consolidated net interest expense was $151.1 million, $181.7 million and
$179.7 million for the years ended December 31, 1993, 1992 and 1991,
respectively. The Company has entered into interest rate agreements which
effectively fix or cap, for a period of time, the interest rate on a portion of
its floating rate
12
<PAGE> 13
obligations. As a result, the interest rate on substantially all debt
obligations at December 31, 1993 is fixed or capped.
Financings
On December 13, 1993, the Company obtained a $250 million senior bank term
loan ("Term Loan") from a group of banks. The Term Loan is secured by the
Company's investments in the capital stock of Anixter, ANTEC and Signal Capital
and its common shares of Energy and Real Estate aggregating $730 million at net
book value at December 31, 1993. The Term Loan matures in 1996. The net proceeds
from the Term Loan were used exclusively to repay other debt of Itel.
In August 1993, Itel's Series C convertible preferred stock was converted
into approximately 3.8 million shares of Common Stock.
In July 1993, ANTEC executed an agreement with a group of banks for a new
$100 million revolving credit facility. The revolving line of credit, which
matures in 1997 and is extendible at the banks' option for one additional year,
was reduced to $50 million upon completion of the Offering. Part of the proceeds
from the new ANTEC revolving credit facility were used to repay a portion of a
secured revolving line of credit of Anixter. The ANTEC revolving credit facility
is non-recourse to Itel.
In May 1993, the Anixter secured revolving line of credit was extended to
1996 and was increased to $300 million. The revolving line of credit may be
extended for two additional one-year periods at the option of the lenders. Upon
completion of the new ANTEC revolving credit facility in July, Anixter's secured
revolving line of credit was reduced to $210 million. In November, the Company
increased the revolving line of credit to $220 million.
At December 31, 1993, $88.6 million was available under the bank revolving
lines of credit at Anixter, most of which was available to Itel for general
corporate purposes.
Debt Maturities and Repayments
Current maturities of non-recourse debt of $67.8 million at December 31,
1993 represent senior debt related to the Rail car leasing business to be
serviced from Rail car leasing cash flow. In 1993 and 1992, Rail car leasing
retired at maturity approximately $62.2 million and $17.9 million of
non-recourse debt, respectively.
In 1993, the Company retired or called for redemption approximately $558
million of the face value of subordinated debt at Itel (including $180 million
of 13% Senior Subordinated Notes ("13% Notes") called on December 17, 1993 for
January 18, 1994 redemption and $41 million of 13% Notes called on January 27,
1994 for February 28, 1994 redemption). In 1992 and 1991, respectively, the
Company retired $688 million and $79 million of the face value of senior and
subordinated debt at Itel and its subsidiaries.
NOL Carryforwards
To the extent of certain taxable income realized by the Company, liquidity
is enhanced by potential tax benefits. As of December 31, 1993, the Company had
cumulative NOL carryforwards for Federal income tax purposes of approximately
$345 million expiring principally in 1995 through 2007, and ITC carryforwards of
approximately $16 million expiring in 1994 through 2001. Certain of these
carryforwards have not been examined by the IRS and, therefore, may be subject
to adjustment. The availability of tax benefits of NOL and ITC carryforwards to
reduce the Company's future Federal income tax liability is subject to various
limitations under the Internal Revenue Code of 1986, as amended (the "Code"),
which may limit their use in the event of substantial ownership changes of
Itel's stock as defined in the Code. Such ownership changes may not be within
the control of the Company. In addition, at December 31, 1993, various foreign
subsidiaries of Itel had aggregate cumulative NOL carryforwards for foreign
income tax purposes of approximately $50 million which are subject to various
provisions of each respective country and expire between 1995 and 2003.
13
<PAGE> 14
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"). Among other things,
SFAS No. 109 requires recognition of deferred tax liability on the temporary
differences between financial statement and income tax bases of assets and
liabilities, measured at enacted tax rates, and the reduction of the liability
for deferred taxes for NOL and ITC carryforwards, to the extent that realization
of such carryforwards are more likely than not. Accordingly, the Company has
reduced its deferred tax liability for its Federal and state NOL and ITC
carryforwards in its consolidated financial statements. The Company's partial
recognition of Federal and state future tax benefits is due to the expected
utilization of those benefits based upon future receipt of substantial taxable
income, specifically resulting from (a) over $546 million of existing temporary
differences at December 31, 1993, primarily rail car depreciation, which will
reverse prior to 2005 and (b) projected consolidated taxable income including
the guaranteed minimum future rentals from the Leases of $153 million annually
through 2004 and the discontinuance of the substantial capital expenditure
program that gave rise to a significant portion of the NOL. Management
anticipates that increases in taxable income during the carryforward period will
arise primarily as a result of the factors mentioned above.
The following table presents the Company's, exclusive of ANTEC, scheduled
reversal of existing temporary differences and the expiration dates and amounts
of the Company's, exclusive of ANTEC, domestic NOL and ITC carryforwards at
December 31, 1993.
<TABLE>
<CAPTION>
NET REVERSING EXPIRING
TEMPORARY DIFFERENCES EXPIRING NOL ITC
--------------------- ------------ --------
(IN MILLIONS)
<S> <C> <C> <C>
1994................................................. $ (83.9) $ -- $ 7.1
1995-1999............................................ 63.7 106.4 7.3
2000-2004............................................ 567.1 35.4 1.7
2005-2007............................................ -- 203.2 --
------- ------------ --------
$ 546.9 $345.0 $ 16.1
------- ------------ --------
------- ------------ --------
</TABLE>
At December 31, 1993, 1992 and 1991, consolidated valuation allowances for
its tax carryforwards are $55.4 million, $58.4 million and $62.1 million,
respectively, including valuation allowances on its foreign NOLs at December 31,
1993, 1992, 1991. The effect of the Revenue Reconciliation Act of 1993 enacted
in August 1993 was not significant to the Company's consolidated results of
operations.
Liquidity Considerations and Other
Certain debt agreements entered into by Itel's subsidiaries contain various
restrictions including restrictions on payments to Itel. Such restrictions have
not had nor are expected to have an adverse impact on Itel's ability to meet its
cash obligations.
At December 31, 1993, the market value of the Company's investment in
marketable equity securities was below cost by $36.5 million. In accordance with
generally accepted accounting principles, the Company's investment in marketable
equity securities has been reflected at market value in the consolidated balance
sheet. The Company continuously evaluates the market value of its marketable
securities held for investment in relation to its historical cost to determine
whether a decline in market value is "other than temporary". When such decline
in market value is deemed to be other than temporary, the Company records such
decline as a charge against income. In 1993, 1992 and 1991, the Company wrote
down the value of its investments in marketable equity securities by $25.0
million, $25.0 million and $50.0 million, respectively.
CAPITAL EXPENDITURES
Consolidated capital expenditures were $13.4 million, $17.0 million and
$75.1 million for 1993, 1992 and 1991, respectively. Anixter capital
expenditures were $11.4 million, $6.3 million and $8.4 million for 1993, 1992
and 1991, respectively. ANTEC capital expenditures were $2.0 million, $1.7
million and $2.0 million for 1993, 1992 and 1991, respectively. Rail car leasing
capital expenditures were zero, $9.0 million and $64.7 million for 1993, 1992
and 1991, respectively. Due to the rail car transaction, future rail car leasing
capital
14
<PAGE> 15
expenditures, if any, will be funded from the proceeds of any dispositions of
the rail cars involved in that transaction.
RESULTS OF OPERATIONS
As a result of the rail car transaction with GECC in June 1992, the
revenues and operating income of Rail car leasing, though essentially fixed, are
lower than such results prior to the rail car transaction. Further, the ongoing
fixed cash flow of Rail car leasing is available only to service interest and
principal on the Trust Notes and the debt of the Partnership.
Earnings Per Share: Weighted average common and common equivalent shares
outstanding decreased substantially from 1989 to 1992 primarily as a result of
Itel's large treasury stock purchases in 1992, 1991 and 1990. Consequently, the
loss per share in 1992 and 1991 was adversely impacted. In 1993, weighted
average common and common equivalent shares increased slightly due primarily to
the conversion of Series C convertible preferred stock into approximately 3.8
million shares of Common Stock in August 1993.
Quarter ended December 31, 1993: Loss from continuing operations for the
fourth quarter of 1993 was ($17.5) million compared with ($29.2) million in the
fourth quarter of 1992. The fourth quarter of 1993 and 1992 each include pre-tax
charges associated with the write-down of marketable equity securities of $25.0
million. Net loss was ($22.6) million and ($53.6) million in the fourth quarter
of 1993 and 1992, respectively. The Company retired or called for redemption
approximately $206.0 million and $65.3 million of its subordinated and senior
debt resulting in an extraordinary net loss of ($5.1) million and ($2.4) million
in the fourth quarters of 1993 and 1992, respectively. The loss from
discontinued operations in the fourth quarter of 1992 includes a ($16.1) million
net loss from the discontinuance of the other transportation services segment.
Consolidated revenues during the period, which includes revenues of Rail
car leasing, increased 24% to $508.5 million, primarily reflecting increased
volume at Anixter and ANTEC. Anixter revenues increased 21% to $359.7 million
from $296.7 million reflecting increased volume in its U.S. wiring systems
business and significantly higher volume in its European operations. ANTEC
revenues increased 48% to $110.6 million in the fourth quarter of 1993 compared
to $74.7 million in 1992 due to the upswing in spending by cable system
operators and the acceptance of products developed by ANTEC.
Consolidated operating income, including Rail car leasing, increased 27% to
$39.4 million from $31.1 million in the fourth quarter of 1992 and consolidated
operating income before amortization of goodwill increased 23% to $45.0 million
from $36.5 million in the fourth quarter of 1992. Anixter's operating income
before amortization of goodwill increased 78% to $16.4 million from $9.2 million
in the fourth quarter of 1992 due to stronger European and U.S. Distribution
earnings. The 1992 period also contained special charges related to a terminated
equity participation plan. ANTEC's operating income before amortization of
goodwill more than doubled to $7.1 million from $3.3 million in 1992 reflecting
significantly increased volume.
Consolidated net interest expense and other for the fourth quarter declined
to $36.5 million from $48.8 million in 1992 due to the use of proceeds from the
continued monetization of Itel's non-core assets to significantly reduce
high-cost debt.
Year ended December 31, 1993: Income (loss) from continuing operations was
$16.1 million in 1993 compared with ($59.8) million in 1992. Results of
continuing operations in 1993 include an $84.5 million pre-tax gain on the
Offering and a ($20.5) million non-recurring pre-tax loss principally relating
to the write-down of miscellaneous investments and certain non-operating assets
to net realizable value. Operating income in 1992 includes a $21.8 million
non-recurring operating charge related to the rail car transaction. Results of
continuing operations in both 1993 and 1992 include pre-tax charges associated
with the write-down of marketable equity securities of $25.0 million. Net loss
was ($1.2) million and ($104.3) million for the years ended December 31, 1993
and 1992, respectively. The loss from discontinued operations in 1992 includes a
($16.1) million net loss on the discontinuance of the other transportation
services segment. The Company retired or called for redemption a significant
amount of its subordinated and senior debt resulting in an extraordinary net
loss of ($16.0) million and ($20.4) million in 1993 and 1992, respectively.
15
<PAGE> 16
Consolidated revenues for the year ended December 31, 1993, which includes
Rail car leasing, increased 14% to approximately $1.9 billion from $1.7 billion
in 1992 primarily reflecting increased volume at Anixter and ANTEC. Anixter
revenues rose 14% to $1.3 billion resulting from the continued growth of the
U.S. wiring systems business and the continuing worldwide expansion. ANTEC
revenues increased 42% to $427.6 million in 1993 compared to 1992 due to the
upswing in spending by cable system operators and the acceptance of products
developed by ANTEC. More than 95% of ANTEC's consolidated sales for the year
ended December 31, 1993 came from sales to the cable industry. Demand for these
products depends primarily on capital spending by cable operators for
constructing, rebuilding, maintaining or upgrading their systems. In February
1994, the FCC announced its intention to impose a 7% rate reduction for basic
cable services and ANTEC's largest customers announced it may reduce its capital
expenditure budget for 1994. However, the Company believes that while capital
expenditures for some products by some operators may be adversely affected,
capital spending for infrastructure improvements and upgrades will continue and,
therefore, the Company does not anticipate a material adverse impact on its
performance as a result of these recent announcements. Rail car leasing revenue
in 1993 decreased to $153.0 million from $217.5 million due to the effect of the
rail car transaction in June 1992.
Consolidated operating income, including Rail car leasing, was $157.9
million compared with $148.7 million (before the $21.8 million non-recurring
operating charge) in 1992. Consolidated operating income before amortization of
goodwill and the non-recurring operating charge increased to $179.4 million from
$166.3 million in 1992. Anixter operating income before amortization of goodwill
for 1993 increased 36% to $61.1 million due to improved margins and volume at
U.S. distribution offset slightly by increased spending in international
markets. Net start-up losses from recently established foreign operations were
($4.4) million in 1993 compared to ($2.5) million in 1992. The 1992 period also
contained special charges related to a terminated equity participation plan.
ANTEC's operating income before amortization of goodwill increased 70% to $25.2
million in 1993 from $14.8 million in 1992 reflecting significantly increased
volume. Rail car leasing operating income before amortization of goodwill
increased to $102.4 million from $93.5 million in 1992. Rail car leasing results
in 1992 include a $21.8 million non-recurring operating charge relating to the
rail car transaction.
Consolidated net interest expense and other for 1993 declined to $151.1
million from $181.7 million in 1992 due to the use of proceeds from the 1992
rail car transaction and the continued monetization of Itel's non-core assets to
significantly reduce high-cost debt.
Year ended December 31, 1992: Loss from continuing operations was ($59.8)
million in 1992 compared with ($57.7) million in 1991. Operating income in 1992
includes a $21.8 million non-recurring operating charge related to the rail car
transaction. Results of continuing operations in 1992 and 1991 include pre-tax
charges associated with the sale and write-down of marketable equity securities
of $25.0 million and $79.4 million, respectively. Net loss was ($104.3) million
and ($55.7) million for the years ended December 31, 1992 and 1991,
respectively. The loss from discontinued operations in 1992 includes a ($16.1)
million net loss on the disposition of certain other transportation services
assets. The loss from discontinued operations in 1991 includes a ($14.6) million
net loss on the sale of APC and Great Lakes. The Company retired a significant
amount of its subordinated and senior debt resulting in an extraordinary net
gain (loss) of ($20.4) million and $8.8 million in 1992 and 1991, respectively.
Consolidated revenues for the year ended December 31, 1992, which includes
revenues of Rail car leasing, increased 6% to approximately $1.7 billion from
$1.6 billion in 1991 primarily reflecting increased volume at Anixter and ANTEC.
Anixter revenues increased 13% to $1.2 billion reflecting strong U.S. data
markets and significantly higher European volume. ANTEC revenues increased 17%
to $301.0 million due to stronger fiber optics sales. Rail car leasing revenues
decreased to $217.5 million from $307.0 million primarily due to the effect of
the June 1992 rail car transaction.
Consolidated operating income before the $21.8 million non-recurring
operating charge was $148.7 million compared with $165.3 million in 1991.
Consolidated operating income before the non-recurring operating charge and
amortization of goodwill decreased to $166.3 million from $177.8 million in
1991. Anixter operating income before amortization of goodwill for 1992
increased 7% to $44.8 million due to lower European losses and stronger U.K.
results partially offset by lower Canadian earnings. Net start-up losses from
16
<PAGE> 17
recently established foreign operations decreased to ($2.5) million in 1992 from
($9.6) million in 1991. ANTEC's operating income before amortization of goodwill
increased 48% to $14.8 million in 1992 from $10.0 million in 1991 reflecting
significantly increased volume. Rail car leasing operating income before
amortization of goodwill decreased to $93.5 million in 1992 from $136.4 million
in 1991 reflecting the rail car transaction.
Consolidated net interest expense and other for 1992 was $181.7 million
compared to $179.7 million in 1991. Results in 1992 reflect the effects of debt
reduction and lower interest costs following the 1991 sales of the Company's
investments in APC, Santa Fe and Great Lakes, and the 1992 rail car transaction
offset by the effect of the Company's treasury stock purchases and lower
investment income. Net interest expense includes the carrying costs on the
remaining marketable equity securities of approximately $25 million for the year
ended December 31, 1992.
Year ended December 31, 1991: Loss from continuing operations was ($57.7)
million compared with ($32.4) million in 1990. Results in both years include
pre-tax charges associated with the sale and write-down of marketable equity
securities of $79.4 million and $31.7 million in 1991 and 1990, respectively.
Net income (loss) was ($55.7) million and $128.7 million for the years ended
December 31, 1991 and 1990, respectively. The loss from discontinued operations
in 1991 includes a ($14.6) million net loss on the sales of APC and Great Lakes.
Income from discontinued operations in 1990 primarily reflects a $154.9 million
net gain on the sale of the Company's container leasing assets. In 1991, the
Company retired approximately $78.9 million of the face value of its
subordinated debt resulting in an extraordinary net gain of $8.8 million.
Consolidated revenues for the year ended December 31, 1991 decreased
slightly to approximately $1.6 billion. Anixter revenues, which included the
start-up operations in Europe, increased 5% over 1990. ANTEC revenues declined
21% from 1990 due to significantly lower cable industry spending. Rail car
leasing revenue was $307.0 million, slightly lower than 1990 primarily due to
continued softness in the grain car leasing market.
Consolidated operating income was $165.3 million compared with $168.2
million in 1990. Consolidated operating income before amortization of goodwill
was $177.8 million compared with $180.8 million in 1990. Anixter operating
income before amortization of goodwill for 1991 increased 14% to $42.0 million.
Net start-up losses from recently established foreign operations were ($9.6)
million and ($10.1) million in 1991 and 1990, respectively. ANTEC's operating
income before amortization of goodwill decreased to $10.0 million in 1991 from
$22.0 million in 1990 due to the poor cable television market. Rail car leasing
operating income before amortization of goodwill was $136.4 million, up slightly
from 1990 due to lower maintenance costs, partially offset by lower rental
revenues.
Net interest expense and other for the year was $179.7 million compared to
$174.7 million in 1990 as the effect of the Company's treasury stock purchases
was partially offset by the effects of debt reduction following the 1991 sales
of the Company's investments in APC, Santa Fe and Great Lakes and excess
proceeds from the sale of the Company's container leasing assets at the end of
1990. Net interest expense includes the carrying costs on marketable equity
securities of approximately $60 million and $70 million for the years ended
December 31, 1991 and 1990, respectively.
Impact of Inflation: Inflation has slowed in recent years and is currently
not an important determinant of Anixter and ANTEC's results of operations due,
in part, to rapid inventory turnover. Due to the rail car transaction, inflation
is currently not a determinant of the Company's rail car leasing business
results of operations.
17
<PAGE> 18
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors...................................... 20
Consolidated Balance Sheets......................................... 21
Consolidated Statements of Operations............................... 23
Consolidated Statements of Cash Flows............................... 25
Consolidated Statements of Stockholders' Equity..................... 27
Notes to the Consolidated Financial Statements...................... 28
Supplementary Financial Data (Unaudited)............................ 40
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
18
<PAGE> 19
[This page left intentionally blank]
19
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Itel Corporation
We have audited the accompanying consolidated balance sheets of Itel
Corporation as of December 31, 1993 and 1992, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1993. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Itel
Corporation at December 31, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
Our audits were conducted for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The accompanying
supplemental balance sheets at December 31, 1993 (page 22) and supplemental
statements of operations for the years ended December 31, 1993 and 1992 (page
24) and supplemental statements of cash flows for the year ended December 31,
1993 (page 26) are presented for purposes of additional analysis and are not a
required part of the consolidated financial statements. Such information has
been subjected to the auditing procedures applied in our audits of the
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the consolidated financial statements taken as
a whole.
ERNST & YOUNG
Chicago, Illinois
February 8, 1994
20
<PAGE> 21
ITEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................................... $ 31,000 $ 22,000
Restricted cash......................................................................... 21,500 24,500
Accounts receivable (net of allowances for doubtful accounts of $6,200 and $10,700,
respectively)......................................................................... 296,700 246,500
Inventories, primarily finished goods................................................... 322,200 261,600
Other assets............................................................................ 9,300 11,500
---------- ----------
Total current assets............................................................. 680,700 566,100
Property, at cost:
Rental equipment--rail cars............................................................. 1,388,600 1,395,000
Other................................................................................... 68,500 58,300
---------- ----------
1,457,100 1,453,300
Accumulated depreciation................................................................ (412,500) (357,400)
---------- ----------
Net property..................................................................... 1,044,600 1,095,900
Goodwill (net of accumulated amortization of $93,800 and $72,300, respectively)........... 418,500 437,600
Discontinued and assets held for sale, net................................................ 191,100 337,700
Marketable equity securities available-for-sale (cost of $163,000 and $191,300,
respectively)........................................................................... 126,400 116,900
Other assets.............................................................................. 33,100 86,600
---------- ----------
$2,494,400 $2,640,800
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 173,200 $ 136,500
Accrued expenses........................................................................ 124,300 138,500
Current maturities of long-term debt--subordinated...................................... -- 74,300
--senior, non-recourse to Itel....................... 67,800 62,200
---------- ----------
Total current liabilities........................................................ 365,300 411,500
Deferred income taxes, net................................................................ 99,600 84,800
Other liabilities......................................................................... 12,300 13,900
Long-term debt--subordinated.............................................................. 238,500 496,600
--senior.................................................................... 238,300 154,700
--senior, non-recourse to Itel.............................................. 1,036,900 1,086,600
---------- ----------
Total liabilities................................................................ 1,990,900 2,248,100
Minority interests........................................................................ 98,200 25,400
Stockholders' equity:
Series C convertible preferred stock--zero and 1,702,525 shares issued and outstanding,
respectively.......................................................................... -- 83,600
Common stock--100,000,000 shares authorized, 33,010,000 and 28,080,000 shares issued and
outstanding, respectively............................................................. 33,000 28,100
Capital surplus......................................................................... 383,500 281,200
Retained earnings....................................................................... 22,400 26,700
Cumulative translation adjustments...................................................... (9,900) (3,200)
---------- ----------
429,000 416,400
Unrealized losses on marketable equity securities available-for-sale (net of deferred
income tax benefit)................................................................... (23,700) (49,100)
---------- ----------
Total stockholders' equity....................................................... 405,300 367,300
---------- ----------
$2,494,400 $2,640,800
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to the consolidated financial statements.
21
<PAGE> 22
ITEL CORPORATION
SUPPLEMENTAL BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------------------
RAIL CAR
CONSOLIDATED ANIXTER ANTEC LEASING ALL OTHER
------------ -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 31,000 $ 22,600 $ 1,100 $ -- $ 7,300
Restricted cash........................................... 21,500 -- -- 21,500 --
Accounts receivable, net.................................. 296,700 228,500 55,200 12,700 300
Inventories, primarily finished goods..................... 322,200 240,300 81,900 -- --
Other assets.............................................. 9,300 4,100 700 2,300 2,200
------------ -------- -------- ---------- ---------
Total current assets............................... 680,700 495,500 138,900 36,500 9,800
Property, at cost:
Rental equipment--rail cars............................... 1,388,600 -- -- 1,388,600 --
Other..................................................... 68,500 52,500 13,800 -- 2,200
------------ -------- -------- ---------- ---------
1,457,100 52,500 13,800 1,388,600 2,200
Accumulated depreciation.................................. (412,500) (25,700) (8,300) (376,400) (2,100)
------------ -------- -------- ---------- ---------
Net property....................................... 1,044,600 26,800 5,500 1,012,200 100
Goodwill, net............................................... 418,500 193,900 92,300 132,300 --
Discontinued and assets held for sale, net.................. 191,100 -- -- -- 191,100
Marketable equity securities available-for-sale, net........ 126,400 -- -- -- 126,400
Other assets................................................ 33,100 2,100 2,300 12,600 16,100
------------ -------- -------- ---------- ---------
$2,494,400 $718,300 $239,000 $1,193,600 $ 343,500
------------ -------- -------- ---------- ---------
------------ -------- -------- ---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 173,200 $128,800 $ 44,400 $ -- $ --
Accrued expenses.......................................... 124,300 56,400 20,400 10,200 37,300
Current maturities of long-term debt--subordinated........ -- -- -- -- --
--senior, non-recourse
to Itel............... 67,800 -- -- 67,800 --
------------ -------- -------- ---------- ---------
Total current liabilities.......................... 365,300 185,200 64,800 78,000 37,300
Deferred income taxes, net.................................. 99,600 (18,300) (2,600) 277,000 (156,500)
Other liabilities........................................... 12,300 11,300 -- -- 1,000
Intercompany payable (receivable)........................... -- 91,700 1,400 -- (93,100)
Long-term debt--subordinated................................ 238,500 -- -- -- 238,500
--senior...................................... 238,300 188,300 -- -- 50,000
--senior, non-recourse to Itel................ 1,036,900 -- 18,000 1,018,900 --
------------ -------- -------- ---------- ---------
Total liabilities.................................. 1,990,900 458,200 81,600 1,373,900 77,200
Minority interests.......................................... 98,200 8,000 -- 16,900 73,300
Stockholders' equity:
Common stock.............................................. 33,000 300 200 -- 32,500
Capital surplus........................................... 383,500 329,000 152,400 -- (97,900)
Retained earnings......................................... 22,400 (68,300) 4,900 (197,200) 283,000
Cumulative translation adjustments........................ (9,900) (8,900) (100) -- (900)
------------ -------- -------- ---------- ---------
429,000 252,100 157,400 (197,200) 216,700
Unrealized losses on marketable equity securities
available-for-sale, net................................. (23,700) -- -- -- (23,700)
------------ -------- -------- ---------- ---------
Total stockholders' equity......................... 405,300 252,100 157,400 (197,200) 193,000
------------ -------- -------- ---------- ---------
$2,494,400 $718,300 $239,000 $1,193,600 $ 343,500
------------ -------- -------- ---------- ---------
------------ -------- -------- ---------- ---------
</TABLE>
Supplemental consolidating data are shown for Anixter, ANTEC, Rail car leasing
and All other. Transactions between Anixter, ANTEC, Rail car leasing and All
other have been eliminated from the consolidated column.
22
<PAGE> 23
ITEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
CONSOLIDATED
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Revenues -- Anixter................................... $ 1,328,600 $ 1,163,600 $ 1,025,800
-- ANTEC..................................... 427,600 301,000 258,300
-- Rail car leasing.......................... 153,000 217,500 307,000
----------- ----------- -----------
1,909,200 1,682,100 1,591,100
Cost of operations:
Cost of sales....................................... (1,319,700) (1,092,800) (948,200)
Operating expense................................... (49,900) (63,000) (81,300)
Marketing and administration........................ (355,400) (328,300) (318,000)
Maintenance expense................................. (4,800) (31,700) (65,800)
Rail car leasing non-recurring operating expense.... -- (21,800) --
Amortization of goodwill............................ (21,500) (17,600) (12,500)
----------- ----------- -----------
(1,751,300) (1,555,200) (1,425,800)
----------- ----------- -----------
Operating income...................................... 157,900 126,900 165,300
Other (expenses) income:
Interest expense and other.......................... (164,600) (189,500) (199,200)
Interest income and other........................... 13,500 7,800 19,500
Non-recurring items, net (including an $84.5 million
gain on ANTEC offering).......................... 64,000 -- --
Write-down of marketable equity securities.......... (25,000) (25,000) (79,400)
----------- ----------- -----------
Income (loss) from continuing operations
before income taxes................................. 45,800 (79,800) (93,800)
Income tax (expense) benefit.......................... (29,700) 20,000 36,100
----------- ----------- -----------
Income (loss) from continuing operations.............. 16,100 (59,800) (57,700)
Loss from discontinued operations
(net of related taxes).............................. (1,300) (24,100) (6,800)
----------- ----------- -----------
Income (loss) before extraordinary items.............. 14,800 (83,900) (64,500)
Extraordinary items (net of related taxes)............ (16,000) (20,400) 8,800
----------- ----------- -----------
Net loss.............................................. (1,200) (104,300) (55,700)
Preferred stock dividends and amortization............ (3,100) (6,100) (6,100)
----------- ----------- -----------
Loss applicable to common stock....................... $ (4,300) $ (110,400) $ (61,800)
----------- ----------- -----------
----------- ----------- -----------
Income (loss) per common and common equivalent share:
Continuing operations............................... $ .43 $(2.26) $(1.85)
Before extraordinary items.......................... $ .39 $(3.09) $(2.05)
Net loss............................................ $(.14) $(3.79) $(1.79)
------ ------ ------
------ ------ ------
</TABLE>
See accompanying notes to the consolidated financial statements.
23
<PAGE> 24
ITEL CORPORATION
SUPPLEMENTAL STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
ANIXTER ANTEC RAIL CAR LEASING ALL OTHER
------------------------- --------------------- -------------------- --------------------
1993 1992 1993 1992 1993 1992 1993 1992
----------- ----------- --------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 1,328,600 $ 1,163,600 $ 427,600 $ 301,000 $153,000 $ 217,500 $ -- $ --
Cost of operations:
Cost of sales.............. (975,300) (850,800) (344,400) (242,000) -- -- -- --
Operating expense.......... -- -- -- -- (49,900) (63,000) -- --
Marketing and
administration........... (287,600) (264,400) (57,800) (43,900) (700) (11,400) (9,300) (8,600)
Maintenance expense........ (4,600) (3,600) (200) (300) -- (27,800) -- --
Rail car leasing
non-recurring operating
expense.................. -- -- -- -- -- (21,800) -- --
Amortization of goodwill... (6,000) (5,700) (2,800) (2,700) (12,700) (9,200) -- --
----------- ----------- --------- --------- -------- --------- -------- ---------
(1,273,500) (1,124,500) (405,200) (288,900) (63,300) (133,200) (9,300) (8,600)
----------- ----------- --------- --------- -------- --------- -------- ---------
Operating income (loss)...... 55,100 39,100 22,400 12,100 89,700 84,300 (9,300) (8,600)
Other (expenses) income:
Interest expense and
other.................... (31,000) (24,100) (3,500) (3,500) (92,400) (84,700) (37,700) (77,200)
Interest income and
other.................... 1,100 1,400 100 -- 200 800 12,100 5,600
Non-recurring items, net... -- -- -- -- -- -- 64,000 --
Write-down of marketable
equity securities........ -- -- -- -- -- -- (25,000) (25,000)
----------- ----------- --------- --------- -------- --------- -------- ---------
Income (loss) from continuing
operations before income
taxes...................... 25,200 16,400 19,000 8,600 (2,500) 400 4,100 (105,200)
Income tax (expense)
benefit.................... (17,500) (12,500) (9,000) (4,600) (5,400) (2,100) 2,200 39,200
----------- ----------- --------- --------- -------- --------- -------- ---------
Income (loss) from continuing
operations................. 7,700 3,900 10,000 4,000 (7,900) (1,700) 6,300 (66,000)
Loss from
discontinued operations
(net of related taxes)..... -- -- -- -- -- -- (1,300) (24,100)
----------- ----------- --------- --------- -------- --------- -------- ---------
Income (loss) before
extraordinary items........ 7,700 3,900 10,000 4,000 (7,900) (1,700) 5,000 (90,100)
Extraordinary items (net of
related taxes)............. -- -- -- -- -- (9,800) (16,000) (10,600)
----------- ----------- --------- --------- -------- --------- -------- ---------
Net income (loss)............ $ 7,700 $ 3,900 $ 10,000 $ 4,000 $ (7,900) $ (11,500) $(11,000) $(100,700)
----------- ----------- --------- --------- -------- --------- -------- ---------
----------- ----------- --------- --------- -------- --------- -------- ---------
</TABLE>
Supplemental consolidating data are shown for Anixter, ANTEC, Rail car leasing
and All other. Transactions between Anixter, ANTEC, Rail car leasing and All
other have been eliminated from the consolidated columns.
24
<PAGE> 25
ITEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
--------- ----------- ---------
<S> <C> <C> <C>
Operating activities:
Income (loss) from continuing operations....................... $ 16,100 $ (59,800) $ (57,700)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided (used) by continuing
operating activities:
Depreciation............................................... 60,500 58,300 55,000
Amortization of goodwill................................... 21,500 17,600 12,500
Deferred income tax expense (benefit)...................... 22,900 (22,100) (32,500)
Non-recurring items, net................................... (64,000) -- --
Write-down of marketable equity securities................. 25,000 25,000 79,400
Non-cash financing expense................................. 10,200 10,600 9,600
Other, net................................................. 8,200 13,400 (2,600)
Changes in assets and liabilities, net of effects of
acquisitions and asset purchases:
Restricted cash......................................... 3,000 (3,900) (12,600)
Accounts receivable..................................... (50,100) 4,500 (9,400)
Inventories............................................. (55,700) (16,800) 33,100
Accounts payable and accrued expenses................... 34,000 (43,500) (21,900)
Other, net.............................................. (10,300) 11,200 (18,500)
--------- ----------- ---------
Net cash provided (used) by continuing operating
activities.......................................... 21,300 (5,500) 34,400
Discontinued operations, net................................... 117,400 68,000 170,700
--------- ----------- ---------
Net cash provided by operating activities............. 138,700 62,500 205,100
Investing activities:
Sales of securities............................................ -- -- 260,400
Purchases of property.......................................... (13,400) (17,000) (75,100)
Sales of property.............................................. 2,800 15,000 7,900
Acquisitions................................................... (9,900) -- --
Receipts from and (advances to) Q-TEL.......................... 23,700 (15,000) 20,000
Other, net..................................................... 8,500 (1,700) (3,800)
--------- ----------- ---------
Net investing activities.............................. 11,700 (18,700) 209,400
--------- ----------- ---------
Net cash provided before financing activities.................... 150,400 43,800 414,500
Financing activities:
Borrowings..................................................... 915,500 1,888,700 684,600
Reductions in subordinated indebtedness........................ (344,500) (484,200) (65,800)
Reductions in borrowings....................................... (879,600) (1,351,400) (897,700)
Proceeds from issuance of common stock......................... 21,100 21,300 4,800
Proceeds from ANTEC Offering................................... 156,600 -- --
Purchases of treasury stock.................................... (300) (114,300) (147,400)
Other, net..................................................... (10,200) (10,500) (20,500)
--------- ----------- ---------
Net financing activities.............................. (141,400) (50,400) (442,000)
--------- ----------- ---------
Cash provided (used)............................................. 9,000 (6,600) (27,500)
Cash and equivalents at beginning of year........................ 22,000 28,600 56,100
--------- ----------- ---------
Cash and equivalents at end of year.............................. $ 31,000 $ 22,000 $ 28,600
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
See accompanying notes to the consolidated financial statements.
25
<PAGE> 26
ITEL CORPORATION
SUPPLEMENTAL STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------------
RAIL CAR
CONSOLIDATED ANIXTER ANTEC LEASING ALL OTHER
------------ --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Operating activities:
Income (loss) from continuing operations........ $ 16,100 $ 7,700 $ 10,000 $ (7,900) $ 6,300
Adjustments to reconcile income (loss) from
continuing operations to net cash provided
(used) by continuing operating activities:
Depreciation................................ 60,500 8,400 2,000 49,700 400
Amortization of goodwill.................... 21,500 6,000 2,800 12,700 --
Deferred income tax expense (benefit)....... 22,900 (6,200) (2,000) 5,200 25,900
Non-recurring items, net.................... (64,000) -- -- -- (64,000)
Write-down of marketable equity
securities............................... 25,000 -- -- -- 25,000
Non-cash financing expense.................. 10,200 3,800 100 2,100 4,200
Other, net.................................. 8,200 7,400 600 900 (700)
Changes in assets and liabilities, net of
effects of acquisitions and asset
purchases:
Restricted cash.......................... 3,000 -- -- 1,100 1,900
Accounts receivable...................... (50,100) (41,800) (6,500) -- (1,800)
Inventories.............................. (55,700) (37,600) (18,100) -- --
Accounts payable and accrued expenses.... 34,000 39,700 6,400 (800) (11,300)
Other, net............................... (10,300) (11,700) 1,200 700 (500)
------------ --------- --------- -------- ---------
Net cash provided (used) by continuing
operating activities................. 21,300 (24,300) (3,500) 63,700 (14,600)
Discontinued operations, net...................... 117,400 -- -- -- 117,400
------------ --------- --------- -------- ---------
Net cash provided (used) by operating
activities........................... 138,700 (24,300) (3,500) 63,700 102,800
Investing activities:
Purchases of property........................... (13,400) (11,400) (2,000) -- --
Sales of property............................... 2,800 2,600 200 -- --
Acquisitions.................................... (9,900) -- (9,900) -- --
Receipts from Q-TEL............................. 23,700 -- -- -- 23,700
Other, net...................................... 8,500 -- 900 -- 7,600
------------ --------- --------- -------- ---------
Net investing activities............... 11,700 (8,800) (10,800) -- 31,300
------------ --------- --------- -------- ---------
Net cash provided (used) before financing
activities...................................... 150,400 (33,100) (14,300) 63,700 134,100
Financing activities:
Borrowings...................................... 915,500 672,500 149,600 -- 93,400
Reductions in subordinated indebtedness......... (344,500) -- -- -- (344,500)
Reductions in borrowings........................ (879,600) (567,400) (203,100) (62,200) (46,900)
Proceeds from issuance of common stock.......... 21,100 -- -- -- 21,100
Proceeds from ANTEC Offering.................... 156,600 -- 89,600 -- 67,000
Redemption of ANTEC preferred stock............. -- -- (30,000) -- 30,000
Intercompany activity, net...................... -- (57,100) 8,300 -- 48,800
Purchases of treasury stock..................... (300) -- -- -- (300)
Other, net...................................... (10,200) (4,000) -- (1,500) (4,700)
------------ --------- --------- -------- ---------
Net financing activities............... (141,400) 44,000 14,400 (63,700) (136,100)
------------ --------- --------- -------- ---------
Cash provided (used).............................. 9,000 10,900 100 -- (2,000)
Cash and equivalents at beginning of year......... 22,000 11,700 1,000 -- 9,300
------------ --------- --------- -------- ---------
Cash and equivalents at end of year............... $ 31,000 $ 22,600 $ 1,100 $ -- $ 7,300
------------ --------- --------- -------- ---------
------------ --------- --------- -------- ---------
</TABLE>
Supplemental consolidating data are shown for Anixter, ANTEC, Rail car leasing
and All other. Transactions between Anixter, ANTEC, Rail car leasing and All
other have been eliminated from the consolidated column.
26
<PAGE> 27
ITEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED LOSSES
ON MARKETABLE
CUMULATIVE WARRANT EQUITY SECURITIES
PREFERRED COMMON CAPITAL RETAINED TRANSLATION NOTE AVAILABLE-FOR-
STOCK STOCK SURPLUS EARNINGS ADJUSTMENTS RECEIVABLE SALE, NET TOTAL
--------- ------ --------- -------- ----------- ---------- ----------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1990.......... $82,900 $39,100 $ 409,500 $ 199,100 $ 7,400 $(15,000) $(112,900) $610,100
Net loss..................... -- -- -- (55,700) -- -- -- (55,700)
Issuance of common
stock and other............. -- 500 (1,000) (200) -- -- -- (700)
Foreign currency
translation adjustments..... -- -- -- -- (2,200) -- -- (2,200)
Transfer from
temporary equity............ -- -- 100,100 -- -- -- -- 100,100
Purchases and retirement of
treasury stock.............. -- (7,500) (139,900) -- -- -- -- (147,400)
Preferred stock
dividends and other......... 400 -- -- (6,100) -- -- -- (5,700)
Net change in unrealized
losses on marketable
equity securities
available-for-sale.......... -- -- -- -- -- -- 65,100 65,100
------- ------- ------- --------- ------- -------- ----------- -----------
Balance at
December 31, 1991........... 83,300 32,100 368,700 137,100 5,200 (15,000) (47,800) 563,600
Net loss...................... -- -- -- (104,300) -- -- -- (104,300)
Issuance of common
stock and other............. (100) 1,500 21,300 -- -- 15,000 -- 37,700
Foreign currency
translation adjustments..... -- -- -- -- (8,400) -- -- (8,400)
Purchases and retirement of
treasury stock............... -- (5,500) (108,800) -- -- -- -- (114,300)
Preferred stock dividends
and other..................... 400 -- -- (6,100) -- -- -- (5,700)
Net change in unrealized
losses on marketable
equity securities
available-for-sale........... -- -- -- -- -- -- (1,300) (1,300)
------- ------- --------- --------- ------- -------- ------------- ---------
Balance at
December 31, 1992........... 83,600 28,100 281,200 26,700 (3,200) -- (49,100) 367,300
Net loss...................... -- -- -- (1,200) -- -- -- (1,200)
Issuance of common
stock and other............. -- 1,100 23,400 -- -- -- -- 24,500
Foreign currency
translation adjustments..... -- -- -- -- (6,700) -- -- (6,700)
Preferred stock
dividends and other......... 200 -- -- (3,100) -- -- -- (2,900)
Conversion of
preferred stock............. (83,800) 3,800 78,900 -- -- -- -- (1,100)
Net change in unrealized
losses on marketable
equity securities
available-for-sale.......... -- -- -- -- -- -- 25,400 25,400
------- ------- --------- --------- ------- -------- ------------- ----------
Balance at
December 31, 1993........... $ -- $33,000 $ 383,500 $ 22,400 $(9,900) $ -- $ (23,700) $405,300
------- ------- --------- --------- ------- -------- ------------- --------
------- ------- --------- --------- ------- -------- ------------- --------
</TABLE>
See accompanying notes to the consolidated financial statements.
27
<PAGE> 28
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of Itel Corporation ("Itel") and its majority-owned subsidiaries (collectively
"the Company") after elimination of intercompany transactions. Minority
interests of $98.2 million at December 31, 1993 primarily relate to the 47%
public ownership in ANTEC (see Note 4) and the 1% external ownership interests
in the Trust and Partnership, respectively (see Note 7).
Reclassifications: The 1992 and 1991 consolidated financial statements and
related notes have been reclassified to reflect the 1993 presentation. The
Company adopted the Statements of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" and No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" at December 31, 1993. The
effect on the consolidated financial statements was immaterial.
Cash and equivalents and restricted cash: The Company considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents. The carrying amount of cash and equivalents approximates fair value
because of the short maturity of those instruments. Restricted cash consists
primarily of cash to be used for interest and principal on the debt related to
Rail car leasing (see Note 9).
Inventories: Inventories are valued principally at the lower of average,
approximating first-in, first-out, cost or market.
Depreciation: The Company provides for depreciation of property principally
on the straight-line basis over various useful lives including the term of the
Leases (see Note 7) for rental equipment--rail cars, 25 to 40 years for
buildings and improvements, 3 to 10 years for machinery and equipment and the
term of the lease for leasehold improvements.
Goodwill: Goodwill relates to the excess of cost over net tangible assets
of businesses acquired. The Company at each balance sheet date evaluates, for
recognition of potential impairment, its recorded goodwill against the current
and undiscounted expected future operating income before goodwill amortization
expense of the entities to which goodwill relates. In the opinion of management,
goodwill at Anixter Inc. and its subsidiaries (collectively "Anixter") and ANTEC
Corporation and its subsidiaries (collectively "ANTEC") has not diminished in
value since their date of acquisition, and, having an indefinite life, is not
subject to amortization. However, in accordance with Opinion 17 of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, goodwill is being amortized over a period of 40 years using the
straight-line method. The remaining goodwill relates to the purchase of Pullman
Leasing Company in 1988 and is being amortized over the term of the Leases (see
Note 7).
Marketable equity securities available-for-sale: Marketable equity
securities available-for-sale are reflected in the balance sheet at the quoted
market price as of the balance sheet date. The difference between cost and
market is reflected in stockholders' equity net of deferred tax benefit.
Realized gains on dispositions of securities are determined using the average
cost method. Realized pre-tax gains, before related interest carrying costs,
were $.3 million, zero and $5.5 million in 1993, 1992 and 1991, respectively.
Aggregate unrealized pre-tax loss on marketable equity securities
available-for-sale amounted to $36.6 million at December 31, 1993 (see Note 5).
Investment in and advances to Q-TEL S.A. de C.V. of Mexico ("Q-TEL"):
Investment in and advances to Q-TEL, formerly Quadrum, include a 19% equity
interest in Q-TEL and at December 31, 1993 a $6.6 million loan.
Interest rate agreements: The Company has entered into interest rate
agreements which effectively fix or cap, for a period of time, the interest rate
on a portion of its floating rate obligations. As a result, the interest rate on
substantially all debt obligations at December 31, 1993 is fixed or capped. The
net effects of such
28
<PAGE> 29
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
agreements are included in interest expense.
Revenue recognition: Sales and related cost of sales are recognized
primarily upon shipment of products.
Advertising and sales promotion: Advertising and sales promotion costs are
expensed as incurred.
Income taxes: Provisions for income taxes include deferred taxes resulting
from temporary differences in determining income for financial and tax purposes
using the liability method. Such temporary differences result primarily from
differences in the carrying value of assets and liabilities.
Income (loss) per common share: Income (loss) per share amounts are based
upon results from operations after deducting preferred dividends earned and the
amortization of preferred stock discounts. Weighted average common and common
equivalent shares were 30,132,000, 29,085,000 and 34,440,000 for 1993, 1992 and
1991, respectively.
NOTE 2. SUPPLEMENTAL CASH FLOW INFORMATION
Continuing operations of the Company paid interest, including interest
allocated to discontinued operations, of approximately $187.9 million, $232.5
million and $248.6 million for the years ended December 31, 1993, 1992 and 1991,
respectively. Approximately $7.0 million, $1.5 million and $3.3 million was paid
principally for foreign and certain state income taxes for the years ended
December 31, 1993, 1992 and 1991, respectively.
In a non-cash transaction Itel's Series C convertible preferred stock
("Preferred Stock") was converted into approximately 3.8 million shares of
common stock in August 1993.
NOTE 3. DISCONTINUED AND ASSETS HELD FOR SALE
The finance business of Signal Capital Corporation ("Signal Capital") has
been included as assets held for sale since acquisition in connection with the
purchase of a major railcar fleet in 1988. The finance business is being
liquidated and no material amounts of new loans or investments are being made by
Signal Capital. Since the date of acquisition the portfolio has been reduced
from $1.44 billion to $175 million at December 31, 1993, including reductions of
$82 million, $82 million and $157 million in 1993, 1992 and 1991 respectively.
Proceeds were used to repay indebtedness.
In 1993 and 1992, the Company sold substantially all of its other
transportation services assets, except for one short-line railroad which is
currently being held for sale, for aggregate net cash proceeds of $54 million.
The Company recorded a $26 million pre-tax loss in 1992 in discontinued
operations to reflect the disposal of this segment.
In 1991, the Company sold its investments in various other businesses for
aggregate cash proceeds in excess of $250 million. These 1991 sales resulted in
pre-tax losses totaling $65 million which was reflected in discontinued
operations.
29
<PAGE> 30
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The results of operations of the other transportation services segment,
other previously sold businesses and Signal Capital have been included in
discontinued operations net of allocated corporate interest expense. Allocated
corporate interest expense amounted to $19.0 million, $38.1 million and $53.6
million for the years ended December 31, 1993, 1992 and 1991, respectively.
Summarized financial results of discontinued operations were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1992 1991
----- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues:
Signal Capital............................................. $21.3 $ 29.4 $ 55.0
Other discontinued operations.............................. 49.4 95.6 291.0
----- ------ ------
$70.7 $125.0 $346.0
----- ------ ------
----- ------ ------
Operating income:
Signal Capital............................................. $ 8.0 $ 18.2 $ 46.0
Other discontinued operations.............................. 4.9 12.9 21.1
----- ------ ------
$12.9 $ 31.1 $ 67.1
----- ------ ------
----- ------ ------
Income (loss) from discontinued operations before loss on
sales (net of related taxes and allocated interest)........ $(1.3) $ (8.0) $ 7.8
Loss on sales (net of related taxes)......................... -- (16.1) (14.6)
----- ------ ------
Loss from discontinued operations (net of related taxes)..... $(1.3) $(24.1) $ (6.8)
----- ------ ------
----- ------ ------
</TABLE>
The composition of remaining discontinued and assets held for sale, net
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Discontinued assets, net (principally receivables and property for one
short-line railroad at December 31, 1993)........................... $ 24.6 $ 96.9
Assets held for sale, net:
Finance receivables, net............................................ 174.9 245.9
Other, net.......................................................... (8.4) (5.1)
------ ------
166.5 240.8
------ ------
$191.1 $337.7
------ ------
------ ------
</TABLE>
NOTE 4. GAIN ON ANTEC OFFERING AND NON-RECURRING ITEMS
The pre-tax gain on ANTEC Offering relates to the September 1993 initial
public offering of shares of common stock of ANTEC (the "Offering"). Itel
provided deferred taxes relating to the recognized pre-tax book gain. Itel and
ANTEC sold approximately 4.0 million and 5.4 million shares of ANTEC common
stock, respectively, at $18 per share. Net proceeds from the Offering were
approximately $157 million of which Itel, after considering the redemption by
ANTEC of preferred shares owned by Itel, received approximately $97 million. As
a result of the Offering, Itel's ownership of ANTEC common stock was reduced to
53%.
The non-recurring pre-tax loss in 1993 principally relates to the
write-down of miscellaneous investments and certain non-operating assets to net
realizable value.
30
<PAGE> 31
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. MARKETABLE EQUITY SECURITIES AVAILABLE-FOR-SALE
In 1993, 1992 and 1991, the Company wrote down the value of its investments
in marketable equity securities by $25.0 million, $25.0 million and $50.0
million, respectively. Also in 1991, the Company recorded a pre-tax loss of
$29.4 million on the sale of its investment in Santa Fe Pacific Corporation
("Santa Fe"). The Company has reduced the pre-tax unrealized losses on
marketable equity securities available-for-sale included in stockholders' equity
by $12.9 million at December 31, 1993 to reflect a deferred tax benefit due to
the Company's current ability to either (a) carryback all December 31, 1993
unrealized capital losses to previously generated capital gains or (b) generate
capital gains by the future sale of capital assets to offset December 31, 1993
unrealized capital losses.
NOTE 6. EXTRAORDINARY ITEMS
In 1993, 1992 and 1991, the Company retired or called for redemption senior
and subordinated debt resulting in a pre-tax extraordinary gain (loss) of
($26.2) million, ($32.9) million and $13.3 million, respectively.
NOTE 7. RAIL CAR TRANSACTION
In 1992, a 98% owned affiliate of Itel leased all of the rail cars owned by
the Company to an affiliate of General Electric Capital Corporation ("GECC") for
twelve years with fixed annual rentals of approximately $153 million. The leases
(the "Leases") include an option for GECC to purchase all, but not less than
all, of the rail cars for approximately $500 million at the end of the term of
the Leases. GECC is responsible for the maintenance and other expenses of the
rail cars and has unconditionally guaranteed all obligations of its affiliate.
Operating income in 1992 includes $21.8 million of non-recurring operating
expense relating to severance and transition costs due to the rail car
transaction.
NOTE 8. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Interest............................................................... $ 27.8 $ 42.3
Wages, salaries and related............................................ 42.4 33.2
Taxes other than income................................................ 8.6 8.2
Other.................................................................. 45.5 54.8
------ ------
$124.3 $138.5
------ ------
------ ------
</TABLE>
31
<PAGE> 32
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. DEBT
Debt is summarized below. Subsequent to December 31, 1993, the Company
retired $221.0 million of the 13% Senior Subordinated Notes ("13% Notes")
primarily using a $250 million senior bank term loan ("Term Loan") at Itel (see
discussion below). The pro forma column reflects such redemption of 13% Notes as
if it occurred on December 31, 1993.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
PRO FORMA 1993 1992
1993 ----------- -----------
-----------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C>
Recourse debt:
Itel:
13% Senior Subordinated Notes....................... $ -- $ 221.0 $ 246.0
12 5/8% Senior Subordinated Notes due 1998.......... -- -- 161.0
12 5/8% Senior Subordinated Notes due 1993.......... -- -- 74.3
11% Senior Subordinated Notes....................... -- -- 72.1
10.2% Senior Subordinated Extendible Notes.......... 17.5 17.5 17.5
Term loan........................................... 250.0 50.0 --
----------- ----------- -----------
Total Itel debt................................ $ 267.5 $ 288.5 $ 570.9
----------- ----------- -----------
----------- ----------- -----------
Anixter:
Bank revolving lines of credit...................... $ 205.7 $ 184.7 $ 152.5
Other............................................... 3.6 3.6 2.2
----------- ----------- -----------
Total Anixter debt................................ $ 209.3 $ 188.3 $ 154.7
----------- ----------- -----------
----------- ----------- -----------
Non-recourse debt:
ANTEC:
Bank revolving line of credit....................... $ 18.0 $ 18.0 $ --
----------- ----------- -----------
----------- ----------- -----------
Rail car leasing:
Trust Notes......................................... $ 952.9 $ 952.9 $ 988.0
Equipment Trust Certificates and other secured
indebtedness...................................... 133.8 133.8 160.8
----------- ----------- -----------
Total Rail car leasing debt....................... $ 1,086.7 $ 1,086.7 $ 1,148.8
----------- ----------- -----------
----------- ----------- -----------
Total debt............................................... $ 1,581.5 $ 1,581.5 $ 1,874.4
Less: Current maturities................................. (67.8) (67.8) (136.5)
----------- ----------- -----------
Long-term debt........................................... $ 1,513.7 $ 1,513.7 $ 1,737.9
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Itel--
13% Notes: On December 17, 1993, Itel called $180 million of the 13% Notes
for redemption on January 18, 1994. Itel called the remaining $41 million of 13%
Notes on January 27, 1994 for redemption on February 28, 1994.
10.2% Senior Subordinated Extendible Notes ("Extendible Notes"): The
Extendible Notes are callable in January 1995 and may be extended for periods of
one to five years after January 1995 at an interest rate and period established
by Itel. Unless repurchased by Itel at the option of the holder at the end of
any interest period, the Extendible Notes mature in 2001.
32
<PAGE> 33
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Term Loan: On December 13, 1993, the Company obtained a $250 million Term
Loan from a group of banks. The Term Loan is secured by the Company's
investments in the capital stock of Anixter, ANTEC and Signal Capital and its
common shares of Santa Fe Energy Resources, Inc. ("Energy") and Catellus
Development Corporation ("Real Estate") aggregating $730 million at net book
value at December 31, 1993. The Term Loan matures in 1996. Various interest rate
options are available. The interest rate at December 31, 1993 was 4 3/4%. The
net proceeds from the Term Loan were used exclusively to repay other debt of
Itel.
Anixter--
Bank revolving lines of credit: Anixter has various secured revolving bank
lines of credit worldwide which provide for up to $281 million of borrowings
contingent on the level of certain assets. At December 31, 1993, $184.7 million
was borrowed and $88.6 million was available under the bank revolving lines of
credit at Anixter, most of which was available for general corporate purposes.
These lines of credit reduce or mature at various dates from 1994 through 1996.
The $220.0 million domestic revolving line of credit, which matures in 1996, may
be extended for two additional one-year periods at the option of the lender.
Various interest rate options are available under these facilities and the
average interest rate at December 31, 1993 was 6.0%. Commitment fees of 1/2% are
payable on the unused portion of these revolving lines of credit. The 1993
commitment fees paid were insignificant.
ANTEC--
Bank revolving line of credit: ANTEC has a revolving line of credit which
provides for up to $50.0 million in borrowings. The line of credit is
non-recourse to Itel, matures in 1997 and is extendible at the banks' option for
one additional year. Various interest rate options are available. The interest
rate at December 31, 1993 was 4.5%. Commitment fees of 1/2% are payable on the
unused portion of the revolving line of credit. The 1993 commitment fees paid
were insignificant.
Rail car leasing--
In connection with the completion of the rail car transaction (see Note 7),
a trust (the "Trust") issued $998 million of 7 3/4% Notes (the "Trust Notes").
The Trust Notes are non-recourse to Itel, mature through 2004 and are secured by
the Trust's ownership interest in a partnership, which holds substantially all
of the rail cars formerly operated by Itel Rail Corporation and its subsidiaries
(collectively "Rail"). The net proceeds from the Trust Notes were used to repay
certain senior indebtedness of Rail and other debt of Itel. Equipment Trust
Certificates ("ETCs") and other secured indebtedness of the Partnership are
non-recourse to Itel, have interest rates ranging from 9.5% to 11.1% and mature
through 2003. The ETCs have annual sinking fund requirements. With the
completion of the rail car transaction in June 1992, the ongoing fixed cash flow
of the Company's Rail car leasing business is available only to service interest
and principal on the debt of the Rail car leasing business.
Other--
Certain debt agreements entered into by Itel's subsidiaries contain various
restrictions including restrictions on payments to Itel. These debt agreements
are secured by certain assets of the subsidiaries aggregating approximately $1.6
billion at December 31, 1993. Itel has guaranteed certain debt and other
obligations of Anixter. Restricted net assets of subsidiaries were approximately
$600 million at December 31, 1993.
Certain of Itel's loan agreements or indentures require that Itel maintain
a minimum net worth and interest coverage, use the proceeds of certain asset
sales to repay debt, and limit Itel's ability to make capital investments, incur
debt, declare dividends or make distributions to holders of any shares of
capital stock, or
33
<PAGE> 34
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
redeem or otherwise acquire such shares of the Company. Approximately $30
million is available for such distributions under the most restrictive of these
covenants.
At December 31, 1993, the Company had four outstanding interest swap
agreements having a total notional principal amount of $193.0 million and an
average fixed rate of approximately 8.4%. The swap agreements expire in 1994.
The Company also had five future interest swap agreements having a total
notional principal amount of $150.0 million and an average fixed rate of 6.8%.
These swap agreements begin in the latter half of 1994 and expire in 1995 and
1996.
Aggregate annual maturities of debt, after consideration of early 1994
retirements of the 13% Notes, are as follows:
<TABLE>
<CAPTION>
SENIOR DEBT
----------------------------------------------------
RECOURSE NON-RECOURSE
---------------------- -------------------------
SUBORDINATED RAIL CAR
DEBT ANIXTER CORPORATE ANTEC LEASING TOTAL
----- -------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1994........... $ -- $ -- $ -- $ -- $ 67.8 $ 67.8
1995........... 17.5 47.8 -- -- 73.7 139.0
1996........... -- 119.5 250.0 -- 79.8 449.3
1997........... -- -- -- 18.0 84.8 102.8
1998........... -- -- -- -- 111.0 111.0
</TABLE>
The fair value of the Company's debt and interest rate swaps is presented
below. The fair value of the Company's debt is estimated based on the quoted
market prices. The fair value of interest rate swaps is the estimated amount
that the Company would be required to pay to terminate the swap agreements at
the reporting date, taking into account current interest rates.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
--------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
(IN MILLIONS)
<S> <C> <C>
Subordinated debt..................................... $ 238.5 $ 246.9
Senior debt, including interest rate swaps............ $ 240.6 $ 250.0
Senior non-recourse debt--principally Rail car
leasing............................................. $1,104.7 $1,234.6
</TABLE>
NOTE 10. INCOME TAXES
Itel and its U.S. subsidiaries (other than ANTEC for periods after
September 1993) file their Federal income tax return on a consolidated basis. As
of December 31, 1993, the Company had cumulative net operating loss ("NOL")
carryforwards for Federal income tax purposes of approximately $345 million
expiring principally in 1995 through 2007, and investment tax credit ("ITC")
carryforwards of approximately $16 million expiring in 1994 through 2001.
Certain of these carryforwards have not been examined by the Internal Revenue
Service and, therefore, may be subject to adjustment. The availability of NOL
and ITC carryforwards to reduce the Company's future Federal income tax
liability is subject to various limitations under the Internal Revenue Code of
1986, as amended (the "Code"), which may limit their use in the event of
substantial ownership changes of Itel's stock as defined in the Code. Such
ownership changes may not be within the control of the Company. In addition, at
December 31, 1993, various foreign subsidiaries of Itel had aggregate cumulative
NOL carryforwards for foreign income tax purposes of approximately $50 million
which are subject to various provisions of each respective country and expire
primarily between 1995 and 2003.
34
<PAGE> 35
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In accordance with generally accepted accounting principles, the Company
has reduced its deferred tax liability to reflect its Federal and state NOL and
ITC carryforwards. The Company's partial recognition of Federal and state future
tax benefits is based on the expected utilization of those benefits based upon
future receipt of substantial taxable income, specifically resulting from (a)
over $546 million of existing temporary differences at December 31, 1993,
primarily rail car depreciation, which will reverse prior to 2005 and (b)
projected consolidated taxable income including the receipt of guaranteed
minimum future rentals from the Leases of $153 million annually through 2004 and
the discontinuance of the substantial capital expenditure programs that gave
rise to a significant portion of the NOL. Management anticipates that increases
in taxable income during the carryforward period will arise primarily as a
result of the factors mentioned above.
Domestic income (loss) from continuing operations before income taxes was
$58.6 million, ($68.5) million and ($79.9) million for the years ended December
31, 1993, 1992 and 1991, respectively. Foreign loss from continuing operations
before income taxes was ($12.8) million, ($11.3) million and ($13.9) million for
the years ended December 31, 1993, 1992 and 1991, respectively.
Deferred income taxes reflect the impact of temporary differences between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Deferred income taxes also result from
differences between the fair value of assets acquired in business combinations
accounted for as purchases and their tax bases.
Significant components of the Company's deferred tax liabilities and assets
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1993 1992
------ ------
(IN MILLIONS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation................................................ $296.4 $295.0
Deferred tax assets:
Domestic NOL carryforwards................................................ 133.6 133.5
ITC carryforwards......................................................... 16.1 22.8
Foreign NOL carryforwards................................................. 19.7 16.8
Unrealized losses on securities available-for-sale........................ 47.4 53.8
Other, principally operating reserves..................................... 35.4 41.7
------ ------
Total deferred tax assets.............................................. 252.2 268.6
Valuation allowance on deferred tax assets................................ (55.4) (58.4)
------ ------
Net deferred tax assets................................................ 196.8 210.2
------ ------
Net deferred tax liability............................................. $ 99.6 $ 84.8
------ ------
------ ------
</TABLE>
At December 31, 1993, 1992 and 1991, consolidated valuation allowances for
its tax carryforwards were $55.4 million, $58.4 million and $62.1 million,
respectively, including valuation allowances on its foreign NOLs at December 31,
1993, 1992 and 1991.
35
<PAGE> 36
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax (expense) benefit relating to operations was comprised of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1992 1991
------ ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Continuing operations:
Current--Foreign.................................. $ .4 $ 1.0 $ (1.0)
State.................................... (4.1) (3.1) 4.8
Federal--principally ANTEC in 1993....... (3.1) -- (.2)
------ ----- ------
(6.8) (2.1) 3.6
Deferred--State................................... .9 5.4 (5.5)
Federal................................. (23.8) 16.7 38.0
------ ----- ------
(22.9) 22.1 32.5
------ ----- ------
$(29.7) $20.0 $ 36.1
------ ----- ------
------ ----- ------
Discontinued operations:
Current--Foreign.................................. $ (.1) $ (.1) $ --
State.................................... 1.1 .2 (10.0)
Federal.................................. -- -- (6.6)
------ ----- ------
1.0 .1 (16.6)
Deferred--State................................... .7 .3 20.8
Federal................................. 6.6 13.0 52.6
------ ----- ------
7.3 13.3 73.4
------ ----- ------
$ 8.3 $13.4 $ 56.8
------ ----- ------
------ ----- ------
Extraordinary items:
Deferred--State................................... $ 1.6 $ 2.0 $ --
Federal................................. 8.6 10.5 (4.5)
------ ----- ------
$ 10.2 $12.5 $ (4.5)
------ ----- ------
------ ----- ------
</TABLE>
Reconciliations of income tax (expense) benefit in continuing operations to
the statutory corporate Federal tax rate, 35% in 1993 and 34% in 1992 and 1991,
were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1992 1991
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Statutory tax (expense) benefit...................... $(16.0) $27.1 $31.9
Effects of--
Amortization of goodwill........................... (7.5) (6.0) (4.3)
Losses on foreign operations....................... (3.6) (2.9) (5.7)
State income taxes, net of Federal benefit......... (2.1) 1.5 (.5)
Change in valuation allowance...................... -- -- 3.1
Impact of Revenue Reconciliation Act of 1993....... (2.7) -- --
Adjustment to prior year tax accruals.............. 2.4 -- 10.0
Other, net......................................... (.2) .3 1.6
------ ----- -----
$(29.7) $20.0 $36.1
------ ----- -----
------ ----- -----
</TABLE>
36
<PAGE> 37
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The income tax effects of items comprising the deferred income tax
(expense) benefit were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1993 1992 1991
----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Depreciation........................................ $(1.4) $ 8.1 $ (3.8)
NOL and ITC carryforwards........................... (7.4) 28.7 (77.0)
Changes in the valuation allowance.................. 3.0 3.7 (3.1)
Securities available-for-sale....................... 6.0 9.5 25.4
Sales of assets..................................... -- -- 163.9
Other, net.......................................... (5.6) (2.1) (4.0)
----- ----- ------
$(5.4) $47.9 $101.4
----- ----- ------
----- ----- ------
</TABLE>
NOTE 11. CONTINGENCIES AND LITIGATION
In the ordinary course of business, Itel and its subsidiaries become
involved as plaintiffs or defendants in various legal proceedings. The claims
and counterclaims in such litigation, including those for punitive damages,
individually in certain cases and in the aggregate, involve amounts which may be
material. However, it is the opinion of the Company's management, based upon the
advice of its counsel, that the ultimate disposition of pending litigation will
not be material.
NOTE 12. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS
The Company's various pension plans are non-contributory and cover
substantially all full-time domestic employees. Retirement benefits are provided
based on compensation as defined in the plans. The Company's policy is to fund
these plans as required by ERISA and the Code.
Assets of the Company's plans at fair value were $44.0 million and $40.1
million at December 31, 1993 and 1992, respectively. Projected benefit
obligations of the Company's plans were $57.2 million and $48.3 million at
December 31, 1993 and 1992, respectively. The accumulated benefit obligations of
the Company's plans were $44.5 million and $33.5 million at December 31, 1993
and 1992, respectively. The weighted-average assumed discount rate used to
measure the projected benefit obligation was 6.8% and 7.3% at December 31, 1993
and 1992, respectively. Pension expense, including the cost of 401(k) plans, for
1993, 1992 and 1991 was insignificant. The Company's liability for
post-retirement benefits other than pensions is insignificant.
NOTE 13. PREFERRED STOCK AND COMMON STOCK
Itel has authorized 15 million shares of Preferred Stock, par value $1.00
per share. In August 1993, the Preferred Stock was converted into approximately
3.8 million shares of Common Stock. At December 31, 1993, 1992 and 1991,
33,010,000, 28,080,000 and 32,140,000 shares of Common Stock, respectively, were
issued and outstanding. In connection with all Itel employee stock plans
described below, 2,998,485 shares were reserved for issuance at December 31,
1993.
Stock options and stock grants--
Itel has Employee Stock Incentive Plans ("ESIP") authorizing an aggregate
of 5.7 million stock options or restricted grants. In addition, Itel has a
Director Stock Option Plan ("DSOP") authorizing an aggregate of .2 million stock
options. Substantially all options and grants under these plans have been at
fair market value or higher. The exercise price of certain options increase at a
specified fixed rate. One-third of the options granted become exercisable each
year after the year of grant (except in the case of director options which vest
fully in six months) and the options expire seven to ten years after the date of
grant.
37
<PAGE> 38
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Additionally, Itel has an Employee Stock Purchase Plan ("ESPP") covering
most employees, excluding ANTEC after September 1993. Participants can request
that up to 10% of their base compensation be applied toward the purchase of
Common Stock under Itel's ESPP. The exercise price is the lower of 85% of the
fair market value of the Common Stock at the date of grant or at the later
exercise date (currently one year).
Under the ESIP, DSOP and ESPP, total options currently exercisable at
December 31, 1993 and 1992 were 763,336 and 1,374,030, respectively.
The following table summarizes the 1993 activity under the ESIP, DSOP and
ESPP.
<TABLE>
<CAPTION>
ESIP DSOP ESPP EXERCISE
OPTIONS OPTIONS OPTIONS PRICE
---------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992................... 2,453,202 70,000 105,502 $ 9.50 - $26.75
Grants during 1993............................. 2,500 35,000 90,563 $23.90 - $30.00
Exercised...................................... (1,033,663) (5,000) (95,415) $10.38 - $26.64
Expirations and terminations................... (93,000) -- (10,087) $10.38 - $26.81
---------- ------- ------- ---------------
Balance at December 31, 1993................... 1,329,039 100,000 90,563 $ 9.50 - $30.00
---------- ------- ------- ---------------
---------- ------- ------- ---------------
</TABLE>
Total stock options exercised for the years ended December 31, 1992 and
1991 were 1,438,316 and 353,103, respectively. The purchase price per share for
all stock options exercised ranged from $4.44 to $21.88 in 1992 and $3.38 to
$16.50 in 1991.
Stock option plans of subsidiaries--
In 1993, Anixter adopted the Anixter Employee Stock Incentive Plan and
options to purchase approximately 2.1 million shares of Anixter common stock
were granted with an exercise price of $9.00 per share to key employees of
Anixter. Substantially, all options and grants under these plans have been at
fair market value. These options vest immediately to three years and terminate
one to seven years from the date of grant. At December 31, 1993, Itel owned all
of the 29.0 million shares of outstanding Anixter common stock.
In 1993, ANTEC adopted the ANTEC Employee Stock Incentive Plan and options
to purchase approximately 1.5 million shares of ANTEC common stock were granted
with exercise prices of $10.00 to $18.00 per share to key employees of ANTEC.
All options and grants under these plans have been at fair market value or
higher. These options vest over four years beginning in January 1995 and
terminate seven years from the date of grant. At December 31, 1993, Itel owned
53% of the 20.1 million shares of outstanding ANTEC common stock.
In 1993, ANTEC also adopted the ANTEC Employee Stock Purchase Plan, with
terms identical to Itel's ESPP described above, and the ANTEC Director Stock
Option Plan. Options to purchase 56,000 shares of ANTEC common stock were
granted under the ANTEC Employee Stock Purchase Plan at $15.30 per share. At
December 31, 1993, no options were outstanding under the ANTEC Director Stock
Option Plan. In connection with all ANTEC option plans, 2.3 million ANTEC shares
were reserved for issuance at December 31, 1993.
Warrants--
The Company has issued warrants to directors, which are currently
exercisable, to purchase 130,000 shares of Common Stock at prices ranging from
$10.13 to $24.25 per share expiring between 1995 and the year 2000.
In 1992, Itel acquired warrants to purchase 4.675 million shares of Common
Stock held by an affiliate of Samuel Zell, the chairman of the board of
directors of Itel. In connection with the warrant purchase, a $15.0 million note
receivable was cancelled.
38
<PAGE> 39
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common Stock--
In a series of transactions in 1992, 1991 and 1990, the Company purchased
from the Henley Group, Inc. ("Henley") 18.7 million shares of the Company's
Common Stock for an aggregate price of $377 million. In addition to the Common
Stock purchased from Henley, in 1992 and 1991, Itel purchased 2,046,000 and
1,605,300 shares of Common Stock, respectively. All treasury stock was retired.
There are restrictions in several of Itel's debt agreements which limit the
payment of dividends and the repurchases or redemption of Common Stock (see Note
9).
NOTE 14. BUSINESS SEGMENTS
The Company is engaged in three principal areas of business: distribution
of wiring systems products for voice, data and video networks and electrical
power applications (Anixter), the development and distribution of products used
in the cable television industry (ANTEC) and rail car leasing operations through
the Leases. Itel Corporate obtains and coordinates financing, legal and other
related services, certain of which are rebilled to these segments.
Information for the years ended December 31, 1993, 1992 and 1991 regarding
the Company's major business segments is presented in the following table. The
business segments of Itel have been reclassified to reflect ANTEC as a separate
segment.
<TABLE>
<CAPTION>
RAIL CAR
ANIXTER ANTEC LEASING CORPORATE(A) TOTAL
-------- ------ -------- ------------ --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues:
1993................................... $1,328.6 $427.6 $ 153.0 $ -- $1,909.2
1992................................... 1,163.6 301.0 217.5 -- 1,682.1
1991................................... 1,025.8 258.3 307.0 -- 1,591.1
Operating income:
1993................................... 55.1 22.4 89.7 (9.3) 157.9
1992................................... 39.1(b) 12.1 84.3(c) (8.6) 126.9
1991................................... 36.3 7.3 132.3 (10.6) 165.3
Operating income before amortization of
goodwill:
1993................................... 61.1 25.2 102.4 (9.3) 179.4
1992................................... 44.8(b) 14.8 93.5(c) (8.6) 144.5
1991................................... 42.0 10.0 136.4 (10.6) 177.8
Identifiable assets:
1993................................... 718.3 239.0 1,193.6 343.5 2,494.4
1992................................... 636.1 202.9 1,279.9 521.9 2,640.8
1991................................... 623.5 186.0 1,345.4 674.6 2,829.5
Depreciation expense:
1993................................... 8.4 2.0 49.7 .4 60.5
1992................................... 8.2 1.6 48.2 .3 58.3
1991................................... 8.3 1.6 44.7 .4 55.0
Capital expenditures:
1993................................... 11.4 2.0 -- -- 13.4
1992................................... 6.3 1.7 9.0 -- 17.0
1991................................... 8.4 2.0 64.7 -- 75.1
</TABLE>
- ---------------
(a) Identifiable assets are principally comprised of marketable equity
securities (including Energy and Real Estate) and discontinued and assets
held for sale.
(b) Reflects $9.0 million of expenses relating to a terminated equity
participation plan.
(c) Includes $21.8 million of non-recurring operating costs relating to
severance and transition costs due to the rail car transaction.
39
<PAGE> 40
ITEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The classification of the Company's 1993, 1992 and 1991 foreign operations
in the following table includes all revenues and related items of the Company's
non-U.S. operations. Export sales are insignificant.
<TABLE>
<CAPTION>
WORLDWIDE (NON-U.S.)
OPERATIONS
----------------------------
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues...................................... $386.6 $344.5 $308.0
Operating income (loss)....................... $ (.5) $ 1.7 $ (2.5)
Identifiable assets........................... $209.7 $185.0 $181.6
Tangible identifiable assets.................. $186.5 $163.4 $164.1
</TABLE>
SUMMARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following tables summarize the Company's quarterly financial
information.
<TABLE>
<CAPTION>
QUARTERLY INFORMATION:
QUARTERS ENDED
-----------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
---------------- ---------------- ----------------- ----------------
1993 1992 1993 1992 1993(A) 1992 1993 1992
------ ------ ------ ------ ------- ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................................... $431.5 $422.8 $476.5 $424.9 $492.7 $424.5 $508.5 $409.9
Operating income(b)........................... 37.2 42.5 39.6 18.8 41.7 34.5 39.4 31.1
Income (loss) from continuing operations
before income taxes(c)...................... (2.1) (6.6) (.8) (23.7) 70.8 (6.8) (22.1) (42.7)
Income (loss) from continuing operations...... (3.8) (6.3) (3.1) (17.0) 40.5 (7.3) (17.5) (29.2)
Income (loss) before extraordinary items(d)... (5.1) (8.7) (3.1) (15.9) 40.5 (8.1) (17.5) (51.2)
Net income (loss)(e).......................... $ (5.1) $(11.4) $ (3.1) $(30.8) $ 29.6 $ (8.5) $(22.6) $(53.6)
------ ------ ------ ------ ------- ------ ------ ------
------ ------ ------ ------ ------- ------ ------ ------
Income (loss) per common and common equivalent
share:
Continuing operations....................... $ (.19) $ (.25) $ (.16) $ (.62) $ 1.24 $ (.33) $ (.53) $(1.12)
Before extraordinary items.................. $ (.23) $ (.32) $ (.16) $ (.58) $ 1.24 $ (.36) $ (.53) $(1.92)
Net income (loss)........................... $ (.23) $ (.41) $ (.16) $(1.08) $ .97 $ (.37) $ (.69) $(2.00)
------ ------ ------ ------ ------- ------ ------ ------
------ ------ ------ ------ ------- ------ ------ ------
Income (loss) per common and common equivalent
share--assuming full dilution:
Continuing operations....................... $ (.19) $ (.25) $ (.16) $ (.62) $ 1.12 $ (.33) $ (.53) $(1.12)
Before extraordinary items.................. $ (.23) $ (.32) $ (.16) $ (.58) $ 1.12 $ (.36) $ (.53) $(1.92)
Net income (loss)........................... $ (.23) $ (.41) $ (.16) $(1.08) $ .88 $ (.37) $ (.69) $(2.00)
------ ------ ------ ------ ------- ------ ------ ------
------ ------ ------ ------ ------- ------ ------ ------
</TABLE>
- ---------------
(a) The third quarter of 1993 has been restated from amounts previously reported
to reflect a $4.6 million reclassification from non-recurring items to
extraordinary items relating to the write-off of deferred financing fees on
early extinguishment of debt.
(b) The second quarter of 1992 includes a $21.8 million non-recurring operating
charge relating to severance and transition costs due to the rail car
transaction.
(c) Continuing operations in the third quarter of 1993 include an $84.5 million
pre-tax gain on the Offering and a ($20.5) million non-recurring pre-tax
loss principally relating to the write-down of miscellaneous investments and
certain non-operating assets to net realizable value. Continuing operations
in the fourth quarter of 1993 and 1992 include pre-tax charges of $25.0
million associated with the write-down of the Company's marketable equity
securities.
(d) Discontinued operations in the fourth quarter of 1992 include a $26.0
million pre-tax loss on the discontinuance of the other transportation
services segment.
(e) The extraordinary items in 1993 and 1992 reflect a pre-tax loss of ($26.2)
million and ($32.9) million, respectively, on the early extinguishment of
the Company's subordinated and senior debt.
40
<PAGE> 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
See Registrant's Proxy Statement for the 1994 Annual Meeting of
Stockholders -- "Election of Directors" and "Timeliness of Certain Filings."
ITEM 11. EXECUTIVE COMPENSATION.
See Registrant's Proxy Statement for the 1994 Annual Meeting of
Stockholders -- "Summary Compensation Table," "Option Grants in Last Fiscal
Year," "Aggregated Option Exercised in Last Fiscal Year and FY-End Option
Value," "Pension Plan Table," "Compensation of Directors," "Employment Contracts
and Termination of Employment and Changes in Control Arrangements," and
"Compensation Committee Interlocks and Insider Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See Registrant's Proxy Statement for the 1994 Annual Meeting of
Stockholders -- "Security Ownership of Management" and "Security Ownership of
Principal Stockholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Registrant's Proxy Statement for the 1994 Annual Meeting of
Stockholders -- "Certain Relationships and Related Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Exhibits.
The exhibits listed below in Item 14(a)1, 2 and 3 are filed as part of
this annual report. Each management contract or compensatory plan
required to be filed as an exhibit is identified by an asterisk(*).
(b) Reports on Form 8-K.
None.
ITEM 14(A)1 AND 2. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES.
Financial Statements.
The following Consolidated Financial Statements of Itel Corporation and
Report of Independent Auditors are filed as part of this report.
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Report of Independent Auditors.................................................. 20
Consolidated Balance Sheets at December 31, 1993 and 1992....................... 21
Consolidated Statements of Operations for the years ended December 31, 1993,
1992 and 1991................................................................. 23
Consolidated Statements of Cash Flows for the years ended December 31, 1993,
1992 and 1991................................................................. 25
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1992 and 1991........................................................... 27
Notes to the Consolidated Financial Statements.................................. 28
</TABLE>
41
<PAGE> 42
Financial Statement Schedules.
The following financial statement schedules of Itel Corporation are filed
as part of this Report and should be read in conjunction with the Consolidated
Financial Statements of Itel Corporation.
Consolidated Schedules for the years ended December 31, 1993, 1992 and
1991, except as noted:
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. Marketable securities--other investments (at December 31, 1993).......... 48
II. Amounts receivable from related parties and underwriters, promoters, and
employees other than related parties..................................... 49
III. Condensed financial information of Registrant............................ 50
V. Property and equipment................................................... 53
VI. Accumulated depreciation................................................. 54
VIII. Valuation and qualifying accounts and reserves........................... 55
</TABLE>
All other schedules are omitted because they are not required or are not
applicable, or the required information is shown in the consolidated financial
statements or notes thereto.
ITEM 14(A)3. EXHIBIT LIST. Each management contract or compensation plan
required to be filed as an exhibit is identified by an asterisk(*).
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
----- ----------------------------------------------------------------------------
<S> <C> <C>
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession.+
2.1 (a) Stock Purchase Agreement, dated August 14, 1990, between Itel
Corporation and The Henley Group, Inc. (Incorporated by reference from
Itel Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1990, Exhibit 10.24.)..........................
(b) First Amendment to Stock Purchase Agreement, dated March 15, 1991,
between Itel Corporation and The Henley Group, Inc. (Incorporated by
reference from Itel Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, Exhibit 2.3(b).).................
(c) Second Amendment to Stock Purchase Agreement, dated July 19, 1991,
between Itel Corporation and The Henley Group, Inc. (Incorporated by
reference from Itel Corporation's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1991, Exhibit 2.3(c).)..............
(d) Third Amendment to Stock Purchase Agreement, dated January 31,
1992, between Itel Corporation and The Henley Group, Inc.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, Exhibit
2.2(d).)..............................................................
(e) Fourth Amendment to Stock Purchase Agreement, dated February 28,
1992, between Itel Corporation and The Henley Group, Inc.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, Exhibit
2.2(e).)..............................................................
(f) Fifth Amendment to Stock Purchase Agreement, dated March 31, 1992,
between Itel Corporation and The Henley Group, Inc. (Incorporated by
reference from Itel Corporation's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1992, Exhibit 2.2(f).).............
(g) Sixth Amendment to Stock Purchase Agreement, dated April 30, 1992,
between Itel Corporation and The Henley Group, Inc. (Incorporated by
reference from Itel Corporation's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1992, Exhibit 2.2(g).).............
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
----- -----------------------------------------------------------------------------
<S> <C> <C>
(3) Articles of Incorporation and by-laws.
3.1 Restated Certificate of Incorporation of Itel Corporation and
Certificates of Designations of Class B Preferred Stock, Series C,
filed with Secretary of State of Delaware on September 29, 1987.
(Incorporated by reference from Itel Corporation's Registration
Statement on Form S-3, Registration Number 33-18008, filed October 26,
1987, Exhibit 3.1.)...................................................
3.2 By-laws of Itel Corporation as amended through January 1, 1993.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, Exhibit
3.2.).................................................................
(4) Instruments defining the rights of security holders, including indentures.+
4.1 Indenture, dated January 15, 1988, and First Supplemental Indenture,
dated January 15, 1989, between Itel Corporation and First Fidelity
Bank, National Association, New Jersey, as Trustee, providing for
10.2% Senior Subordinated Extendible Notes due 2001 and 13% Senior
Subordinated Notes due 1999. (Incorporated by reference from Amendment
No. 1 to Itel Corporation's Registration Statement on Form S-3,
Registration Number 33-18008, filed January 8, 1988, Exhibit 4.1, Itel
Corporation's Current Report on Form 8-K, January 19, 1989, Exhibit 4,
and Itel Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1991, Exhibit 4.4.)............................
4.2 Amended and Restated Credit Agreement, dated March 11, 1994, among
Anixter Inc., Chemical Bank, as Agent, and the other banks named
therein. .............................................................
4.3 Indenture, dated June 1, 1992, between Rail Car Trust No. 1992-1 and
Harris Trust and Savings Bank, as Trustee, providing for 7.75% Trust
Notes due 2004. (Incorporated by reference from the Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1992 of Railcar
Trust No. 1992-1, Exhibit 4.1.).......................................
(10) Material contracts (also see plan of acquisition etc.).+
10.1 Form of Itel Corporation Tax Allocation Agreement, dated January 1,
1987. (Incorporated by reference from Itel Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987, Exhibit
10.1.)................................................................
10.2* Itel Corporation Incentive Plan, dated January 26, 1989. (Incorporated
by reference from Itel Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988, Exhibit 10.2.)...............
10.3* Itel Corporation 1983 Stock Incentive Plan as amended and restated
July 16, 1992. (Incorporated by reference from Itel Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1992, Exhibit 10.3.)..................................................
10.4* Warrant Agreement, dated December 5, 1985, between Itel Corporation
and Harold Haynes, Jerome Jacobson, Melvyn N. Klein and James D.
Woods, individually. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1985, Exhibit 10.14.)....................................
10.5* Warrant Agreement, dated June 24, 1986, between Itel Corporation and
William A. Buzick, Jr., F. Philip Handy, Harold Haynes, Jerome
Jacobson, Melvyn N. Klein and James D. Woods, individually.
(Incorporated by reference from Itel Corporation's Registration
Statement on Form S-1, Registration Number 33-7000, filed July 3,
1986, Exhibit 10.17.).................................................
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
----- ----------------------------------------------------------------------------
<S> <C> <C>
10.6* Supplemental Pension Agreement, dated November 17, 1986, between Itel
Corporation and Rod F. Dammeyer. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1986, Exhibit 10.14.)....................................
10.7* (a) Itel Corporation Supplemental Retirement Benefits Plan, dated
January 1, 1987. (Incorporated by reference from Itel Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1987, Exhibit 10.16.).................................................
(b) Amendment No. 1, dated May 17, 1989 and effective as of January 1,
1989, to Itel Corporation Supplemental Retirement Benefits Plan.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989, Exhibit
10.9(b).).............................................................
(c) Amendment No. 2, dated October 15, 1992, to Itel Corporation
Supplemental Retirement Benefits Plan (Incorporated by reference from
Itel Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Exhibit 10.7(c).)............................
(d) Amendment No. 3, dated February 25, 1993, to Itel Corporation
Supplemental Retirement Benefits Plan. (Incorporated by reference from
Itel Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Exhibit 10.7(d).)............................
10.8* Itel Corporation Key Executive Equity Plan, as amended and restated
July 16, 1992. (Incorporated by reference from Itel Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1992, Exhibit 10.8.)..................................................
10.9* Warrant Agreement, dated September 10, 1987, between Itel Corporation
and William A. Buzick, Jr., F. Philip Handy, Harold Haynes, Jerome
Jacobson, Melvyn N. Klein and James D. Woods, individually.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988, Exhibit
10.15.)...............................................................
10.10 Registration Rights Agreement, dated December 29, 1989, among Bay Area
Real Estate Investment Associates, L.P., Olympia & York SF Holdings
Corporation and Itel Corporation. (Incorporated by reference from Itel
Corporation's Schedule 13D, filed November 19, 1990, relating to the
shares of Catellus Development Corporation, Exhibit 2.)...............
10.11* Warrant Agreement, dated July 14, 1988, between Itel Corporation and
William A. Buzick, Jr., F. Philip Handy, Harold Haynes, Jerome
Jacobson, Melvyn N. Klein, Robert H. Lurie, John R. Petty and James D.
Woods, individually. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, Exhibit 10.19.)....................................
10.12* Executive Supplemental Life Plan, dated June 15, 1989, for Itel
Corporation and participating subsidiaries. (Incorporated by reference
from Itel Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, Exhibit 10.20.)..............................
10.13* (a) Itel Corporation Supplemental Executive Retirement Plan, dated
January 18, 1990. (Incorporated by reference from Itel Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1989, Exhibit 10.23.).................................................
(b) Amendment No. 1 dated February 25, 1993, to Itel Corporation
Supplemental Executive Retirement Plan. (Incorporated by reference
from Itel Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Exhibit 10.13(b).)...........................
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
----- -----------------------------------------------------------------------------
<S> <C> <C>
10.14* Warrant Agreement, dated July 13, 1989, between Itel Corporation and
Bernard F. Brennan, William A. Buzick, Jr., F. Philip Handy, Harold
Haynes, Jerome Jacobson, Melvyn N. Klein, Robert H. Lurie, John R.
Petty and James D. Woods, individually. (Incorporated by reference
from Itel Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Exhibit 10.21.)..............................
10.15* Plan for Alternative Payment of Incentive Compensation, dated December
10, 1990. (Incorporated by reference from Itel Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990,
Exhibit 10.22.).......................................................
10.16* Itel Corporation Severance/Retention Plan. (Incorporated by reference
from Itel Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, Exhibit 10.23.)..............................
10.17* Itel Corporation Director Stock Option Plan. (Incorporated by
reference from Itel Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Exhibit 10.24.)..................
10.18* Warrant Agreement, dated August 22, 1990, between Itel Corporation and
Bernard F. Brennan, William A. Buzick, Jr., F. Philip Handy, Harold
Haynes, Jerome Jacobson, Melvyn Klein, John R. Petty and James D.
Woods, individually. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, Exhibit 10.25.)....................................
10.19* Letter Agreement, dated December 2, 1991, with John Pigott.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, Exhibit
10.26.)...............................................................
10.20* (a) Agreement, dated January 1, 1992, with Rod F. Dammeyer.
(Incorporated by reference from Itel Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, Exhibit
10.22.)...............................................................
* (b) Amendment to Agreement, dated January 1, 1992, with Rod F.
Dammeyer. ............................................................
* (c) Agreement, dated January 27, 1994, with Rod F. Dammeyer. .........
10.21* Agreement, dated November 1, 1992, with James E. Knox. (Incorporated
by reference from Itel Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, Exhibit 10.23.)..............
10.22* Form of Stock Option Agreement. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, Exhibit 10.24.)....................................
10.23 Participation Agreement, dated December 31, 1991, among General
Electric Rail Car Services Corporation, GE Rail Car Associates, Inc.,
GE Rail Car Leasing Associates, Inc., General Electric Capital
Corporation, Itel Rail Funding Corporation, Rex Railways, Inc., and
Railcar Associates, LP.. (Incorporated by reference from the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1992 of
Railcar Trust No. 1992-1, Exhibit 10.1.)..............................
10.24 Second Amendment and Restated Trust Agreement, dated May 1, 1992,
between Itel Rail Corporation and Wilmington Trust Company, as
Trustee. (Incorporated by reference from Amendment No. 4 to Railcar
Trust No. 1992-1's Registration Statement on Form S-1, Registration
Number 33-44946, filed May 18, 1992, Exhibit 10.5.)...................
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
----- -----------------------------------------------------------------------------
<S> <C> <C>
10.25 (a) Amended and Restated Agreement of Limited Partnership of Railcar
Associates, LP., dated June 1, 1992, among GE Railcar Associates,
Inc., GE Railcar Leasing Associates, Inc., and Railcar Trust No.
1992-1. (Incorporated by reference from the Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1992 of Railcar Trust No.
1992-1, Exhibit 10.3(a).).............................................
(b) Guaranty, dated June 1, 1992, by General Electric Capital
Corporation of certain obligations under the above Agreement of
Limited Partnership. (Incorporated by reference from the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1992 of
Railcar Trust No. 1992-1, Exhibit 10.3(b).)...........................
10.26 (a) Master Lease Agreement, dated June 1, 1992, between Railcar
Associates, LP. and GE Capital Railcar Associates, Inc.. (Incorporated
by reference from Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1992 of Railcar Trust No. 1992-1, Exhibit 10.4(a).)....
(b) Lease Guaranty, dated June 1, 1992, by General Electric Capital
Corporation of the obligations of GE Capital Railcar Associates, Inc.
under the above Master Lease Agreement. (Incorporated by reference
from Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1992 of Railcar Trust No. 1992-1, Exhibit 10.4(b).)...............
10.27 Tax Allocation Agreement with ANTEC Corporation. (Incorporated by
reference from Amendment No. 2 to ANTEC Corporation's Registration
Statement on Form S-1, Registration Number 33-65488, filed August 20,
1993, Exhibit 10.5.)..................................................
10.28 Registration Rights Agreement with ANTEC Corporation. (Incorporated by
reference from Amendment No. 3 to ANTEC Corporation's Registration
Statement on Form S-1, Registration Number 33-65488, filed September
13, 1993, Exhibit 10.9.)..............................................
10.29 Directors & Officers Insurance Agreement with ANTEC Corporation.
(Incorporated by reference to ANTEC Corporation's Registration
Statement on Form S-1, Registration Number 33-65488, filed July 2,
1993, Exhibit 10.8.)..................................................
(21) Subsidiaries of the Registrant.
21.1 List of Subsidiaries of the Registrant................................
(23) Consents of experts and counsel.
23.1 Consent of Ernst & Young..............................................
(24) Power of attorney.
24.1 Power of Attorney executed by Bernard F. Brennan, F. Philip Handy,
Harold Haynes, Jerome Jacobson, Melvyn N. Klein, John R. Petty, John
A. Pigott, Sheli Rosenberg and Samuel Zell............................
</TABLE>
46
<PAGE> 47
(28) Additional exhibits.
This Annual Report on Form 10-K includes the following Financial Statement
Schedules:
ITEL CORPORATION AND SUBSIDIARIES--
FINANCIAL SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Schedule I -- Marketable securities--other investments............................. 48
Schedule II -- Amounts receivable from related parties and underwriters, promoters,
and employees other than related parties............................. 49
Schedule III -- Condensed financial information of Registrant........................ 50
Schedule V -- Property and equipment............................................... 53
Schedule VI -- Accumulated depreciation............................................. 54
Schedule VIII -- Valuation and qualifying accounts and reserves....................... 55
</TABLE>
All other schedules are omitted because they are not required or are not
applicable, or the required information is included in the consolidated
financial statements or notes thereto.
- ---------------
+ Copies of other instruments defining the rights of holders of long-term debt
of Itel Corporation and its subsidiaries not filed pursuant to Item
601(b)(4)(iii) of Regulation S-K and omitted copies of attachments to plans
and material contracts will be furnished to the Securities and Exchange
Commission upon request.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, as amended,
the Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Registrant's Registration Statement on Form
S-8 Nos. 2-93173 (filed September 30, 1987), 33-13486 (filed April 15, 1987),
33-21656 (filed May 3, 1988) and 33-60676 (filed April 5, 1993):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provision, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
47
<PAGE> 48
ITEL CORPORATION
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS
DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARKET AMOUNT
VALUE AT
OF EACH WHICH
ISSUE AT CARRIED
COST OF DECEMBER IN THE
NAME OF ISSUER AND NUMBER OF EACH 31, BALANCE
TITLE OF EACH ISSUE SHARES ISSUE(A) 1993 SHEET
- ------------------------------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
Common stock:
Santa Fe Energy Resources, Inc. ......... 8,064,005 $110,000 $ 74,600 $ 74,600
Catellus Development Corporation......... 6,687,575 53,000 51,800 51,800
-------- -------- --------
Total....................... $163,000 $126,400 $126,400
-------- -------- --------
-------- -------- --------
</TABLE>
- ---------------
(a) At December 31, 1993, the Company wrote down its investment in marketable
equity securities by $25 million.
48
<PAGE> 49
ITEL CORPORATION
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES
OTHER THAN RELATED PARTIES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE AT
BALANCE AT ---------------------- END OF PERIOD
BEGINNING AMOUNTS AMOUNTS -------------------
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NONCURRENT
-------------- --------- --------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
John M. Egan.................. $ 123 -- (3) -- -- $ 120
Steve Necessary............... -- 200 -- -- -- $ 200
Jerry Fernandez............... -- 184 -- -- -- $ 184
Year ended December 31, 1992:
SZRL Investments(a)........... $15,000 -- (15,000) -- -- --
John M. Egan.................. $ 125 -- (2) -- -- $ 123
Year ended December 31, 1991:
SZRL Investments.............. $15,000 -- -- -- -- $15,000
John M. Egan.................. $ 128 -- (3) -- -- $ 125
Cross Harbor RR............... $ 243 -- (243) -- -- $ --
</TABLE>
- ---------------
(a) In 1992, Itel acquired warrants to purchase 4.675 million shares of Common
Stock held by an affiliate of Samuel Zell, a director of Itel. In
connection with the warrant purchase, a $15.0 million note receivable was
cancelled.
49
<PAGE> 50
ITEL CORPORATION
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ITEL CORPORATION (PARENT COMPANY)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................................ $ 800 $ 3,600
Accounts receivable................................................. 300 700
Amounts currently due from affiliates............................... 101,700 489,200
Other assets........................................................ 1,500 2,100
-------- --------
Total current assets................................... 104,300 495,600
Property (net)........................................................ 100 400
Deferred tax asset, net............................................... 136,900 164,000
Investment in and advances to subsidiaries............................ 360,200 192,200
Marketable equity securities available-for-sale....................... 126,400 116,900
Other assets.......................................................... 4,100 12,200
-------- --------
$732,000 $981,300
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses, due currently.................. $ 37,300 $ 41,600
Current maturities of Senior Subordinated Notes....................... -- 74,300
-------- --------
Total current liabilities.............................. 37,300 115,900
Long-term debt........................................................ 288,500 496,600
Other liabilities..................................................... 900 1,500
-------- --------
Total liabilities...................................... 326,700 614,000
Stockholders' equity:
Series C convertible preferred stock................................ -- 83,600
Common stock........................................................ 33,000 28,100
Capital surplus..................................................... 383,500 281,200
Retained earnings................................................... 22,400 26,700
Cumulative translation adjustments.................................. (9,900) (3,200)
-------- --------
429,000 416,400
Unrealized losses on marketable equity securities available for sale
(net of related deferred income tax benefit)..................... (23,700) (49,100)
-------- --------
Total stockholders' equity............................. 405,300 367,300
-------- --------
$732,000 $981,300
-------- --------
-------- --------
</TABLE>
50
<PAGE> 51
ITEL CORPORATION
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ITEL CORPORATION (PARENT COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Revenues:
Interest and investment income, including intercompany.... $ 15,600 $ -- $ 90,200
Other (expenses) income:
Corporate interest........................................ (65,200) (127,900) (167,700)
General and administrative................................ (9,300) (8,600) (10,500)
Gain on ANTEC Offering.................................... 84,500 -- --
Write-down of marketable equity securities................ (25,000) (25,000) (9,200)
-------- --------- ---------
(15,000) (161,500) (187,400)
-------- --------- ---------
Income (loss) from operations before income taxes and equity
in earnings (losses) of subsidiaries...................... 600 (161,500) (97,200)
Income tax benefit.......................................... 3,300 57,100 144,100
Equity in earnings (losses) of subsidiaries................. 10,900 9,400 (111,400)
-------- --------- ---------
Income (loss) before extraordinary items.................... 14,800 (95,000) (64,500)
Extraordinary items (net of related income taxes)........... (16,000) (9,300) 8,800
-------- --------- ---------
Net loss.................................................... $ (1,200) $(104,300) $ (55,700)
-------- --------- ---------
-------- --------- ---------
</TABLE>
51
<PAGE> 52
ITEL CORPORATION
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ITEL CORPORATION (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Income (loss) before extraordinary items................. $ 14,800 $ (95,000) $ (64,500)
Adjustments to reconcile income (loss) before
extraordinary items to net cash used by operating
activities:
Depreciation.......................................... 400 300 400
Income tax benefit.................................... (3,300) (57,100) (144,100)
Gain on ANTEC Offering................................ (84,500) -- --
Write-down of marketable equity securities............ 25,000 25,000 9,200
Equity in (earnings) losses of subsidiaries........... (10,900) (9,400) 111,400
Non-cash financing expense............................ 4,200 6,900 6,800
Change in other operating items....................... (27,000) 12,800 (95,700)
--------- --------- ---------
Net cash used by operating activities............ (81,300) (116,500) (176,500)
Investing activities:
Sales of securities...................................... 3,700 800 19,500
Net dividends from (capital contributions to)
subsidiaries.......................................... 150,300 (37,500) 481,100
Loans from subsidiaries, net............................. 95,200 808,000 169,200
Other, net............................................... 13,700 (4,500) (39,800)
--------- --------- ---------
Net investing activities......................... 262,900 766,800 630,000
--------- --------- ---------
Net cash provided before financing activities.............. 181,600 650,300 453,500
Financing activities:
Borrowings............................................... 93,400 -- 24,700
Reductions in borrowings................................. (391,300) (548,300) (327,400)
Purchases of treasury stock.............................. (300) (114,300) (147,400)
Preferred stock dividend payments........................ (2,900) (5,700) (5,700)
Proceeds from issuance of common stock................... 21,100 21,300 4,800
Proceeds from ANTEC Offering............................. 67,000 -- --
Redemption of ANTEC preferred stock...................... 30,000 -- --
Other, net............................................... (1,400) -- (10,100)
--------- --------- ---------
Net financing activities......................... (184,400) (647,000) (461,100)
--------- --------- ---------
Cash provided (used)....................................... (2,800) 3,300 (7,600)
Cash and equivalents at beginning of year.................. 3,600 300 7,900
--------- --------- ---------
Cash and equivalents at end of year........................ $ 800 $ 3,600 $ 300
--------- --------- ---------
--------- --------- ---------
</TABLE>
52
<PAGE> 53
ITEL CORPORATION
SCHEDULE V--PROPERTY AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT ADDITIONS RETIREMENTS BALANCE AT
BEGINNING OF ADDITIONS AND OR SALES END OF
CLASSIFICATION THE PERIOD AT COST DEDUCTIONS AT COST THE PERIOD
-------------- ------------ --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Rental equipment--rail cars..... $1,395,000 $ -- $ (6,400) $ -- $1,388,600
Other........................... 58,300 13,400 -- (3,200) 68,500
---------- ------- -------- -------- ----------
$1,453,300 $13,400 $ (6,400) $ (3,200) $1,457,100
---------- ------- -------- -------- ----------
---------- ------- -------- -------- ----------
Year ended December 31, 1992:
Rental equipment--rail cars..... $1,380,500 $ 9,000 $ 34,200 $(28,700) $1,395,000
Other........................... 74,000 8,000 (15,600) (8,100) 58,300
---------- ------- -------- -------- ----------
$1,454,500 $17,000 $ 18,600 $(36,800) $1,453,300
---------- ------- -------- -------- ----------
---------- ------- -------- -------- ----------
Year ended December 31, 1991:
Rental equipment--rail cars..... $1,317,900 $62,500 $ 17,400 $(17,300) $1,380,500
Other........................... 64,200 12,600 200 (3,000) 74,000
---------- ------- -------- -------- ----------
$1,382,100 $75,100 $ 17,600 $(20,300) $1,454,500
---------- ------- -------- -------- ----------
---------- ------- -------- -------- ----------
</TABLE>
53
<PAGE> 54
ITEL CORPORATION
SCHEDULE VI--ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER RETIREMENTS,
BALANCE AT ADDITIONS ADDITIONS RENEWALS BALANCE AT
BEGINNING OF CHARGED TO AND AND END OF
CLASSIFICATION THE PERIOD EXPENSES DEDUCTIONS REPLACEMENTS THE PERIOD
-------------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Rental equipment--rail cars........ $329,700 $49,700 $ (3,000) $ -- $376,400
Other.............................. 27,700 10,800 (700) (1,700) 36,100
-------- ------- -------- -------- --------
$357,400 $60,500 $ (3,700) $ (1,700) $412,500
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Year ended December 31, 1992:
Rental equipment--rail cars........ $294,600 $47,200 $ (4,200) $ (7,900) $329,700
Other.............................. 32,700 11,100 (11,000) (5,100) 27,700
-------- ------- -------- -------- --------
$327,300 $58,300 $(15,200) $(13,000) $357,400
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Year ended December 31, 1991:
Rental equipment--rail cars........ $264,500 $41,700 $ -- $(11,600) $294,600
Other.............................. 22,400 13,300 (400) (2,600) 32,700
-------- ------- -------- -------- --------
$286,900 $55,000 $ (400) $(14,200) $327,300
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
</TABLE>
54
<PAGE> 55
ITEL CORPORATION
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF CHARGED TO OTHER END OF
DESCRIPTION THE PERIOD INCOME ACCOUNTS DEDUCTIONS THE PERIOD
----------- ------------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful accounts......... $ 10,700 $ 5,500 $ 2,300 $(12,300) $ 6,200
Unrealized losses on marketable equity
securities available-for-sale(a)..... $ 74,400 -- (12,800) (25,000) $36,600
Allowance for deferred tax asset........ $ 58,400 -- -- (3,000) $55,400
Year ended December 31, 1992:
Allowance for doubtful accounts......... $ 13,200 7,600 2,900 (13,000) $10,700
Unrealized losses on marketable equity
securities available-for-sale(a)..... $ 72,500 -- 26,900 (25,000) $74,400
Allowance for deferred tax asset........ $ 62,100 -- -- (3,700) $58,400
Year ended December 31, 1991:
Allowance for doubtful accounts......... $ 15,100 3,500 600 (6,000) $13,200
Unrealized losses on marketable equity
securities available-for-sale(a)..... $171,100 -- (19,200) (79,400) $72,500
Allowance for deferred tax asset........ $ 59,000 3,100 -- -- $62,100
</TABLE>
- ---------------
(a) At December 31, 1993, 1992 and 1991, the Company wrote down its investment
in marketable equity securities by $25.0 million, $25.0 million and $50.0
million, respectively. The remaining deduction of $29.4 million in 1991
relates to the loss on sale of the Company's investment in Santa Fe.
55
<PAGE> 56
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, IN THE CITY OF
CHICAGO, STATE OF ILLINOIS, ON THE 25TH DAY OF MARCH, 1994.
ITEL CORPORATION
JAMES E. KNOX
----------------------------------------
James E. Knox
Senior Vice President, General Counsel
and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
Chief Executive Officer
and President
ROD F. DAMMEYER (Principal Executive Officer) March 25, 1994
- ---------------------------------------------
Rod F. Dammeyer
Senior Vice President--Finance
GARY M. HILL (Chief Financial Officer) March 25, 1994
- ---------------------------------------------
Gary M. Hill
Vice President--Controller
JOHN P. MCNICHOLAS, JR. (Chief Accounting Officer) March 25, 1994
- ---------------------------------------------
John P. McNicholas, Jr.
BERNARD F. BRENNAN* Director March 25, 1994
- ---------------------------------------------
Bernard F. Brennan
ROD F. DAMMEYER Director March 25, 1994
- ---------------------------------------------
Rod F. Dammeyer
F. PHILIP HANDY* Director March 25, 1994
- ---------------------------------------------
F. Philip Handy
HAROLD HAYNES* Director March 25, 1994
- ---------------------------------------------
Harold Haynes
JEROME JACOBSON* Director March 25, 1994
- ---------------------------------------------
Jerome Jacobson
MELVYN N. KLEIN* Director March 25, 1994
- ---------------------------------------------
Melvyn N. Klein
JOHN R. PETTY* Director March 25, 1994
- ---------------------------------------------
John R. Petty
JOHN A. PIGOTT* Director March 25, 1994
- ---------------------------------------------
John A. Pigott
SHELI ROSENBERG* Director March 25, 1994
- ---------------------------------------------
Sheli Rosenberg
SAMUEL ZELL* Director March 25, 1994
- ---------------------------------------------
Samuel Zell
*BY JAMES E. KNOX
- ---------------------------------------------
James E. Knox (Attorney in fact)
James E. Knox, as attorney in fact for each person indicated.
</TABLE>
56
<PAGE> 57
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 2-93173) pertaining to the Itel Corporation 1983 Stock Incentive
Plan, the Registration Statement (Form S-8 No. 33-13486) pertaining to the Itel
Corporation Key Executive Equity Plan, the Registration Statement (Form S-8 No.
33-21656) pertaining to the Itel Corporation 1988 Employee Stock Purchase Plan,
the Registration Statement (Form S-8 No. 33-38364) pertaining to the Itel
Corporation 1989 Employee Stock Incentive Plan and the Registration Statement
(Form S-8 No. 33-60676) pertaining to the Itel Corporation 1993 Director Stock
Option Plan and in the related Prospectuses of our report dated February 8, 1994
with respect to the consolidated financial statements and schedules of Itel
Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1993.
ERNST & YOUNG
Chicago, Illinois
March 25, 1994
57
<PAGE> 1
Execution Copy
EXHIBIT 4.2
$345,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of March 11, 1994
among
ANIXTER INC.,
as Borrower,
THE FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO,
as Lenders,
and
CHEMICAL BANK,
as Agent
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Computation of Time Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.03. Accounting Terms; Accounting for Non-Group
Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.04. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.05. Collateral Release; References to Collateral. . . . . . . . . . . . . . . . . . . . . . . 23
1.06. Amendment and Restatement of Original Credit
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<CAPTION>
ARTICLE II
AMOUNTS AND TERMS OF REVOLVING CREDIT FACILITY
<S> <C> <C>
2.01. The Revolving Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.02. Loan Facility Mechanics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.03. Interest on the Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.04. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.05. Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.06. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.07. Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.08. Special Provisions Governing Eurodollar Rate Loans. . . . . . . . . . . . . . . . . . . . 36
2.09. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.10. Increased Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.11. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.12. Authorized Officers of Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.13. Replacement of Certain Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.14. Incurrence of Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
<CAPTION>
ARTICLE III
LETTERS OF CREDIT
<S> <C> <C>
3.01. Obligation to Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.02. Types and Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.03. Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.04. Issuance of Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.05. Reimbursement Obligations; Duties of the Issuing Banks. . . . . . . . . . . . . . . . . . 45
3.06. Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
3.07. Payment of Reimbursement Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.08. Compensation for Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.09. Indemnification; Exoneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.10 Reporting By Issuing Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
<CAPTION>
ARTICLE IV
CONDITIONS TO LOANS AND LETTERS OF CREDIT
<S> <C> <C>
4.01. Conditions Precedent to the Effectiveness of this Agreement . . . . . . . . . . . . . . 50
4.02. Conditions Precedent to all Loans and Letters of Credit. . . . . . . . . . . . . . . . 52
<CAPTION>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
5.01. Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.02. Subsequent Funding Representations and Warranties. . . . . . . . . . . . . . . . . . 61
<CAPTION>
ARTICLE VI
REPORTING COVENANTS
<S> <C> <C>
6.01. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.02. Environmental Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
<CAPTION>
ARTICLE VII
AFFIRMATIVE COVENANTS
<S> <C> <C>
7.01. Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.02. Corporate Powers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.03. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.04. Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.05. Maintenance of Properties; Insurance. . . . . . . . . . . . . . . . . . . . . . . 69
7.06. Inspection of Property; Books and Records; Discussions. . . . . . . . . . . . . 69
7.07. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.08. Maintenance of Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.09. Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.10. Foreign Subsidiary Credit Support; Change of Subsidiary Status. . . . . . . . . . 70
7.11. Maintenance of Separate Corporate Existence. . . . . . . . . . . . . . . . . . . 72
<CAPTION>
ARTICLE VIII
NEGATIVE COVENANTS
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
8.01. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.02. Sales of Assets; Liens. . . . . . . . . . . . . . . . . . . . . . . . . 74
8.03. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.04. Accommodation Obligations. . . . . . . . . . . . . . . . . . . . . . . 78
8.05. Restricted Junior Payments. . . . . . . . . . . . . . . . . . . . . . . 78
8.06. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.07. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . 80
8.08. Restriction on Fundamental Changes. . . . . . . . . . . . . . . . . . . 80
8.09. Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . . . . 81
8.10. Environmental Liabilities. . . . . . . . . . . . . . . . . . . . . . . 81
8.11. Margin Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.12. Change of Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . 82
8.13. Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 82
<CAPTION>
ARTICLE IX
FINANCIAL COVENANTS
<S> <C> <C>
9.01. Defined Terms for Financial Covenants. . . . . . . . . . . . . . . . . 82
9.02. Minimum Consolidated Net Worth. . . . . . . . . . . . . . . . . . . . . 84
9.03 Ratio of Indebtedness to Capitalization. . . . . . . . . . . . . . . . 84
9.04. Interest Coverage Ratios. . . . . . . . . . . . . . . . . . . . . . . . 84
9.05. Ratio of Current Assets to Current Liabilities. . . . . . . . . . . . . 85
9.06. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.07. Calculation of Financial Covenants. . . . . . . . . . . . . . . . . . . 86
<CAPTION>
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
<S> <C> <C>
10.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.02. Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 89
<CAPTION>
ARTICLE XI
THE AGENT
<S> <C> <C>
11.01. Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.02. Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.03. Rights, Exculpation, Etc. . . . . . . . . . . . . . . . . . . . . . . 91
11.04. Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
11.05. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
11.06. The Agent Individually. . . . . . . . . . . . . . . . . . . . . . . . 92
11.07. Successor Agent; Resignation of Agent. . . . . . . . . . . . . . . . . 93
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
11.08. Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
11.09. Relations Among Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
11.10. Notices to Itel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
<CAPTION>
ARTICLE XII
MISCELLANEOUS
<S> <C> <C>
12.01. Survival of Warranties and Agreements. . . . . . . . . . . . . . . . . . . . . . . 96
12.02. Assignments and Participations. . . . . . . . . . . . . . . . . . . . . . . . . . 96
12.03. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.04. Indemnification and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.05. Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12.06. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12.07. Ratable Sharing; Defaulting Lender. . . . . . . . . . . . . . . . . . . . . . . . 101
12.08. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.09. Independence of Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
12.10. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
12.11. Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . . . . . . . . . . 104
12.12. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
12.13. Marshalling; Recourse to Security; Payments Set Aside. . . . . . . . . . . . . . . 105
12.14. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
12.15. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
12.16. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
12.17. Successors and Assigns; Subsequent Holders of Notes. . . . . . . . . . . . . . . 105
12.18. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. . . . . . . . . . . . . . 106
12.19. Counterparts; Effectiveness; Inconsistencies. . . . . . . . . . . . . . . . . . . 107
12.20. Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
12.21. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
</TABLE>
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<PAGE> 6
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit 1 -- Assignment and Acceptance (Section Section 1.01, 12.02(d))
Exhibit 2 -- Form of Foreign Subsidiary Pledge (Section 1.01)
Exhibit 3 -- Compliance Certificate (Section Section 1.01, 6.01(e))
Exhibit 4 -- Notice of Borrowing (Section 1.01)
Exhibit 5 -- Notice of Conversion/Continuation (Section 1.01)
Exhibit 6 -- List of Closing Documents (Section 4.01(a))
Exhibit 7 -- Form of Loss Payable Endorsement (Section 7.05)
Exhibit 8 -- Form of Foreign Subsidiary Guaranty (Section 1.01)
Exhibit 9 -- Form of Note (Section 2.02)
Exhibit 10 -- Form of Revolving Subordinated Note (Section 1.01)
</TABLE>
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<PAGE> 7
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule A -- List of Lenders, Domestic and Eurodollar Lending Offices and Commitments
(Section 1.01, 12.02(c), 12.10)
Schedule 1.01-A -- Existing Indebtedness (Section 1.01)
Schedule 1.01-B -- Real Property Subject to Mortgages (Section 1.01)
Schedule 1.01-C -- Permitted Existing Liens (Section 1.01)
Schedule 5.01(c) -- Subsidiaries (Section Section 5.01(c), 7.01)
Schedule 5.01(d) -- Violation of Requirements of Law (Section 5.01(d))
Schedule 5.01(i) -- Capitalization (Section 5.01(i))
Schedule 5.01(j) -- Pending or Threatened Litigation (Section 5.01(j))
Schedule 5.01(l) -- Tax Assessments (Section 5.01(l))
Schedule 5.01(s) -- Environmental Matters (Section 5.01(s))
Schedule 5.01(t) -- ERISA Matters (Section 5.01(t))
Schedule 5.01(w) -- Joint Ventures (Section 5.01(w))
Schedule 5.01(x) -- Labor Matters (Section 5.01(x))
Schedule 7.05 -- Insurance (Section 7.05)
Schedule 8.03 -- Existing Investments (Section 8.03)
</TABLE>
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<PAGE> 8
AMENDED AND RESTATED
CREDIT AGREEMENT
This Amended and Restated Credit Agreement dated as of March 11,
1994 (as amended, supplemented, modified or restated from time to time, the
"Agreement") is entered into among ANIXTER INC. (formerly known as Anixter
Bros., Inc.), a Delaware corporation ("Borrower"), THE FINANCIAL INSTITUTIONS
LISTED ON THE SIGNATURE PAGES HEREOF and each other financial institution which
from time to time becomes a party hereto in accordance with Section 12.02(a)
(together with their respective successors and assigns, individually, a
"Lender" and, collectively, the "Lenders"), and CHEMICAL BANK, in its separate
capacity as agent for the Lenders hereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested and the Agent, The Bank of
New York as Issuing Bank (the "Original Issuing Bank") and the Lenders have
agreed to amend that certain Credit Agreement dated as of May 20, 1992 among
the Borrower, the Lenders, the Original Issuing Bank and the Agent (as the same
has been amended, supplemented or modified prior to the date hereof, the
"Original Credit Agreement");
WHEREAS, the Borrower, the Lenders, the Issuing Banks and the
Agent have agreed to enter into this Agreement in order to (i) amend and
restate the Original Credit Agreement in its entirety, (ii) re-evidence the
Obligations which shall be repayable in accordance with the terms of this
Agreement and (iii) set forth the terms and conditions under which the Lenders
and the Issuing Banks will, from time to time, make loans and extend other
financial accommodations to or for the benefit of the Borrower;
WHEREAS, it is the intention of the parties to this Agreement
that this Agreement not constitute a novation, and that, from and after the
Effective Date, the Original Credit Agreement shall be amended and restated
hereby and all references herein or in the other Loan Documents to the "Credit
Agreement" and all references herein to "hereunder", "hereof", "herein" or
words of like import shall mean and be a reference to the Original Credit
Agreement as amended and restated hereby;
NOW THEREFORE, in consideration of the terms and conditions
contained herein, and of any loans or extensions of credit heretofore, now or
hereafter made to or for the benefit of the Borrower by the Lenders, the
Issuing Banks and the Agent, the parties hereto hereby agree as follows:
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<PAGE> 9
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.
The following terms used in this Agreement shall have the
following meanings (such meanings to be applicable, except to the extent
otherwise indicated in a definition of a particular term, both to the singular
and the plural forms of the terms defined):
"Accommodation Obligation," as applied to any Person, shall mean
any contractual obligation, contingent or otherwise, of that Person with
respect to any Indebtedness or other obligation or liability of another,
including, without limitation, any such Indebtedness, obligation or liability
directly or indirectly guaranteed, supported by letter of credit, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
co-made or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable, including
Contractual Obligations (contingent or otherwise) arising through any agreement
to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or
liability or any security therefor, or to provide funds for the payment or
discharge thereof (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition, or to make payment other than for value
received. For purposes of interpreting any provision of this Agreement which
refers to the Dollar amount of Accommodation Obligations of any Person, such
provision shall be deemed to mean the maximum amount of such Accommodation
Obligations or, in the case of an Accommodation Obligation to maintain
solvency, assets, level of income or other financial condition, the amount of
Indebtedness to which such Accommodation Obligation relates, or if less, the
stated maximum, if any, in the documents evidencing such Accommodation
Obligation.
"Affected Lender" shall have the meaning ascribed to that term
in Section 2.13.
"Affiliate," as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to vote 20% or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise.
"Agent" shall have the meaning ascribed to such term in the
preamble hereto and shall include any successor Agent appointed pursuant to
Section 11.07.
"Agreement" shall have the meaning ascribed to such term in the
preamble hereto.
"Agreement Accounting Principles" shall mean GAAP as of the date
of this Agreement together with any changes in GAAP after the date hereof which
are not "Material
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<PAGE> 10
Accounting Changes" (as defined below). If any changes in GAAP are hereafter
required or permitted and are adopted by the Borrower with the agreement of its
independent certified public accountants and such changes result in a material
change in the method of calculation of any of the financial covenants,
restrictions or standards herein or in the related definitions or terms used
therein ("Material Accounting Changes"), the parties hereto agree to enter into
negotiations, in good faith, in order to amend such provisions in a credit
neutral manner so as to reflect equitably such changes with the desired result
that the criteria for evaluating the Borrower's financial condition shall be
the same after such changes as if such changes had not been made; provided,
however, that no Material Accounting Change shall be given effect in such
calculations until such provisions are amended, in a manner reasonably
satisfactory to the Requisite Lenders. In the event such amendment is entered
into, all references in this Agreement to Agreement Accounting Principles shall
mean GAAP as of the date of such amendment together with any changes in GAAP
after the date of such amendment which are not Material Accounting Changes.
"Agreement Obligations" shall mean all Obligations other than
with respect to Eligible Hedging Contracts.
"AHI" shall have the meaning ascribed to that term in the
definition of Foreign Subsidiaries below.
"AII" shall have the meaning ascribed to that term in the
definition of Foreign Subsidiaries below.
"Alternate Base Rate" shall mean, for any day, a fluctuating
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
as shall be in effect from time to time, which rate per annum shall at all
times be equal to the greatest of (a) the Prime Rate in effect on such day; (b)
the sum of one-half of one percent (0.50%) and the Federal Funds Effective Rate
in effect on such day; and (c) the sum of one percent (1.0%) and the
Three-Month Secondary CD Rate in effect on such day. For purposes hereof,
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by Chemical Bank as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective on
the date such change is publicly announced as being effective. "Three-Month
Secondary CD Rate" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day
(or, if such day shall not be a Business Day, the next preceding Business Day)
by the Federal Reserve Board through the public information telephone line of
the Federal Reserve Bank of New York (which rate will, under the current
practices of the Federal Reserve Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by Chemical Bank from three
New York City negotiable certificate of deposit dealers of recognized standing
selected by the Agent. "Federal Funds Effective Rate" shall mean, for any day,
a fluctuating interest rate per annum equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published
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<PAGE> 11
on the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
Chemical Bank from three Federal funds brokers of recognized standing selected
by the Agent. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
or both for any reason, including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or both, of
the first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate
Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate
or the Federal Funds Effective Rate shall be effective on the effective date of
such change.
"Anixter Venezuela" shall have the meaning ascribed to that term
in the definition of Foreign Subsidiaries below.
"ANTEC Restructuring" shall have the meaning ascribed to that
term in Section 4.01(e).
"Applicable Base Rate Margin" as at any date of determination,
shall be the rate per annum then applicable to Base Rate Loans determined in
accordance with the provisions of Section 2.03(e).
"Applicable Commitment Fee" as at any date of determination,
shall be the rate per annum then applicable in the determination of the amount
payable under Section 2.04(a) determined in accordance with the provisions of
Section 2.03(e).
"Applicable Eurodollar Rate Margin" as at any date of
determination, shall be the rate per annum then applicable to Eurodollar Rate
Loans determined in accordance with the provisions of Section 2.03(e).
"Applicable Fees" shall have the meaning ascribed to that term
in Section 2.03(e).
"Applicable Letter of Credit Fee" as at any date of
determination, shall be the rate per annum then applicable in the determination
of the amount payable under Section 3.08(a) with respect to Letters of Credit,
determined in accordance with the provisions of Section 2.03(e).
"Applicable Margin(s)" shall have the meaning ascribed to that
term in Section 2.03(e).
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office, in the case of a Base Rate Loan
and such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate
Loan.
"APR" shall have the meaning ascribed to that term in the
definition of Foreign Subsidiaries below.
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<PAGE> 12
"Assignment and Acceptance" shall mean an Assignment and
Acceptance substantially in the form of Exhibit 1 (with blanks appropriately
filled in) delivered to the Agent in connection with an assignment of a
Lender's interest under this Agreement pursuant to Section 12.02.
"Bank Book" shall have the meaning ascribed to that term in
Section 5.01(h).
"Base Amount" shall have the meaning ascribed to that term in
Section 9.01.
"Base Credit Support" shall have the meaning ascribed to that
term in the definition of "Credit Support" below.
"Base Rate Loans" shall mean all Loans outstanding which bear
interest at a rate determined by reference to the Alternate Base Rate, as
provided in Section 2.03(a)(i).
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower" shall have the meaning ascribed to such term in the
preamble hereto.
"Borrower Distribution Stock Plan" shall mean the Anixter
Distribution Stock Option Plan dated as of January 1, 1993, as such agreement
may be amended, restated or otherwise modified from time to time.
"Borrower Interest Coverage Ratio" shall have the meaning
ascribed to that term in Section 9.01.
"Borrowing" shall mean a borrowing consisting of Loans of the
same type, having the same Interest Period, in the case of Eurodollar Rate
Loans, and made on the same day by the Lenders.
"Business Day" shall mean (i) for all purposes other than as
described by clause (ii) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York, or is a day
on which banking institutions located in New York are required or authorized by
law or other governmental action to close and (ii) with respect to all notices,
determinations, fundings and payments in connection with Eurodollar Rate Loans,
any day which is a Business Day described in clause (i) and which is also a day
for trading by and between banks in the London interbank Eurodollar market.
"Capital Lease," as applied to any Person, shall mean any lease
of any property (whether real, personal, or mixed) by that Person as lessee
which, in conformity with Agreement Accounting Principles, is or should be
accounted for as a capital lease on the balance sheet of that Person.
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<PAGE> 13
"Cash Equivalents" shall mean (i) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by an agency thereof and backed by the full faith and credit of the United
States of America, in each case maturing within ninety (90) days after the date
of acquisition thereof; (ii) marketable direct obligations issued by any state
of the United States of America maturing within ninety (90) days after the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then from such other
nationally recognized rating services acceptable to the Agent) and not listed
in Credit Watch published by S&P (or a similar publication of S&P or another
nationally recognized rating service); (iii) commercial paper (other than
commercial paper issued by Itel, Borrower or any Subsidiary of Borrower or any
of their Affiliates), domestic and Eurodollar certificates of deposit, time
deposits or bankers' acceptances, in any such case maturing no more than ninety
(90) days after the date of acquisition thereof and, at the time of the
acquisition thereof, the issuer's rating on its commercial paper is at least
A-1 or P-1 from either S&P or Moody's (or, if at any time neither S&P nor
Moody's shall be rating such obligations, then the highest rating from other
nationally recognized rating services acceptable to the Agent); and (iv)
commercial paper (other than commercial paper issued by Itel, Borrower or any
Subsidiary of Borrower or any of their Affiliates), domestic and Eurodollar
certificates of deposit, time deposits or bankers' acceptances, in any such
case maturing no more than ninety (90) days after the date of acquisition
thereof and, at the time of the acquisition thereof, the issuer is a Lender and
has a rating on its commercial paper of at least A- 2 or P-2 from either S&P or
Moody's (or, if at any time neither S&P nor Moody's shall be rating such
obligations, then the equivalent rating from other nationally recognized rating
services acceptable to the Agent) provided the amount of Cash Equivalents under
this clause (iv) shall not at any time exceed $2,500,000.
"Change of Control" shall mean any "person," as such term is
defined in Section 13(d)(3) of the Securities Exchange Act, other than the
Samuel Zell Group, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act), directly or indirectly, of 20% or
more of the combined voting power of the Borrower's outstanding securities
ordinarily having the right to vote at elections of directors.
"Chemical Bank" shall mean Chemical Bank, a New York banking
corporation, and any successor thereto.
"Collateral" shall mean all property and interests in property
now owned or hereafter acquired by Borrower or any of Borrower's Subsidiaries
in or upon which a security interest, pledge, lien or mortgage is intended to
be granted, or of which a collateral assignment is intended to be made, under
the Collateral Documents.
"Collateral Documents" shall mean the Security Agreement, the
Subsidiary Security Agreements, the Subsidiary Guaranties, the Intellectual
Property Agreements, the Pledge Agreements, the Mortgages and all other
security agreements, mortgages, deeds of trust, collateral assignments,
financing statements and other agreements, conveyances or documents at any time
delivered to the Agent which intend to create or evidence Liens to secure or to
guarantee the Obligations as amended or reaffirmed from time to time.
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<PAGE> 14
"Commercial Letter of Credit" shall mean any letter of credit
which is drawable upon presentation of a sight draft and other documents
evidencing the sale or shipment of goods purchased by Borrower or any of its
Domestic Subsidiaries or Supported Foreign Subsidiaries in the ordinary course
of such entity's business.
"Commission" shall mean the Securities and Exchange Commission
or any Governmental Authority succeeding to the functions thereof.
"Commitment" shall mean, with respect to each Lender, the
principal amount set forth on Schedule A below such Lender's name under the
heading "Commitment" or assigned to it in accordance with Section 12.02(a), as
such amount may be reduced or otherwise adjusted from time to time pursuant to
the terms of this Agreement, including, without limitation, pursuant to Section
2.02(d) or 8.01(viii), and "Commitments" shall mean the aggregate amount of the
Commitments of all Lenders.
"Commitment Fee" shall have the meaning ascribed to that term in
Section 2.04(a).
"Compliance Certificate" shall mean a certificate in
substantially the form of Exhibit 3 delivered to the Agent and each Lender by
Borrower pursuant to Section 6.01(e) and covering Borrower's compliance with
the covenants contained in Article IX and certain other provisions of this
Agreement.
"Consolidated EBITDA" shall have the meaning ascribed to that
term in Section 9.01.
"Consolidated Interest Coverage Ratio" shall have the meaning
ascribed to that term in Section 9.01.
"Consolidated Interest Expense" shall have the meaning ascribed
to that term in Section 9.01.
"Consolidated Net Worth" shall have the meaning ascribed to that
term in Section 9.01.
"Consolidated Group" shall mean the Borrower, each of its
Subsidiaries and the Joint Ventures.
"Contaminant" shall mean any pollutant, hazardous substance,
hazardous chemical, toxic substance, hazardous waste or special waste, as those
terms are defined in federal, state or local laws and regulations, radioactive
material, petroleum, including crude oil or any petroleum-derived substance, or
breakdown or decomposition product thereof, or any constituent of any such
substance or waste, including but not limited to polychlorinated biphenyls and
asbestos.
"Contractual Obligation", as applied to any Person, shall mean
any provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, contract, undertaking, document, instrument or other
agreement or instrument to which that Person is a party or by which it or any
of its properties is bound, or to which it or any of its properties is
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<PAGE> 15
subject (including, without limitation, any restrictive covenant affecting such
Person or any of its properties).
"Contribution Agreement" shall mean that certain contribution
agreement dated as of the date hereof, as the same may be amended, restated,
supplemented or otherwise modified with the consent of the Requisite Lenders
from time to time or amended, restated, supplemented or otherwise modified from
time to time for the purpose of adding additional Supported Foreign
Subsidiaries.
"Credit Support" shall mean the provision by the Borrower of
credit support or credit enhancement to any of its Foreign Subsidiaries,
whether directly through loans to or Investments in a Foreign Subsidiary,
letters of credit issued for the benefit of any creditor of any Foreign
Subsidiary or guaranties or other Accommodation Obligations by the Borrower of
such Foreign Subsidiary's Indebtedness; provided, however, (a) the Borrower's
Investments made as permitted pursuant to Section 8.03(ix), (b) the Borrower's
Accommodation Obligations in an amount not to exceed $7,752,000 in the
aggregate at any time with respect to Indebtedness of the Borrower's Foreign
Subsidiaries in Canada, (c) the Borrower's Accommodation Obligations in an
amount not to exceed $500,000 in the aggregate at any time with respect to
Indebtedness of the Borrower's Foreign Subsidiaries which are not in Canada and
(d) the Borrower's Investments in its Foreign Subsidiaries (other than the
provision of credit support through the issuance of a letter of credit for the
benefit of any creditor of a Foreign Subsidiary) in any country made on or
after the Effective Date to the extent that the aggregate of such Investments
does not exceed the U.S. Dollar equivalent of $2,500,000 per country for any
period exceeding either sixty (60) consecutive days or a total of sixty (60)
days in any six-month period shall not constitute Credit Support (any such
Investments or Accommodation Obligations under clause (a), (b), (c) and (d)
being herein referred to as the "Base Credit Support"); provided, further, the
Borrower's Accommodation Obligations with respect to any of its Subsidiaries'
Hedging Obligations under Eligible Hedging Contracts shall not constitute
Credit Support.
"Cure Loans" shall have the meaning ascribed to that term in
Section 12.07(b).
"Current Assets" shall have the meaning ascribed to that term in
Section 9.01.
"Current Liabilities" shall have the meaning ascribed to that
term in Section 9.01.
"Customary Permitted Liens" shall have the meaning ascribed to
that term in Section 8.02.
"Default Rate" shall have the meaning ascribed to that term in
Section 2.03(d).
"Dissenting Lender" shall have the meaning ascribed to that term
in Section 2.02(e).
"Dissenting Lender's Term" shall have the meaning ascribed to
that term in Section 2.02(e).
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"DOL" shall mean the United States Department of Labor and any
successor department or agency.
"Dollars" and "$" shall mean the lawful money of the United
States of America.
"Domestic Group" shall mean (i) Borrower, (ii) each of its
Subsidiaries (other than the Foreign Subsidiaries) and (iii) the Joint
Ventures.
"Domestic Interest Expense" shall have the meaning ascribed to
that term in Section 9.01.
"Domestic Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
under its name on Schedule A or on the Assignment and Acceptance by which it
became a Lender or such other office of such Lender as such Lender may from
time to time specify by written notice to Borrower and the Agent.
"Domestic Subsidiaries" shall mean Anixter-Real Estate, Inc., an
Illinois corporation, WireXpress, Inc., an Illinois corporation and any of
Borrower's Subsidiaries (other than those expressly included in the definition
of Foreign Subsidiaries set forth below) which are incorporated in any
jurisdiction in the United States, and their respective successors and assigns.
"EBITDA of the Borrower" shall have the meaning ascribed to that
term in Section 9.01.
"Effective Date" shall mean March 11, 1994.
"Eligible Hedging Contract" shall mean Hedging Contracts entered
into by the Borrower or entered into by any of its Subsidiaries and guaranteed
by Borrower, in each case, with any Lender as the counterparty.
"Enforceable Judgment" means a judgment or order as to which (a)
the Borrower has not demonstrated to the reasonable satisfaction of the Agent
that the Borrower is covered by third-party insurance (other than retro-premium
insurance) therefor and (b) the period, if any, during which the enforcement of
such judgment or order is stayed shall have expired, it being understood that a
judgment or order which is under appeal or as to which the time in which to
perfect an appeal has not expired shall not be deemed an "Enforceable Judgment"
so long as enforcement thereof is effectively stayed pending the outcome of
such appeal or the expiration of such period, as the case may be; provided that
if enforcement of a judgment or order has been stayed on condition that a bond
or collateral equal to or greater than $1,000,000 be posted or provided, such
judgment or order shall be an "Enforceable Judgment."
"Environmental Lien" shall mean a Lien in favor of any
Governmental Authority for (i) any liability of Borrower or any Subsidiary of
Borrower under federal or state environmental laws or regulations, or (ii)
damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
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"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the IRC) as Borrower or any of its Subsidiaries, (ii)
partnership or other trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the IRC) with Borrower
or any of its Subsidiaries, and (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the IRC) as Borrower or any of
its Subsidiaries, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office" under
its name on Schedule A or on the Assignment and Acceptance by which it became a
Lender (or, if no such office is specified, its Domestic Lending Office) or
such other office of such Lender as such Lender may from time to time specify
by written notice to Borrower and the Agent.
"Eurodollar Rate Loans" shall mean those Loans outstanding which
bear interest at a rate determined by reference to the LIBO Rate as provided in
Section 2.03(a)(ii).
"Event of Default" shall mean any of the occurrences set forth
in Section 10.01 after the expiration of any applicable grace period expressly
provided therein.
"Existing Indebtedness" shall mean the Indebtedness of the
Borrower, any of its Domestic Subsidiaries and any of its Supported Foreign
Subsidiaries reflected on Schedule 1.01-A.
"Extension Request" shall have the meaning ascribed to that term
in Section 2.02(e).
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any successor thereto.
"Federal Funds Effective Rate" shall have the meaning ascribed
to that term in the definition of Alternate Base Rate above.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any Governmental Authority succeeding to its
functions.
"Fee Letter" shall have the meaning ascribed to that term in
Section 2.04(c).
"Financial Officer" shall mean, with respect to any Person, any
of the chief financial officer, controller or treasurer of such Person and,
with respect to the Borrower shall include its Vice President-Finance.
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<PAGE> 18
"Fiscal Year" shall mean the fiscal year of Borrower, which
shall be each twelve (12) month period ending on December 31 of each calendar
year or such other period as Borrower may designate and the Requisite Lenders
may approve in writing.
"Foreign Employee Benefit Plan" shall mean any plan, program,
policy, agreement or contract maintained or contributed to or for the benefit
of employees of the Borrower, any of its Subsidiaries or any ERISA Affiliate
which is not covered by ERISA pursuant to Section 4(b)(4) of ERISA.
"Foreign Holding Company" shall have the meaning ascribed to
that term in Section 7.10(a)(v).
"Foreign Pension Plan" shall mean any pension plan or other
deferred compensation plan, program or arrangement maintained or contributed to
or for the benefit of employees of the Borrower, any of its Subsidiaries or any
ERISA Affiliate, which, under applicable local law, is required to be funded
through a trust or other funding vehicle and which is not covered by ERISA
pursuant to Section 4(b)(4) of ERISA.
"Foreign Subsidiaries" shall mean Anixter Holdings Inc., a
Delaware corporation ("AHI"), Anixter International Inc., a Delaware
corporation ("AII"), Anixter Puerto Rico, Inc., a Delaware corporation ("APR"),
Anixter Venezuela Inc., a Delaware corporation ("Anixter Venezuela") and any of
Borrower's Subsidiaries which are incorporated in any jurisdiction outside of
the United States, and their respective successors and assigns.
"Foreign Subsidiary Guaranties" shall mean guaranty agreements
substantially in the form of Exhibit 8 executed by any Foreign Subsidiary to
which the Borrower desires to provide Credit Support, in each case executed in
favor of the Agent, for the benefit of itself and the Holders of Secured
Obligations, as the same may be amended, restated, supplemented or otherwise
modified from time to time
"Foreign Subsidiary Pledges" shall mean pledge agreements
substantially in the form of Exhibit 2, together with such modifications
thereto as are necessary to adapt such agreements to the requirements of local
law, executed by the Borrower or any Subsidiary with respect to the capital
stock of a Supported Foreign Subsidiary provided such pledge agreement shall
provide for the pledge of shares representing approximately 65% of the total
combined voting power of all classes of stock of the applicable Foreign
Subsidiary (to the maximum extent permitted under Section 956 of the IRC and
Section 1.956-2(c)(2) thereof such that no deemed dividend shall be construed
to have occurred) and 100% of all classes of non-voting stock of such Foreign
Subsidiary.
"Funding Date" shall mean, with respect to any Loan or Letter of
Credit, the date of the funding of such Loan or issuance of such Letter of
Credit.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by
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<PAGE> 19
significant segments of the accounting profession, which are applicable to the
circumstances as of the date of determination.
"Governmental Acts" shall have the meaning ascribed to that term
in Section 3.09(a).
"Governmental Authority" shall mean any nation, state,
sovereign, or government, any federal, regional, state, local or political
subdivision and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Hedging Contracts" shall mean interest rate, foreign currency
or commodity exchange, swap, collar, cap, option, forward, futures or similar
agreements entered into by Borrower or any of its Subsidiaries pursuant to
which Borrower or such Subsidiary has hedged its interest rate, foreign
currency or commodity exposure.
"Hedging Obligations" with respect to any Person shall mean all
obligations of such Person in respect of any Hedging Contracts valued as at the
end of each calendar quarter in an amount equal to the highest termination
payment, if any, that would be payable by such Person, upon termination of such
Hedging Contract for any reason, on the date of determination.
"Holders of Secured Obligations" shall mean the holders of the
Obligations from time to time and shall refer to (i) each Lender in respect of
its Loans, (ii) each of the Issuing Banks in respect of Reimbursement
Obligations owed to it, (iii) the Agent, the Lenders and the Issuing Banks in
respect of all other present and future obligations and liabilities of Borrower
of every type and description arising under or in connection with this
Agreement or any other Loan Document, (iv) each other Person entitled to
indemnification pursuant to Section 12.04, in respect of the obligations and
liabilities of Borrower to such Person thereunder, (v) each Lender, in respect
of all Hedging Obligations of Borrower or any of its Subsidiaries to such
Lender as exchange party or counterparty under any Hedging Contract that was an
Eligible Hedging Contract when originally entered into, and (vi) their
respective successors, transferees and assigns.
"Indebtedness," as applied to any Person, shall mean any
obligation for the payment of money which is a Contractual Obligation, and
shall include, without limitation but without duplication, (i) all
indebtedness, obligations or other liabilities of such Person for borrowed
money or under any debt Securities, whether or not subordinated, (ii) all
obligations with respect to redeemable stock and redemption or repurchase
obligations under any equity securities or profit payment agreements, (iii) all
reimbursement obligations (absolute or contingent) and other liabilities of
such Person with respect to letters of credit issued for such Person's account
or for which such party is a co-applicant, (iv) all obligations of such Person
to pay the purchase price of property or services, except trade payables and
accrued expenses incurred by such Person in the ordinary course of business as
presently conducted, (v) all obligations in respect of Capital Leases of such
Person, (vi) all Accommodation Obligations of such Person, (vii) all Hedging
Obligations, and (viii) all indebtedness, obligations or other liabilities of
such Person or others secured by a Lien on any asset of such Person, whether or
not such indebtedness, obligations or liabilities are assumed by or are a
personal liability of such Person.
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"Indemnified Matters" shall have the meaning ascribed to that
term in Section 12.04.
"Indemnitees" shall have the meaning ascribed to that term in
Section 12.04.
"Initial Termination Date" shall have the meaning ascribed to
that term in the definition of "Termination Date" below.
"Intellectual Property Agreements" shall mean trademark security
agreements dated as of May 20, 1992 executed by the Borrower and certain of its
Subsidiaries in favor of the Agent on behalf of itself and the Holders of
Secured Obligations, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Interest Payment Date" shall mean with respect to any
Eurodollar Rate Loan, (i) the last day of each Interest Period applicable to
such Loan and (ii) with respect to any Eurodollar Rate Loan having an Interest
Period in excess of three (3) calendar months, the last day of each three (3)
calendar month interval during such Interest Period.
"Interest Period" shall have the meaning ascribed to such term
in Section 2.07.
"Interest Rate Determination Date" shall mean the date on which
the Agent determines the LIBO Rate applicable to a Borrowing, continuation or
conversion of Eurodollar Rate Loans. The Interest Rate Determination Date
shall be the second (2nd) Business Day prior to the first day of the Interest
Period applicable to such Borrowing, continuation or conversion.
"Investment" shall have the meaning ascribed to that term in
Section 8.03.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time hereafter, and any successor statute.
"IRS" shall mean the Internal Revenue Service of the United
States or any Governmental Authority succeeding to the functions thereof.
"Issuing Banks" shall mean the Lenders listed on Schedule A
hereto and identified as an Issuing Bank and any other Lender which, at the
Borrower's request, agrees, in each such Lender's sole discretion, to become an
Issuing Bank for the purpose of issuing Letters of Credit and their respective
successors and assigns, in each case in such Lender's separate capacity as an
issuer of Standby Letters of Credit or Commercial Letters of Credit, or both,
pursuant to Article III.
"Itel" shall mean Itel Corporation, a Delaware corporation, and
its successors and assigns.
"Joint Ventures" shall mean Anixter Lincoln, a Nebraska general
partnership, and Anixter Rotelcom, a New York general partnership.
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"Lender" shall have the meaning ascribed to such term in the
preamble and shall include Chemical Bank, in its individual capacity, the
Issuing Banks and each Person which at any time becomes a Lender pursuant to
Section 12.02(a).
"Letter of Credit" shall mean any Commercial Letter of Credit or
any Standby Letter of Credit issued by any Issuing Bank for the account of
Borrower, or for the account of any Domestic Subsidiary or Foreign Subsidiary
(in each case for which Borrower is a co-applicant), pursuant to Article III.
"Letter of Credit Application" shall mean, with respect to any
proposed Letter of Credit requested to be delivered pursuant to Section 3.03,
an application substantially in the form of the applicable Issuing Bank's
standard form application for letters of credit of the type to be issued.
"Letter of Credit Obligations" shall mean, at any particular
time, the sum of (i) outstanding Reimbursement Obligations and (ii) the
aggregate undrawn face amount of outstanding Letters of Credit.
"Letter of Credit Reimbursement Agreement" shall mean, with
respect to a Letter of Credit, such reimbursement agreement as the applicable
Issuing Bank may employ in the ordinary course of business for its own account.
"Liabilities and Costs" shall mean all liabilities, claims,
obligations, responsibilities, losses, damages, punitive damages, consequential
damages, treble damages, charges, costs and expenses (including, without
limitation, attorneys', experts' and consulting fees and costs of investigation
and feasibility studies), fines, penalties and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future.
"LIBO Rate" shall mean, with respect to any Interest Period
applicable to a Borrowing of Eurodollar Rate Loans, an interest rate per annum
equal to the rate of interest (rounded upwards, if necessary, to the next 1/16
of 1%) determined by the Agent to be the rate per annum at which deposits in
Dollars are offered to the principal London office of Chemical Bank in
immediately available funds in the London interbank market at approximately
11:00 a.m. (London time) on the Interest Rate Determination Date for such
Interest Period, in the approximate amount of Chemical Bank's portion of the
relevant Eurodollar Rate Loan and having a maturity comparable to such Interest
Period.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights of way and the like),
judgment, lien (statutory or other), Environmental Lien, Enforceable Judgment,
security agreement or transfer intended as security, including, without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease and any financing lease having
substantially the same economic effect as any of the foregoing.
"Loan" shall have the meaning ascribed to such term in Section
2.01(a).
"Loan Account" shall have the meaning ascribed to such term in
Section 2.06(d).
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"Loan Documents" shall mean this Agreement, the Subordination
Agreement, the Notes, the Collateral Documents, the Letters of Credit, the
Letter of Credit Applications, the Letter of Credit Reimbursement Agreements
and all other agreements delivered to the Agent, any Issuing Bank or any Lender
by or on behalf of Borrower or any Subsidiary of Borrower in satisfaction or
furtherance of the requirements of this Agreement or any other Loan Document.
"Loan Usage" shall mean, at any given time, the sum of (i) the
aggregate outstanding principal balance of the Loans and (ii) the aggregate
outstanding Letter of Credit Obligations.
"Margin Stock" shall have the meaning ascribed to such term in
Regulation G and Regulation U.
"Master Assignment Agreement" shall mean that certain Master
Assignment Agreement of even date signed by the lenders under the Original
Credit Agreement and the Lenders under this Agreement.
"Material Adverse Effect" shall mean a material adverse effect
(a) upon the business, assets or other properties, liabilities or condition
(financial or otherwise), results of operations or prospects of Borrower,
individually, or Borrower and its Subsidiaries taken as a whole, (b) upon the
ability of Borrower to pay the Obligations or on the Lenders' ability to
enforce such Obligations, or (c) upon the benefits provided to the Agent or
Holders of Secured Obligations under any of the Loan Documents.
"Material Transaction" shall mean any sale, assignment,
transfer, conveyance or other disposition of (i) assets of any member of the
Consolidated Group or (ii) capital stock of any member of the Domestic Group
which, when combined with all such other sales, assignments, transfers,
conveyances or other dispositions in the immediately preceding twelve-month
period represents the disposition of an amount which is greater than five
percent (5.0%) of the Domestic Group's (x) assets, (y) revenues or (z)
operating income.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgages" shall mean any and all mortgages, deeds of trust,
collateral assignments of beneficial interest, leasehold mortgages and
leasehold deeds of trust dated as of the date of the Original Credit Agreement
or as of the date hereof and covering the owned and leased real property of
Borrower and its Domestic Subsidiaries identified on Schedule 1.01-B , executed
by the Borrower or the applicable Subsidiary, as applicable, in favor of the
Agent for the benefit of itself and Holders of Secured Obligations, as the same
may be amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by either Borrower or any ERISA
Affiliate.
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"Non Pro Rata Loan" shall have the meaning ascribed to that term
in Section 12.07(b).
"Notes" shall mean the Notes executed by the Borrower and
delivered to each Lender pursuant to Section 2.02 or Section 12.02.
"Notice of Borrowing" shall mean, with respect to a proposed
Borrowing pursuant to Section 2.02(a) or a proposed issuance of a Letter of
Credit pursuant to Section 3.04(a), a notice substantially in the form of
Exhibit 4.
"Notice of Conversion/Continuation" shall mean, with respect to
a proposed conversion or continuation of a Loan pursuant to Section 2.03(c), a
notice substantially in the form of Exhibit 5.
"Obligations" shall mean the principal of and all interest on
all Loans and Reimbursement Obligations, all fees, expense reimbursements,
taxes, compensation and indemnities payable by Borrower to the Agent, any
Issuing Bank, or any Lender pursuant to this Agreement and all other present
and future Indebtedness and other liabilities of Borrower owing to the Agent,
any Issuing Bank, any Lender, or any Person entitled to indemnification
pursuant to Section 12.04, or any of their respective successors, transferees
or assigns, of every type and description, whether or not evidenced by any
note, guaranty or other instrument, arising under or in connection with this
Agreement, any Note, any other Loan Document, the Fee Letter, or any Eligible
Hedging Contract, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however arising.
"Officers' Certificate" shall mean, as to any corporation, a
certificate executed on behalf of such corporation by (i) its chairman or vice
chairman of the board (if an officer) or its president or any vice president
and (ii) a Financial Officer of such corporation.
"Operating Lease" shall mean, as applied to any Person, any
lease of any Property by that Person as lessee which is not a Capital Lease.
"Original Credit Agreement" shall have the meaning ascribed to
that term in the preamble to this Agreement.
"Original Issuing Bank" shall have the meaning ascribed to that
term in the preamble to this Agreement.
"Original Lender" shall mean any financial institution a party
to the Original Credit Agreement immediately prior to the execution and
effectiveness of this Agreement.
"Other Indebtedness" shall mean all Indebtedness of Borrower
other than the Obligations.
"Other Taxes" shall have the meaning ascribed to that term in
Section 2.09(b).
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<PAGE> 24
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any Person succeeding to the functions thereof.
"Permits" shall mean any permit, approval, consent,
authorization, license, variance, or permission required from a Governmental
Authority under an applicable Requirement of Law.
"Permitted Existing Liens" shall mean the Liens on any property
of Borrower or any Domestic Subsidiary of Borrower, in each case reflected on
Schedule 1.01-C .
"Permitted Subordinated Indebtedness" shall mean Indebtedness
evidenced by, or in respect of principal of and interest on, the Revolving
Subordinated Notes issued and/or outstanding in compliance with the terms of
this Agreement.
"Person" shall mean any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, or any other
non-governmental entity, or any Governmental Authority.
"Plan" shall mean an employee benefit plan defined in Section
3(3) of ERISA in respect of which either the Borrower or any ERISA Affiliate
is, or within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreements" shall mean (i) the Restated Pledge Agreement
executed by the Borrower dated as of the date hereof in connection with the
pledge of the stock of each of Anixter-Real Estate, Inc. and WireXpress, Inc.;
(ii) the Pledge Agreements executed as of the date hereof in connection with
the pledge of the stock of AHI, AII, APR, Anixter Venezuela, Anixter De Mexico
S.A. de C.V., Anixter Australia Pty., Ltd., Anixter Singapore Pte., Anixter
Europe Holdings, B.V., Anixter International N.V./S.A., Anixter Belgium N.V.,
and Anixter Sweden A.B.; (iii) pledge agreements executed by Borrower or any of
its Subsidiaries in connection with the pledge of the stock of each additional
Domestic Subsidiary created after the date of this Agreement; (iv) Foreign
Subsidiary Pledges executed by Borrower or any of its Subsidiaries in
connection with the pledge of the stock of each Supported Foreign Subsidiary,
in each case executed in favor of the Agent for the benefit of itself and the
Holders of Secured Obligations as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Potential Event of Default" shall mean an event which, with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default.
"Prime Rate" shall have the meaning ascribed to that term in the
definition of Alternate Base Rate above.
"Property" shall mean with respect to any Person, any real or
personal property, plant, building, facility, structure, equipment or unit, or
other asset (tangible or intangible) owned, leased or operated by such Person.
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"Pro Rata Share" shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the then amount of such Lender's Commitment and the denominator
of which shall be the then aggregate amount of all Commitments, as adjusted
from time to time pursuant to the terms of this Agreement.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. Section Section 6901 et seq., and any successor statute, and
regulations promulgated thereunder.
"Regulation D," "Regulation G," "Regulation T," "Regulation U"
and "Regulation X" shall mean Regulation D, Regulation G, Regulation T,
Regulation U and Regulation X, respectively, of the Federal Reserve Board as in
effect from time to time.
"Reimbursement Obligations" shall mean the reimbursement or
repayment obligations of Borrower or any Subsidiary of Borrower to the Issuing
Banks pursuant to any Letter of Credit and related Letter of Credit
Applications or Letter of Credit Reimbursement Agreements issued or delivered
pursuant to Article III hereof.
"Related Obligations" shall have the meaning ascribed to that
term in Section 11.08(d).
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration from any Property into the indoor or outdoor environment, including
the movement of Contaminants through or in the air, soil, surface water,
groundwater or Property.
"Release Event" shall have the meaning ascribed to that term in
Section 1.05.
"Remedial Action" shall mean any action required to (i) clean
up, remove, treat or in any other way address Contaminants in the indoor or
outdoor environment; (ii) prevent a Release or threat of Release or minimize
the further Release of Contaminants so they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; or (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care.
"Replacement Lender" shall have the meaning ascribed to that
term in Section 2.13.
"Reportable Event" shall mean the events described in Section
4043 of ERISA.
"Required Extension Lenders" shall have the meaning ascribed to
that term in Section 2.02(e).
"Requirements of Law" shall mean, as to any Person, the charter
and by-laws or other organizational or governing documents of such Person, and
any law, rule or regulation, Permit, or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its Property or to which such Person or any of its
property is subject, including, without limitation, the Securities Act, the
Securities
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Exchange Act, Regulation G, Regulation T, Regulation U and Regulation X, and
any certificate of occupancy, zoning ordinance, building, environmental or land
use, law, rule, regulation, ordinance or Permit or occupational safety or
health law, rule or regulation.
"Requisite Lenders" means, except as otherwise provided in
Section 12.07(b)(v), Lenders whose Pro Rata Shares, in the aggregate, are equal
to or greater than fifty-one percent (51%); provided, however, that, in the
event that the Commitments have been terminated pursuant to the terms of this
Agreement, "Requisite Lenders" means Lenders (without regard to such Lenders'
performance of their respective obligations hereunder) whose aggregate ratable
shares (stated as a percentage) of the aggregate outstanding principal balance
of all Loans are equal to or greater than fifty-one percent (51%); provided,
further, that in the event that the Commitments have been terminated pursuant
to the terms of this Agreement, at any time when Letters of Credit are
outstanding and all Loans have been repaid, "Requisite Lenders" means, except
as otherwise provided in Section 12.07(b)(v), Lenders whose participations in
the outstanding Letters of Credit, in the aggregate, are equal to or greater
than fifty-one percent (51%).
"Restricted Junior Payment" shall mean (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
capital stock of Borrower or any of its Subsidiaries, except a distribution of
stock as part of a stock split and except a dividend payable solely in shares
of that class of stock or in any junior class of stock to the holders of that
class, provided that the issuance of such stock or junior class of stock is not
an incurrence of Indebtedness, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of capital stock of Borrower or any of its
Subsidiaries now or hereafter outstanding, (iii) any payment or prepayment of
principal of, premium, if any, or interest on, and any redemption, purchase,
retirement or defeasance of, or sinking fund or similar payment with respect
to, any Permitted Subordinated Indebtedness (whether in cash, by the issuance
of Securities or otherwise), (iv) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of capital stock of Borrower or any of its Subsidiaries now
or hereafter outstanding, (v) any payment of a claim for the rescission of the
purchase or sale of, or for material damages arising from the purchase or sale
of, any Permitted Subordinated Indebtedness or any shares of the capital stock
of Borrower or any of its Subsidiaries or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission, (vi) any payment of tax- sharing payments, allocated
corporate overhead (other than expenses paid to third parties by Itel on behalf
of the Borrower), guaranty fees or management fees to Itel or any of its
Affiliates and (vii) any payment in the nature of a loan from Borrower or any
of its Subsidiaries to Itel or any of Itel's Subsidiaries (other than
intercompany loans between Borrower or any of Borrower's Subsidiaries with each
other as expressly permitted pursuant to this Agreement).
"Revolving Credit Availability" shall mean, as at any particular
date of determination the amount by which Commitments exceed Loan Usage. For
purposes of calculating Revolving Credit Availability as at any date, all Loans
requested but not yet advanced and the aggregate face amount of all Letters of
Credit requested but not yet issued will be treated as advanced and issued in
calculating Loan Usage.
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"Revolving Credit Facility" shall mean the revolving credit
facility established for Loans pursuant to Section 2.01.
"Revolving Subordinated Debt" shall mean all Indebtedness of the
Borrower outstanding under and in connection with the Revolving Subordinated
Notes.
"Revolving Subordinated Notes" shall mean those certain demand
promissory notes from Borrower to Itel in the form attached hereto as Exhibit
10.
"Samuel Zell Group" shall mean Samuel Zell or any of his
affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange
Act) or associates (as such term is defined in Rule 12b-2 of the Securities
Exchange Act).
"Securities" shall mean any stock, shares, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities", or any certificates of interest,
shares, or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations.
"Securities Act" shall mean the Securities Act of 1933, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"Security Agreement" shall mean that certain Security Agreement
executed by the Borrower in favor of the Agent for the benefit of itself and
the Holders of Secured Obligations dated as of the date hereof, as the same may
be amended, restated, supplemented or otherwise modified from time to time.
"Senior Debt Ratings" shall have the meaning ascribed to that
term in Section 2.03(e).
"Solvent" shall mean, when used with respect to any Person, that
at the time of determination:
(i) the fair value of its assets (both at fair valuation and at
present fair saleable value) is equal to or in excess of the total
amount of its liabilities, including, without limitation, contingent
liabilities; and
(ii) it is then able and expects to be able to pay its debts as
they mature; and
(iii) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
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With respect to contingent liabilities (such as litigation, guarantees and
pension plan liabilities), such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represent the amount which can reasonably be expected to become an actual or
matured liability.
"S&P" shall mean Standard & Poor's Corporation.
"Standby Letter of Credit" shall mean any Letter of Credit which
is not a Commercial Letter of Credit.
"Statutory Reserves" shall have the meaning ascribed to that
term in Section 2.14.
"Subordination Agreement" shall mean the Subordination Agreement
dated as of May 20, 1992 and reaffirmed as of the date hereof between Itel and
the Agent on behalf of itself and the Holders of Secured Obligations in respect
of the Revolving Subordinated Notes issued to or to be issued to Itel and the
other obligations of the Borrower to Itel, as such agreement was originally
executed and as it may be amended, restated, modified or supplemented from time
to time with the prior written consent of the Agent and the Requisite Lenders.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership, trust or other entity of which a majority of the
stock (or equivalent ownership or controlling interest) having voting power to
elect a majority of the Board of Directors (if a corporation) or to select the
trustee or equivalent controlling interest is directly or indirectly owned or
controlled by such Person or one or more of the other Subsidiaries of such
Person or any combination thereof; provided, however, the term Subsidiary shall
not include the Joint Ventures.
"Subsidiary Guaranties" shall mean (i) each Guaranty dated as of
or reaffirmed as of the date hereof executed by each of the Domestic
Subsidiaries and initial Supported Foreign Subsidiaries and (ii) guaranty
agreements executed by the additional Supported Foreign Subsidiaries, in each
case executed in favor of the Agent, for the benefit of itself and the Holders
of Secured Obligations, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Subsidiary Security Agreements" shall mean (i) the Security
Agreement dated as of May 20, 1992 executed by WireXpress, Inc., (ii) the
Security Agreement dated as of May 20, 1992 executed by Anixter-Real Estate,
Inc., (iii) the security agreements executed as of the date hereof by each of
the Domestic Subsidiaries other than WireXpress, Inc. and Anixter-Real Estate,
Inc., in each case executed in favor of the Agent, for the benefit of itself
and the Holders of Secured Obligations as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Supported Foreign Subsidiaries" shall mean Borrower's Foreign
Subsidiaries which, on or after the Effective Date (including any Accommodation
Obligations made prior to the Effective Date which remain in effect on or after
the Effective Date and any letters of credit issued for the account of the
Borrower prior to the Effective Date but which remain outstanding after the
Effective Date), have been provided, directly or indirectly by the Borrower
with Credit Support of any type or nature.
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"Taxes" shall have the meaning ascribed to such term in Section
2.09(a).
"Tax Allocation Agreement" shall mean that certain Tax
Allocation Agreement between Itel and Borrower dated as of January 1, 1987 as
initially supplemented by that certain Tax Allocation Agreement Supplement
dated as of May 6, 1987, which Supplement has been superseded by that certain
Tax Allocation Agreement Supplement dated as of May 20, 1992, as the same may
be amended, restated, supplemented or otherwise modified from time to time (i)
in any respect which does not (a) result in the Borrower being required to make
any greater payments thereunder either in absolute amounts or percentage terms
or (b) does not reduce either in absolute amounts or percentage terms the
benefits to the Borrower, without consent of all of the Lenders or (ii)
otherwise with the consent of the Requisite Lenders.
"Termination Date" shall mean the earlier of (a) March 11, 1997
(the "Initial Termination Date") or such later date as is established as the
Termination Date by the Lenders in accordance with Section 2.02(e) and (b) the
date of termination of the Commitments pursuant to Section 2.02(d) or Section
10.02(a).
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which Borrower or such
ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the imposition of an obligation on Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC or any
similar foreign governmental authority of proceedings to terminate a Benefit
Plan or a Foreign Pension Plan; (v) any event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan; (vi) a foreign
governmental authority shall appoint or institute proceedings to appoint a
trustee to administer any Foreign Pension Plan; or (vii) the partial or
complete withdrawal of Borrower or any ERISA Affiliate from a Multiemployer
Plan or a Foreign Pension Plan.
"Terms" shall have the meaning ascribed to that term in Section
2.02(e).
"Three-Month Secondary CD Rate" shall have the meaning ascribed
to that term in the definition of Alternate Base Rate above.
"Total Indebtedness" shall have the meaning ascribed to that
term in Section 9.01.
"Transaction Costs" shall mean the fees, costs and expenses
payable by Borrower or any of its Subsidiaries pursuant hereto or in connection
herewith or in respect hereof or of the other Loan Documents.
"Transaction Documents" shall mean the Loan Documents, the
Contribution Agreement, the Tax Allocation Agreement and the Revolving
Subordinated Notes.
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1.02. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall
be counted in calendar days unless Business Days are expressly prescribed.
1.03. Accounting Terms; Accounting for Non-Group Members. For
purposes of this Agreement, all accounting terms not otherwise defined herein
shall have the meanings assigned to them in conformity with Agreement
Accounting Principles. For purposes of this Agreement, when reference is made
to the Domestic Group, all other Subsidiaries and Investments shall be
accounted for on the equity investment method or cost method of accounting, as
applicable.
1.04. Other Definitional Provisions. References to "Articles,"
"Sections," "subsections," "Schedules," "Exhibits" and "the preamble" shall be
to Articles, Sections, subsections, Schedules, Exhibits and the preamble,
respectively, of this Agreement unless otherwise specifically provided.
1.05. Collateral Release; References to Collateral. Provided
no Event of Default or Potential Event of Default shall have occurred and be
continuing, upon receipt by the Borrower of Senior Debt Ratings which are
investment grade or better, one of which must be a rating of BBB- or better
from S&P or Baa3 or better from Moody's (a "Release Event"), all liens,
security interests and pledges of the Collateral to the Agent for the benefit
of itself and the other Holders of Secured Obligations shall be released. The
Agent is hereby authorized by the Issuing Banks and the Lenders to execute any
and all documentation, including termination statements, mortgage releases and
other documents as may be reasonably requested by Borrower in connection with
the aforementioned release of the Collateral. All references in this Agreement
to the Collateral (or any component thereof) shall be applicable only prior to
the occurrence of the Release Event. Upon the occurrence of the Release Event,
the references to the Collateral contained herein shall be deemed to be
eliminated and shall have no further force and effect.
1.06. Amendment and Restatement of Original Credit Agreement.
The Borrower, the Lenders, the Agent and the Original Issuing Bank agree that,
upon (i) the execution and delivery of this Agreement by each of the parties
hereto and (ii) satisfaction (or waiver by the Agent and all of the Lenders) of
the conditions precedent set forth in Section 4.01, the terms and provisions of
the Original Credit Agreement shall be and hereby are amended, superseded and
restated in their entirety by the terms and provisions of this Agreement. This
Agreement is not intended to and shall not constitute a novation. All Loans
made under the Original Credit Agreement which are outstanding on the Effective
Date shall continue as Loans under (and shall be governed by the terms of) this
Agreement. All Letters of Credit issued for the account of the Borrower under
the Original Credit Agreement which remain outstanding on the Effective Date
shall continue as Letters of Credit under (and shall be governed by the terms
of) this Agreement. All Eligible Hedging Contracts entered into during the
term of the Original Credit Agreement which are outstanding on the Effective
Date shall continue as Eligible Hedging Contracts under this Agreement.
Pursuant to the terms of the Master Assignment Agreement, as of the Effective
Date, each Lender shall have a Pro Rata Share and a Commitment in the
percentage and
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amount, respectively, set forth opposite its name on Schedule A hereof, and the
"Pro Rata Shares" and "Commitments" of the Original Lenders shall automatically
terminate; provided, however it is expressly understood and agreed that the
Borrower shall compensate each Original Lender pursuant to the terms of Section
2.08(d) of the Original Agreement for all losses, expenses and liabilities
which any Original Lender may sustain as a result of the reallocation of the
Pro Rata Shares pursuant to the Master Assignment Agreement.
ARTICLE II
AMOUNTS AND TERMS OF REVOLVING CREDIT FACILITY
2.01. The Revolving Credit Facility.
(a) Availability. Subject to the terms and conditions set
forth in this Agreement, each Lender hereby severally and not jointly agrees to
make revolving loans, in Dollars (each individually, a "Loan" and,
collectively, the "Loans") to Borrower from time to time during the period from
the Effective Date to the Business Day immediately preceding the Termination
Date, in an amount which shall not exceed such Lender's Pro Rata Share of the
Revolving Credit Availability at such time.
(b) Several Commitments. All Loans comprising the same
Borrowing under this Agreement shall be made by the Lenders simultaneously and
proportionately to their respective Pro Rata Shares, it being understood that
no Lender shall be responsible for any failure by any other Lender to perform
its obligation to make a Loan hereunder and that the Commitment of any Lender
shall not be increased or decreased without the prior written consent of such
Lender as a result of the failure by any other Lender to perform its obligation
to make a Loan. The failure of any Lender to make available to the Agent any
Borrowing of the Commitments shall not relieve any other Lender of its
obligation hereunder to make available to the Agent such other Lender's Pro
Rata Share of any Borrowing of the Commitments on the date such funds are to be
made available pursuant to the terms of this Agreement.
(c) Repayments and Prepayments. Loans may be voluntarily
repaid at any time, shall be mandatorily prepaid pursuant to Section 2.05 and,
subject to the provisions of this Agreement, any amounts voluntarily repaid may
be reborrowed, up to the amount available under Section 2.01 at the time of
such Borrowing, until the Business Day immediately preceding the Termination
Date. Each Lender's Commitment shall expire, and each Loan then outstanding
shall mature and be repaid by Borrower, without further action on the part of
the Lenders, on the Termination Date.
(d) Minimum Amounts. Loans made on any Funding Date shall be
in the aggregate minimum amount of $500,000, in the case of Loans constituting
Base Rate Loans, and $1,000,000, in the case of Loans constituting Eurodollar
Rate Loans.
2.02. Loan Facility Mechanics.
(a) Notice of Borrowing. Whenever Borrower desires to borrow
under Section 2.01(a), Borrower shall deliver to the Agent a Notice of
Borrowing no later than 12:00
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noon (New York City time) (i) at least one (1) Business Day in advance of the
proposed Funding Date, in the case of a Borrowing of Base Rate Loans, and (ii)
at least three (3) Business Days in advance of the proposed Funding Date, in
the case of a Borrowing of Eurodollar Rate Loans. The Notice of Borrowing
shall specify (A) the Funding Date (which shall be a Business Day) in respect
of the Loan, (B) the amount of the proposed Borrowing, (C) whether the proposed
Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, and (D) in the
case of Eurodollar Rate Loans, the requested Interest Period. In lieu of
delivering the above-described Notice of Borrowing, and only with the consent
of the Agent in its sole discretion at such time, Borrower may give the Agent
telephonic notice of any proposed Borrowing by the time required under this
Section 2.02(a); provided that, in the event the Agent so consents, such notice
shall be confirmed in writing by delivery to the Agent promptly (but in no
event later than 2:00 p.m. on the Funding Date of the requested Loan) of a
Notice of Borrowing. Any Notice of Borrowing (or telephonic notice in lieu
thereof) pursuant to this Section 2.02(a) shall be irrevocable.
(b) Making of Loans. Promptly after receipt of a Notice of
Borrowing under Section 2.02(a) (or telephonic notice in lieu thereof if the
Agent consents to such telephonic notice), the Agent shall notify each Lender
by telex or telecopy or other similar form of teletransmission, of the proposed
Borrowing. Each Lender shall make the amount of its Loan available to the
Agent in Dollars and in immediately available funds, not later than 12:00 noon
(New York City time) on the Funding Date. After the Agent's receipt of the
proceeds of such Loans, the Agent shall (unless it has not received the Notice
of Borrowing in satisfaction of the requirements of Section 4.02(a) or has been
informed that any of the other conditions precedent have not been satisfied)
make the proceeds of such Loans available to Borrower on such Funding Date and
shall disburse such funds in Dollars and in immediately available funds to an
account of Borrower, designated in writing by Borrower in the Notice of
Borrowing.
(c) Failure to Fund by Lender. Unless the Agent shall have
been notified by any Lender prior to any Funding Date in respect of any
Borrowing of Loans that such Lender does not intend to make available to the
Agent such Lender's Loan on such Funding Date, the Agent may assume that such
Lender has made such amount available to the Agent on such Funding Date and the
Agent in its sole discretion may, but shall not be obligated to, make available
to Borrower a corresponding amount on such Funding Date. If such corresponding
amount is not in fact made available to the Agent by such Lender on or prior to
12:00 noon (New York City time) on a Funding Date, such Lender agrees to pay
and Borrower agrees to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to Borrower until the date such amount is paid or
repaid to the Agent, at (i) in the case of such Lender, the Federal Funds
Effective Rate (as such term is defined in the definition of Alternate Base
Rate) for the first three (3) Business Days and thereafter at the Alternate
Base Rate, and (ii) in the case of Borrower, the interest rate which would be
applicable at the time to a Borrowing of Base Rate Loans. If such Lender shall
pay to the Agent such corresponding amount, such amount so paid shall
constitute such Lender's Loan, and if both such Lender and Borrower shall have
paid and repaid, respectively, such corresponding amount, the Agent shall
promptly pay over to Borrower such corresponding amount in same day funds, but
Borrower shall remain obligated for all interest thereon. Nothing in this
Section 2.02(c) shall be deemed to relieve any Lender of its obligation
hereunder to make its Loan on any Funding Date.
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(d) Voluntary Reduction of Commitments. Borrower shall have
the right, at any time and from time to time, (i) to terminate the Commitments
in whole, without premium or penalty, if no Loans or Letters of Credit are then
outstanding, and no Loans or Letters of Credit have been requested but not yet
advanced or issued, as the case may be, or (ii) subject to the last sentence of
this Section 2.02(d), permanently to reduce in part, without premium or
penalty, the Commitments up to the amount by which the Commitments exceed the
sum of (A) the Loan Usage, (B) the aggregate principal amount of all Loans
requested hereunder but not yet advanced and (C) the aggregate face amount of
all Letters of Credit requested hereunder but not yet issued. Borrower shall
give not fewer than five (5) Business Days' prior written notice to the Agent
designating the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial reduction. Promptly after receipt of a
notice of such termination or reduction, the Agent shall notify each Lender of
the proposed termination or reduction. Such termination or partial reduction
of the Commitments shall be effective on the date specified in the Borrower's
notice and shall reduce the Commitment of each Lender proportionately in
accordance with its Pro Rata Share. Any such partial reduction of the
Commitments shall be in an aggregate minimum amount of $5,000,000 and integral
multiples of $5,000,000 in excess of that amount. Any notice of reduction or
termination pursuant to this Section 2.02(d) shall be irrevocable.
(e) Extension of Termination Date. This Agreement shall be
effective until the Initial Termination Date unless the Initial Termination
Date is extended pursuant hereto for successive periods ("Terms") of one year.
During the period which is not greater than ninety (90) but not less than sixty
(60) days prior to the first anniversary of the date hereof (and during like
periods each year thereafter), the Borrower may request in writing (an
"Extension Request") an extension of the initial Term for successive Terms of
one year; provided, such renewal Terms shall not be available for more than two
(2) years in the aggregate. The then applicable Termination Date shall be
extended for a one-year Term if, after receipt of such Extension Request, the
Lenders whose Pro Rata Shares, in the aggregate, are equal to or greater than
seventy-five percent (75%) (the "Required Extension Lenders") approve such
Extension Request on or before the anniversary of the date hereof immediately
following such Extension Request; provided, however, that the failure of any
Lender to respond to an Extension Request shall be deemed to constitute such
Lender's denial of such Extension Request. If in any year an Extension Request
is not made or is made but not approved by the Required Extension Lenders, no
further Extension Requests may be made and the Revolving Credit Facility shall
expire on the Termination Date which was applicable thereto without regard to
such Extension Request. Notwithstanding anything herein to the contrary, no
Lender which has denied its consent to an Extension Request ("Dissenting
Lender") shall be bound by the approval of the Extension Request granted by the
Required Extension Lenders, and the Commitment of each Dissenting Lender, and
each Dissenting Lender's participation in the Letters of Credit shall expire at
the end of the Term which was applicable thereto at the time of such Lender's
receipt of the Extension Request (the "Dissenting Lender's Term"). The
Borrower shall have the right, at any time, to replace a Dissenting Lender with
another financial institution reasonably acceptable to the Agent and the
Issuing Banks. In the event that a Dissenting Lender is not so replaced prior
to the expiration of the Dissenting Lender's Term, at the end of such Term, the
amount of the Commitments shall be reduced by the aggregate amount of the
expiring Commitments of Dissenting Lenders not so replaced, each remaining
Lender's Pro Rata Share shall be adjusted
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accordingly (including its pro rata participation in the Letters of Credit) and
the Borrower shall pay to the Dissenting Lender all amounts due and owing to
the Dissenting Lender hereunder or under any other Loan Document, including,
without limitation, the aggregate outstanding principal amount of the Loans
owed to such Lender, together with accrued interest and fees thereon through
the date of repayment and amounts payable under Sections 2.09 and 2.10, all of
which amounts shall be immediately due and payable at such time. Upon the
replacement of a Dissenting Lender or payment of a Dissenting Lender's
Obligations at the end of such Dissenting Lender's Term in accordance with the
terms hereof, such Dissenting Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.08, 2.09, 2.10, 3.09,
12.03 and 12.04. Notwithstanding the termination of this Agreement on the
Termination Date, until all of the Obligations shall have been fully and
indefeasibly paid and satisfied, all financing arrangements among Borrower and
the Lenders shall have been terminated and all of the Letters of Credit shall
have expired, been cancelled or terminated, all of the rights and remedies
under this Agreement and the other Loan Documents shall survive and the Agent
shall be entitled to retain its security interest in and to all existing and
future Collateral for the benefit of itself and the Holders of Secured
Obligations.
(f) Notes. The Borrower shall execute and deliver to each
Lender (or to the Agent on behalf of each Lender) on or before the Effective
Date a substitute promissory note substantially in the form of Exhibit 9 to
evidence the aggregate amount of that Lender's Loans and with other appropriate
insertions. The Note delivered to each Lender shall be dated the date hereof
and shall be stated to mature on the Termination Date. Each Lender is hereby
authorized to, and prior to any transfer of the Note issued to it each Lender
shall, endorse the date and amount of each Loan made by such Lender and each
payment or prepayment of principal of the Loans evidenced thereby on the
schedule annexed to and constituting a part of such Note, which endorsement
shall constitute prima facie evidence, absent manifest error, of the accuracy
of the information so endorsed, provided that failure by any such Lender to
make such endorsement shall not affect the obligations of the Borrower
hereunder or under such Note. In lieu of endorsing such schedule as
hereinabove provided, prior to any transfer of such Note, each Lender is hereby
authorized, at its option, to record such Loans and such payments or
prepayments in its books and records, such books and records constituting prima
facie evidence, absent manifest error, of the accuracy of the information
contained therein; provided, however, that if the Loan Account differs from the
information endorsed by a Lender on such Lender's Note, the Loan Account,
absent manifest error, shall govern.
2.03. Interest on the Loans.
(a) Rate of Interest. All Loans shall bear interest on the
unpaid principal amount thereof from the date made until paid in full at a
fluctuating rate determined from time to time by reference to the Alternate
Base Rate or the LIBO Rate. The applicable basis for determining the rate of
interest shall be selected by Borrower at the time a Notice of Borrowing is
given by the Borrower pursuant to Section 2.02(a) or at the time a Notice of
Conversion/Continuation is delivered by Borrower pursuant to Section 2.03(c);
provided, however, that Borrower may not select the LIBO Rate as the applicable
basis for determining the rate of interest on a Loan (1) if at the time of such
selection a Potential Event of Default or Event of Default exists or (2) if
such a selection would be otherwise prohibited by the terms of this Agreement.
If on any day a Loan is outstanding with respect to which notice has not been
delivered to the Agent in
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<PAGE> 35
accordance with the terms of this Agreement specifying the basis for
determining the rate of interest, then for each such day such Loan shall be a
Base Rate Loan. Loans shall bear interest, subject to Section 2.03(d), at the
following rates:
(i) if a Base Rate Loan, then at a rate per annum equal to the
sum of (A) the Applicable Base Rate Margin and (B) the Alternate Base
Rate as in effect from time to time as interest accrues; and
(ii) if a Eurodollar Rate Loan, then at a rate per annum equal
to the sum of (A) the Applicable Eurodollar Rate Margin and (B) the LIBO
Rate determined for the applicable Interest Period.
(b) Interest Payments. Subject to Section 2.03(d), (i)
interest accrued on each Base Rate Loan shall be payable in arrears (A) on the
last calendar day of each calendar quarter occurring after the Effective Date,
(B) upon the prepayment in full of the Loans and the termination of all
Commitments under this Agreement and (C) on the Termination Date, and (ii)
interest accrued on each Eurodollar Rate Loan shall be payable in arrears (A)
on each Interest Payment Date applicable to such Eurodollar Rate Loan, (B) upon
the prepayment thereof and (C) on the Termination Date.
(c) Conversion or Continuation. (i) Subject to the provisions
of Sections 2.07 and 2.08, Borrower shall have the option (A) to convert at any
time all or any part of outstanding Loans which comprise part of the same
Borrowing and which, in the aggregate, equal or exceed $1,000,000 from Base
Rate Loans to Eurodollar Rate Loans; or (B) to convert all or any part of
outstanding Loans which comprise part of the same Borrowing and which, in the
aggregate, equal or exceed $500,000 from Eurodollar Rate Loans to Base Rate
Loans on the expiration date of any Interest Period applicable thereto; or (C)
upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Rate Loans, to continue all or any portion of such Loans equal to or
in excess of $1,000,000 as Eurodollar Rate Loans of the same type, and the
succeeding Interest Period of such continued Loans shall commence on the
expiration date of the Interest Period applicable thereto; provided that no
outstanding Loan may be continued as, or be converted into, a Eurodollar Rate
Loan if any Potential Event of Default or Event of Default exists or if such a
continuation or conversion would otherwise be prohibited by the terms of this
Agreement.
(ii) In the event Borrower shall elect to convert or continue a
Loan under this Section 2.03(c), Borrower shall deliver a Notice of
Conversion/Continuation to the Agent no later than 12:00 noon (New York City
time) (A) at least one (1) Business Day in advance of the proposed conversion
date in the case of a conversion to a Base Rate Loan and (B) at least three (3)
Business Days in advance of the proposed conversion or continuation date in the
case of a conversion to, or a continuation of, a Eurodollar Rate Loan. A
Notice of Conversion/ Continuation shall specify (1) the proposed conversion or
continuation date (which shall be a Business Day), (2) the amount of the Loan
to be converted or continued, (3) the nature of the proposed conversion or
continuation, and (4) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, the requested Interest Period. In lieu of delivering the
above-described Notice of Conversion/Continuation, Borrower may give the Agent
telephonic notice of any proposed conversion or continuation by the time
required under this Section 2.03(c); provided
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<PAGE> 36
that such notice shall be confirmed in writing by delivery to the Agent
promptly (but in no event later than 12:00 noon (New York City time) on the
proposed conversion or continuation date) of a Notice of
Conversion/Continuation. Promptly after receipt of a Notice of Conversion/
Continuation under this Section 2.03(c) (or telephonic notice in lieu thereof),
the Agent shall notify each Lender by telex, telecopy, telephone or other
similar form of transmission, of the proposed conversion or continuation.
(iii) Any Notice of Conversion/Continuation for conversion to,
or continuation of, a Loan (or telephonic notice in lieu thereof) shall be
irrevocable and the Borrower shall be bound to convert or continue in
accordance therewith.
(d) Default Interest. Notwithstanding the rates of interest
specified in Section 2.03(a) and the payment dates specified in Section
2.03(b), (i) from and after the occurrence of a payment default constituting an
Event of Default under Section 10.01(a), until the past-due amount is paid,
such amount not paid when due shall bear interest payable upon demand at a rate
per annum equal to the sum of (A) two and one-eighths percent (2.125%) and (B)
the Alternate Base Rate in effect from time to time (the "Default Rate"), and
(ii) (x) from and after the occurrence of any Event of Default described in
Sections 10.01(f) or 10.01(g) with respect to the Borrower, any Domestic
Subsidiary or any one or more Supported Foreign Subsidiaries the aggregate
Credit Support of which equals or exceeds $25,000,000 and (y) from and after
the occurrence of any other Event of Default set forth in a notice from the
Agent or Requisite Lenders to the Borrower, and for so long thereafter as such
Event of Default is continuing, the principal balance of all Loans and other
Agreement Obligations then outstanding (including, without limitation, all
amounts due and payable pursuant to Section 10.02(a)) and, to the extent
permitted by applicable law, any interest payments on the Loans not paid when
due, shall bear interest payable upon demand at the Default Rate.
(e) Determination of Applicable Margins and Applicable Fees;
Computation of Interest.
(i) Definitions. As used in this Section 2.03(e) and in this
Agreement, the following terms shall have the following meanings:
"Applicable Fees" and "Applicable Margins" shall mean the
Applicable Commitment Fee and/or the Applicable Letter of Credit Fee,
with respect to "Applicable Fees", and Applicable Base Rate Margin
and/or Applicable Eurodollar Rate Margin, with respect to "Applicable
Margins", as the case may be. The Applicable Fees and Applicable
Margins shall be determined, in accordance with the provisions of
Section 2.03(e), by reference to the following:
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<PAGE> 37
<TABLE>
<CAPTION>
Borrower
Interest Senior Applicable Applicable Applicable Applicable
Coverage Debt Commitment Letter of Eurodollar Base Rate
Ratio Ratings Fee Credit Fee Margin Margin
-------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Less than
or equal to Not
4.0 to 1.0 Applicable 0.375% 1.125% 1.125% 0.125%
Greater than
4.0 to 1.0
and less than
or equal to Not
5.0 to 1.0 Applicable 0.250% 0.875% 0.875% 0.000%
Greater than
5.0 to 1.0
and less than
or equal to
6.5 to 1.0 OR BBB- 0.225% 0.750% 0.750% 0.000%
Greater than
6.5 to 1.0 OR BBB 0.1875% 0.625% 0.625% 0.000%
Not Applicable BBB+ 0.1875% 0.500% 0.500% 0.000%
</TABLE>
"Borrower Interest Coverage Ratio" shall have the
meaning ascribed to such term in Section 9.01.
"Senior Debt Ratings" shall mean the publicly announced
ratings by Moody's, S&P or other nationally recognized rating services
acceptable to the Agent on the Borrower's senior unsecured Indebtedness;
provided, the Borrower shall have at least two such ratings and at least
one of which shall be from S&P or Moody's.
(ii) Determination of Applicable Margins and Applicable Fees.
(A) The Applicable Margin in respect of any Loan and the
Applicable Fees payable under Section 2.04 shall be determined by reference to
the tables set forth in clause (i) above, as applicable, on the basis of the
Borrower Interest Coverage Ratio (calculated initially with respect to the
first two quarters after the Effective Date, then the first three quarters
after the Effective Date, and thereafter on a rolling four quarter basis)
determined by reference to the most recent financial statements delivered
pursuant to Section 6.01(b) or 6.01(c) or by reference to the Borrower's Senior
Debt Ratings, if any, from time to time, whichever reference results in the
lower Applicable Margin and Applicable Fees.
(B) Upon receipt of the financial statements delivered pursuant
to Section 6.01(b) or Section 6.01(c), as applicable, the Applicable Margins
for all outstanding Loans and the
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<PAGE> 38
Applicable Fees shall be adjusted, such adjustment being effective on the first
Business Day after receipt of such financial statements and the Compliance
Certificate to be delivered in connection therewith; provided, however, if the
Borrower shall not have timely delivered its financial statements in accordance
with Section 6.01(b) or Section 6.01(c), as applicable, beginning with the date
upon which such financial statements should have been delivered and continuing
until such financial statements are delivered, it shall be assumed for purposes
of determining the Applicable Margins and the Applicable Fees that the Borrower
Interest Coverage Ratio was less than 4.0 to 1.0. Notwithstanding the
foregoing, if reference is made to the Senior Debt Ratings for determination of
the Applicable Margin or the Applicable Fees, the Applicable Margins for all
outstanding Loans and the Applicable Fees shall be adjusted automatically
without reference to the delivery of the Borrower's financial statements, such
adjustment being effective on the first Business Day after any change in
Borrower's Senior Debt Ratings.
(C) Notwithstanding anything herein to the contrary, from the
Closing Date through the date of receipt of the financial statements for the
period ended September 30, 1994 pursuant to Section 6.01(b) or 6.01(c), the
Applicable Margins and Applicable Fees shall be determined based upon an
assumption that the Borrower Interest Coverage Ratio is greater than 4.0 to 1.0
but less than or equal to 5.0 to 1.0.
(iii) Computation of Interest. Interest on all Agreement
Obligations (other than those on which the interest rate is determined by
reference to the Prime Rate) shall be computed on the basis of the actual
number of days elapsed in the period during which interest accrues and a year
of 360 days. Interest on all Agreement Obligations with respect to which the
interest rate is determined by reference to the Prime Rate shall be computed on
the basis of the actual number of days elapsed in the period during which
interest accrues and a year of 365/366 days. In computing interest on any
Loan, the date of the making of the Loan or the first day of an Interest
Period, as the case may be, shall be included and the date of payment or the
expiration date of an Interest Period, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one (1)
day's interest shall be paid on that Loan.
(f) Changes; Legal Restrictions. In the event that after the
date hereof (i) the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a Governmental Authority or any
change in the interpretation or application thereof by a Governmental
Authority, or (ii) compliance by any Lender with any request or directive
(whether or not having the force of law and whether or not the failure to
comply therewith would be unlawful) from any central bank or other Governmental
Authority or quasi-governmental authority exercising jurisdiction, power or
control over banks or financial institutions generally, does impose, modify, or
hold applicable, in the determination of a Lender, any reserve, special
deposit, compulsory loan, FDIC insurance, capital allocation or similar
requirement against assets held by, or deposits or other liabilities (including
those pertaining to Letters of Credit) in or for the account of, advances or
loans by, Commitments made, or other credit extended by, or any other
acquisition of funds by, a Lender or any Applicable Lending Office of such
Lender (except with respect to Base Rate Loans, so long as the Base Rate in
effect at the time is determined under clause (a) in the definition of
"Alternate Base Rate"), and the result of any of the foregoing is to increase
the cost to such Lender of making, renewing or maintaining the Loans or its
Commitment or issuing or participating in any Letter of Credit or to reduce any
amount receivable hereunder or thereunder; then, in any such case, Borrower
shall
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<PAGE> 39
upon written notice from and demand by that Lender pay to such Lender, within
fifteen (15) Business Days of the date specified in such notice and demand,
such amount or amounts (based upon a reasonable allocation thereof by such
Lender to the financing transactions contemplated by this Agreement and
affected by this Section 2.03(f)) as may be necessary to compensate that Lender
on an after-tax basis for any such additional cost incurred or reduced amount
received. Such Lender shall deliver to the Borrower a written statement of the
costs or reductions claimed and the basis therefor, and the allocation made by
such Lender of such costs and reductions, which statement shall, in the absence
of manifest error, be conclusive. If a Lender subsequently recovers from
another Person any amount previously paid by Borrower pursuant to this Section
2.03(f), such Lender shall, within thirty (30) days after receipt of such
refund and to the extent permitted by applicable law, pay to the Borrower,
without interest, the amount of any such recovery.
2.04. Fees.
(a) Commitment Fee. The Borrower shall pay to the Agent, for
the account of the Lenders in accordance with their respective Pro Rata Shares
except as set forth in Section 12.07(b)(vi), a fee (the "Commitment Fee"),
accruing at the rate of the then Applicable Commitment Fee on the average daily
amount by which the Commitments exceed Loan Usage for the period commencing on
the date hereof and ending on the Termination Date, such Commitment Fee being
payable quarterly, in arrears, on the last calendar day of each calendar
quarter occurring after the date hereof and on the Termination Date.
(b) Letter of Credit Fees. Borrower shall pay to the Agent,
for the ratable account of the Lenders a fee for each Letter of Credit issued
on behalf of Borrower, in accordance with the provisions of Section 3.08(a).
(c) Payment of Fees; No Other Compensation. The fees described
in this Section 2.04 represent compensation for services rendered and to be
rendered separate and apart from the lending of money or the provision of
credit and do not constitute compensation for the use, detention or forbearance
of money, and the obligation of Borrower to pay each fee described herein shall
be in addition to, and not in lieu of, the obligation of Borrower to pay
interest, other fees and expenses otherwise described in this Agreement. Fees
and expenses shall be payable when due in immediately available funds. All
fees and expenses shall be nonrefundable when paid. All fees and expenses
specified or referred to in this Agreement or in the letter agreement dated
January 14, 1994 among Chemical, Chemical Securities, Inc. and the Borrower
(the "Fee Letter") due to the Agent, the Issuing Banks or any Lender,
including, without limitation, amounts referred to in this Section 2.04 and in
Section 12.03, shall constitute Obligations and shall be secured by all the
Collateral. All fees described in this Section 2.04 which are expressed as a
per annum charge shall be calculated on the basis of the actual number of days
elapsed in a 365/366-day year. Except for upfront fees payable to the Lenders
on the Effective Date as agreed to by the Borrower and fronting fees of the
Issuing Banks with respect to Letters of Credit payable pursuant to Section
3.08(b), no Lender or Issuing Bank shall be entitled to receive any additional
compensation for its execution or performance under this Agreement or the other
Loan Documents.
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<PAGE> 40
2.05. Prepayments. Borrower shall not at any time cause or
permit Loan Usage to exceed the Commitments. If at any time Loan Usage exceeds
the Commitments, at such time, Borrower shall, without demand or notice,
promptly pay to the Agent such amount as may be necessary to eliminate such
excess, which prepayment shall be applied as set forth in Section 2.06(b). Any
payment required by this Section 2.05 shall be payable without penalty or
premium, except as may be required by Section 2.08(d) with respect to any
Eurodollar Rate Loan prepaid as a result thereof. After the Loans have been
paid in full, further prepayments made pursuant to this Section 2.05 shall be
held as cash collateral for the Letter of Credit Obligations.
2.06. Payments.
(a) Manner and Time of Payment. Except as otherwise expressly
set forth herein, all payments of principal of and interest on the Loans and
Reimbursement Obligations and other Agreement Obligations (including without
limitation, fees and expenses) payable to the Agent, the Lenders or the Issuing
Banks (or any of them) shall be made without setoff, counterclaim, defense,
condition or reservation of right, in Dollars and in immediately available
funds, delivered to the Agent (or, in the case of Reimbursement Obligations, to
the applicable Issuing Bank) not later than 12:00 noon (New York City time) on
the date and at the place due, to such account of the Agent (or the applicable
Issuing Bank) as it may designate, for the account of the Agent, the Lenders or
the Issuing Banks, as the case may be; and funds received by the Agent after
that time and date shall be deemed to have been paid and received by the Agent
on the next succeeding Business Day. Payments actually received by the Agent
for the account of the Agent, the Lenders or the Issuing Banks, or any of them,
shall be paid to them promptly after receipt thereof by the Agent. All
payments of principal, interest, Reimbursement Obligations and fees, and all
reimbursements for expenses pursuant to this Agreement and the other Loan
Documents, may at the option of the Agent (but without any obligation to do so)
and upon reasonable notice to Borrower be paid from the proceeds of Loans made
to Borrower hereunder. Borrower hereby irrevocably and unconditionally
authorizes the Lenders to make Loans to it under the Revolving Credit Facility,
which Loans shall be Base Rate Loans, for the purpose of paying interest,
Reimbursement Obligations and fees due from it and for the purpose of
reimbursing the Agent, the Issuing Banks and each Lender for expenses due and
payable pursuant to this Agreement and the other Loan Documents and agrees that
all such Loans so made shall be deemed to have been requested by it and at the
option of the Agent (but without any obligation to do so) may be charged to
Borrower's Loan Account.
(b) Apportionment of Payments and Prepayments. (i) Subject to
the provisions of Section 12.07(b), all payments and prepayments of principal
and interest in respect of outstanding Loans, all payments in respect of
Reimbursement Obligations, all payments of fees and all other payments in
respect of any other Agreement Obligations, shall be allocated among such of
the Lenders and the Issuing Banks as are entitled thereto, in proportion to
their respective Pro Rata Shares or otherwise as provided herein. Subject to
the provisions of Section 2.06(b)(ii), all such payments and prepayments and
any other amounts received by the Agent from or for the benefit of the Borrower
shall be applied first, to pay principal of and interest on any portion of the
Loans which the Agent may have advanced on behalf of any Lender for which the
Agent has not then been reimbursed by such Lender or the Borrower, second, to
pay principal of and interest on any advance made under Section 12.20 for which
the
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<PAGE> 41
Agent has not then been paid by the Borrower or reimbursed by the Lenders,
third, to pay all other Agreement Obligations then due and payable, and fourth,
as the Borrower so designates. Unless otherwise designated by the Borrower,
all principal payments and prepayments in respect of Loans shall be applied
first, to the Eurodollar Rate Loans maturing on the date of such payment,
second, to repay outstanding Base Rate Loans, and then to repay outstanding
Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier
expiring Interest Periods being repaid prior to those which have later expiring
Interest Periods.
(ii) Subject to the provisions of Section 12.07(b), after the
occurrence of an Event of Default and while the same is continuing, the Agent
shall, unless otherwise specified at the direction of the Requisite Lenders
which direction shall be consistent with the last sentence of this clause (ii),
apply all payments and prepayments in respect of any Obligations and all
proceeds of Collateral in the following order:
(A) first, to pay interest on and then principal of any portion
of the Loans which the Agent may have advanced on behalf of any Lender
for which the Agent has not then been reimbursed by such Lender or the
Borrower;
(B) second, to pay interest on and then principal of any
advance made under Section 12.20 for which the Agent has not then been
paid by the Borrower or reimbursed by the Lenders;
(C) third, to pay Agreement Obligations in respect of any fees,
expense reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Agreement Obligations in respect of any
fees, expenses, reimbursements or indemnities then due to the Lenders
and the Issuing Banks;
(E) fifth, to pay interest due in respect of Loans and Letter
of Credit Obligations;
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans and Reimbursement Obligations in such order as the
Agent may determine in its sole discretion;
(G) seventh, to pay principal on contingent Letter of Credit
Obligations by depositing such funds as cash collateral pursuant to
Section 10.02(b);
(H) eighth, to the ratable payment of all other Agreement
Obligations; and
(I) ninth, to the ratable payment of all Obligations in respect
of Eligible Hedging Contracts.
The order of priority set forth in this Section 2.06(b)(ii) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Agent, the Lenders, the Issuing Banks and other Holders of
Secured Obligations as among themselves. The order of priority set forth in
clauses (D) through (I) of this Section 2.06(b)(ii) may at any time and from
time to time be changed by the Requisite Lenders without necessity of notice to
or consent of or
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<PAGE> 42
approval by the Borrower, or any other Person. The order of priority set forth
in clauses (A) through (C) of this Section 2.06(b)(ii) may be changed only with
the prior written consent of the Agent.
(iii) Subject to Section 12.07(b), the Agent shall promptly
distribute to each Lender and the Issuing Banks at its primary address set
forth on the appropriate signature page hereof or the signature page to the
Assignment and Acceptance by which it became a Lender, or at such other address
as a Lender, an Issuing Bank or other Holder of Secured Obligations may request
in writing, such funds as such Person may be entitled to receive; provided that
the Agent shall under no circumstances be bound to inquire into or determine
the validity, scope or priority of any interest or entitlement of any Lender or
any other Holder of Secured Obligations and may suspend all payments or seek
appropriate relief (including, without limitation, instructions from the
Requisite Lenders or an action in the nature of interpleader) in the event of
any doubt or dispute as to any apportionment or distribution contemplated
hereby.
(c) Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day,
unless such Business Day occurs in the succeeding month in which case such
payment shall be made on the immediately preceding Business Day, and such
extension of time, if any, shall be included in the computation of the payment
of interest hereunder and of any of the fees specified in Section 2.04, as the
case may be.
(d) Agent's or Issuing Banks' Accounting. The Agent shall
maintain such accounts, books and records (a "Loan Account") in which it shall
record (i) the names and addresses of the Lenders and the respective
Commitments of, and principal amount of Loans owing to, each Lender from time
to time; (ii) other appropriate debits and credits as provided in this
Agreement, including, without limitation, all interest and fees constituting
Obligations; and (iii) all payments of such Obligations made by Borrower or for
Borrower's account. Each Lender shall maintain in accordance with its usual
practices an account or accounts evidencing the indebtedness of Borrower to
such Lender resulting from each Loan owing to such Lender from time to time,
including the amount of principal and interest payable and paid to such Lender
from time to time hereunder. Each of the Issuing Banks shall maintain a
separate Loan Account in which it shall record appropriate debits and credits
related to its Letter of Credit Obligations. Entries in any Loan Account made
in accordance with the Agent's, any Lender's or any Issuing Bank's customary
accounting practices as in effect from time to time shall constitute prima
facie evidence of the matters reflected therein.
2.07. Interest Periods. By giving notice as set forth in
Section 2.02(a) or 2.03(c) with respect to a Borrowing of, conversion into or
continuation of Loans consisting of Eurodollar Rate Loans, Borrower shall have
the option, subject to the other provisions of this Section 2.07 and Section
2.08, to specify an interest period (each an "Interest Period") to apply to the
Borrowing described in such notice, which Interest Period shall be either a one
(1), two (2), three (3) or six (6) month period. The determination of Interest
Periods shall be subject to the following provisions:
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<PAGE> 43
(a) In the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(b) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to expire on
the next succeeding Business Day; provided that if any such Interest Period
would otherwise expire on a day which is not a Business Day and no further
Business Day occurs in that calendar month, that Interest Period shall expire
on the immediately preceding Business Day;
(c) Borrower may not select an Interest Period which terminates
later than the Termination Date;
(d) Without the prior written consent of the Agent, there shall
be no more than five (5) Interest Periods under this Agreement in effect at any
one time.
2.08. Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding other provisions of this Agreement, the following provisions
shall govern with respect to Eurodollar Rate Loans as to the matters covered:
(a) Determination of Interest Rate. As soon as practicable
after 12:00 noon (New York City time) on the Interest Rate Determination Date,
the Agent shall determine (which determination shall, absent manifest error, be
presumptively correct) the interest rate which shall apply to the Eurodollar
Rate Loans for which an interest rate is then being determined for the
applicable Interest Period and shall promptly give notice thereof (in writing
or by telephone confirmed in writing) to Borrower and to each Lender.
(b) Interest Rate Unascertainable, Inadequate or Unfair. With
respect to any Interest Period, if deposits in Dollars (in the applicable
amount) are not being offered to (i) Chemical Bank or (ii) the Requisite
Lenders in the London interbank Eurodollar market for such Interest Period, or
if adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of LIBO Rate, then
the Agent shall forthwith give notice thereof to Borrower and each Lender,
whereupon until the Agent has determined that the circumstances giving rise to
such suspension no longer exist, (a) the right of Borrower to elect to have
Loans bear interest based upon the LIBO Rate shall be suspended, and (b) each
outstanding Eurodollar Rate Loan shall be converted into a Base Rate Loan on
the last day of the then current Interest Period therefor, notwithstanding any
prior election by the Borrower to the contrary.
(c) Illegality. (i) In the event that on any date any Lender
shall have determined (which determination shall, in the absence of manifest
error, be final and conclusive and binding upon all parties) that the making or
continuation of any Eurodollar Rate Loan has become unlawful by compliance by
that Lender in good faith with any law, governmental rule, regulation or order
of any Governmental Authority (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful), then, and in any
such event, such Lender shall promptly give notice (by teletransmission or by
telephone promptly confirmed in writing) to Borrower and the Agent of that
determination and the reasons therefor. The Agent shall promptly forward any
such notice it receives to the other Lenders.
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<PAGE> 44
(ii) Upon the giving of the notice referred to in Section
2.08(c)(i), (A) Borrower's right to request of the Lenders and the Lenders'
obligation to make Eurodollar Rate Loans with respect to the requested
Borrowing shall be immediately suspended, and the Lenders shall make Loans,
with respect to such requested Borrowing of Eurodollar Rate Loans as Base Rate
Loans, and (B) if Eurodollar Rate Loans are then outstanding, Borrower shall
immediately (or, if permitted by applicable law, no later than the date
permitted thereby, upon at least one (1) Business Day's written notice to the
Agent and the Lenders) convert all such Loans of the same Borrowing into Base
Rate Loans.
(iii) In the event that a Lender determines at any time
following its giving of a notice referred to in Section 2.08(c)(i) that such
Lender may lawfully make Eurodollar Rate Loans, such Lender shall promptly give
notice (by teletransmission or by telephone promptly confirmed in writing) to
Borrower and the Agent of that determination, whereupon Borrower's right to
request of the Lenders and the Lenders' obligation to make Eurodollar Rate
Loans shall be restored. The Agent shall promptly forward any such notice it
receives to the Lenders.
(d) Compensation. In addition to such amounts as are required
to be paid by Borrower pursuant to Sections 2.03(a), 2.03(d), 2.03(f), 2.04 and
each other provision of this Agreement requiring payment by Borrower, Borrower
shall compensate each Lender, upon demand, for all losses (including lost
profits but excluding therefrom the Applicable Eurodollar Rate Margin),
expenses and liabilities (including, without limitation, any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to fund or maintain such Lender's Eurodollar Rate
Loans to the Borrower) which such Lender may sustain (i) if for any reason a
Borrowing of, conversion into or continuation of Eurodollar Rate Loans does not
occur on a date specified therefor in a Notice of Borrowing or a Notice of
Conversion/Continuation or in a telephonic request for borrowing or conversion
or continuation or a successive Interest Period does not commence after notice
therefor is given pursuant to Section 2.03(c)(ii), (ii) if any prepayment of
any Eurodollar Rate Loan (including, without limitation, any prepayment
pursuant to Section 2.05 but excluding any prepayment of any Eurodollar Rate
Loan in connection with the replacement of any Lender under clause (i) or
clause (ii) of Section 2.13) occurs for any reason on a date which is not the
last day of the applicable Interest Period, (iii) as a consequence of any
required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result
of any of the events indicated in Section 2.08(c), (iv) as a consequence of an
acceleration of the Obligations pursuant to Section 10.02(a) and (v) as a
consequence of any other failure by Borrower to repay Eurodollar Rate Loans
when required by the terms of this Agreement. Such Lender shall deliver to
Borrower, as a condition of Borrower's obligation to compensate such Lender, a
written statement as to such losses, expenses and liabilities which statement,
in the absence of manifest error, shall be conclusive as to such amounts.
(e) Booking of Eurodollar Rate Loans. Any Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices, agencies or the office of an Affiliate of that Lender;
provided that no such Lender shall be entitled to receive any greater amount
under Section 2.03(f) or Section 2.09 as a result of the transfer of any such
Loan than such Lender would be entitled to immediately prior thereto unless (i)
such transfer occurred at a time when circumstances giving rise to the claim
for such greater amount did not
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exist and were not reasonably foreseeable by such Lender, or (ii) such claim
would have arisen even if such transfer had not occurred.
2.09. Taxes. (a) Any and all payments by Borrower hereunder
shall be made, in accordance with Section 2.06, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges, or withholdings, and all liabilities with respect thereto including
those arising after the date hereof as a result of the adoption of or any
change in any law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or application
thereof by a Governmental Authority but excluding, in the case of each Lender,
each Issuing Bank and the Agent, such taxes (including income taxes, franchise
taxes and branch profit taxes) as are imposed on or measured by such Lender's,
Issuing Bank's or Agent's, as the case may be, income by the United States of
America or any Governmental Authority of the jurisdiction under the laws of
which such Lender, Issuing Bank or Agent, as the case may be, is organized,
maintains an Applicable Lending Office or is deemed to be engaged in trade or
business (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings, and liabilities which the Agent, an Issuing Bank or a Lender
determines to be applicable to this Agreement, the other Loan Documents, the
Commitments, the Loans or the Letters of Credit being hereinafter referred to
as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under the other Loan Documents to
any Lender, Issuing Bank or the Agent, (i) the sum payable shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.09) such
Lender, Issuing Bank or Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law. If a withholding tax of the United States of America or
any other Governmental Authority shall be or become applicable (y) after the
date of this Agreement, to such payments by Borrower made to the Applicable
Lending Office or any other office that a Lender may claim as its Applicable
Lending Office, or (z) after such Lender's selection and designation of any
other Applicable Lending Office, to such payments made to such other Applicable
Lending Office, such Lender shall use reasonable efforts to make, fund and
maintain its Loans through another Applicable Lending Office of such Lender in
another jurisdiction so as to reduce such Borrower's liability hereunder, if
the making, funding or maintenance of such Loans through such other Applicable
Lending Office of such Lender does not, in the judgment of such Lender,
otherwise materially adversely affect such Loans, obligations under the
Commitments or such Lender.
(b) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder, from the issuance
of Letters of Credit hereunder, or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement, the other Loan Documents, the
Commitments, the Loans or the Letters of Credit (hereinafter referred to as
"Other Taxes").
(c) Borrower will indemnify each Lender, each Issuing Bank and
the Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any Governmental Authority on
amounts payable under this Section 2.09) paid by
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such Lender, Issuing Bank or the Agent (as the case may be) and any liability
(including penalties, interest, and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within thirty (30) days after the
date such Lender, Issuing Bank or the Agent (as the case may be) makes written
demand therefor. A certificate as to any additional amount payable to any
Lender, any Issuing Bank or the Agent under this Section 2.09 submitted to such
Borrower and the Agent (if a Lender or Issuing Bank is so submitting) by such
Lender, Issuing Bank or the Agent shall show in reasonable detail the amount
payable and the calculations used to determine such amount and shall, absent
manifest error, be final, conclusive and binding upon all parties hereto. With
respect to such deduction or withholding for or on account of any Taxes and to
confirm that all such Taxes have been paid to the appropriate Governmental
Authorities, Borrower shall promptly (and in any event not later than thirty
(30) days after receipt) furnish to each Lender, Issuing Bank and the Agent
such certificates, receipts and other documents as may be required (in the
judgment of such Lender, Issuing Bank or the Agent) to establish any tax credit
to which such Lender, Issuing Bank or the Agent may be entitled.
(d) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by Borrower, Borrower will furnish to the Agent, at its
address referred to in Section 12.10, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 2.09 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
(f) Without limiting the obligations of Borrower under this
Section 2.09, each Lender that is not created or organized under the laws of
the United States of America or a political subdivision thereof shall deliver
to Borrower and the Agent on or before the initial Funding Date, or, if later,
the date on which such Lender becomes a Lender pursuant to Section 12.02
hereof, a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender, in a form satisfactory to Borrower and the
Agent, to the effect that such Lender is capable under the provisions of an
applicable tax treaty concluded by the United States of America (in which case
the certificate shall be accompanied by two executed copies of Form 1001 of the
IRS) or under Section 1442 of the IRC (in which case the certificate shall be
accompanied by two copies of Form 4224 of the IRS) of receiving payments of
interest hereunder without deduction or withholding of United States federal
income tax. Each such Lender further agrees to deliver to Borrower and the
Agent from time to time a true and accurate certificate executed in duplicate
by a duly authorized officer of such Lender substantially in a form
satisfactory to Borrower and the Agent, before or promptly upon the occurrence
of any event requiring a change in the most recent certificate previously
delivered by it to Borrower and the Agent pursuant to this Section 2.09(f).
Further, each Lender which delivers a certificate accompanied by Form 1001 of
the IRS covenants and agrees to deliver to Borrower and the Agent within
fifteen (15) days prior to January 1, 1995, and every third (3rd) anniversary
of such date thereafter, on which this Agreement is still in effect, another
such certificate and two accurate and complete original signed copies of Form
1001 (or any successor form or forms required under the IRC or the applicable
regulations promulgated thereunder), and each Lender that delivers a
certificate accompanied by Form 4224 of the IRS covenants and
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agrees to deliver to Borrower and the Agent within fifteen (15) days prior to
the beginning of each subsequent taxable year of such Lender during which this
Agreement is still in effect, another such certificate and two accurate and
complete original signed copies of IRS Form 4224 (or any successor form or
forms required under the IRC or the applicable regulations promulgated
thereunder). Each such certificate shall certify as to one of the following:
(i) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United States of
America federal income tax;
(ii) that such Lender is not capable of receiving payments of
interest hereunder without deduction or withholding of United States of
America federal income tax as specified therein but is capable of
recovering the full amount of any such deduction or withholding from a
source other than the Borrower and will not seek any such recovery from
Borrower; or
(iii) that, as a result of the adoption of or any change in any
law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date such
Lender became a party hereto, such Lender is not capable of receiving
payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from a
source other than the Borrower.
Each Lender shall promptly furnish to Borrower and the Agent
such additional documents as may be reasonably required by Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other Taxes
required to be deducted or withheld and which may be obtained without undue
expense to such Lender.
2.10. Increased Capital. If any Lender determines that either
(A) the introduction of or any change in any law, order or regulation or in the
interpretation or administration of any law, order or regulation by any
Governmental Authority charged with the interpretation or administration
thereof after the date hereof or (B) compliance with any guideline or request
issued or made after the date hereof from any central bank or other
Governmental Authority (whether or not having the force of law) has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender, as a consequence of or with reference
to such Lender's Commitment or its making or maintaining Loans or, in the case
of such Lender acting in its capacity as an Issuing Bank, such Issuing Bank's
issuance or maintenance of any Letter of Credit, or any Lender's participation
in any Letter of Credit, below the rate which such Lender or such other
corporation could have achieved but for such compliance (taking into account
the policies of such Lender or corporation with regard to capital), then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), pay to such Lender additional amounts sufficient to
compensate such Lender on an after-tax basis for such reduction, upon receipt
by Borrower (with a copy to the Agent) of a certificate as to such amounts, by
such Lender, setting forth in reasonable detail the basis for, and the
calculations used by such Lender in determining, any such amounts. Such
certificate, in the absence of manifest error shall be conclusive and binding
for all purposes. Each Lender agrees promptly to notify Borrower and the Agent
of any
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circumstances that would cause Borrower to pay additional amounts pursuant to
this Section 2.10, provided that the failure to give such notice shall not
affect Borrower's obligation to pay such additional amounts hereunder.
2.11. Use of Proceeds. The proceeds of the Loans and Letters
of Credit may be used only in the ordinary course of business and for proper
corporate purposes. Letters of Credit may be used (a) to support financial or
performance obligations of the Borrower, (b) to provide Credit Support, subject
to the terms of Section 7.10, to Borrower's Subsidiaries and/or (c) with
respect to Commercial Letters of Credit, to facilitate international purchases.
2.12. Authorized Officers of Borrower. Borrower shall notify
the Agent and the Issuing Banks in writing of the names of the Financial
Officers and the other officers and employees authorized to request Loans and
Letters of Credit and to request a conversion or continuation of any Loan and
shall provide the Agent with a specimen signature of each such Financial
Officer, officer or employee. The Agent and the Issuing Banks shall be
entitled to rely conclusively on such Financial Officer's, officer's or
employee's authority to request such Loan or Letter of Credit or such
conversion or continuation until the Agent and the Issuing Banks receive
written notice to the contrary. The Agent and the Issuing Banks shall have no
duty to verify the authenticity of the signature appearing on any written
Notice of Borrowing or Notice of Conversion/Continuation and, with respect to
an oral request for such a Loan or Letter of Credit or such conversion or
continuation, the Agent and the Issuing Banks shall have no duty to verify the
identity of any person representing himself as one of the Financial Officers,
officers or employees authorized to make such request on behalf of Borrower.
Neither the Agent, any Issuing Bank nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above which the Agent
believes to have been given by a duly authorized Financial Officer, officer or
other person authorized to borrow on behalf of Borrower.
2.13. Replacement of Certain Lenders. In the event a Lender
("Affected Lender") shall have: (i) failed to fund its Pro Rata Share of any
Borrowing requested by the Borrower which such Lender is obligated to fund
under the terms of this Agreement and which such failure has not been cured,
(ii) failed to issue a Letter of Credit requested by the Borrower which such
Lender is obligated to issue as an Issuing Bank under the terms of this
Agreement, (iii) has requested compensation from the Borrower under Sections
2.03(f), 2.09 or 2.10 to recover additional costs incurred by such Lender which
are not being incurred generally by the other Lenders, or (iv) delivered a
notice pursuant to Section 2.08(c)(i) claiming that such Lender is unable to
extend Eurodollar Rate Loans to the Borrower for reasons not generally
applicable to the other Lenders, then, in any such case, the Borrower or the
Agent may make written demand on such Affected Lender (with a copy to the Agent
in the case of a demand by the Borrower and a copy to the Borrower in the case
of a demand by the Agent) for the Affected Lender to assign, and such Affected
Lender shall assign pursuant to one or more duly executed Assignment and
Acceptances five (5) Business Days after the date of such demand, to one or
more financial institutions which complies with the provisions of Section 12.02
(and, if selected by the Borrower is reasonably acceptable to the Agent) which
the Borrower or the Agent, as the case may be, shall have engaged for such
purpose ("Replacement Lender"), all of such Affected Lender's rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, its Commitments, all Loans owing to it, all of its
participation interests in existing Letters of Credit, and its obligation to
participate in additional Letters of Credit
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hereunder) in accordance with Section 12.02. The Agent is hereby authorized to
execute one or more Assignment and Acceptances as attorney-in- fact for any
Affected Lender failing to execute and deliver the same within five (5)
Business Days after the date of such demand. Further, with respect to such
assignment:
(a) in the event the Affected Lender is an Issuing Bank the
Borrower shall have, with respect to each outstanding Letter of Credit issued
by such Issuing Bank, provided the Affected Lender with cash collateral,
arranged for surrender of such Letters of Credit, arranged for a back-to-back
Letter of Credit or made such other arrangement in respect of such Letter of
Credit as shall be mutually acceptable to the Borrower and such Affected
Lender; and
(b) the Affected Lender shall have concurrently received, in
cash, all amounts due and owing to the Affected Lender hereunder or under any
other Loan Document, including, without limitation, the aggregate outstanding
principal amount of the Loans owed to such Lender, together with accrued
interest thereon through the date of such assignment, amounts payable under
Sections 2.03(f), 2.09, 2.10, 2.14, 3.09, 12.03 and 12.04 and compensation
payable under Section 2.08(d) in the event of any replacement of any Affected
Lender under clause (iii) or clause (iv) of this Section 2.13; provided, upon
such Affected Lender's replacement, such Affected Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.03(f), 2.08, 2.09, 2.10, 2.14, 3.09, 12.03 and 12.04, as well as to any fees
accrued for its account hereunder and not yet paid.
Upon the replacement of any Affected Lender pursuant to this Section 2.13, (x)
each Letter of Credit issued by such Affected Lender shall cease to be a Letter
of Credit under this Agreement, shall cease to have any participation in,
entitlement to, or other right to share in the security interests and liens of
the Agent and the Holders of Secured Obligations in the Collateral and shall no
longer be subject to the participation provisions of Section 3.06, all of which
participations shall be deemed to have terminated and been repurchased by the
applicable Issuing Bank hereunder and (y) the provisions of Section 12.07(b)
shall continue to apply with respect to Borrowings which are then outstanding
with respect to which the Affected Lender failed to fund its Pro Rata Share and
which failure has not been cured.
2.14. Incurrence of Costs. In the event any Lender shall be
subject to any cost to such Lender of agreeing to make or making, funding or
maintaining such Lender's Commitment or its Loans or, in the case of an Issuing
Bank, the issuance or maintenance of any Letter of Credit, or any Lender's
participation in any Letter of Credit, which cost is due to either (i) the
compliance by such Lender or Issuing Bank with any law or regulation or other
requirements imposed upon it with respect to "Statutory Reserves" (as defined
below) or (ii) the application to such Lender of the annual assessment rate
that will be employed in determining amounts payable by such Lender to the FDIC
for insurance by the FDIC of time deposits made in Dollars at such Lender's
domestic office, then the Borrower shall, from time to time, on demand by such
Lender, pay to such Lender additional amounts sufficient to compensate such
Lender on an after-tax basis for such costs. Any Lender wishing to require
payment of such additional costs shall notify the Borrower in writing (with a
copy to the Agent), which notification shall include a certificate as to such
costs, setting forth in reasonable detail the basis for and the calculations
used by such Lender in determining any such amounts. The Borrower shall make
any such payment directly to the affected Lender. For purposes hereof, the
term "Statutory Reserves"
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shall mean the reserve percentages (including, without limitation, any basic,
marginal, special, emergency, supplemental or other reserves) expressed as a
decimal established by the Federal Reserve Board and any other banking
authority to which such Lender or Issuing Bank is subject (a) with respect to
the Three-Month Secondary CD Rate (as such term is used in the definition of
Alternate Base Rate), for new negotiable nonpersonal time deposits in Dollars,
and (b) with respect to the LIBO Rate, for Eurocurrency Liabilities (as defined
in Regulation D) (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate on Eurodollar Rate
Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any bank to United States
residents). Eurodollar Rate Loans shall be deemed to constitute Eurocurrency
Liabilities and to be subject to such reserve requirements without benefit of
or credit for proration, exemptions or offsets which may be available from to
time to time to any Lender under Regulation D. Statutory Reserves, assessments
and other costs shall be adjusted automatically on and as of the effective date
of any change in any reserve percentage, assessment rate or other imposed cost.
ARTICLE III
LETTERS OF CREDIT
3.01. Obligation to Issue. Subject to the terms and conditions
set forth in this Agreement, from time to time during the period commencing on
the Effective Date and ending on the Business Day which is twenty (20) Business
Days prior to the Termination Date, Borrower may request any Issuing Bank, and
upon such request such Issuing Bank hereby agrees, to issue for the account of
Borrower, or for the account of any Subsidiary of Borrower if Borrower is named
as a co-applicant with respect to such Letter of Credit, one or more Letters of
Credit; provided, however, no Issuing Bank shall be required to issue any
Letter of Credit if, after giving effect to the Letter of Credit requested,
such Issuing Bank's Letter of Credit Obligations would exceed the maximum
Letter of Credit Obligations indicated for such Issuing Bank on Schedule A
attached hereto.
3.02. Types and Amounts. Notwithstanding the provisions of
Section 3.01, no Issuing Bank shall have any obligation to issue any Letter of
Credit at any time:
(a) if the aggregate maximum amount then available for drawing
under Letters of Credit issued by such Issuing Bank, after giving effect
to the Letter of Credit requested hereunder, shall exceed any limit
imposed by law or regulation upon such Issuing Bank;
(b) if, after giving effect to such requested Letter of Credit,
(i) Loan Usage exceeds the Commitments or (ii) the aggregate outstanding
Letter of Credit Obligations would exceed $150,000,000; and any Letter
of Credit issued by any Issuing Bank in excess of any such amounts shall
not, to the extent of the excess, constitute a Letter of Credit
hereunder; or
(c) which has an expiration date which is (i) more than (1) one
year after the date of issuance of such Letter of Credit (provided that
a Standby Letter of Credit may provide for an annual renewal if such
renewal is consented to by the
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Issuing Bank and the conditions precedent to the issuance of such
Standby Letter of Credit are met at the time of such renewal) or (ii)
after three (3) Business Days immediately preceding the Termination Date
or, if the Issuing Bank is a Dissenting Lender, such Dissenting Lender's
Term, and any letter of credit issued by an Issuing Bank with an
expiration date after three (3) Business Days immediately preceding the
Termination Date or such Dissenting Lender's Term, as applicable, shall
not constitute a Letter of Credit hereunder and the deemed purchase of
participations pursuant to Section 3.06 shall not occur with respect to
such letter of credit.
(d) Notwithstanding anything herein to the contrary letters of
credit issued under the Original Credit Agreement which constituted
"Letters of Credit" under the Original Credit Agreement and which remain
outstanding on the Effective Date, shall constitute Letters of Credit
under this Agreement.
3.03. Conditions. In addition to being subject to the
satisfaction of the conditions precedent contained in Sections 4.01 and 4.02,
the obligation of any Issuing Bank to issue any Letter of Credit is subject to
the satisfaction in full of the following conditions:
(a) Borrower shall have delivered to such Issuing Bank, at such
times and in such manner as such Issuing Bank may prescribe, a Letter of Credit
Application and a Letter of Credit Reimbursement Agreement and such other
documents and materials as may be required pursuant to the terms thereof and
the terms of the proposed Letter of Credit shall be reasonably satisfactory to
such Issuing Bank and shall be consistent with such Issuing Bank's ordinary
practice with respect to terms of its letters of credit; and
(b) as of the date of issuance, no order, judgment or decree of
any court, arbitrator or Governmental Authority shall purport by its terms to
enjoin or restrain such Issuing Bank from issuing such Letter of Credit and no
law, rule or regulation applicable to such Issuing Bank and no request or
directive (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) from any Governmental Authority
with jurisdiction over such Issuing Bank shall prohibit or request such Issuing
Bank to refrain from the issuance of letters of credit generally or the
issuance of that Letter of Credit.
3.04. Issuance of Letters of Credit.
(a) Borrower shall give the applicable Issuing Bank and each
Lender written notice (with a copy to the Agent) not later than 12:00 noon (New
York City time) on the fifth (5th) Business Day immediately preceding the
requested issuance of a Letter of Credit under this Agreement, which notice as
provided to the Agent shall be accompanied by a Notice of Borrowing as required
pursuant to Section 4.02. Such notice shall be irrevocable and shall specify
(i) the stated amount of the Letter of Credit requested, (ii) the effective
date (which day shall be a Business Day) of issuance of such requested Letter
of Credit, (iii) whether such Letter of Credit is a Commercial Letter of Credit
or a Standby Letter of Credit, (iv) the date on which such requested Letter of
Credit is to expire, which date shall be a Business Day, (v) the Person for
whose benefit the requested Letter of Credit is to be issued, (vi) the amount
of Letter of Credit Obligations then outstanding, (vii) if such Letter of
Credit is also for the account of any
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Subsidiary of Borrower, the name of such Subsidiary, (viii) the Issuing Bank
being requested to issue such Letter of Credit and (ix) any other terms to be
included in such Letter of Credit. Prior to issuing any Letter of Credit, the
applicable Issuing Bank shall request and the Agent shall provide confirmation
that the request for such Letter of Credit complies with the provisions of
Section 3.02(b). If the Agent notifies the applicable Issuing Bank that it is
authorized to issue such Letter of Credit, and the conditions described in
Sections 3.02, 3.03, 4.01 (if issued on the Effective Date) and 4.02 otherwise
have been satisfied, then such Issuing Bank shall issue such Letter of Credit
as requested. The applicable Issuing Bank shall give the Agent and each Lender
prompt notice of the issuance of any such Letter of Credit by it.
(b) No Letter of Credit may be amended, extended, modified or
supplemented unless Borrower shall have complied with the requirements of
Section 3.04(a) to the same extent as if such Letter of Credit, as so amended,
extended, renewed, modified or supplemented, were requested to be reissued
hereunder. No Issuing Bank may amend, extend, renew, modify or supplement any
Letter of Credit if the issuance of a new Letter of Credit having the same
terms as such Letter of Credit as so amended, extended, modified or
supplemented would be prohibited by Section 3.02. Each Issuing Bank shall
provide the Agent and each Lender with a copy of each amendment, extension,
renewal, modification or supplement to any Letter of Credit.
3.05. Reimbursement Obligations; Duties of the Issuing Banks.
(a) Notwithstanding any provisions to the contrary in any Letter of
Credit Reimbursement Agreement or Letter of Credit Application:
(i) Borrower shall reimburse (or cause the Subsidiary which is
a co-applicant with respect thereto to reimburse) the applicable Issuing
Bank (by paying the Agent, for the account of such Issuing Bank) for
drawings under a Letter of Credit issued by it no later than the earlier
of (a) the time specified in such Letter of Credit Reimbursement
Agreement or Letter of Credit Application, and (b) one (1) Business Day
after the payment by such Issuing Bank; and
(ii) any Reimbursement Obligation with respect to any Letter of
Credit shall bear interest from the date of the relevant drawing under
the pertinent Letter of Credit at the interest rate then applicable to
Base Rate Loans until the first (1st) Business Day after such date on
which the applicable Issuing Bank with respect to such Letter of Credit
gives notice of such drawing to Borrower and thereafter at the Default
Rate.
(b) No action taken or omitted to be taken by any Issuing Bank under or
in connection with any Letter of Credit shall put an Issuing Bank under any
resulting liability to any Lender (except for its gross negligence or willful
misconduct in connection therewith, as determined by the final judgment of a
court of competent jurisdiction) or, subject to Sections 3.02 and 3.03, relieve
that Lender of its obligations hereunder to the Issuing Banks. In the event
this Agreement and any Letter of Credit Reimbursement Agreement or any Letter
of Credit Application are inconsistent, the terms of this Agreement shall
prevail. In determining whether to pay under any Letter of Credit, the Issuing
Bank shall have no obligation to the Lenders other
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than to confirm that any documents required to be delivered under such Letter
of Credit appear to have been delivered and that they appear on their face to
comply with the requirements of such Letter of Credit.
3.06. Participations.
(a) Immediately upon issuance by any Issuing Bank of any Letter
of Credit for the account of Borrower in accordance with the procedures set
forth in this Article III, each Lender irrevocably and unconditionally agrees
that it shall be deemed to have purchased and received from the applicable
Issuing Bank, without recourse or warranty, an undivided interest in the amount
of such Lender's Pro Rata Share in such Letter of Credit (other than the fees
earned with respect to such Letter of Credit pursuant to 3.08(b)) and any
security therefor or guaranty pertaining thereto; provided, however, that a
letter of credit issued by any Issuing Bank shall not be deemed to be a Letter
of Credit for purposes of this Section 3.06(a) if the Issuing Bank shall not
have received the confirmation from the Agent provided for in Section 3.04(a)
or shall have received written notice from the Agent or any Lender on or before
the Business Day immediately prior to the date of the Issuing Bank's issuance
of such letter of credit that one or more conditions of this Article III is not
satisfied and, in the event any Issuing Bank receives such a notice, it shall
have no further obligation to issue any Letter of Credit until such notice is
subsequently withdrawn or it receives notice from the Agent that such
conditions have been waived in writing by the Requisite Lenders or otherwise
have been satisfied.
(b) If any Issuing Bank makes any payment under any Letter of
Credit and Borrower (or the Subsidiary which is a co-applicant with respect
thereto) does not repay such amount to such Issuing Bank pursuant to Section
3.05(a), 3.07 or 3.09, such Issuing Bank shall promptly notify the Agent of
such failure and the Agent shall, in turn, promptly notify each Lender of such
failure, and each Lender shall promptly and unconditionally pay to the Agent
for the account of such Issuing Bank the amount of such Lender's Pro Rata Share
of such payment, in Dollars and in immediately available funds, and the Agent
shall promptly pay such amount, and any other amounts received by the Agent for
such Issuing Bank's account pursuant to this Section 3.06(b), to such Issuing
Bank. If the Agent so notifies any such Lender prior to 12:00 noon (New York
City time) on any Business Day of such failure, such Lender shall make
available to the Agent for the account of the applicable Issuing Bank its Pro
Rata Share of the amount of such payment on such Business Day in Dollars and in
immediately available funds, and otherwise on the next succeeding Business Day.
If and to the extent such Lender shall not have so made its Pro Rata Share of
the amount of such payment available to the Agent for the account of the
applicable Issuing Bank, such Lender agrees to pay to the Agent for the account
of the applicable Issuing Bank forthwith on demand such amount together with
interest thereon, for each day from the date such payment was first due until
the date such amount is paid to the Agent for the account of such Issuing Bank,
at the Federal Funds Effective Rate (as such term is defined in the definition
of Alternate Base Rate) for three (3) Business Days and then at the Alternate
Base Rate. The failure of any Lender to make available to the Agent for the
account of the applicable Issuing Bank its Pro Rata Share of any such payment
shall not relieve any other Lender of its obligation hereunder to make
available to the Agent for the account of the applicable Issuing Bank its Pro
Rata Share of any payment on the date such payment is to be made.
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(c) Whenever any Issuing Bank receives a payment on account of
a Reimbursement Obligation, including any interest thereon, as to which the
Agent has previously received payments from the Lenders for such account of the
Issuing Bank pursuant to this Section 3.06, it shall promptly pay to the Agent
and the Agent shall promptly pay to each Lender which has funded its
participating interest therein, in Dollars, an amount equal to such Lender's
Pro Rata Share thereof. Each such payment shall be made by the applicable
Issuing Bank or the Agent, as the case may be, on the Business Day on which
such Person receives the funds paid to such Person pursuant to the preceding
sentence, if received prior to 12:00 noon (New York City time) on such Business
Day, and otherwise on the next succeeding Business Day together with interest
thereon at the Federal Funds Effective Rate (as such term is defined in the
definition of Alternate Base Rate) unless the applicable Issuing Bank certifies
that it received such amount later than it could be invested overnight.
(d) Promptly upon the request of any Lender, any Issuing Bank
shall furnish to such Lender copies of any documentation with respect to the
Letters of Credit issued by it as may reasonably be requested by such Lender.
(e) The obligations of a Lender to make payments to the Agent
for the account of the Issuing Banks with respect to a Letter of Credit issued
on behalf of the Borrower or the Borrower and one of its Subsidiaries shall be
irrevocable, shall not be subject to any qualification or exception whatsoever,
and shall be honored in accordance with the terms and conditions of this
Agreement under all circumstances (subject to Section 3.02), including, without
limitation, (i) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents; (ii) the existence of any claim, set-off, defense
or other right which Borrower or any of its Subsidiaries may have at any time
against a beneficiary named in a Letter of Credit or any transferee of any
Letter of Credit (or any Person for whom any such transferee may be acting),
the Agent, any Issuing Bank, any Lender, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between Borrower and the beneficiary named in any Letter of
Credit); (iii) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
(in the absence of gross negligence or willful misconduct in connection
therewith, as determined by the final judgment of a court of competent
jurisdiction, on the part of the applicable Issuing Bank); (iv) the surrender
or impairment of any security for the performance or observance of any of the
terms of any of the Loan Documents; (v) any failure by the Agent or any Issuing
Bank to make any reports required pursuant to Section 3.10; or (vi) the
occurrence of any Event of Default or Potential Event of Default.
3.07. Payment of Reimbursement Obligations.
(a) Borrower agrees to pay (or cause its Subsidiary which is a
co-applicant with respect thereto to pay) to the Issuing Banks the amount of
all Reimbursement Obligations, interest and other amounts payable to the
Issuing Banks under or in connection with any Letter of Credit issued on behalf
of Borrower immediately when due, irrespective of any and all events,
including, without limitation, (i) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents; (ii) the existence of any
claim, set-off, defense or other
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right which Borrower or any of its Subsidiaries may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the Agent,
any Issuing Bank, any Lender, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transactions between
Borrower and the beneficiary named in any Letter of Credit); (iii) any draft,
certificate or any other document presented under any Letter of Credit proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect (in the absence of
gross negligence or willful misconduct in connection therewith, as determined
by the final judgment of a court of competent jurisdiction, on the part of the
applicable Issuing Bank); (iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any of the Loan Documents;
(v) any failure by the Agent or any Issuing Bank to make any reports required
pursuant to Section 3.10; or (vi) the occurrence of any Event of Default or
Potential Event of Default.
(b) In the event any payment by Borrower (or by any of its
Subsidiaries which is a co-applicant with respect thereto) received by any
Issuing Bank with respect to any Letter of Credit and distributed by the Agent
to the Lenders on account of their participations is thereafter set aside,
avoided or recovered from the applicable Issuing Bank in connection with any
receivership, liquidation or bankruptcy proceeding or otherwise, each Lender
which received such distribution shall, upon demand by such Issuing Bank,
contribute such Lender's Pro Rata Share of the amount set aside, avoided or
recovered together with interest at the rate required to be paid by such
Issuing Bank upon the amount required to be repaid by it.
3.08. Compensation for Letters of Credit.
(a) Lenders' Letter of Credit Fees. Borrower shall pay, with
respect to each Letter of Credit, a Letter of Credit fee equal to the
Applicable Letter of Credit Fee in effect from time to time (computed based
upon actual days elapsed in a 365/366-day year) of the maximum amount available
to be drawn under such Letter of Credit. Such fee shall be paid to the Agent,
for the account of the Lenders in proportion to their respective Pro Rata
Shares, in arrears, on a calendar quarterly basis, on the last calendar day of
each March, June, September and December occurring after the Effective Date.
Each of the Issuing Banks shall provide the Borrower and the Agent on or before
the last Business Day of each March, June, September and December occurring
after the Effective Date a statement calculating the Letter of Credit fees
payable under this Section 3.08(a) for the quarter then ending with respect to
Letters of Credit issued by such Issuing Bank.
(b) Issuing Bank Fees. In addition to the fees under clause
(a) above, Borrower shall pay to each Issuing Bank, (i) with respect to each
Commercial Letter of Credit payable at such time as is agreed to between the
Borrower and the applicable Issuing Bank, the customary charges of the
applicable Issuing Bank with respect thereto for commercial letters of credit
of similar type and for similar credit risks, (ii) with respect to each Standby
Letter of Credit, such fronting fee as shall have been agreed to (both with
respect to amount and timing) between the applicable Issuing Bank and the
Borrower and (iii) with respect to all Letters of Credit issued by such Issuing
Bank, on demand, such Issuing Bank's customary administration fees charged in
connection with its issuance, administration, transfer or amendment of or
drawing under any
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Letter of Credit. Such fees shall be paid directly to and shall be solely for
the account of the applicable Issuing Bank.
3.09. Indemnification; Exoneration. (a) In addition to
amounts payable as elsewhere provided in this Article III, Borrower hereby
agrees to protect, indemnify, pay and save harmless the Agent, the Issuing
Banks and each Lender from and against any and all Liabilities and Costs which
the Agent, any Issuing Bank or any Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit
other than, in the case of any Issuing Bank, as a result of its gross
negligence or willful misconduct, as determined by the final judgment of a
court of competent jurisdiction or (ii) the failure of any Issuing Bank to
honor a drawing under such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
Governmental Authority (all such acts or omissions herein called "Governmental
Acts").
(b) As among Borrower, the Lenders, the Issuing Banks and the
Agent, Borrower assumes all risks of the acts and omissions of, or misuse of
such Letter of Credit by, the beneficiary of any Letter of Credit. In
furtherance and not in limitation of the foregoing, subject to the provisions
of the Letter of Credit Applications and Letter of Credit Reimbursement
Agreements, the Issuing Banks, the Agent and the Lenders shall not be
responsible (in the absence of gross negligence or willful misconduct in
connection therewith, as determined by the final judgment of a court of
competent jurisdiction): (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Letters of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of a Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (v) for errors in interpretation of technical
terms; (vi) for any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter of Credit;
and (viii) for any consequences arising from causes beyond the control of the
Agent, the Issuing Bank and the Lenders including, without limitation, any
Governmental Acts. None of the above shall affect, impair, or prevent the
vesting of any of the Issuing Banks' rights or powers under this Section 3.09.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by any
Issuing Bank under or in connection with Letters of Credit issued on behalf of
the Borrower or the Borrower and one of its Subsidiaries or any related
certificates shall not, in the absence of gross negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, put such Issuing Bank, the Agent or any Lender under any
resulting liability to Borrower or relieve Borrower of any of its obligations
hereunder to any such Person.
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(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 3.09 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
3.10 Reporting By Issuing Banks. On or before the thirtieth
(30th) day following the end of each calendar month ending after the Effective
Date, each of the Issuing Banks shall provide the Agent and each Lender with a
written report describing, as of the end of such month, the then aggregate
outstanding face amount of each Letter of Credit issued by it, whether such
Letter of Credit is a Standby Letter of Credit or Commercial Letter of Credit,
the beneficiary of such Letter of Credit, the name of any Subsidiary of
Borrower which is a co-applicant with respect to any such Letter of Credit and
any other additional information with respect thereto which the Agent or any
Lender reasonably requests. Together with each monthly report, each of the
Issuing Banks shall provide the Agent and each Lender with a copy of each
Letter of Credit issued by it during the immediately preceding month and each
Letter of Credit Application and/or Letter of Credit Reimbursement Agreement
executed in connection therewith.
ARTICLE IV
CONDITIONS TO LOANS AND LETTERS OF CREDIT
4.01. Conditions Precedent to the Effectiveness of this
Agreement. The effectiveness of this Agreement and the obligation of each
Lender to make any Loan requested to be made by it from and after the Effective
Date, and the obligation of each Issuing Bank to issue and of each Lender to
participate in any Letter of Credit from and after the Effective Date, shall be
subject to the satisfaction on or before the Effective Date of all of the
following conditions precedent:
(a) Documents. The Agent and the Lenders shall have received
on or before the Effective Date (i) this Agreement, the Notes, amendments,
restatements and/or reaffirmations of the other Loan Documents and all other
agreements, documents and instruments described in the List of Closing
Documents attached hereto as Exhibit 6 and made a part hereof, each duly
executed where appropriate and in form and substance satisfactory to the Agent
and the Lenders; and (ii) such additional documentation as the Agent or any
Lender may reasonably request.
(b) Perfection of Liens. The Agent shall have received (i)
evidence that all financing statements relating to the Collateral have been
filed and the Agent shall be satisfied that arrangements for the filing and
recording of amendments to the Mortgages have been made, (ii) title
endorsements (in form and substance acceptable to the Agent) with respect to
the Mortgages, (iii) certificates representing capital stock constituting
Collateral (together with duly executed stock powers) and (iv) such other
evidence (including, without limitation, legal opinions from counsel to the
Borrower and its Subsidiaries), as the Agent or any Lender may request,
confirming that the Agent's security interests in the Collateral for the
benefit of itself and the Holders of Secured Obligations have been properly
perfected and constitute first and prior security interests subject only to
Permitted Existing Liens and Customary Permitted Liens. In
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addition, all title charges, recording fees and filing taxes shall have been
paid or adequate provisions for the payment of such charges, fees and taxes
shall have been made.
(c) Audit. The Agent and each Lender shall have completed its
due diligence audit of the business, operations, assets and liabilities of
Borrower and its Subsidiaries, including, without limitation, pending and
threatened litigation and insurance coverage relating thereto, environmental
risks and liabilities, material agreements, ERISA obligations and compliance
with applicable laws and regulations which shall have provided the Agent and
each Lender with results and information which, in its judgment are
satisfactory to permit it to enter into the financing transaction contemplated
hereby.
(d) No Legal Impediments. No law, regulation, order, judgment
or decree of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain this Agreement from becoming effective, the
making of the Loans and/or the issuance of Letters of Credit on or after
Effective Date or (ii) impose or result in the imposition of a Material Adverse
Effect.
(e) No Change in Condition. No change in the business, assets,
management, operations, financial condition or prospects of Borrower or the
Borrower and its Subsidiaries taken as a whole shall have occurred since
December 31, 1992, which change, in the judgment of the Lenders, will have or
is reasonably likely to have a Material Adverse Effect, it being expressly
understood and agreed that neither (i) the divisional restructuring which
occurred on July 16, 1993 pursuant to which ANTEC CORPORATION was established
as an entity separate and distinct from the Borrower (the "ANTEC
Restructuring") nor (ii) the termination on January 15, 1994 of the Anixter
Cincinnati joint venture is a change which the Lenders have determined has had
or is reasonably likely to have a Material Adverse Effect.
(f) No Default. No Event of Default or Potential Event of
Default shall have occurred and be continuing or shall not have been waived in
accordance with the terms of the Original Credit Agreement or would result from
this Agreement becoming effective and the parties' respective performance
hereunder.
(g) Representations and Warranties. All of the representations
and warranties contained in Section 5.01 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Effective
Date.
(h) Fees and Expenses Paid. There shall have been paid to the
Agent, for the accounts of the Lenders and the Agent, as applicable, all fees
due and payable on or before the Effective Date (including, without limitation,
all fees described in the Fee Letter, all upfront fees to be paid to the
Lenders as agreed to by the Borrower, and all expenses due and payable on or
before the Effective Date).
(i) Capital Structure; Foreign Operations. The corporate,
capital and legal structures and the constituent documents of the Borrower and
its Subsidiaries shall be satisfactory to the Agent and the Lenders.
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(j) Legal Matters. All legal and regulatory matters shall be
satisfactory to the Agent and its counsel and to each Lender and their
respective counsel.
(k) Subordinated Debt. Itel shall have executed a
reaffirmation of the Subordination Agreement in form and substance acceptable
to the Agent. All Revolving Subordinated Notes issued to Itel shall be issued
under and shall be subject to the terms of the Subordination Agreement.
(l) No Default. No Event of Default or Potential Event of
Default under the Original Credit Agreement or this Agreement shall have
occurred and be continuing or would result from the effectiveness of this
Agreement.
4.02. Conditions Precedent to all Loans and Letters of Credit.
The obligation of each Lender to make any Loan requested to be made by it and
of each Issuing Bank to issue any Letter of Credit, on any date, is subject to
the following conditions precedent as of such date:
(a) Notice of Borrowing. The Agent shall have received in
accordance with the provisions of Section 2.02(a), with respect to any Loan, or
Section 3.04(a), with respect to any Letter of Credit, an original and duly
executed Notice of Borrowing.
(b) Additional Matters. As of the Funding Date for any Loan or
the date of issuance of any Letter of Credit:
(i) Representations and Warranties. All of the representations
and warranties of Borrower contained in or repeated pursuant to Section
5.02 and of Borrower or any Subsidiary of Borrower contained in any
other Loan Document (other than representations and warranties which
expressly speak only as of a different date) shall be true and complete
in all respects on and as of such Funding Date or issuance date, as
though made on and as of such date both before and after taking into
account the requested Loans to be made and Letters of Credit to be
issued;
(ii) No Default. No Event of Default or Potential Event of
Default shall have occurred and be continuing or would result from the
making of the requested Loan or the issuance of the requested Letter of
Credit; and
(iii) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority
shall have been issued, and no litigation shall be pending or threatened
(other than as a result of any condition described in Section 2.08(d),
2.09 or 2.10), which in the reasonable judgment of the Requisite
Lenders, would enjoin, prohibit or restrain any Lender from making the
requested Loan or the applicable Issuing Bank from issuing the requested
Letter of Credit or as a result of making any such Loan or issuing such
Letter of Credit impose or result in the imposition of any material
adverse condition upon any Lender or any Issuing Bank.
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(iv) No Material Adverse Change. No event shall have occurred
after December 31, 1992 which, in the reasonable judgment of the
Requisite Lenders, has had or could have a Material Adverse Effect, it
being expressly understood and agreed that neither the ANTEC
Restructuring nor the termination of the Anixter Cincinnati joint
venture is a change which the Requisite Lenders have determined has had
or is reasonably likely to have a Material Adverse Effect.
(v) No Forfeiture Proceedings. The Borrower shall not have
been named as a defendant in a criminal indictment under the Racketeering
Influenced and Corrupt Organizations Act or any similar federal or state
statute which provides for forfeiture of assets as a potential criminal penalty
unless such proceeding shall not be adverse to the interests of the Lenders.
The request by Borrower for any Loan made, or to be made, or any
Letter of Credit issued, or to be issued, on any Funding Date shall constitute
a representation and warranty by Borrower as of such Funding Date that all the
conditions contained in this Section 4.02 have been satisfied or waived in
writing pursuant to Section 12.08.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations. To induce each Lender, each Issuing
Bank and the Agent to enter into this Agreement and to make the Loans and to
issue or participate in the Letters of Credit, Borrower hereby represents and
warrants to each Lender, each Issuing Bank and the Agent that the following
statements are true and correct:
(a) Organization; Corporate Powers. Borrower and each
Subsidiary of Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
(ii) is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it owns or leases real
property or in which the nature of its business requires it to be so qualified,
except those jurisdictions where the failure to be in good standing or to so
qualify has not had or will not have a Material Adverse Effect, and (iii) has
all requisite corporate power and authority to own, operate and encumber its
property and assets and to conduct its business as presently conducted and as
proposed to be conducted in connection with and following the consummation of
the transactions contemplated by the Transaction Documents.
(b) Authority. (i) Borrower and each Subsidiary of Borrower
party to any of the Transaction Documents, has the requisite corporate power
and authority to execute, deliver and perform its obligations under each of the
Transaction Documents executed by it, or to be executed by it.
(ii) The execution, delivery and performance (or filing
or recording, as the case may be) of each of the Transaction Documents to which
it is party and the consummation of the transactions contemplated thereby, have
been duly authorized by all necessary corporate action on the part of Borrower
and each Subsidiary of Borrower party thereto and no other
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corporate proceedings on the part of any such Person are necessary to
consummate such transactions.
(iii) Each of the Transaction Documents to which it is
a party has been duly executed and delivered (or filed or recorded, as the case
may be) by Borrower and each Subsidiary of Borrower party thereto and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles), is in full force and effect (unless terminated in
accordance with the terms thereof) and no term or condition thereof has been
amended, modified or waived from the terms and conditions contained therein
without the prior written consent of the Agent and the Requisite Lenders or,
where so required, all of the Lenders, and Borrower and each Subsidiary of
Borrower party thereto and, to the best of Borrower's knowledge, the other
parties thereto have performed and complied in all material respects with all
the material terms, provisions, agreements and conditions set forth therein and
required to be performed or complied with by such parties on or before the
effective date thereof, and no default by any such party exists thereunder.
(c) Subsidiaries. Borrower has no Subsidiaries other than
those described in Schedule 5.01(c) and those, if any, which are permitted by
Section 8.03 to be created after the Effective Date. With respect to each of
AHI and AII, their only activities are to hold the stock of their Subsidiaries.
The only activity of Anixter-Real Estate, Inc. is to hold title to real
property.
(d) No Conflict. The execution, delivery and performance of
each Transaction Document to which it is a party by Borrower and each
Subsidiary of Borrower party thereto and each of the transactions contemplated
thereby do not and will not (i) conflict with any Contractual Obligation of any
such Person, any liability resulting from which would have or be reasonably
expected to have a Material Adverse Effect, or (ii) conflict with or violate
such Person's certificate or articles of incorporation or by-laws or similar
charter and constituting documents, or (iii) except as set forth on Schedule
5.01(d), conflict with, result in a breach of or constitute (with or without
notice or lapse of time or both) a default under any Requirement of Law or
Contractual Obligation of any such Person, or require termination of any
Contractual Obligation of any such Person, or (iv) result in or require the
creation or imposition of any Lien whatsoever upon any of the properties or
assets of any such Person (other than Liens in favor of the Agent, for the
benefit of itself and the Holders of Secured Obligations, or any Issuing Bank
arising pursuant to the Loan Documents or Liens permitted pursuant to Section
8.02(b)), or (v) require any approval of stockholders of any such Person,
unless such approval has been obtained.
(e) Governmental Consents. The execution, delivery and
performance of each Transaction Document to which it is a party, by Borrower
and each Subsidiary of Borrower party thereto and the transactions contemplated
thereby do not and will not require any registration with, consent or approval
of, or notice to, or other action with or by, any Governmental Authority,
except filings, consents or notices which have been made, obtained or given.
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(f) Governmental Regulation. Neither Borrower nor any of
Borrowers' Subsidiaries is subject to regulation under the Public Utility
Holdings Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, the Investment Company Act of 1940 or any other statute or regulation of
any Governmental Authority such that its ability to incur indebtedness is
limited or its ability to consummate the transactions contemplated hereby or by
the other Transaction Documents is materially impaired.
(g) Financial Position. (i) As of the Effective Date, all
quarterly and annual financial statements of Borrower or of Borrower and any of
its Subsidiaries and Joint Ventures delivered to the Agent were prepared in
conformity with GAAP (except as otherwise noted therein) and fairly present the
financial position of Borrower or the consolidated financial position of
Borrower and such Subsidiaries and Joint Ventures, as the case may be, as at
the respective dates thereof and the results of operations and changes in cash
flows for each of the periods covered thereby, subject, in the case of any
unaudited interim financial statements, to changes resulting from audit and
normal year- end adjustments.
(ii) All monthly, quarterly and annual financial
statements of Borrower or of Borrower and any of its Subsidiaries and Joint
Ventures delivered to the Agent after the Effective Date were prepared in
conformity with GAAP (except as otherwise noted therein) and fairly present the
financial position of Borrower or the consolidated financial position of
Borrower and such Subsidiaries and Joint Ventures, as the case may be, as at
the respective dates thereof and the results of operations and changes in cash
flows for each of the periods covered thereby, subject, in the case of any
unaudited interim financial statements, to changes resulting from audit and
normal year-end adjustments. Except as contemplated in the Transaction
Documents, none of Borrower, any of its Subsidiaries or any Joint Venture has
any material obligations, contingent liabilities or liabilities for taxes, long
term leases or material or unusual forward or long term commitments which are
not reflected in such financial statements and the notes thereto.
(h) Pro Forma Financials and Projections. As of the date of
this Agreement, the pro forma financial statements of the Borrower, its
Subsidiaries and the Joint Ventures dated February 8, 1994 set forth in that
certain Confidential Information Memorandum furnished by the Agent and Chemical
Securities, Inc. on behalf of the Borrower to the Lenders (the "Bank Book")
fairly present the financial condition of the Borrower, its Subsidiaries and
the Joint Ventures and the results of operations and changes in cash flows for
the periods covered thereby (subject to normal year-end adjustments). As of
the date of such pro forma financial statements, none of Borrower, any of its
Subsidiaries or any Joint Venture has any material obligations, contingent
liabilities or liabilities for taxes, long-term leases or material or unusual
forward or long-term commitments which are not reflected in such pro forma
financial statements or the notes thereto. As of the date of this Agreement
the projections concerning the Borrower, its Subsidiaries and the Joint
Ventures dated February 8, 1994 set forth in the Bank Book accurately represent
the good faith projections of Borrower of each such Person's projected
financial performance and are based upon reasonable assumptions.
(i) Capitalization.
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(i) As of the Effective Date, Schedule 5.01(i) sets forth the
number of shares and the relevant percentages of capital stock held by each
shareholder of the Borrower.
(ii) There are outstanding no shares of any class of capital
stock (or any securities, instruments, warrants, option or purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for capital stock) of:
(A) Borrower other than capital stock described on Schedule
5.01(i);
(B) any Domestic Subsidiary other than the capital stock held
directly or indirectly by Borrower all of which has been pledged to the
Agent for the benefit of itself and the Holders of Secured Obligations
pursuant to Pledge Agreements; and
(C) any other Subsidiary of Borrower other than (i) the capital
stock held by Borrower and/or Itel, provided that (x) capital stock
representing at least 51% in the aggregate of each class of capital
stock of such Subsidiary shall be owned by Borrower and (y) any such
capital stock held by Itel shall have been obtained in exchange for cash
proceeds or by debt conversion equal to the fair market value of such
capital stock and (ii) capital stock representing not greater than 20%
in the aggregate of any class of capital stock held by other Persons;
provided however, if such other Subsidiary is a Supported Foreign
Subsidiary and the Release Event shall not have occurred then the
capital stock held directly or indirectly by Borrower shall be pledged
to the Agent for the benefit of itself and the Holders of the Secured
Obligations pursuant to a Foreign Subsidiary Pledge provided such pledge
shall not be for capital stock representing not greater than 65% of the
total combined voting power of all classes of such Foreign Subsidiary.
None of such capital stock is subject to any security, instrument, warrant,
option or purchase rights, agreement, conversion or exchange rights, call,
commitment or claim of any right, title or interest therein or thereto other
than pursuant to the Pledge Agreements and the Borrower Distribution Stock
Plan. The outstanding capital stock of Borrower and each of its Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable.
(iii) The subordination provisions of the Subordination
Agreement are enforceable against the holders of the Permitted Subordinated
Indebtedness and the Obligations are within the definition of "Senior
Obligations" included in the Subordination Agreement.
(j) Litigation; Adverse Effects. (i) Except as set forth in
Schedule 5.01(j), there is no action, suit, proceeding, investigation of any
Governmental Authority or arbitration, at law or in equity, or before or by any
Governmental Authority, pending, or, to the best knowledge of Borrower,
threatened against Borrower, any Subsidiary of Borrower or any Joint Venture or
any Property of any of them, which if adversely determined would be reasonably
expected to result in any Material Adverse Effect.
(ii) Neither Borrower, any Subsidiary of Borrower nor
any Joint Venture is (A) in violation of any applicable law which violation has
or might reasonably be expected to have a Material Adverse Effect, or (B)
subject to or in default with respect to any final judgment, writ, injunction,
decree, order, rule or regulation of any court or Governmental
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Authority which has or might have a Material Adverse Effect. Except as set
forth in Schedule 5.01(j), there is no action, suit, proceeding or
investigation pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, any Subsidiary of Borrower or any Joint Venture (i) which
challenges the validity or the enforceability of any of the Transaction
Documents or (ii) which will or would reasonably be expected to result in (a)
any liability individually in the amount of greater than $2,000,000 (net of
applicable third-party insurance coverage other than retro-premium insurance),
(b) any liability in the aggregate in the amount of greater than $2,000,000
(net of applicable third-party insurance coverage other than retro-premium
insurance) or (c) which involves a claim under the Racketeering Influenced and
Corrupt Organizations Act or any similar federal or state statute where such
Person is a defendant in a criminal indictment that provides for the forfeiture
of assets to any Governmental Authority as a potential criminal penalty.
(k) No Material Adverse Change. With respect to Borrower or
Borrower and its Joint Ventures and Subsidiaries taken as a whole, there has
occurred no event since December 31, 1992 which has or could have a Material
Adverse Effect, it being expressly understood and agreed that neither the ANTEC
Restructuring nor the termination of the Anixter Cincinnati joint venture shall
be considered to be such an event.
(l) Payment of Taxes. All tax returns and reports of each of
Borrower and Borrower's Subsidiaries required to be filed (including
extensions), have been timely filed, and all taxes, assessments, fees and other
charges of Governmental Authorities thereupon and upon their respective
properties, assets, income and franchises which are shown on such returns as
being due and payable, have been paid when due and payable, except (i) taxes
being contested in good faith by appropriate proceedings and that are reserved
against in accordance with GAAP, (ii) taxes which are not yet delinquent, (iii)
taxes which are payable in installments so long as paid before any penalty
accrues with respect thereto and (iv) other taxes, assessments, fees and other
charges of Governmental Authorities which do not exceed $250,000 in the
aggregate. On the Effective Date, except as set forth in clause (iv) above or
on Schedule 5.01(l), and after the Effective Date, except as set forth in
clauses (i) through (iv) above or on Schedule 5.01(l), Borrower has no
knowledge of any proposed tax assessment against Borrower or any of Borrower's
Subsidiaries. All tax assessments referred to in Schedule 5.01(l) are being
contested in good faith by Borrower or such Subsidiary or a settlement with
respect to any such assessment is being negotiated in good faith by such Person
and appropriate reserves have been established in accordance with GAAP.
(m) Material Adverse Agreements. Neither Borrower, any of
Borrower's Subsidiaries nor any Joint Venture is a party to or subject to any
Contractual Obligation or other restriction contained in its charter or by-laws
which has or would be reasonably expected to have a Material Adverse Effect
after giving effect to the consummation of the transactions contemplated in the
Transaction Documents or otherwise.
(n) Performance. Neither Borrower, any of Borrower's
Subsidiaries nor any Joint Venture is in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any Contractual Obligation applicable to it under any agreement or instrument
the absence or termination of which Contractual Obligations could have a
Material Adverse Effect, and no condition exists which, with the giving of
notice or the lapse
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of time, or both, would constitute a default under such Contractual Obligation,
except where the consequences, direct or indirect, of such default or defaults,
if any, would not have or are not reasonably expected to have a Material
Adverse Effect.
(o) Securities Activities. Neither Borrower nor any of
Borrower's Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock and none will use the
proceeds of any Loan to purchase or carry Margin Stock.
(p) Disclosure. Subject to changes in facts or conditions
which are required or permitted under this Agreement, the representations and
warranties of Borrower and each Subsidiary of Borrower contained in the
Transaction Documents, and all certificates and other documents delivered to
the Agent in connection therewith, taken as a whole do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
(q) Requirements of Law. Borrower, each of its Subsidiaries
and each Joint Venture is in compliance with all Requirements of Law
(including, without limitation, the Securities Act and the Securities Exchange
Act, the applicable rules and regulations thereunder, and state securities
laws) applicable to it and its business, where the failure to so comply would
have or would be reasonably expected to have a Material Adverse Effect.
(r) Patents, Trademarks, Permits, Etc. Borrower and each of
its Subsidiaries owns, is licensed or otherwise has the lawful right to use, or
has all permits and other approvals of Governmental Authorities, patents,
trademarks, service marks, trade names, copyrights, technology, know-how and
processes used in or necessary for the conduct of its business as currently
conducted which are material to its financial condition, business, operations,
assets and prospects, individually or taken as a whole. The use of such
permits and other approvals of Governmental Authorities, patents, trademarks,
service marks, trade names, copyrights, technology, know-how and processes by
Borrower or any such Subsidiary does not infringe on the rights of any Person,
subject to such claims and infringements the existence of which do not have or
are not reasonably expected to have a Material Adverse Effect. The
consummation of the transactions contemplated by the Transaction Documents will
not impair the ownership of or rights under (or the license or other right to
use, as the case may be) any permits and governmental approvals, patents,
trademarks, service marks, trade names, copyrights, technology, know-how or
processes by Borrower or any such Subsidiary in any manner which has or might
have a Material Adverse Effect.
(s) Environmental Matters. Except as disclosed in Schedule
5.01(s) and except to the extent that a failure of any of the following
representations to be true would not be reasonably likely to result in a
Material Adverse Effect or subject the Borrower or any of its Subsidiaries to a
material liability to pay money, (i) each of the operations of Borrower, its
Subsidiaries and the Joint Ventures comply in all respects with all applicable
environmental, health and safety Requirements of Law; (ii) each of Borrower,
its Subsidiaries and the Joint Ventures has obtained all environmental, health
and safety Permits necessary for its operations, all such Permits are in good
standing and each of Borrower, its Subsidiaries and the Joint Ventures is in
compliance with all terms and conditions of such Permits; (iii) (A) none of
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Borrower, any of its Subsidiaries or any Joint Venture, any of their present
Property or operations and (B) none of the Borrower's, its Subsidiaries or any
Joint Venture's previously owned Property or past operations is subject to any
order from or agreement with any Governmental Authority or private party or any
judicial or administrative proceeding or investigations respecting any
environmental, health or safety Requirements of Law or is the subject of any
investigation by any Governmental Authority evaluating the need for Remedial
Action to respond to a material Release or threatened Release of a Contaminant
into the environment, or is subject to any Remedial Action or other Liabilities
and Costs arising from the Release or threatened Release of a Contaminant into
the environment; (iv) none of the operations of Borrower, any of its
Subsidiaries or any Joint Venture is subject to any judicial or administrative
proceeding alleging a violation of any environmental, health or safety
Requirement of Law; (v) none of the present or past operations of Borrower, any
of its Subsidiaries or of any Joint Venture is the subject of any investigation
by any Governmental Authority evaluating whether any Remedial Action is needed
to respond to a Release or threatened Release of a Contaminant into the
environment; (vi) no past or present property of Borrower, any of its
Subsidiaries or Joint Ventures is now or has ever been a storage, treatment or
disposal facility for hazardous waste, as those terms are defined under 40 CFR
Part 261 or any state equivalent; (vii) neither Borrower, any of its
Subsidiaries nor any Joint Venture has filed any notice under any applicable
Requirement of Law reporting a Release of a Contaminant into the environment;
(viii) there is not now, nor has there ever been, on or in the Property of
Borrower, any of its Subsidiaries or any Joint Venture: (A) any underground
storage tanks or surface impoundments or (B) any polychlorinated biphenyls used
in hydraulic oils, electrical transformers or other equipment; (ix) neither
Borrower, any of its Subsidiaries nor any Joint Venture has received any notice
or claim to the effect that it is or might be liable to any Person as a result
of the Release or threatened Release of a Contaminant into the environment, or
as a result of exposure to asbestos or to any other hazardous substance, which
might result in liability in excess of workers compensation; (x) no
Environmental Lien has attached to any Property of Borrower, any of its
Subsidiaries or any Joint Venture; (xi) between March, 1991 and November, 1991,
Borrower inspected its Property, the Property of its Subsidiaries and the
Property of its Joint Ventures and all asbestos containing material, if any,
which was on or part of such Property (excluding any raw materials which are
used in the manufacture of products or products themselves) was in good repair
according to the then current standards and practices governing such material,
and its presence or condition does not violate any currently applicable or
proposed Requirement of Law; and (xii) to the best of the Borrower's knowledge,
none of the products which Borrower, any of its Subsidiaries or any of the
Joint Ventures manufactures, distributes or sells, or ever has manufactured,
distributed or sold, contains asbestos material.
(t) Employee Benefit Matters.
(i) ERISA. Neither Borrower nor any ERISA Affiliate maintains
or contributes to any Plan other than those listed on Schedule 5.01(t). Each
Plan which is intended to be qualified under Section 401(a) of the IRC as
currently in effect has been determined by the IRS to be so qualified, and each
trust related to any such Plan has been determined to be exempt from Federal
income tax under Section 501(a) of the IRC as currently in effect. Except as
disclosed in Schedule 5.01(t), neither Borrower nor any ERISA Affiliate
maintains or contributes to any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides benefits to employees after
termination of employment other than as required by
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Section 601 of ERISA. The Borrower and all of its ERISA Affiliates are in
compliance in all material respects with all of the responsibilities,
obligations or duties imposed on them by ERISA or regulations promulgated
thereunder with respect to all Plans. No Benefit Plan has incurred any
accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA and
412(a) of the IRC) whether or not waived. Neither Borrower nor any ERISA
Affiliate nor any fiduciary of any Plan which is not a Multiemployer Plan (i)
has engaged in a nonexempt prohibited transaction described in Section 406 of
ERISA or 4975 of the IRC or (ii) has taken or failed to take any action which
would constitute or result in a Termination Event that could subject either the
Borrower or an ERISA Affiliate to a material liability to pay money. Except as
disclosed on Schedule 5.01(t), neither the Borrower nor any ERISA Affiliate has
any potential liability under Section 4063, 4064, 4069, 4204 or 4212(c) of
ERISA. Neither Borrower nor any ERISA Affiliate has incurred any liability to
the PBGC which remains outstanding other than the payment of premiums, and
there are no premium payments which have become due which are unpaid. Schedule
B to the most recent annual report filed with the IRS with respect to each
Benefit Plan and furnished to the Agent is complete and accurate. Since the
date of each such Schedule B, there has been no material adverse change in the
funding status or financial condition of the Benefit Plan relating to such
Schedule B. Neither Borrower nor any ERISA Affiliate has (i) failed to make a
required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan. Neither Borrower nor any ERISA Affiliate has failed to
make a required installment or any other required payment under Section 412 of
the IRC on or before the due date for such installment or other payment.
Neither Borrower nor any ERISA Affiliate is required to provide security to a
Benefit Plan under Section 401(a)(29) of the IRC due to a Plan amendment that
results in an increase in current liability for the plan year. Neither the
Borrower nor any ERISA Affiliate has by reason of the transactions contemplated
hereby any obligation to make any payment to any employee pursuant to any Plan
or existing contract or arrangement.
(ii) Foreign Employee Benefit Matters. Each Foreign Employee
Benefit Plan is in compliance in all material respects with all laws,
regulations and rules applicable thereto and the respective requirements of the
governing documents for such Foreign Employee Benefit Plan. The aggregate of
the liabilities to provide all of the accrued benefits under each Foreign
Pension Plan does not exceed the current fair market value of the assets held
in the trust or other funding vehicle for each such Foreign Pension Plan. With
respect to any Foreign Employee Benefit Plan maintained by Borrower, any of its
Subsidiaries or any ERISA Affiliate which is not a Foreign Pension Plan,
reasonable reserves have been established in accordance with prudent business
practice or where required by ordinary accounting practices in the jurisdiction
in which such a plan is maintained. The aggregate unfunded liabilities with
respect to such Foreign Employee Benefit Plans, after giving effect to any
reserves for such liabilities, will not result in a material liability. There
are no actions, suits or claims (other than routine claims for benefits)
pending or threatened against the Borrower, any of its Subsidiaries or any
ERISA Affiliate with respect to any Foreign Employee Benefit Plan.
(u) Solvency. The Borrower, individually, and the Borrower,
its Subsidiaries and Joint Ventures, considered as one enterprise, is Solvent
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents and the payment and accrual of all Transaction
Costs with respect to any of the foregoing.
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(v) Assets and Properties. Each of Borrower and its
Subsidiaries has good title to all of the assets (tangible and intangible)
owned by it, except for imperfections of title (including Liens to the extent
permitted under Section 8.02(b)) which in the aggregate do not have a Material
Adverse Effect; and all such assets are free and clear of all Liens, except as
otherwise specifically permitted by the terms and provisions of this Agreement
and the other Loan Documents. Substantially all of the assets and properties
owned by, leased to or used by Borrower or any of its Domestic Subsidiaries are
in good repair, working order and condition, excepting ordinary wear and tear,
are free and clear of any known defects except such defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations.
(w) Joint Venture; Partnership. Except as set forth in
Schedule 5.01(w), none of Borrower or any Subsidiary of Borrower is engaged in
any joint venture or partnership with any other Person.
(x) Labor Matters. Except as listed on Schedule 5.01(x), there
are no collective bargaining agreements, other labor agreements or
Multiemployer Plans covering any of the employees of Borrower or any Subsidiary
of Borrower. No attempt to organize the employees of Borrower or any such
Subsidiary, and no labor disputes, strikes or walkouts affecting the operations
of Borrower or any of its Subsidiaries, is pending, or, to Borrower's
knowledge, threatened, planned or contemplated.
(y) No Default. No Potential Event of Default or Event of
Default exists.
(z) Restricted Junior Payments. On or after the Effective
Date, neither Borrower, any Subsidiary of Borrower nor any Joint Venture has
directly or indirectly declared, ordered, paid or made or set apart any sum or
property for any Restricted Junior Payment or agreed to do so, except to the
extent permitted pursuant to Section 8.05.
(aa) Security Interests. The Collateral Documents create valid
and perfected first priority liens on and security interests in the Collateral
covered thereby subject only to Permitted Existing Liens.
5.02. Subsequent Funding Representations and Warranties. To
induce each Lender, each Issuing Bank and the Agent to enter into this
Agreement, to make the Loans and to issue or participate in Letters of Credit,
Borrower hereby represents and warrants to each Lender, each Issuing Bank and
the Agent that the statements set forth in Section 5.01 (except Section
5.01(w), 5.01(x) and 5.01(aa), or except to the extent that such statements
expressly are made only as of the Effective Date), are true, correct and
complete in all material respects on and as of the Funding Date in respect of
each Borrowing after the Effective Date and the date of issuance of each Letter
of Credit, except that the representations and warranties need not be true and
correct to the extent that changes in the facts and conditions on which such
representations and warranties are based are required or permitted under this
Agreement.
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ARTICLE VI
REPORTING COVENANTS
So long as Borrower shall have any outstanding Agreement
Obligations or any Lender shall have any Commitment hereunder or any Letter of
Credit remains outstanding:
6.01. Financial Statements. Borrower shall maintain or cause
to be maintained a system of accounting established and administered in
accordance with sound business practices and consistent with past practice to
permit preparation of financial statements in conformity with GAAP, and, if
required by the terms of this Agreement in conformity with Agreement Accounting
Principles, and each of the financial statements described below shall be
prepared from such system and records. Borrower shall deliver or cause to be
delivered to the Agent and each Lender:
(a) Monthly Reports. As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal month (y) on a
consolidated basis for the CONSOLIDATED GROUP and (z) on a combined basis for
the DOMESTIC GROUP (with all Subsidiaries not included therein being accounted
for on the equity investment method of accounting), each of the following:
(i) a balance sheet as of the end of such fiscal month, as of
the end of the previous fiscal month and as of the end of the previous
Fiscal Year; and
(ii) an income statement and a cash flow statement for such
fiscal month and for the period from the beginning of the current Fiscal
Year to the end of such fiscal month, setting forth in each case in
comparative form and in reasonable detail the figures for the
corresponding periods of the previous Fiscal Year;
all prepared by Borrower, together with a certification by one of the
Borrower's Financial Officers that they fairly represent the financial
condition of the Persons covered thereby as at the dates indicated in
accordance with GAAP, subject to changes resulting from audit and normal
year-end adjustments; provided, however, none of such monthly reports shall be
required to be delivered after the occurrence of the Release Event.
(b) Quarterly Reports.
(i) As soon as practicable, and in any event within forty-five
(45) days after the end of each of Borrower's fiscal quarters, on a
combined basis for the DOMESTIC GROUP (with all Subsidiaries not
included therein being accounted for on the equity investment method of
accounting) income statements for the period from the beginning of such
Fiscal Year to the end of such fiscal quarter setting forth in each case
in comparative form and in reasonable detail a comparison with the
figures for the corresponding periods contained in the projected
financial statements delivered pursuant to clause (d) below; and
(ii) As soon as practicable, and in any event within forty-five
(45) days after the end of each of Borrower's fiscal quarters, on a
consolidating basis for the CONSOLIDATED GROUP, each of the following:
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(A) a balance sheet as of the end of such fiscal
quarter, as of the end of the previous fiscal month and as of
the end of the previous Fiscal Year; and
(B) an income statement for such fiscal quarter and for
the period from the beginning of the current Fiscal Year to the
end of such fiscal quarter, setting forth in each case in
comparative form and in reasonable detail the figures for the
corresponding periods of the previous Fiscal Year;
all prepared by Borrower, together with a certification by one of the
Borrower's Financial Officers that they fairly represent the financial
condition of the Persons covered thereby as at the dates indicated in
accordance with GAAP, subject to changes resulting from audit and normal
year-end adjustments.
(c) Annual Reports. As soon as practicable, and in any event
within ninety (90) days after the end of each Fiscal Year (y) on a consolidated
basis for the CONSOLIDATED GROUP and (z) on a combined basis for the DOMESTIC
GROUP (with all Subsidiaries not included therein being accounted for on the
equity investment method of accounting), annual financial statements consisting
of a balance sheet, income statement and cash flow statement, setting forth in
comparative form in each case the consolidated figures for the corresponding
periods of the previous Fiscal Year all in reasonable detail, and accompanied
by an opinion (unqualified as to scope or going concern and which is not
adverse and does not contain any disclaimer) thereon of the firm of independent
certified public accountants of recognized national standing regularly retained
by Borrower and acceptable to the Agent, which report shall state that such
financial statements present fairly the financial position of the Persons
covered thereby as at the dates indicated and the results of their operations
and cash flow for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (or, in the event of a change in accounting
principles, such accountants' concurrence with such change) and that such
firm's audit has been conducted in accordance with generally accepted auditing
standards.
(d) Budget and Business Plan. Promptly upon completion, but in
any event not later than sixty (60) days after the end of each fiscal year, (x)
on a consolidated basis for the CONSOLIDATED GROUP (with all Subsidiaries not
included therein being accounted for on the equity investment method of
accounting), and (y) on a combined basis for the DOMESTIC GROUP (with all
Subsidiaries not included therein being accounted for on the equity investment
method of accounting), a copy of the operating budget and projections by the
Borrower of the income statement, balance sheet and cash flow of each such
group, taken as a whole, for the next succeeding fiscal year of the Borrower,
all in form customarily prepared by the Borrower's management, and promptly
after preparation of any commentary on any such budget or projected financial
statements, a copy of such commentary, such operating budget and projected
financial statements to be accompanied by a certificate of one of the
Borrower's Financial Officers to the effect that such operating budget and
projected financial statements have been prepared on the basis of sound
financial planning practice and that such Financial Officer has no reason to
believe they are incorrect or misleading in any material respect.
(e) Compliance Certificate. Together with each delivery of (i)
the financial statements pursuant to subsections (a), (b) and (c) above, (A) an
Officers' Certificate of
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Borrower stating that the signers have reviewed the terms of this Agreement and
the Loan Documents, and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and condition of
Borrower and its Subsidiaries and Joint Ventures, during the accounting period
covered by such financial statements, and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of the Officers'
Certificate, of any condition or event which constitutes an Event of Default or
Potential Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
Borrower has taken, is taking and proposes to take with respect thereto; and
(B) a Compliance Certificate (1) demonstrating in reasonable detail compliance
during and at the end of such accounting periods with the provisions set forth
in Sections 2.05, 8.01, 8.03, 8.04, 8.05, 8.13 and Article IX, (2) setting
forth Borrower's calculation, in detail, of the Borrower Interest Coverage
Ratio and based upon its calculations the Applicable Margins and Applicable
Fees and (3) in the case of the financial statements delivered pursuant to
subsection (a) or subsection (b) above, stating that such financial statements
present fairly the financial position of Borrower and its Subsidiaries and
Joint Ventures as at the dates indicated and the results of their operations
and changes in their cash flow for the periods indicated in conformity with
GAAP (except as otherwise noted therein) consistently applied and (ii) the
financial statements pursuant to subsections (b) and (c) above, a written
discussion and analysis by the management of Borrower of such financial
statements.
(f) Accountant's Compliance Certificate. Simultaneously with
the delivery of the financial statements referred to in subsection (c) above, a
statement of the firm of independent certified public accountants which
reported on such financial statements whether anything has come to their
attention to cause them to believe that there existed on the date of such
statements any Event of Default or Potential Event of Default.
(g) Report of Material Events. Promptly upon Borrower
obtaining knowledge (A) of any condition or event which constitutes an Event of
Default or Potential Event of Default, (B) of any condition or event which
constitutes an event of default or which, with the giving of notice or lapse of
time or both, would constitute an event of default under the Subordination
Agreement, the Revolving Subordinated Notes or under any indenture or agreement
relating to any Permitted Subordinated Indebtedness, (C) of any condition or
event which, if the Borrower were a reporting company would be required to be
disclosed in a current report filed by Borrower with the Commission on Form
8-K, or (D) of any condition or event which has or could have a Material
Adverse Effect, an Officers' Certificate specifying the nature and period of
existence of any such condition or event and what action Borrower has taken, is
taking and proposes to take with respect thereto.
(h) Notice of Claims and Proceedings. (i) Promptly after
learning thereof, notice of the institution of, or threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Borrower or any Subsidiary of Borrower involving claims in excess of $1,000,000
or any Property of Borrower or any Domestic Subsidiary of Borrower valued in
excess of $1,000,000 except where the same is fully covered (other than any
applicable deductible) by insurance (other than insurance in the nature of
retro-premium insurance or other self insurance programs) and of any material
adverse change in any existing action, suit, proceeding, governmental
investigation or arbitration; and (ii) promptly upon
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learning thereof, notice of any investigation or proceeding before or by any
Governmental Authority, the effect of which might limit, prohibit or restrict
materially the manner in which the Borrower or any Subsidiary of Borrower
currently conducts its business or to declare any substance contained in the
products manufactured or distributed by it to be dangerous, if such declaration
has or could have a Material Adverse Effect.
(i) ERISA Matters.
(i) As soon as possible, and in any event within ten (10)
Business Days after Borrower or any ERISA Affiliate knows or has reason
to know that a Termination Event has occurred, a written statement of
one of the Financial Officers of Borrower describing such Termination
Event and the action, if any, which Borrower or such ERISA Affiliate has
taken, is taking or proposes to take with respect thereto, and when
known, any action taken or threatened by the IRS, DOL or PBGC with
respect thereto.
(ii) As soon as possible, and in any event within ten (10)
Business Days, after Borrower or any ERISA Affiliate knows or has reason
to know that a prohibited transaction (as defined in Section 406 of
ERISA and Section 4975 of the IRC) involving Borrower or any ERISA
Affiliate has occurred, a statement of one of the Financial Officers of
Borrower describing such transaction and the action which Borrower or
such ERISA Affiliate has taken, is taking or proposes to take with
respect thereto;
(iii) Within seven (7) Business Days after receipt by the
Borrower or any ERISA Affiliate of a written request from the Agent
(which shall make such request at the request of any Lender), a copy of
each annual report (Form 5500 series), including Schedule B thereto,
filed with respect to each Benefit Plan;
(iv) Within seven (7) Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Borrower or any
ERISA Affiliate with respect to such request;
(v) Within seven (7) Business Days after receipt by the
Borrower or any ERISA Affiliate of a written request from the Agent
(which shall make such request at the request of any Lender), a copy of
each actuarial report for any Benefit Plan or Multiemployer Plan and
each annual report for any Multiemployer Plan;
(vi) Within seven (7) Business Days after the occurrence
thereof, notification of any increases in the benefits of any existing
Benefit Plan or the establishment of any new Plan or the commencement of
contributions to any Multiemployer Plan to which Borrower or any ERISA
Affiliate was not previously contributing;
(vii) Within seven (7) Business Days after receipt by Borrower
or an ERISA Affiliate of notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice;
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(viii) Within seven (7) Business Days after receipt by Borrower
or any ERISA Affiliate of any unfavorable determination letter from the
IRS regarding the qualification of a Plan under Section 401(a) of the
IRC, copies of such letter;
(ix) Within seven (7) Business Days after receipt by Borrower
or an ERISA Affiliate of a notice from a Multiemployer Plan regarding
the imposition of withdrawal liability, copies of each such notice;
(x) Within seven (7) Business Days after the failure by
Borrower or any ERISA Affiliate to make a required installment or any
other payment required under Section 412 of the IRC on or before the due
date for such installment or payment, a notification of such failure;
(xi) Within seven (7) Business Days after Borrower or any ERISA
Affiliate knows or has reason to know (A) a Multiemployer Plan has been
terminated, (B) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (C) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan, a notification of such information; and
(xii) Within seven (7) Business Days after receipt by Borrower
or any ERISA Affiliate of a written request from the Agent, copies of
any Foreign Employee Benefit Plan and related documents, reports and
correspondence as requested by the Agent (which shall make such request
at the request of any Lender) in such notice.
For purposes of this Section 6.01, Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the administrator of any Plan of which
Borrower or any ERISA Affiliate is the plan sponsor.
(j) Publicly Distributed Information. On a timely basis,
copies of all financial statements, reports and notices, if any, sent or made
available generally by Borrower to the holders of its publicly-held securities,
if any, or filed with the Commission, and of all press releases made available
generally by Borrower to the public, if any, concerning material developments
in the business of Borrower or any of its Subsidiaries.
(k) Property Damage or Condemnation. Promptly after the
occurrence thereof, written notification (or telephonic notice promptly
confirmed in writing) of and a description of any property damaged, lost or
taken and the anticipated amount of any insurance or condemnation proceeds in
connection therewith.
(l) Management Reports. Copies of any management reports
prepared by Borrower's independent certified public accountants in connection
with their annual audit of the Borrower or otherwise.
(m) Notices from and to Holders of Permitted Subordinated
Indebtedness. (i) A copy of each notice or other written communication
delivered by or on behalf of Borrower to any holder of any Permitted
Subordinated Indebtedness or to the trustee under any Permitted
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Subordinated Indebtedness indenture, such delivery to be made at the same time
and by the same means as such notice or other written communication is
delivered to such Person, and (ii) a copy of each notice or other written
communication received by Borrower from the holders of or trustee for the
Permitted Subordinated Indebtedness, such delivery to be made promptly after
such notice or other written communication is received by Borrower.
(n) Senior Debt Ratings. Promptly after learning thereof, (i)
notice of the initial establishment of any Senior Debt Rating for the Borrower
and thereafter any change therein and (ii) a copy of each notice or other
written communication received by Borrower from S&P, Moody's or any other
nationally recognized rating agency relating to Borrower's Senior Debt Ratings.
(o) Supported Foreign Subsidiaries. Together with each
delivery of the financial statements pursuant to subsections (a), (b) and (c)
above, an Officers' Certificate of Borrower setting forth (i) a list of each
Supported Foreign Subsidiary, (ii) for each Supported Foreign Subsidiary, a
detailed statement specifying the nature of the Credit Support provided to it;
and (iii) for each Supported Foreign Subsidiary, the amount of interest expense
associated with such Credit Support during the accounting period covered by
such financial statements used in calculating the Borrower Interest Coverage
Ratio.
(p) Other Information. Such other information respecting the
financial condition of Borrower, any Subsidiary of Borrower or any Joint
Venture, or their respective business, operations, assets, performance or
prospects as the Agent or any Lender may, from time to time, reasonably request
including, without limitation, financial projections, business plans and any
information such Person's accountants may have prepared with respect to such
Person's financial condition, its business, operations, assets, performance and
prospects. The Agent and the Lenders shall treat any non-public information so
obtained as confidential.
6.02. Environmental Notices. Borrower shall notify the Agent
and each Lender in writing, promptly upon Borrower's learning thereof, of any:
(a) Notice or claim to the effect that Borrower, any Subsidiary
of Borrower or any Joint Venture is or may be liable to any Person as a
result of the Release or threatened Release of any Contaminant into the
environment;
(b) Notice that Borrower, any Subsidiary of Borrower or any
Joint Venture is subject to investigation by any Governmental Authority
evaluating whether any Remedial Action is needed to respond to the
Release or threatened Release of any Contaminant into the environment;
(c) Notice that any Property of Borrower or any Subsidiary of
Borrower is subject to an Environmental Lien;
(d) Notice of violation to Borrower, any Subsidiary of Borrower
or any Joint Venture or awareness by Borrower, any Subsidiary of
Borrower or any Joint Venture of a condition which might reasonably be
expected to result in a notice of
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violation of any environmental, health or safety Requirement of Law
which has or could have a Material Adverse Effect;
(e) Commencement or threat of any judicial or administrative
proceeding alleging a violation by Borrower, any Subsidiary of Borrower
or any Joint Venture of any environmental, health or safety Requirement
of Law which, if adversely determined, has or could have a Material
Adverse Effect;
(f) New or proposed changes to any existing environmental,
health or safety Requirement of Law that has or could have a Material
Adverse Effect; or
(g) Any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by Borrower, any Subsidiary of
Borrower or any Joint Venture that could subject Borrower, any such
Subsidiary or any Joint Venture to environmental, health or safety
Liabilities and Costs in excess of $1,000,000.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof
and so long as Borrower shall have any outstanding Agreement Obligations or any
Lender shall have any Commitment hereunder or any Letter of Credit remains
outstanding:
7.01. Corporate Existence, Etc. Borrower shall, and Borrower
shall cause each of its Domestic Subsidiaries and Supported Foreign
Subsidiaries to, at all times, maintain its corporate existence and preserve
and keep in full force and effect its rights and franchises. Borrower shall
promptly provide the Agent and each of the Lenders with a complete list of its
Subsidiaries upon the occurrence of any change in the list set forth on
Schedule 5.01(c) hereto. Notwithstanding anything to the contrary contained in
this Agreement, the Borrower shall not be required to continue the existence of
any Joint Venture beyond the term specified in the applicable joint venture
agreement.
7.02. Corporate Powers, Etc. Borrower shall, and Borrower
shall cause each of its Subsidiaries and the Joint Ventures to, qualify and
remain qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified, except in those jurisdictions where
the failure to so qualify does not have or could not have a Material Adverse
Effect.
7.03. Compliance with Laws. Borrower shall, and Borrower shall
cause each of its Subsidiaries and the Joint Ventures to, comply with all
Requirements of Law, and all restrictive covenants affecting it or its
business, properties, assets or operations, except where the failure so to
comply does not have or could not have a Material Adverse Effect.
7.04. Payment of Taxes and Claims. Borrower shall, and
Borrower shall cause each of its Subsidiaries and the Joint Ventures to, pay
(a) all taxes, assessments and other governmental charges imposed upon it or on
any of its properties or assets or in respect of any
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of its franchises, business, income or property before any penalty or interest
accrues thereon, and (b) all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due and
payable and which by law have or may become a Lien (other than a Customary
Permitted Lien) upon any of its properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto; provided that no
such taxes, assessments and governmental charges referred to in clause (a)
above or claims referred to in clause (b) above need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor.
7.05. Maintenance of Properties; Insurance. Borrower shall,
and shall cause each of its Subsidiaries to, maintain or cause to be maintained
in good repair, working order and condition, excepting ordinary wear and tear
and damage, due to casualty or condemnation, all Property material to its
operations (which shall in any event include each parcel of real property
subject to any Mortgage) and will make or cause to be made all appropriate
repairs, renewals and replacements thereof. Borrower shall, and shall cause
each of its Subsidiaries to, maintain with financially sound insurance
companies, which companies shall be licensed to do business in the states where
such Property is located, the insurance policies and programs, including,
self-insurance retention levels, listed on Schedule 7.05 hereto (or
substantially similar programs or policies and amounts or other programs,
policies and amounts acceptable to the Requisite Lenders) insuring all Property
and other assets material to the operations of Borrower and its Subsidiaries
(which shall in any event include each parcel of real property subject to any
Mortgage) against loss or damage by fire, theft, burglary, pilferage and loss
in transit and business interruption, together with such other hazards as are
reasonably consistent with prudent industry practice, and maintain product and
other liability insurance consistent with prudent industry practice with
financially sound insurance companies licensed to do business in the states
where such Property is located. Not later than thirty (30) days after the
renewal, replacement or material modification of any policy or program,
Borrower shall deliver or cause to be delivered to the Agent (in sufficient
quantity for each of the Lenders, which the Agent shall promptly distribute to
each Lender) a detailed schedule setting forth for each such policy or program:
(a) the amount of such policy, (b) the risks insured against by such policy,
(c) the name of the insurer and each insured party under such policy, and (d)
the policy number of such policy. All casualty and business interruption
insurance covering Borrower or any Domestic Subsidiary or any Property of
Borrower or any Domestic Subsidiary shall contain an endorsement in the form of
Exhibit 7.
7.06. Inspection of Property; Books and Records; Discussions.
Borrower shall permit, and Borrower shall cause each of its Subsidiaries and
the Joint Ventures to permit, any authorized representative(s) designated by
any Lender or the Agent to visit and inspect any of its properties, including
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its affairs, finances and accounts with its officers,
employees, representatives, agents or independent certified public accountants,
all upon reasonable notice and at such reasonable time and as often as may be
reasonably requested. Each such visitation and inspection made by or on behalf
of the Agent shall be at Borrower's expense. Any visitation and inspection
made by or on behalf of any Lender shall be at such Lender's expense.
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7.07. Labor Matters. Borrower shall notify the Agent and each
Lender in writing, promptly, but in any event within two (2) Business Days
after learning thereof, of any material labor dispute to which it or any of its
Subsidiaries may become a party, any strikes or walkouts relating to any of its
or its Subsidiaries' facilities where the operation of any such facility is
material to the operations of the Borrower or such Subsidiary and the
expiration of any material labor contract to which it or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound.
7.08. Maintenance of Permits. Borrower shall obtain and
maintain, and shall cause each of its Subsidiaries to obtain and maintain, in
full force and effect all licenses, franchises, Permits or other rights
necessary for the operation of its business, except where the failure to obtain
or maintain such licenses, franchises, Permits or rights does not have and
could not have a Material Adverse Effect.
7.09. Employee Benefit Matters. Borrower shall establish,
maintain and operate, and cause each of its Subsidiaries and other ERISA
Affiliates to establish, maintain and operate, all Plans in all material
respects in compliance with the applicable provisions of ERISA, the IRC, and
all other applicable laws, and the regulations and interpretations thereunder,
and the respective requirements of the governing documents for such Plans.
Borrower shall, and shall cause each of its Subsidiaries and other ERISA
Affiliates to, establish, maintain and operate all Foreign Employee Benefit
Plans to comply in all material respects with all laws, regulations and rules
applicable thereto and the respective requirements of the governing documents
for such Foreign Employee Benefit Plans.
7.10. Foreign Subsidiary Credit Support; Change of Subsidiary
Status.
(a) Credit Support to Foreign Subsidiaries. Prior to any
Credit Support being provided to any Foreign Subsidiary, each of the following
conditions precedent shall be required to be satisfied in connection therewith:
(i) such Foreign Subsidiary shall execute a Foreign Subsidiary
Guaranty on terms and conditions reasonably satisfactory to the Agent;
provided, however, such guaranty shall be limited in amount to the
maximum amount of Credit Support provided by Borrower to such Foreign
Subsidiary; provided, further, such guaranty shall not be required to
the extent the Borrower shall have demonstrated to the reasonable
satisfaction of the Agent that such a guaranty results in material
adverse tax consequences for the Borrower;
(ii) Borrower's proposed Credit Support to such Foreign
Subsidiary is in compliance with the terms of Section 8.03;
(iii) such Foreign Subsidiary shall have executed and become a
party to the Contribution Agreement;
(iv) unless the Release Event shall have occurred, Borrower
shall have executed or shall have caused its appropriate Subsidiary to
execute a Foreign Subsidiary Pledge with respect to the stock of such
Foreign Subsidiary;
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(v) unless the Release Event shall have occurred, if the stock
of such Foreign Subsidiary is owned by any Subsidiary which is not a
Domestic Subsidiary (a "Foreign Holding Company"), then Borrower shall
have executed or shall have caused the appropriate Subsidiary to execute
a Foreign Subsidiary Pledge with respect to the capital stock of such
Foreign Holding Company; provided, however, notwithstanding the
provisions of the definition of Foreign Subsidiary Pledge which limit to
65% the total combined voting power pledged, the Foreign Subsidiary
Pledge for such Foreign Holding Company shall be for one-hundred percent
(100%) of the capital stock of such Foreign Holding Company unless it
shall have been demonstrated to the reasonable satisfaction of the Agent
that such pledge would result in material adverse tax consequences to
the Borrower;
(vi) the Agent shall have received an opinion of counsel
qualified to practice in the jurisdiction of such Foreign Subsidiary's
incorporation, in form and substance reasonably satisfactory to the
Agent, covering such matters as the Agent deems necessary relating to
the Foreign Subsidiary Guaranty, if any, executed and delivered to the
Agent pursuant to clause (i) above and, if applicable, the Foreign
Subsidiary Pledge executed and delivered to the Agent pursuant to clause
(iv) above;
(vii) unless the Release Event shall have occurred, the Agent
shall have received an opinion of counsel for the pledgors with respect
to each Foreign Subsidiary Pledge executed and delivered to the Agent
pursuant to clause (vi) above;
(viii) the Agent shall have received a compliance certificate
from a Financial Officer of the Borrower certifying that after the
issuance of such Credit Support for such Foreign Subsidiary, no Event of
Default or Potential Event of Default exists; and
(ix) the Lenders shall have received such other documents,
instruments or agreements as are reasonably requested by the Agent or
the Requisite Lenders.
(b) Structure of Support Payments. In connection with the
payment by Borrower in respect of any Accommodation Obligation with respect to
the Foreign Subsidiaries, Borrower shall make such payments by way of a loan
from Borrower to the applicable Foreign Subsidiary secured by all or
substantially all of such Foreign Subsidiary's assets and, provided the Release
Event shall not have occurred, assign the intercompany note and security to the
Agent on behalf of itself and the Holders of Secured Obligations as additional
Collateral for the Obligations unless Borrower shall have demonstrated to the
reasonable satisfaction of the Agent that such a secured-loan structure results
in material adverse tax consequences for the Borrower. To the extent that such
a secured loan would be prohibited by the pertinent Foreign Subsidiary's
contractual obligations, the Borrower shall use and shall cause such Foreign
Subsidiary to use its best efforts to obtain waivers of such restrictions or to
agree upon alternative structures reasonably satisfactory to the Agent.
(c) Change of Subsidiary Status. In connection with the
cancellation and release and, if applicable, return of Investment, of the
Borrower from or with respect to any Credit Support provided to any Supported
Foreign Subsidiary, the Borrower may change the status of a
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Supported Foreign Subsidiary to a Foreign Subsidiary which is no longer
considered to be a Supported Foreign Subsidiary provided each of the following
conditions precedent is met in connection therewith:
(i) the Agent shall have received documentation satisfactory to
it evidencing the repayment of any loan and return of any Investment,
other than with respect to Base Credit Support, cancellation or
expiration of any letter of credit and/or release of any guaranty or
other Accommodation Obligation, which comprised such Supported Foreign
Subsidiary's Credit Support;
(iii) all Letters of Credit with respect to which such Supported
Foreign Subsidiary is a co-applicant shall have been cancelled or cash
collateral shall have been provided therefor pursuant to the terms of
Section 10.02(b);
(iv) the Agent shall have received a compliance certificate from
a Financial Officer of the Borrower certifying that no Event of Default
or Potential Event of Default exists; and
(v) the Lenders shall have received such other documents,
instruments or agreements as are reasonably requested by the Agent or
the Requisite Lenders.
Each Lender and each Issuing Bank consent to the release by the Agent of each
Foreign Subsidiary Guaranty and Foreign Subsidiary Pledge with respect to such
Foreign Subsidiary or its Foreign Holding Company (provided such Foreign
Holding Company does not also hold the capital stock of another Supported
Foreign Subsidiary) in connection with the change of such Foreign's
Subsidiary's status hereunder.
7.11. Maintenance of Separate Corporate Existence. The
Borrower shall take all reasonable steps (including, without limitation, all
steps which the Agent or any Lender may from time to time reasonably request)
to maintain its identity as a separate legal entity and to make it apparent to
third parties that the Borrower is an entity with assets and liabilities
distinct from those of ANTEC CORPORATION. Without limiting the generality of
the foregoing, the Borrower shall:
(i) to the extent any employee, consultant or agent of Borrower
is also an employee, consultant or agent of ANTEC CORPORATION, allocate
the compensation of such employee, consultant or agent between Borrower
and ANTEC CORPORATION on the basis of actual use of the services so
rendered to the extent practicable and, to the extent such allocation is
not practical, on a basis reasonably related to actual use of such
services;
(ii) allocate all overhead expenses (including, without
limitation, telephone and other utility charges) for items shared
between Borrower and ANTEC CORPORATION on the basis of actual use to the
extent practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to actual use; and
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(iii) not maintain bank accounts or other depository accounts
to which ANTEC CORPORATION is an account party, into which ANTEC
CORPORATION makes deposits or from which ANTEC CORPORATION has the power
to make withdrawals.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof
and so long as Borrower shall have any outstanding Agreement Obligations or any
Lender shall have any Commitment hereunder or any Letter of Credit remains
outstanding:
8.01. Indebtedness. Borrower shall not, and shall not permit
any member of the Consolidated Group to, directly or indirectly create, incur,
assume or otherwise become or remain directly or indirectly liable with respect
to any Indebtedness, except:
(i) the Obligations;
(ii) the Existing Indebtedness;
(iii) Indebtedness in respect of Accommodation Obligations
permitted by Section 8.04;
(iv) Indebtedness incurred by any Foreign Subsidiary unless the
incurrence of that Indebtedness could reasonably be anticipated to
result in an Event of Default or Potential Event of Default;
(v) Indebtedness incurred by any Domestic Subsidiary where the
Borrower or any other Domestic Subsidiary is the lending entity;
(vi) Indebtedness incurred by the Borrower where any Domestic
Subsidiary is the lending entity;
(vii) Permitted Subordinated Indebtedness not to exceed an
aggregate outstanding principal amount of $60,000,000, to the extent
such Indebtedness is permitted under Section 8.13; and
(viii) other Indebtedness of the Borrower and the other members
of the Domestic Group which, when combined with outstanding Permitted
Subordinated Indebtedness, does not exceed in the aggregate $150,000,000
at any one time outstanding; provided, however, any such Indebtedness
(including the Permitted Subordinated Indebtedness) in excess of
$100,000,000 shall automatically result in a permanent reduction, by the
amount of such excess, in the Commitments and such reduction of the
Commitments shall be effective as of the date such Indebtedness is
incurred and shall reduce the Commitment of each Lender proportionately
in accordance with its Pro Rata Share;
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provided, however, in each case after taking such Indebtedness into
account, Borrower is in compliance with the terms of Article IX, and no
Event of Default or Potential Event of Default exists or is pending,
whether or not such Event of Default or Potential Event of Default has
been reported to the Agent.
8.02. Sales of Assets; Liens.
(a) Limitation on Sales. Borrower shall not, and shall not
permit any Subsidiary of Borrower to, sell, assign, transfer, lease, convey or
otherwise dispose of any properties or assets, including, without limitation,
any capital stock of any Domestic Subsidiary or Supported Foreign Subsidiary,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for:
(i) sales of inventory in the ordinary course of business;
(ii) the disposition of obsolete equipment in the ordinary
course of business;
(iii) sales by Borrower of stock held by it of a Foreign
Subsidiary which is not a Supported Foreign Subsidiary in any
transaction not constituting a Material Transaction;
(iv) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets, other than the stock of any Domestic
Subsidiary, for cash consideration and for not less than fair market
value which do not constitute a Material Transaction individually or in
the aggregate (together with all sales of stock of any Foreign
Subsidiary under clause (iii) above); and
(v) transfers of assets to any Affiliate for less than fair
market value to the extent such transfer constitutes a permitted
Investment pursuant to Section 8.03.
(b) Liens. Prior to and after the occurrence of the Release
Event, Borrower shall not, and shall not permit any Subsidiary of Borrower to,
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of its Property (including all capital stock of any
Subsidiary of Borrower and all Collateral) except:
(i) Liens granted to the Agent for the benefit of itself and
the Holders of Secured Obligations, securing the Obligations;
(ii) Customary Permitted Liens;
(iii) Permitted Existing Liens;
(iv) Liens on property existing at the time of acquisition
thereof by Borrower or any of its Subsidiaries and not created in
contemplation of such acquisition and Liens securing purchase money
Indebtedness for equipment to the extent the aggregate outstanding
principal amount of such Indebtedness does not exceed $10,000,000, is
permitted under Section 8.01 and the value of the
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Equipment securing such Indebtedness approximates the amount of such
Indebtedness;
(v) Liens with respect to judgments or attachments which do not
result in an Event of Default or Potential Event of Default hereunder;
(vi) Liens with respect to the capital stock of any Foreign
Subsidiary; provided such Foreign Subsidiary is not a Supported Foreign
Subsidiary or a Foreign Holding Company with respect to a Supported
Foreign Subsidiary or a subsidiary of a Supported Foreign Subsidiary;
and
(vii) Liens with respect to the assets of any Foreign
Subsidiary (other than capital stock which is covered by clause (vi)
above) granted to secure Indebtedness of such Foreign Subsidiary to the
extent such Indebtedness is permitted under the terms of this Agreement.
For the purposes of this Agreement, the term "Customary
Permitted Liens" shall mean:
(A) Liens (other than Environmental Liens, Liens imposed under
ERISA or Enforceable Judgments) for claims, taxes, assessments or
charges of any Governmental Authority not yet due or which are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(B) statutory Liens of landlords, bankers, carriers,
warehousemen, mechanics, materialmen and other Liens (other than
Environmental Liens, Liens imposed under ERISA or Enforceable Judgments)
imposed by law, arising in the ordinary course of business and for
amounts which (A) are not yet due, (B) are not more than thirty (30)
days past due as long as no notice of default has been given or other
action taken to enforce such Liens, or (C) (1) are not more than thirty
(30) days past due and a notice of default has been given or other
action taken to enforce such Liens, or (2) are more than thirty (30)
days past due, and, in the case of clause (1) or (2), are being
contested in good faith by appropriate proceedings which are sufficient
to prevent imminent foreclosure of such Liens and with respect to which
adequate reserves or other appropriate provisions are being maintained
in accordance with GAAP;
(C) Liens (other than Environmental Liens, Liens imposed under
ERISA or Enforceable Judgments) incurred or deposits made in the
ordinary course of business (including, without limitation, surety bonds
and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of employment benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under government
contracts;
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(D) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, rights of landlords, reservations, encroachments, variations
and other restrictions, charges or encumbrances (whether or not
recorded) affecting the use of real property, which do not materially
interfere with the ordinary conduct of the business of Borrower or any
Subsidiary of Borrower;
(E) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods; and
(F) precautionary filings of financing statements in connection
with Operating Leases entered into in the ordinary course of business.
8.03. Investments. Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly make or commit to make any
advance, loan, extension of credit or capital contribution, or purchase of any
stock, bonds, notes, debentures or other securities of, or make any other
investment in, any Person, including, without limitation, any Affiliate of the
Borrower (all such transactions being referred to as "Investments") except:
(i) Investments by Borrower or any of its Subsidiaries in Cash
Equivalents;
(ii) Investments made prior to the date hereof and set forth on
Schedule 8.03;
(iii) Investments constituting (a) loans by Borrower or any
Subsidiary of Borrower to its employees in each case in the ordinary
course of business not in excess of an aggregate amount of $2,500,000
outstanding at any one time and (b) in addition to the loans permitted
pursuant to clause (a), loans by the Borrower to its employees
concurrent with the exercise of an option for the purchase of capital
stock of the Borrower pursuant to the Borrower Distribution Stock Plan,
which loans shall: (1) be in an amount not to exceed the lesser of (A)
$15,000,000 in the aggregate and (B) the sum of (i) the exercise price
with respect to the stock being purchased plus (ii) the amount of tax
withheld on the difference between the exercise price with respect to
such stock and the fair market value of such stock on the date of
exercise of such option; and (2) be secured by a pledge in favor of the
Borrower of the capital stock so purchased;
(iv) Investments in connection with the acquisition by the
Borrower of substantially all of the assets or all of the capital stock
of any Person not in excess of an individual amount of $10,000,000 or an
aggregate amount of $25,000,000 over the term of this Agreement;
provided, however, in connection with any such acquisition not more than
20% of the acquisition price shall be attributable to goodwill;
(v) Investments in connection with the purchase of any other
Person's interest in any of the Joint Ventures;
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<PAGE> 84
(vi) Investments (other than such Investments made by any
Foreign Subsidiary which is not a Supported Foreign Subsidiary) made
after the Effective Date in any joint ventures, including the Joint
Ventures, which when aggregated with Investments made pursuant to clause
(v) above do not exceed $10,000,000 in the aggregate;
(vii) Investments by any Foreign Subsidiary in any other
Foreign Subsidiary or by any Foreign Subsidiary that is not a Supported
Foreign Subsidiary in any joint ventures, including the Joint Ventures;
(viii) Investments (other than those set forth on Schedule
8.03) in notes receivable received in connection with transactions
permitted pursuant to Section 8.02(a); provided, unless the Release
Event shall have occurred, such notes receivable are pledged to the
Agent for the benefit of itself and the Holders of Secured Obligations
pursuant to the requirements of the Collateral Documents; provided,
further, the aggregate amount of such Investments at any one time
outstanding shall not exceed $2,500,000;
(ix) Investments made after the date hereof by the Borrower in
any Foreign Subsidiary in the United Kingdom or Canada; provided, at the
time of such Investment and after taking into account the making of such
Investment, no Event of Default or Potential Event of Default exists or
is pending, whether or not such Event of Default or Potential Event of
Default has been reported to the Agent; and provided, further that the
aggregate of such Investments entered into by Borrower with respect to
Indebtedness of any such Foreign Subsidiary does not exceed, at any
time, $10,000,000 for each of (i) all such Foreign Subsidiaries in the
United Kingdom and (ii) all such Foreign Subsidiaries in Canada;
(x) Investments (including, without limitation, all Investments
referred to in clauses (iv) and (ix) above) made after the date hereof
by the Borrower in any Foreign Subsidiary provided each of the following
conditions has been met:
(A) no Event of Default or Potential Event of Default
exists or is pending, whether or not such Event of Default or
Potential Default has been reported to the Agent;
(B) prior to making any such Investment, Borrower shall
be in compliance with each of the requirements set forth in
Section 7.10; and
(C) the sum, without duplication, of (1) all such
Investments, (2) all Accommodation Obligations made or entered
into by the Borrower after the date hereof with respect to the
Foreign Subsidiaries, (3) the aggregate Base Credit Support
provided to the Foreign Subsidiaries, and (4) all Credit Support
provided to the Foreign Subsidiaries does not exceed the amounts
set forth below during the periods set forth below:
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<PAGE> 85
<TABLE>
<CAPTION>
Period Aggregate Amount
- ------ ----------------
<S> <C>
Effective Date through
December 31, 1994 $35,000,000
Effective Date through
December 31, 1995 $60,000,000
Effective Date through
December 31, 1996 $80,000,000
Effective Date through The sum of $80,000,000
each December 31 thereafter and $20,000,000 for each January 1
occurring thereafter commencing with January 1, 1997.
</TABLE>
(xi) other Investments not to exceed $2,500,000 in the
aggregate outstanding at any time.
8.04. Accommodation Obligations. Borrower shall not and shall
not permit any Subsidiary of Borrower to, directly or indirectly, create or
become or be liable with respect to any Accommodation Obligation involving
Indebtedness of Itel or any Affiliate of Itel which is not one of the Joint
Ventures or a Subsidiary of Borrower. In addition, Borrower shall not, and
shall not permit any other Domestic Subsidiary or Supported Foreign Subsidiary
to, directly or indirectly, create or become or be liable with respect to any
Accommodation Obligation except:
(i) guaranties resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(ii) Accommodation Obligations arising in connection with the
Transaction Documents; and
(iii) Accommodation Obligations (a) by Borrower and its
Domestic Subsidiaries with respect to the Borrower's Foreign
Subsidiaries and (b) by Borrower with respect to any of its
Subsidiaries' Hedging Obligations with respect to Eligible Hedging
Contracts, in an aggregate amount outstanding at any time with respect
to (a) and (b) less than or equal to the U.S. Dollar equivalent of Fifty
Million Dollars ($50,000,000); provided, however, no such Accommodation
Obligations shall be entered into or incurred after the occurrence and
during the continuance of an Event of Default or Potential Event of
Default.
8.05. Restricted Junior Payments. Borrower shall not, and
shall not permit any Subsidiary of Borrower to, declare or make any Restricted
Junior Payment, except:
(i) payments of dividends by the Borrower to Itel provided:
(a) at the time thereof and after taking into account the payment
thereof, no Event of Default or Potential Event of Default exists or is
pending, whether or not such Event of Default or Potential Default has
been reported to the Agent; and (b) the aggregate amount of such
dividends does not
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exceed fifty percent (50%) of the consolidated net income of the
Consolidated Group for the period from January 1, 1994 to the date of
such calculation;
(ii) payments by the Borrower to Itel under the Tax Allocation
Agreement provided: (a) no such payments shall be made at any time with
respect to the income (whether trade or business income or passive
income) of the Borrower's Foreign Subsidiaries unless the Borrower has
received a like amount from such Foreign Subsidiaries; (b) no such
payments shall be made at any time to the extent such payments are not
in an amount substantially the same as the amount of federal and state
taxes which would be due and payable by Borrower and the corporations
(with the Borrower, collectively the "Borrower Group") which would be
members of the "affiliated group" (as defined in Section 1504 of the
IRC) of which Borrower would be the common parent if Borrower were not a
member of the Itel affiliated group (as so defined) (the "Itel Group")
if the Borrower Group filed a separate consolidated federal income tax
return and separate consolidated or combined state income tax returns;
(c) no such payments shall be made at any time an Event of Default or
Potential Event of Default exists or is pending, whether or not such
Event of Default or Potential Default has been reported to the Agent, to
the extent such payments exceed the lesser of (1) the amount of federal
and state taxes which would be due and payable by the Borrower Group, if
the Borrower Group filed a separate consolidated federal income tax
return and separate consolidated or combined state income tax returns
and (2) the amount of the tax liability actually incurred and paid by
the Itel Group; and (d) no such payment shall be made after the
occurrence of an Event of Default under Section 10.01(f) or 10.01(g);
(iii) any Subsidiary of Borrower may pay dividends to Borrower;
(iv) to the extent that such payments are permitted by
subordination restrictions applicable thereto, including the
Subordination Agreement, or are payments in respect of the Permitted
Subordinated Indebtedness, provided that at the time of such payment and
after taking into account such payment, no Event of Default or Potential
Event of Default exists or is reasonably anticipated to occur
thereafter;
(v) payments required pursuant to any Hedging Contracts entered
into between Borrower and Itel or any similar type of hedging agreement
entered into by any Subsidiary of Borrower and Itel which are ordinary
course arms-length transactions; provided, that at the time of such
payment and after taking into account such payment, no Event of Default
or Potential Event of Default exists or is pending, whether or not such
Event of Default or Potential Default has been reported to the Agent;
(vi) payments in the ordinary course of business of arms-length
fees by the Foreign Subsidiaries to Itel in connection with any guaranty
executed by Itel of such Foreign Subsidiary's Indebtedness; and
(vii) regularly scheduled payments of principal and interest (on
an unaccelerated basis) in connection with any loan from Itel to any
Foreign Subsidiary entered into in the ordinary course of business and
upon terms that would be obtained in an arms-length transaction,
provided that at the time of such payment and after taking into account
such
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<PAGE> 87
payment, (1) no event of default or unmatured event of default exists or
is reasonably anticipated to occur thereafter in respect of such Foreign
Subsidiary's Indebtedness to any third party and (2) no Event of Default
or Potential Event of Default exists or is pending, whether or not such
Event of Default or Potential Default has been reported to the Agent;
and
(viii) any redemption, retirement, purchase or other
acquisition for value, direct or indirect, of any shares of capital
stock of the Borrower issued to its employees under and pursuant to the
provisions of the Borrower Distribution Stock Plan pursuant to Section
8.03(iii)(b).
8.06. Conduct of Business. Borrower shall not and shall not
permit any of its Subsidiaries to, engage in any business other than the
business engaged in by Borrower or such Subsidiary on the date hereof and any
business activities substantially similar or related thereto. The businesses
engaged in by the Foreign Subsidiaries outside of the United States shall
continue to be conducted solely through the Borrower's Foreign Subsidiaries.
Borrower shall not and shall not permit any of its Subsidiaries to enter into
any interest rate, commodity or foreign currency exchange, swap, collar, cap,
option, forward, futures or similar agreements other than Hedging Contracts.
8.07. Transactions with Affiliates. Borrower shall not, and
shall not permit any other member of the Domestic Group to, directly or
indirectly enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any of its Affiliates on terms that are less
favorable to it than those fair and reasonable terms that might be obtained in
a comparable arms-length transaction at the time other than transactions
involving the payment to Itel of guaranty fees or tax sharing payments not to
exceed the amounts permitted pursuant to Section 8.05.
8.08. Restriction on Fundamental Changes.
(a) Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), discontinue its
business or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or any substantial part of its
business or Property, whether now or hereafter acquired, except:
(i) as otherwise permitted under Section 8.02(a);
(ii) any Domestic Subsidiary may merge into or convey, sell,
lease or transfer all or substantially all of its assets to Borrower or
any other Domestic Subsidiary of Borrower;
(iii) any Foreign Subsidiary may merge into or convey, sell,
lease or transfer all or substantially all of its assets to any other
Foreign Subsidiary; provided, however, if one of such Foreign
Subsidiaries is a Supported Foreign Subsidiary, then all of the
conditions set forth in Section 7.10(a) shall be complied with with
respect to the surviving or acquiring corporation.
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<PAGE> 88
(b) Borrower shall not, and shall not permit its Subsidiaries
to acquire by purchase or otherwise any property or assets of, or stock or
other evidence of beneficial ownership of, any Person, except in the ordinary
course of its business or to the extent permitted pursuant to Section 8.03.
8.09. Employee Benefit Matters. Borrower shall not, and shall
not permit any of its ERISA Affiliates to:
(i) Engage in any prohibited transaction described in Section
406 of ERISA or 4975 of the IRC for which a statutory or class exemption
is not available or a private exemption has not been previously obtained
from the DOL;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the IRC), whether or not
waived;
(iii) fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
(iv) terminate any Benefit Plan in a distress termination under
Section 4041(c) of ERISA which would result in any liability to Borrower
or any ERISA Affiliate;
(v) fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate may be required
to make under any agreement relating to such Multiemployer Plan, or any
law pertaining thereto;
(vi) fail to pay any required installment or any other payment
required under Section 412 of the IRC on or before the due date for such
installment or other payment;
(vii) amend a Plan resulting in an increase in current
liability for the plan year such that Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of
the IRC;
(viii) permit any unfunded liabilities with respect to any
Foreign Pension Plan to exist; or
(ix) fail to pay any required contribution or payment to a
Foreign Pension Plan on or before the date for such required installment
or payment.
8.10. Environmental Liabilities. Borrower shall not, and shall
not permit any of its Subsidiaries or any Joint Venture to, become subject to
any Liabilities and Costs, which could have a Material Adverse Effect, arising
out of or related to (a) the Release or threatened Release at any location of
any Contaminant into the environment, or any Remedial Action in response
thereto, or (b) any violation of any environmental, health and safety
Requirements of Law.
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<PAGE> 89
8.11. Margin Regulations. No portion of the proceeds of any
credit extended under this Agreement and no portion of the proceeds of the
Permitted Subordinated Indebtedness shall be used in any manner which might
cause the extension of credit or the application of such proceeds to violate
Regulation G, Regulation T, Regulation U or Regulation X or any other
regulation of the Federal Reserve Board or to violate the Securities Exchange
Act or the Securities Act, in each case as in effect on the date or dates of
such Borrowing and the use of such proceeds.
8.12. Change of Fiscal Year. Borrower shall not change its
Fiscal Year.
8.13. Subordinated Indebtedness.
(a) Incurrence of Subordinated Debt. The Borrower shall be
permitted to incur Revolving Subordinated Debt provided, after taking into
account the incurrence thereof (i) no Event of Default or Potential Event of
Default shall have occurred or is reasonably anticipated to occur thereafter
and (ii) the aggregate maximum outstanding principal amount of Revolving
Subordinated Debt shall not exceed $60,000,000.
(b) No Change. Borrower shall not amend, supplement or modify
the terms of any Permitted Subordinated Indebtedness, or make any payment
required as a result of an amendment or change thereto.
(c) Extension. So long as any Revolving Subordinated Notes may
be outstanding, Borrower shall extend the maturity thereof if and as permitted
under the Subordination Agreements.
(d) Other Subordinated Indebtedness. Nothing in this Section
8.13 shall be construed as prohibiting the incurrence of subordinated
Indebtedness, other than the Revolving Subordinated Debt, provided such
Indebtedness is permitted pursuant to Section 8.01(viii).
ARTICLE IX
FINANCIAL COVENANTS
9.01. Defined Terms for Financial Covenants.
The following terms used in this Agreement shall have the
following meanings (such meanings to be applicable, except to the extent
otherwise indicated in a definition of a particular term, both to the singular
and the plural forms of the terms defined):
"Base Amount" shall mean an amount equal to the greater of (a)
$240,000,000 and (b) the Borrower's shareholder's equity as at December 31,
1993 minus $12,700,000.
"Borrower Interest Coverage Ratio" shall mean, for any period,
the ratio of (a) EBITDA of the Borrower for such period to (b) Consolidated
Interest Expense for such period
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<PAGE> 90
minus interest expense with respect to Indebtedness of any of the Borrower's
Foreign Subsidiaries incurred to any Person outside of the Consolidated Group
if Credit Support is not provided to such Foreign Subsidiaries (except that all
interest expense with respect to Indebtedness of Borrower's Foreign
Subsidiaries in Canada shall be included in Consolidated Interest Expense for
the purpose of calculating the Borrower Interest Coverage Ratio) minus, to the
extent otherwise included in Consolidated Interest Expense, amortization of
upfront fees payable on the Effective Date to the Agent and the Lenders.
"Consolidated EBITDA" shall mean, for any period, for the
Consolidated Group calculated in accordance with Agreement Accounting
Principles, (i) net income (or loss) of the Consolidated Group for such period
taken as a single accounting period, plus (ii) the provision for depreciation
and amortization expense of the Consolidated Group for such period, plus (iii)
income taxes of the Consolidated Group for such period, and plus (iv)
Consolidated Interest Expense for such period; provided that there shall be
excluded therefrom any non-operating gains or losses (including, without
limitation, extraordinary or unusual gains or losses, gains or losses arising
from the sale of capital assets or the sale of owned buildings and properties
and other non-recurring gains or losses other than in connection with the
discontinuance of operations) during such period.
"Consolidated Interest Coverage Ratio" shall mean, for any
period, the ratio of (a) Consolidated EBITDA for such period to (b) the amount
of Consolidated Interest Expense of the Consolidated Group for such period
(provided, to the extent otherwise included in Consolidated Interest Expense,
there shall be excluded from such Consolidated Interest Expense amortization of
upfront fees payable on the Effective Date to the Agent and the Lenders).
"Consolidated Interest Expense" shall mean, for any period, the
net interest expense of the Consolidated Group for such period calculated in
accordance with Agreement Accounting Principles; provided, however, there shall
be included in Consolidated Interest Expense, to the extent not otherwise
included, (a) interest with respect to the Revolving Subordinated Debt, whether
or not paid, deferred or forgiven at the applicable rate specified in the
Revolving Subordinated Notes applicable thereto and (b) all fees payable in
connection with the Letters of Credit.
"Consolidated Net Worth" shall mean, at a particular date, all
amounts which would be included under shareholders' equity for the Consolidated
Group determined in accordance with Agreement Accounting Principles.
"Current Assets" shall mean, at a particular date, all amounts
which would, in conformity with Agreement Accounting Principles, be included
under current assets on a balance sheet as at such date, except that there
shall be excluded therefrom cash and Cash Equivalents.
"Current Liabilities" shall mean, at a particular date, all
amounts which would, in conformity with Agreement Accounting Principles, be
included under current liabilities on a balance sheet as at such date, except
that there shall be excluded therefrom the current portion of long-term
Indebtedness and the outstanding principal amount of the Loans hereunder.
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<PAGE> 91
"Domestic Interest Expense" shall mean, for any period, the net
interest expense of the Domestic Group for such period, calculated in
accordance with Agreement Accounting Principles.
"EBITDA of the Borrower" shall mean, for any period, for the
Domestic Group (with all foreign subsidiaries being accounted for on the equity
investment method of accounting) determined on a combined basis in accordance
with Agreement Accounting Principles, (i) net income (or loss) of the Domestic
Group for such period taken as a single accounting period, plus (ii) the
provision for depreciation and amortization expense for such period of the
Domestic Group, plus (iii) income taxes of the Domestic Group for such period,
and plus (iv) Domestic Interest Expense for such period; provided that there
shall be excluded therefrom (x) any non-operating gains or losses (including,
without limitation, extraordinary or unusual gains or losses, gains or losses
arising from the sale of capital assets or the sale of owned buildings and
properties and other non-recurring gains or losses other than in connection
with the discontinuance of operations) of the Domestic Group during such period
and (y) income or loss from the operations of the Foreign Subsidiaries during
such period.
"Total Indebtedness" shall mean, in each case with respect to
the Domestic Group, all Indebtedness of the Domestic Group; provided, however,
it is expressly agreed that (a) there shall be included in Total Indebtedness
(whether or not such amounts would be included as liabilities on the balance
sheet or as Indebtedness) (i) contingent liabilities with respect to Standby
Letters of Credit and (ii) the maximum amount of Indebtedness supported by any
guaranty issued by the Borrower and (b) there shall be excluded from Total
Indebtedness all Indebtedness of any of the Borrower's Foreign Subsidiaries if
no Credit Support is provided with respect to such Indebtedness.
9.02. Minimum Consolidated Net Worth. Borrower covenants and
agrees that, on and after the date hereof so long as Borrower shall have any
Agreement Obligations or any Lender has any Commitment hereunder or any Letter
of Credit remains outstanding, Borrower shall not permit Consolidated Net Worth
at any time to be less than (i) the Base Amount plus (ii) fifty percent (50%)
of cumulative consolidated net income of the Consolidated Group from the
Effective Date minus (iii) an amount, not to exceed $15,000,000 in the
aggregate, in connection with all redemptions, retirements, purchases or other
acquisitions for value, direct or indirect, of any shares of capital stock of
the Borrower issued to its employees under and pursuant to the provisions of
the Borrower Distribution Stock Plan made in conformity with the provisions of
Section 8.03(iii)(b) and Section 8.05(vii).
9.03 Ratio of Indebtedness to Capitalization. Borrower
covenants and agrees that, on and after the date hereof so long as Borrower
shall have any Agreement Obligations or any Lender has any Commitment hereunder
or any Letter of Credit remains outstanding, Borrower shall not permit the
ratio of (a) Total Indebtedness to (b) the sum of (i) Consolidated Net Worth
and (ii) Total Indebtedness, at any time to be greater than 0.60 to 1.00.
9.04. Interest Coverage Ratios.
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<PAGE> 92
(a) Borrower Interest Coverage Ratio. Borrower covenants and
agrees that, on and after the date hereof so long as Borrower shall have any
Agreement Obligations or any Lender has any Commitment hereunder or any Letter
of Credit remains outstanding, Borrower shall not permit the Borrower Interest
Coverage Ratio calculated at the end of each fiscal quarter for the period of
the immediately preceding four fiscal quarters (or in the case of the first
three full fiscal quarters after the date hereof, the period from March 31,
1994 through such date) to be less than the ratio set forth below with respect
to such quarter:
<TABLE>
<CAPTION>
For each fiscal quarter
-----------------------
ending during the
------------------
following periods Ratio
----------------- -----
<S> <C>
July 1, 1994 through
December 30, 1994 3.00 to 1.0
December 31, 1994
and thereafter 3.50 to 1.0
</TABLE>
(b) Consolidated Interest Coverage Ratio. Borrower covenants
and agrees that, on and after the date hereof so long as Borrower shall have
any Agreement Obligations or any Lender has any Commitment hereunder or any
Letter of Credit remains outstanding, Borrower shall not permit the
Consolidated Interest Coverage Ratio calculated at the end of each fiscal
quarter for the period of the immediately preceding four fiscal quarters (or in
the case of the first three full fiscal quarters after the date hereof, the
period from March 31, 1994 through such date) to be less than the ratio set
forth below with respect to such quarter:
<TABLE>
<CAPTION>
For each fiscal quarter
-----------------------
ending during the
------------------
following periods Ratio
----------------- -----
<S> <C>
July 1, 1994 through
December 30, 1994 3.00 to 1.0
December 31, 1994
and thereafter 3.50 to 1.0
</TABLE>
9.05. Ratio of Current Assets to Current Liabilities. Borrower
covenants and agrees that, on and after the date hereof so long as Borrower
shall have any Agreement Obligations or any Lender has any Commitment hereunder
or any Letter of Credit remains outstanding, Borrower shall not, at any time,
permit the ratio of Current Assets of the Domestic Group to Current Liabilities
of the Domestic Group to be less than 2.0 to 1.0.
9.06. Capital Expenditures. Borrower shall not and shall not
permit any of its Subsidiaries which are members of the Domestic Group to, in
any Fiscal Year, purchase, invest in or otherwise acquire, including by Capital
Leases, additional property, plant and equipment or other fixed assets which
capital expenditures, net of dispositions of fixed assets during such Fiscal
Year (determined based upon the lesser of the book value of such disposed
assets or the
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<PAGE> 93
net cash proceeds received), exceed $15,000,000 in the aggregate. For purposes
of calculating capital expenditures for any Fiscal Year, there shall be
included in the calculation thereof the excess, if any, of (i) the amount of
Investments made during such Fiscal Year pursuant to Section 8.03(iv) over (ii)
the amount of such Investments allocable to the Current Assets acquired in
connection with such Investments.
9.07. Calculation of Financial Covenants. In this Agreement,
in the calculation of the financial covenants set forth in this Article IX:
(a) unless otherwise expressly specified to the contrary
therein, all such financial covenants shall be calculated with the
operations of all Subsidiaries which are not included in the group for
which such financial covenant is set being accounted for on the equity
investment method of accounting; and
(b) all such financial covenants shall be calculated after the
elimination of the minority interest in the Joint Ventures and any
Subsidiaries which are not wholly-owned Subsidiaries.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. Borrower shall fail (i)
to pay when due any principal of any Loan or Reimbursement Obligation, or (ii)
to pay when due any interest on any Loan or Reimbursement Obligation, or any
fee or other amount payable under this Agreement or any of the other Loan
Documents and such failure under this clause (ii) shall continue for three (3)
calendar days.
(b) Breach of Certain Covenants. Borrower or any Subsidiary of
Borrower shall fail duly and punctually to perform or observe any agreement,
covenant or obligation under Sections 6.01 (other than clauses (d), (f), (i),
(j) and (k) thereof), 7.01, 7.05, 7.10 or under Articles VIII (other than
Section 8.09 thereof) or IX or binding on Borrower or any Subsidiary of
Borrower under any section of the Collateral Documents (which failure continues
after the expiration of any grace period specified under such section of the
Collateral Documents).
(c) Breach of Representation or Warranty. Any representation
or warranty made or deemed made by Borrower to the Agent, any Issuing Bank or
any Lender herein or by Borrower or any Subsidiary of Borrower in any of the
other Loan Documents or in any written statement or certificate at any time
given by Borrower or any Subsidiary of Borrower pursuant to any of the Loan
Documents shall be false or misleading in any respect on the date as of which
made or deemed made.
(d) Other Defaults. Borrower or any Subsidiary of Borrower
shall fail duly and punctually to perform or observe any agreement, covenant or
obligation arising under this
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<PAGE> 94
Agreement (except those described in Sections 10.01(a), (b) and (c)) or under
any of the other Loan Documents, and such failure shall continue for fifteen
(15) days (or, in the case of Loan Documents other than this Agreement, any
longer period of grace expressly set forth therein).
(e) Default as to Other Indebtedness. Borrower, any Subsidiary
of Borrower or any Joint Venture shall fail to make any payment when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) on any Indebtedness of Borrower, any such Subsidiary or any Joint
Venture, other than any of the Obligations, if the aggregate outstanding amount
of all such Indebtedness is $1,000,000 or more; or any breach, default or event
of default shall occur, or any other event shall occur or condition shall
exist, under any instrument, agreement or indenture pertaining thereto, if the
effect thereof is to accelerate, or permit the holder(s) of such Indebtedness
to accelerate, the maturity of any such Indebtedness; or any such Indebtedness
shall be declared to be due and payable or required to be prepaid or
mandatorily redeemed (other than by a regularly scheduled required prepayment
prior to the stated maturity thereof); or the holder of any Lien, in any
amount, shall commence foreclosure of such Lien upon property of Borrower, any
Subsidiary of Borrower or any Joint Venture having a book or fair market value
in excess of $1,000,000 in the aggregate.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i)
An involuntary case shall be commenced against Borrower, any Domestic
Subsidiary or any Supported Foreign Subsidiary, and the petition shall not be
dismissed within sixty (60) days after commencement of the case, or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of Borrower, any Domestic Subsidiary or any Supported Foreign
Subsidiary in an involuntary case, under any applicable bankruptcy, insolvency
or other similar law now or hereinafter in effect; or any other similar relief
shall be granted under any applicable federal, state or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Borrower, any Domestic
Subsidiary or any Supported Foreign Subsidiary, or over all or a substantial
part of the property of Borrower, any Domestic Subsidiary or Supported Foreign
Subsidiary, shall be entered; or an interim receiver, trustee or other
custodian of Borrower, any Domestic Subsidiary or Supported Foreign Subsidiary,
or of all or a substantial part of the property of Borrower, any Domestic
Subsidiary or Supported Foreign Subsidiary, shall be appointed or a warrant of
attachment, execution or similar process against any substantial part of the
property of Borrower, any Domestic Subsidiary or any Supported Foreign
Subsidiary, shall be issued and any such event shall not be stayed, vacated,
dismissed, bonded or discharged within sixty (60) days of entry, appointment or
issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc.
Borrower, any Domestic Subsidiary or any Supported Foreign Subsidiary shall
have an order for relief entered with respect to it or commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking of
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; Borrower, any Domestic Subsidiary or Supported Foreign
Subsidiary shall make any assignment for the benefit of creditors or shall
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be unable or generally fail, or admit in writing its inability, to pay its
debts as such debts become due; or the Board of Directors (or any committee
thereof) of Borrower or any Subsidiary of Borrower adopts any resolution to
authorize or approve any of the foregoing.
(h) Judgments. (i) An Enforceable Judgment (other than an
Enforceable Judgment described in the proviso contained in the definition of
Enforceable Judgment) for the payment of money in excess of $2,000,000 shall be
rendered against Borrower or any Subsidiary of Borrower and such Enforceable
Judgment shall continue unsatisfied or unstayed for a period of thirty (30)
days or action shall have been commenced to foreclose on such Enforceable
Judgment, or (ii) an Enforceable Judgment described in the proviso contained in
the definition of Enforceable Judgment shall be rendered against Borrower or
any Domestic Subsidiary or any Supported Foreign Subsidiary.
(i) Dissolution. Any order, judgment or decree shall be
entered against Borrower, any Domestic Subsidiary or any Supported Foreign
Subsidiary decreeing its involuntary dissolution or split-up and such order
shall remain undischarged and unstayed for a period in excess of thirty (30)
days; or Borrower, any Domestic or any Supported Foreign Subsidiary shall
otherwise dissolve or cease to exist except as expressly permitted pursuant to
Section 8.08.
(j) Collateral Documents; Failure of Security or Subordination.
For any reason other than a release of Liens in accordance with the terms of
the Loan Documents, including Section 1.05 upon the occurrence of a Release
Event, or the failure of the Agent and the Lenders to take any action available
to them to maintain the perfection of the Liens created in favor of the Agent,
for the benefit of itself and the Holders of Secured Obligations, pursuant to
this Agreement and the Collateral Documents, any Collateral Document ceases to
be in full force and effect or any Lien intended to be created thereby ceases
to be or is not valid and perfected; or any Lien in favor of the Agent, for the
benefit of itself and the Holders of Secured Obligations contemplated by this
Agreement or any Collateral Document, or the subordination provisions of the
documents and instruments evidencing any Permitted Subordinated Indebtedness
shall, at any time, be invalidated or otherwise cease to be in full force and
effect; or any such Lien or any Obligation shall be subordinated or shall not
have the priority contemplated by this Agreement, the Collateral Documents or
such subordination provisions, for any reason.
(k) Change in Control. (i) Any Change of Control occurs; (ii)
Borrower shall cease to own directly or indirectly all of the capital stock of
the Domestic Subsidiaries and the Supported Foreign Subsidiaries (other than
director's qualifying shares); or (iii) (a) Borrower shall cease to own at
least 51% of each class of the capital stock of each Subsidiary of the Borrower
other than Domestic Subsidiaries and Supported Foreign Subsidiaries; (b)
Borrower and/or Itel shall cease to own at least 80% of each class of the
capital stock of each Subsidiary of the Borrower other than the Domestic
Subsidiaries and Supported Foreign Subsidiaries; or (c) any such capital stock
held by Itel shall have been obtained other than in exchange for cash proceeds
or by debt conversion equal to the fair market value of such capital stock.
(l) Employee Benefit Related Liabilities. (i) Any Termination
Event occurs which the Agent believes could subject Borrower or an ERISA
Affiliate to a material liability to pay money; (ii) the plan administrator of
any Plan applies under Section 412(d) of the IRC for a waiver of the minimum
funding standards of Section 412(a) of the IRC and the Agent believes
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that the substantial business hardship upon which the application for the
waiver is based could subject either the Borrower or any ERISA Affiliate to a
material liability to pay money.
(m) Contribution Agreement Default. Any party to the
Contribution Agreement shall terminate or revoke any of its obligations under
the Contribution Agreement or breach any of the terms of the Contribution
Agreement.
(n) Subordination Default. Any breach or other violation by
any holder of Permitted Subordinated Indebtedness of the subordination or
enforcement restrictions, including, without limitation, those in the
Subordination Agreement, shall occur.
(o) Subsidiary Guaranty Default. Any Subsidiary party to any
Subsidiary Guaranty or Foreign Subsidiary Guaranty shall terminate or revoke
any of its obligations under its Subsidiary Guaranty or Foreign Subsidiary
Guaranty, breach any of the terms of its Subsidiary Guaranty or Foreign
Subsidiary Guaranty, or any Subsidiary Guaranty or Foreign Subsidiary Guaranty
shall otherwise become unenforceable for any reason.
For purposes of this Agreement and each of the other Loan
Documents, an Event of Default shall be deemed "continuing" until cured or
waived in writing in accordance with Section 12.08.
10.02. Rights and Remedies.
(a) Acceleration and Termination of Commitments. Upon the
occurrence of any Event of Default described in Section 10.01(f) or 10.01(g)
with respect to Borrower or any Domestic Subsidiary, the Commitments shall
automatically and immediately terminate and the unpaid principal amount of and
any and all accrued interest on the Loans, all Reimbursement Obligations and
all other Agreement Obligations shall automatically become immediately due and
payable, with all additional interest from time to time accrued thereon and
without presentment, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by Borrower, and the obligation of each
Lender to make any Loan hereunder and of each Issuing Bank to issue any Letter
of Credit shall thereupon terminate; and upon the occurrence and during the
continuance of any other Event of Default, the Agent shall at the request, or
may with the consent, of the Requisite Lenders, by written notice to Borrower,
(i) declare that the Commitments are terminated, whereupon the Commitments and
the obligation of each Lender to make any Loan hereunder and of each Issuing
Bank to issue any Letter of Credit shall immediately terminate, and (ii)
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loans, and all Reimbursement Obligations and all other
Agreement Obligations to be, and the same shall thereupon be, immediately due
and payable with all additional interest from time to time accrued thereon and
without presentment, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by Borrower.
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(b) Deposit for Letters of Credit. In addition, upon demand by
the Agent, the applicable Issuing Bank or the Requisite Lenders after the
occurrence and during the continuance of any Event of Default, Borrower shall
deposit with the Agent for the benefit of the applicable Issuing Bank with
respect to each Letter of Credit then outstanding which was issued by such
Issuing Bank, cash or Cash Equivalents in an amount equal to the greatest
amount for which such Letter of Credit may be drawn. Such deposit and cash
deposits shall be held by the Agent for the benefit of such Issuing Bank as
cash collateral and security for, and to provide for the payment of, the
Reimbursement Obligations, and may, and will at the request of the applicable
Issuing Bank, be applied by the Agent from time to time in payment of any of
the Reimbursement Obligations then due and payable. Borrower grants to the
Agent, for the benefit of itself and the Holders of Secured Obligations, a
security interest in and right of setoff against any such deposit or deposits.
Pending the application of such deposit to payment of the Reimbursement
Obligations, the Agent may invest such deposit in an open account or similar
immediately available savings deposit and all interest accrued thereon shall be
held with such deposit as additional security for the Reimbursement
Obligations. Such deposits shall be held by the Agent until the Reimbursement
Obligations have been paid in full and all Letters of Credit have expired or
been cancelled.
(c) Rescission. If at any time after acceleration of the
maturity of the Loans, Borrower shall pay all arrears of interest and all
payments on account of principal of the Loans and Reimbursement Obligations
which shall have become due otherwise than by acceleration (with interest on
principal and, to the extent permitted by law, on overdue interest, at the
rates specified in this Agreement) and all Events of Default and Potential
Events of Default (other than nonpayment of principal of and accrued interest
on the Loans due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to Section 12.08, then by written notice to
Borrower, the Requisite Lenders may elect, in the sole discretion of such
Requisite Lenders, to rescind and annul the acceleration and its consequences
and thereupon the Agent shall release any deposit made pursuant to Section
10.02(b); but such action shall not affect any subsequent Event of Default or
Potential Event of Default or impair any right or remedy consequent thereon.
The provisions of the preceding sentence are intended merely to bind the
Lenders to a decision which may be made at the election of the Requisite
Lenders; they are not intended to benefit Borrower and do not give Borrower the
right to require the Lenders to rescind or annul any acceleration hereunder,
even if the conditions set forth herein are met.
ARTICLE XI
THE AGENT
11.01. Appointment. (a) Each of the Lenders and each of the
Issuing Banks hereby designates and appoints Chemical Bank as the Agent of such
Lender and such Issuing Bank under this Agreement and the Loan Documents, and
each of the Lenders and each of the Issuing Banks hereby irrevocably authorizes
the Agent to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are incidental
thereto. The Agent agrees to act as such on the express conditions contained
in this Article XI.
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(b) The provisions of this Article XI are solely for the
benefit of the Agent, the Lenders and the Issuing Banks, and Borrower shall
have no right to rely on or enforce any of the provisions hereof (other than as
expressly set forth in Section 11.07 or in Section 11.08). In performing its
functions and duties under this Agreement, the Agent shall act solely as agent
of the Issuing Banks and the Holders of Secured Obligations and does not assume
and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for Borrower or any of its Affiliates.
11.02. Nature of Duties. The Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement or in
the other Loan Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement
a fiduciary relationship in respect of any Holder of Secured Obligations or any
Issuing Bank. Nothing in this Agreement or any of the other Loan Documents,
expressed or implied, is intended to or shall be construed to impose upon the
Agent any obligations in respect of this Agreement or any of the other Loan
Documents except as expressly set forth herein or therein. Each Holder of
Secured Obligations and each Issuing Bank shall make its own independent
investigation of the financial condition and affairs of Borrower and its
Subsidiaries in connection with the making and the continuance of the Loans
hereunder, the issuance of Letters of Credit and the entering into any Eligible
Hedging Contract and shall make its own appraisal of the creditworthiness of
Borrower and its Subsidiaries, and the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any
Holder of Secured Obligations or Issuing Bank with any credit or other
information with respect thereto, whether coming into its possession before the
Effective Date or at any time or times thereafter. Each Lender acknowledges
that neither the Agent nor counsel to the Agent nor any other Lender or
Original Lender is providing any assurances, or shall have any responsibility,
with respect to the ownership of the Property or the absence of any prior Liens
or defects of title, or the legality, sufficiency or effect of any mortgage,
certificate or notice, or any other document, or the validity, creation,
perfection or priority of any Lien, or as to any decision to request, take,
defer, omit or release any Collateral or to investigate or not to investigate
any of those matters, and each Lender agrees to look solely to its rights as
one of the Lenders with respect to any of the foregoing. If the Agent seeks
the consent or approval of the Requisite Lenders to the taking or refraining
from taking any action hereunder, the Agent shall send notice thereof to each
Lender. The Agent shall promptly notify each Lender at any time that the
Requisite Lenders or, where expressly required, all of the Lenders, have
instructed the Agent to act or refrain from acting pursuant hereto.
11.03. Rights, Exculpation, Etc. Neither the Agent nor any of
its Affiliates nor any of its officers, directors, employees, agents, attorneys
or consultants shall be liable to any Holder of Secured Obligations or any
Issuing Bank for any action taken or omitted by it or such Person hereunder or
under any of the Loan Documents, or in connection herewith or therewith, except
that (i) the Agent shall be obligated on the terms set forth herein for
performance of its express obligations hereunder, and (ii) no Person shall be
relieved of any liability imposed by law for its gross negligence or willful
misconduct (as determined by the final judgment of a court of competent
jurisdiction). The Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith pursuant to the terms of this
Agreement and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Holder of
Secured Obligations to whom payment was due, but not
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made, shall be to recover from other Holders of Secured Obligations any payment
in excess of the amount to which they are determined to have been entitled.
The Agent shall not be responsible to any Holder of Secured Obligations or any
Issuing Bank for any recitals, statements, representations or warranties herein
or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement, any of the Collateral
Documents or any of the other Loan Documents, or any of the transactions
contemplated hereby and thereby, or of any of the Transaction Documents or any
of the transactions contemplated thereby, or for the financial condition of
Borrower or any of its Subsidiaries. The Agent shall not be required to make
any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any of the Loan Documents
or the financial condition of Borrower or any of its Subsidiaries, or the
existence or possible existence of any Potential Event of Default or Event of
Default. The Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the other Loan Documents the Agent is permitted or required to take or
to grant, and if such instructions are promptly requested, the Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from the Requisite
Lenders or, where expressly required, all of the Lenders. Without limiting the
foregoing, no Holder of Secured Obligations or Issuing Bank shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting under this Agreement, the Collateral Documents or any of
the other Loan Documents in accordance with the instructions of the Requisite
Lenders or, where expressly required, all of the Lenders.
11.04. Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement, the Collateral Documents or any of the
other Loan Documents and its duties hereunder or thereunder, upon advice of
legal counsel (including counsel for Borrower), independent public accountants
and other experts selected by it in good faith.
11.05. Indemnification. To the extent that the Agent is not
reimbursed and indemnified by Borrower or Borrower fails upon demand by the
Agent to perform its obligations to reimburse or indemnify the Agent, the
Lenders will reimburse and indemnify the Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement, the Collateral Documents or any
of the other Loan Documents or any action taken or omitted by the Agent under
this Agreement, the Collateral Documents or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct, as
determined by the final judgment of a court of competent jurisdiction. The
obligations of the Lenders under this Section 11.05 shall survive the payment
in full of the Loans and Reimbursement Obligations and the termination of this
Agreement.
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11.06. The Agent Individually. With respect to its Pro Rata
Share hereunder and the Loans made by it, the Agent shall have and may exercise
the same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. The
terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its individual
capacity as a Lender or one of the Requisite Lenders. The Agent may accept
deposits from, lend money to, and generally engage in any kind of banking,
trust or other business with Borrower as if it were not acting as Agent
pursuant hereto.
11.07. Successor Agent; Resignation of Agent. (a) The Agent
may resign from the performance of its functions and duties hereunder at any
time by giving at least thirty (30) days prior written notice to the Lenders
and Borrower. In the event that the Agent gives notice of its desire to resign
from the performance of its functions and duties as Agent, any such resignation
shall take effect only upon the acceptance by a successor Agent of appointment
pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) The Requisite Lenders shall appoint a successor Agent who
shall be reasonably satisfactory to Borrower provided no such approval of the
Borrower shall be required after the occurrence and during the continuance of
an Event of Default.
(c) If a successor Agent shall not have been so appointed
within said thirty (30) day period, the retiring Agent, with the consent of
Borrower (which may not be withheld unreasonably), shall then appoint a
successor Agent who shall serve as Agent until such time, if any, as the
Requisite Lenders, with the consent of Borrower (which may not be withheld
unreasonably), appoint a successor Agent as provided above. No consent of the
Borrower shall be required after the occurrence and during the continuance of
an Event of Default.
(d) Upon the appointment of a successor Agent, the term "Agent"
shall, for all purposes of this Agreement, thereafter include such successor,
except that the retiring Agent shall reserve all rights as to Obligations
accrued or due to it, in its capacity as such, at the time of such succession
and all rights (whenever arising) under Section 12.04.
(e) Notwithstanding anything in this Section 11.07 to the
contrary, no Person shall serve as an Agent unless such Person is a Lender.
11.08. Collateral Matters. (a) Each of the Lenders and each
of the Issuing Banks authorizes and directs the Agent to enter into the Loan
Documents relating to the Collateral for the benefit of itself and the Holders
of Secured Obligations. Each of the Lenders and each of the Issuing Banks
agrees that any action taken by the Agent or the Requisite Lenders (or, where
required by the express terms of this Agreement or any other Loan Document, a
greater proportion of the Lenders) in accordance with the provisions of this
Agreement or the other Loan Documents, and the exercise by the Agent or the
Requisite Lenders (or, where so required, such greater proportion) of the
powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all of the
Lenders and Issuing Banks. Without limiting the generality of the foregoing,
the Agent shall have the sole and exclusive right and authority to (i) act as
the disbursing and collecting agent for the Lenders and the Issuing Banks with
respect to all payments and collections arising in
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connection with this Agreement and the other Loan Documents relating to the
Loans or Collateral; (ii) execute and deliver each Loan Document relating to
the Collateral and accept delivery of each such agreement delivered by the
Borrower or any of its Subsidiaries; (iii) act as collateral agent for the
Lenders and Issuing Banks for purposes of the perfection of all security
interests and Liens created by such agreements and all other purposes stated
therein, provided, however, the Agent hereby appoints, authorizes and directs
the Lenders and the Issuing Banks to act as collateral sub-agent for the Agent,
the Lenders and the Issuing Banks for purposes of the perfection of all
security interests and Liens with respect to the Borrower's and its
Subsidiaries' respective deposit accounts maintained with, and cash and Cash
Equivalents held by, such Lender or such Issuing Bank; (iv) manage, supervise
and otherwise deal with the Collateral in accordance with the terms of this
Agreement and the other Loan Documents; (v) take such action as is necessary or
desirable to maintain the perfection and priority of the security interests and
liens created or purported to be created by the Loan Documents; and (vi) except
as may be otherwise specifically restricted by the terms of this Agreement or
any other Loan Document, exercise all remedies given to the Agent, the Lenders
or the Issuing Banks with respect to the Collateral under the Loan Documents
relating thereto, under applicable law or otherwise.
(b) The Holders of Secured Obligations hereby irrevocably
authorize the Agent, at the option and in the discretion of the Agent, to
release any Lien granted to or held by the Agent upon any Collateral (a) upon
the occurrence of the Release Event or (b) (i) upon termination of the
Commitments and payment and satisfaction of all Loans, Reimbursement
Obligations, other Letter of Credit Obligations (whether or not due) and all
other Agreement Obligations which have matured and which the Agent has been
notified in writing are then due and payable; or (ii) constituting property
being sold or disposed of if Borrower certifies to the Agent that the sale or
disposition is made in compliance with Section 8.02 (and the Agent may rely
conclusively on any such certificate, without further inquiry); or (iii)
constituting property in which the Borrower owned no interest at the time the
Lien was granted or at any time thereafter; or (iv) if approved, or with
consent, authorized or ratified in writing by the Agent at the direction of the
Requisite Lenders (or, where so required, all of the Lenders). Upon request by
the Agent at any time, the Lenders will confirm in writing the Agent's
authority to release particular types or items of Collateral pursuant to this
Section 11.08(b).
(c) Without in any manner limiting the Agent's authority to act
without any specific or further authorization or consent by the Requisite
Lenders (as set forth in Section 11.08(b)), each Lender agrees to confirm in
writing, upon request by Borrower, the authority to release Collateral
conferred upon the Agent under clauses (i) through (iv) of Section 11.08(b).
So long as no Event of Default is then continuing, upon receipt by the Agent of
the net cash proceeds of any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Agreement, and upon at least five (5)
Business Days' prior written request by Borrower, the Agent shall (and is
hereby irrevocably authorized by the Holders of Secured Obligations to) execute
such documents as may be necessary to evidence the release of the Liens granted
to the Agent for the benefit of the Holders of Secured Obligations herein or
pursuant hereto upon such Collateral; provided, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent's opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of Borrower in respect of) all
interests
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retained by Borrower, including, without limitation, the proceeds of any sale,
all of which shall continue to constitute part of the Collateral.
(d) The benefit of the Collateral Documents and of the
provisions of this Agreement relating to the Collateral shall extend to and be
available in respect of any Obligations ("Related Obligations") which arise
under any Eligible Hedging Contracts or which are otherwise owed to Persons
entitled to indemnification pursuant to Section 12.04; provided that (i) the
Related Obligations shall be entitled to the benefit of the Collateral to the
extent and with the priority expressly set forth in this Agreement and the
Collateral Documents, and to such extent the Agent shall hold, and have the
right and power to act with respect to, the Collateral on behalf of and as
agent for the holders of the Related Obligations; but the Agent is otherwise
acting solely as agent for the Lenders and the Issuing Banks and shall have no
separate fiduciary duty, duty of loyalty, duty of care, duty of disclosure or
other obligation whatsoever to any holder of Related Obligations; and (ii) all
matters, acts and omissions relating in any manner to the Collateral, or the
omission, creation, perfection, priority, abandonment or release of any Lien,
shall be governed solely by the provisions of this Agreement and the Collateral
Documents, and no separate Lien, right, power or remedy shall arise or exist in
favor of any Holder of Secured Obligations under any separate instrument or
agreement or in respect of any Related Obligations; and (iii) each Holder of
Secured Obligations shall be bound by all actions taken or omitted, in
accordance with the provisions of this Agreement and the Collateral Documents,
by the Agent and the Requisite Lenders or, where expressly required, all of the
Lenders, each of whom shall be entitled to act at its sole discretion and
exclusively in its own interest given its own Commitments and its own interest
in the Loans, Reimbursement Obligations, Letter of Credit Obligations and its
other Agreement Obligations, without any duty or liability to any other Holder
of Secured Obligations or as to any Related Obligations and without regard to
whether any Related Obligations remain outstanding or are deprived of the
benefit of the Collateral or become unsecured or are otherwise affected or put
in jeopardy thereby; and (iv) no holder of Related Obligations and no other
Holder of Secured Obligations (except the Agent and the Lenders, to the extent
set forth in this Agreement) shall have any right to be notified of, or to
direct, require or be heard with respect to, any action taken or omitted in
respect of the Collateral or under this Agreement or the Collateral Documents;
and (v) no holder of any Related Obligations shall exercise any right of
setoff, banker's lien or similar right except as expressly provided in Section
12.06.
11.09. Relations Among Lenders.
(a) Except with respect to the exercise of set-off rights of
any Lender in accordance with Section 12.06, the proceeds of which are applied
in accordance with this Agreement, and except as set forth below, each Lender
agrees that it will not take any action, nor institute any actions or
proceedings, against Borrower or any other obligor hereunder or with respect to
any Collateral or Loan Document, without the prior written consent of the
Requisite Lenders or, as may be provided in this Agreement or the other Loan
Documents, at the direction of the Agent.
(b) The Lenders are not partners or co-venturers, and no Lender
shall be liable for the acts or omissions of, or (except as otherwise set forth
herein in case of the Agent) authorized to act for, any other Lender.
Notwithstanding the foregoing, and subject to Section 12.07(a)
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hereof, any Lender shall have the right to enforce on an unsecured basis the
payment of the principal of and interest on any Loan made by it after the date
such principal or interest has become due and payable pursuant to the terms of
this Agreement.
(c) Each Lender acknowledges that it has, independently and
without reliance upon the Agent, any Issuing Bank, any Original Lender or any
other Lender and based on the financial statements prepared by the Borrower and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, any Issuing Bank or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
11.10. Notices to Itel. At any time after the occurrence and
during the continuance of an Event of Default, the Agent may, and shall at the
direction of the Requisite Lenders, notify Itel of the occurrence of such Event
of Default in connection with Itel's obligations under the Subordination
Agreement.
ARTICLE XII
MISCELLANEOUS
12.01. Survival of Warranties and Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of the
Loans hereunder.
12.02. Assignments and Participations.
(a) At any time after the Effective Date, each Lender may
assign to one or more banks or financial institutions all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments, Loans, participations in the Letters of Credit
and its obligations to acquire such participations) in conformity with the
following provisions:
(i) each such assignment shall be of a constant, and not a
varying, percentage of the assigning Lender's rights and obligations under this
Agreement and the assignment shall transfer the same percentage of such
Lender's Commitment, Loans, Letter of Credit Obligations and other interests
hereunder; provided, however, any assignment by any Issuing Bank shall not
include an assignment of its obligation to issue Letters of Credit;
(ii) unless the Agent and the Borrower otherwise consent, the
aggregate amount of the Commitments of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$5,000,000 (provided that assignments between Lenders shall have no minimum
amount and assignments after the occurrence and during the continuance of an
Event of Default shall not require Borrower's consent regardless of the size of
such assignment);
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(iii) the Agent and the Issuing Banks shall each consent (which
consent shall not unreasonably be withheld) to each such assignment and the
parties to each such assignment shall execute and deliver to the Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,000; and
(iv) With respect to any assignment made at a time when no
Event of Default exists, the Borrower shall have consented to such assignment,
which consent shall not unreasonably be withheld.
Upon such execution, delivery, approval, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
date thereof, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned or negotiated
to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder (including, in respect of the Collateral, all
the rights and obligations of a Holder of Secured Obligations, as fully as if
such assignee had been named as a Lender in accordance with the terms of this
Agreement) and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned or negotiated by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.08, 2.09, 2.10, 3.09, 12.03 and 12.04, as well as to any fees
accrued for its account hereunder and not yet paid.
(b) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) the
assignment made under such Assignment and Acceptance is made without recourse
and, other than as provided in such Assignment or and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Document or any
other document, instrument or agreement executed or delivered in connection
herewith or therewith or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto or thereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any
Subsidiary of Borrower or the performance or observance by Borrower or any
Subsidiary of Borrower of any of its obligations under any Loan Document or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements most recently delivered pursuant to Article VI and
such other Loan Documents and other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, the Issuing Banks, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such
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assignee appoints and authorizes the Agent to take such action as an Agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender.
(c) The Agent shall maintain at its address referred to on
Schedule A a copy of each Assignment and Acceptance delivered to and accepted
by it and shall record in the Agent's Loan Account the names and addresses of
each Lender and the Commitment of, and principal amount of the Loans owing to,
such Lender from time to time. Borrower, the Agent and the Lenders may treat
each Person whose name is recorded in the Loan Account as a Lender hereunder
for all purposes of this Agreement.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and the assignee, the Agent shall, if such Assignment
and Acceptance has been properly completed and is in substantially the form of
Exhibit 1 and if the conditions for the assignment referred to in the
Assignment and Acceptance and set forth in Section 12.02(a) have been met, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Agent's Loan Account and (iii) give prompt notice thereof to
Borrower.
(e) Each Lender may sell participations to one or more banks or
other entities as to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitments,
Loans, participations in the Letters of Credit and its obligations to acquire
such participations); provided, that (i) notice thereof is given to the
Borrower and the Agent, (ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment to Borrower hereunder) shall
remain unchanged, (iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iv) the
participating banks or other entities shall be entitled to the benefit of the
cost protection provisions contained in Sections 2.03(f), 2.08, 2.09, 2.10,
2.14, and 3.09 to the same extent as if they were Lenders; provided, however,
that no such participating bank or entity shall be entitled to receive any
greater amount pursuant to such Sections than the Lender from which it
purchased its participation would have been entitled to receive in respect of
the amount of the participation transferred by such Lender to such
participating bank or entity had no transfer occurred, (v) Borrower, the Agent,
the Issuing Banks and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and with regard to any and all payments to be
made under this Agreement, and (vi) the holder of any such participation shall
not be entitled to voting rights under this Agreement; provided, that the
participation agreement between a Lender and its participants may provide that
such Lender will obtain the approval of such participant prior to any amendment
or waiver of any provisions of this Agreement which would (A) extend the
scheduled maturities of the Loans, the Termination Date or the Reimbursement
Obligations or the time of payment of interest thereon or fees, (B) reduce the
interest rate or any fees hereunder, or the principal amount of the Loans or
the Letter of Credit Obligations, (C) increase the aggregate amount of the
Commitment or the Loans of the Lender granting the participation, or increase
such Lender's Pro Rata Share (except by operation of Section 2.02(e)), (D)
release all or substantially all of the Collateral other than in connection
with the Release Event or (E)
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except as expressly contemplated herein or therein, release any of the
Subsidiary Guaranties or Foreign Subsidiary Guaranties.
(f) Upon the acceptance by the Agent of any Assignment and
Acceptance, the parties to such Assignment and Acceptance may at any time
request that new Notes be issued to the Lender assignor and the Lender assignee
by (i) providing written notice of such request to the Agent and the Borrower
and (ii) delivering to the Borrower such assigning Lender's Notes for
cancellation and substitution. Promptly following receipt by the Borrower of
any such notice, and verification from the Agent that the applicable Assignment
and Acceptance shall have been accepted by the Agent, the Borrower forthwith
shall cause to be executed, and shall deliver to the Lender assignee, a new
Note to the order of the assignee and, if applicable, a replacement Note to the
order of the Lender assignor, and such Notes shall equal the aggregate
principal amount of such assigning Lender's Notes issued by the Borrower
immediately prior to the acceptance by the Agent of the applicable Assignment
and Acceptance. The Borrower shall immediately upon delivery of such new
Note(s), cancel the original Note delivered by the Lender assignor to the
Borrower.
(g) Notwithstanding anything herein to the contrary, each
Lender may assign all or any portion of its rights under this Agreement as
collateral security to the Federal Reserve Bank or any Governmental Authority
succeeding to its functions.
12.03. Expenses.
(a) Generally. Whether or not any Funding Date shall have
occurred, Borrower agrees upon demand to pay, or reimburse the Agent for, all
such Agent's and any of its Affiliates' costs and expenses of every type and
nature (including, without limitation, the reasonable fees, expenses and
disbursements of attorneys and legal assistants (including allocated costs of
internal counsel and legal assistants), auditors, accountants, appraisers,
printers, insurance and environmental advisers, and other consultants retained
by the Agent, and other legal, travel, search and filing fees and expenses and
all fees, taxes (except income and franchise taxes), assessments and duties
incurred by any of them) incurred by the Agent or its Affiliates in connection
with (i) the negotiation, preparation and execution of this Agreement and any
amendments or waivers thereto (including, without limitation, the satisfaction
or attempted satisfaction of any of the conditions set forth in Article IV),
the Collateral Documents and the other Loan Documents or any amendment or
waiver thereto and the making of the Loans hereunder; (ii) the creation,
perfection or protection of the Agent's Liens in the Collateral for the benefit
of itself and the Holders of Secured Obligations (including, without
limitation, any fees and expenses for title and lien searches, filing and
recording fees and taxes, trustee's fees, duplication costs and corporate
search fees); (iii) reasonable fees, expenses and disbursements of the Agent's
legal counsel (including allocated costs of internal counsel and legal
assistants) in connection with the administration of this Agreement, the Loan
Documents, the Loans and the Collateral; and (iv) the protection, collection or
enforcement of any of the Obligations or the Collateral. In addition, Borrower
shall pay, or reimburse the Agent, the Issuing Banks and the Lenders for, all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys' and legal assistants' fees (including allocated costs of internal
counsel and costs of settlement) incurred by the Agent, any Issuing Bank or any
Lender prior to the occurrence of an Event of Default in commencing, defending
or intervening in any litigation or in filing a
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petition, complaint, answer, motion or other pleading in any legal proceeding
relating to the Borrower or any Subsidiary of Borrower and arising out of or in
connection with the Transaction Documents.
(b) After Default. Borrower further agrees to pay, or
reimburse the Agent, the Issuing Banks and the Lenders for all out-of-pocket
costs and expenses, including, without limitation, reasonable attorneys' and
legal assistants' fees, expenses and disbursements (including allocated costs
of internal counsel and costs of settlement) incurred by the Agent, any Issuing
Bank or any Lender after the occurrence of an Event of Default (i) in enforcing
any of the Obligations or in foreclosing against the Collateral or exercising
or enforcing any other right or remedy available by reason of such Event of
Default; (ii) in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or in
any insolvency or bankruptcy proceeding; (iii) in commencing, defending or
intervening in any litigation or in filing a petition, complaint, answer,
motion or other pleading in any legal proceeding relating to Borrower or any
Subsidiary of Borrower and related to or arising out of the transactions
contemplated hereby or by any of the Transaction Documents; (iv) in taking any
other action in or with respect to any suit or proceeding (whether in
bankruptcy or otherwise); (v) in protecting, preserving, collecting, leasing,
selling, taking possession of, or liquidating any of the Collateral; or (vi) in
attempting to enforce or enforcing any security interest in any of the
Collateral or any other rights under the Collateral Documents. Any payments
made by Borrower or received by the Agent and applied as reimbursements for
costs and expenses under this Section 12.03(b) shall be apportioned among the
Agent, the Issuing Banks and the Lenders in the order of priority set forth in
Section 2.06.
12.04. Indemnification and Waiver. Borrower agrees: (a) to
defend, protect, indemnify, and hold harmless the Agent, each and all of the
Issuing Banks and each and all of the Lenders, each of their respective
Affiliates and each of the respective officers, directors, employees and agents
of each of the foregoing (collectively called the "Indemnitees") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitees shall be designated a party thereto), imposed on, incurred by, or
asserted against such Indemnitees (whether direct, indirect or consequential
and whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities and commercial laws and regulations,
under common law or at equitable cause, or on contract or otherwise, including
any liabilities and costs under federal, state or local environmental, health
or safety laws, regulations, or common law principles, arising from or in
connection with the past, present or future operations of Borrower and its
Subsidiaries, or their respective predecessors in interest, or the past,
present or future environmental condition of the Property of Borrower or any
Subsidiary of Borrower, the presence of asbestos- containing materials at any
such Property, or the Release or threatened Release of any Contaminant into the
environment from any such Property) in any manner relating to or arising out of
this Agreement, the Collateral Documents or any of the other Transaction
Documents, the capitalization of Borrower, the Permitted Subordinated
Indebtedness, the Lenders' Commitments, the making of, issuance of, management
of and participation in the Loans or the Letters of Credit, or the use or
intended use of the Letters of Credit and the proceeds of the Loans hereunder
(collectively, the "Indemnified
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Matters"); provided, that Borrower shall have no obligation to an Indemnitee
hereunder with respect to (i) matters for which such Indemnitee has been
compensated pursuant to or for which an exemption is provided in Section
2.03(f) or 2.08(d) or any other provision of this Agreement and (ii)
Indemnified Matters caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a final judgment of a court of
competent jurisdiction; and (b) to assert no claim against the Agent, any of
the Lenders, any of the Issuing Banks or any other Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages, all of
which claims, if any, are hereby waived. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding clause (a) may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Matters incurred by the Indemnitees. Without prejudice to the survival of any
other agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this Section 12.04 shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of Credit and
the termination of this Agreement.
12.05. Limitation of Liability. No claim may be made by
Borrower, any Lender or other Person against the Agent, any Issuing Bank, or
any Lender or the Affiliates, directors, officers, employees, or agents of any
of them for any special, indirect, consequential or punitive damages in respect
of any claim for breach of contract or any other theory of liability arising
out of or related to the transactions contemplated by this Agreement or any
other Loan Document, or any act, omission or event occurring in connection
therewith, and Borrower and each Lender hereby waives, releases and agrees not
to sue upon any claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
12.06. Setoff. In addition to any Liens granted to the Agent,
the Issuing Banks or Lenders and any rights now or hereafter granted under
applicable law and not by way of limitation of any such Lien or rights, upon
the occurrence and during the continuance of any Event of Default, each Lender
and each Issuing Bank is hereby authorized by Borrower at any time or from time
to time, without notice to Borrower, or to any other Person (any such notice
being hereby expressly waived) to set off and to appropriate and to apply any
and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured
but not including trust accounts) and any other Indebtedness at any time held
or owing by that Lender or that Issuing Bank to or for the credit or the
account of Borrower against and on account of the Obligations of Borrower to
that Lender or that Issuing Bank including, but not limited to, all Loans and
Reimbursement Obligations and all claims of any nature or description arising
out of or connected with this Agreement or any of the other Loan Documents,
irrespective of whether or not (i) that Lender or that Issuing Bank shall have
made any demand hereunder or (ii) the Agent shall have declared the principal
of and interest on the Loans and other amounts due hereunder to be due and
payable as permitted by Article X and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
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12.07. Ratable Sharing; Defaulting Lender.
(a) Subject to Sections 2.06 and 12.07(b), the Lenders agree
among themselves that (i) with respect to all amounts received by them which
are applicable to the payment of the Agreement Obligations (excluding amounts
payable under this Agreement which are determined on a non-pro-rata basis,
including, without limitation, amounts payable under Sections 2.03(f), 2.04(c),
2.08(d), 2.09, 2.10, 2.13, 2.14, 3.09, 12.03 and 12.04), equitable adjustment
will be made so that, in effect, all such amounts will be shared among them
ratably in accordance with their Pro Rata Shares, whether received by voluntary
payment, by the exercise of the right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any or all of the
Agreement Obligations (excluding amounts payable under this Agreement which are
determined on a non-pro-rata basis, including, without limitation, amounts
payable under Sections 2.02(c), 2.03(f), 2.04(c), 2.08(d), 2.09, 2.10, 2.14,
3.09, 12.03 and 12.04) or the Collateral, (ii) if any of them shall by
voluntary payment or by the exercise of any right of counterclaim, setoff,
banker's lien or otherwise, receive payment of a proportion of the aggregate
amount of the Agreement Obligations held by it which is greater than its Pro
Rata Share of the payments on account of the Agreement Obligations (excluding
the fees described or referred to in Section 2.04), the one receiving such
excess payment shall purchase, without recourse or warranty, an undivided
interest and participation (which it shall be deemed to have been done
simultaneously upon the receipt of such payment) in such Agreement Obligations
owed to the others so that all such recoveries with respect to such Agreement
Obligations shall be applied ratably in accordance with their Pro Rata Shares;
provided, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to that
party to the extent necessary to adjust for such recovery, but without interest
except to the extent the purchasing party is required to pay interest in
connection with such recovery. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 12.07(a) may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
subject to Section 12.06, the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower
in the amount of such participation.
(b) In the event that any Lender fails to fund its Pro Rata
Share of any Borrowing requested or deemed requested by the Borrower which such
Lender is obligated to fund under the terms of this Agreement (the funded
portion of such Borrowing being hereinafter referred to as a "Non Pro Rata
Loan"), until the earlier of such Lender's cure of such failure and the
termination of the Commitments, the proceeds of all amounts thereafter repaid
to the Agent by the Borrower and otherwise required to be applied to such
Lender's share of all other Obligations pursuant to the terms of this Agreement
shall be advanced to the Borrower by the Agent on behalf of such Lender to
cure, in full or in part, such failure by such Lender, but shall nevertheless
be deemed to have been paid to such Lender in satisfaction of such other
Obligations. Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions of this Section 12.07(b) shall
apply only with respect to the proceeds of payments of Obligations and
shall not affect the conversion or continuation of Loans pursuant to
Section 2.03(c);
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(ii) any such Lender shall be deemed to have cured its failure
to fund its Pro Rata Share of any Borrowing at such time as an amount
equal to such Lender's original Pro Rata Share of the requested
principal portion of such Borrowing is fully funded to the Borrower,
whether made by such Lender itself or by operation of the terms of this
Section 12.07(b), and whether or not the Non Pro Rata Loan with respect
thereto has been repaid, converted or continued;
(iii) amounts advanced to the Borrower to cure, in full or in
part, any such Lender's failure to fund its Pro Rata Share of any
Borrowing ("Cure Loans") shall bear interest at the rate applicable to
Base Rate Loans under Section 2.03 in effect from time to time, and for
all other purposes of this Agreement shall be treated as if they were
Base Rate Loans;
(iv) regardless of whether or not an Event of Default has
occurred or is continuing, and notwithstanding the instructions of the
Borrower as to its desired application, all repayments of principal
which, in accordance with the terms of Section 2.06, would be applied to
the outstanding Base Rate Loans shall be applied first, ratably to all
Base Rate Loans constituting Non Pro Rata Loans, second, ratably to Base
Rate Loans other than those constituting Non Pro Rata Loans or Cure
Loans and, third, ratably to Base Rate Loans constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's
cure of the failure to fund its Pro Rata Share of any Borrowing and the
termination of the Commitments, the term "Requisite Lenders" for
purposes of this Agreement shall mean Lenders (excluding all Lenders
whose failure to fund their respective Pro Rata Shares of such Borrowing
have not been so cured) whose Pro Rata Shares represent more than
fifty-one percent (51%) of the aggregate Pro Rata Shares of such
Lenders; and
(vi) for so long as and until any such Lender's failure to fund
its Pro Rata Share of any Borrowing is cured in accordance with Section
12.07(b)(ii), (A) such Lender shall not be entitled to any Commitment
Fees with respect to its Commitment and (B) the Commitment Fee shall
accrue in favor of the Lenders which have funded their respective Pro
Rata Shares of such requested Borrowing, shall be allocated among such
performing Lenders ratably based upon their relative Commitments, and
shall be calculated based upon the average amount by which the aggregate
Commitments of such performing Lenders exceeds the sum of (I) the
outstanding principal amount of the Loans owing to such performing
Lenders, plus (II) the outstanding Reimbursement Obligations owing to
such performing Lenders, plus (III) the aggregate participation
interests of such performing Lenders arising pursuant to Section 3.06
with respect to undrawn and outstanding Letters of Credit.
12.08. Amendments and Waivers. No amendment or modification of
any provision of this Agreement shall be effective without the written
agreement of the Requisite Lenders and Borrower, and no termination or waiver
of any provision of this Agreement, or consent to any departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
the Requisite Lenders, which the Requisite Lenders shall have the right to
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grant or withhold at their sole discretion; except that any amendment,
modification, or waiver of any provision of this Agreement which would (i)
extend the time of expiration or termination of any of the Commitments or the
scheduled maturities of the Loans or the Reimbursement Obligations or the time
of payment of interest thereon or fees (including, without limitation by any
amendment to or waiver of Section 10.02(a)), (ii) reduce the interest rate, the
amount of any fees, indemnities or reimbursements hereunder, or the principal
amount of the Loans or the Letter of Credit Obligations (including, without
limitation by any amendment to or waiver of Section 10.02(a)), (iii) except
pursuant to Section 2.02(e) increase the aggregate amount of the Commitments or
the Loans of the Lenders or increase the Lender's Pro Rata Share, (iv) release
all or substantially all of the Collateral except after the occurrence of the
Release Event, (v) amend the definitions of "Requisite Lenders," "Pro Rata
Share", the provisions of Section 2.01(b), the next to the last sentence of
Section 12.20 or the provisions contained in Section 12.07 or in this Section
12.08 or the parties whose consent is required for action hereunder or under
the other Loan Documents, shall be effective only if evidenced by a writing
signed by or on behalf of all Lenders. No amendment, modification,
termination, or waiver of any provision of Article XI or any other provision
referring to the Agent shall be effective without the written concurrence of
the Agent. No amendment, modification, termination or waiver of any provision
of Article III shall be effective without the written consent of each of the
Issuing Banks. The Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of such Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower
to any other or further notice or demand in similar or other circumstances.
Any amendment, modification, termination, waiver or consent effected in
accordance with this Section 12.08 shall be binding on each assignee,
transferee or recipient of a Lender's Commitment or Loans, each future
assignee, transferee, recipient of a Lender's Commitment or Loans, and, if
signed by Borrower, on Borrower.
12.09. Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of an Event of Default or Potential Event of
Default if such action is taken or condition exists.
12.10. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telecopied, telexed or sent
by courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail
(registered or certified, with postage prepaid and properly addressed).
Notices to the Agent shall not be effective until received by the Agent. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section 12.10) shall be as set
forth in Schedule A or on the applicable Assignment and Acceptance, or, as to
each party, at such other address as may be designated by such party in a
written notice to all of the other parties.
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<PAGE> 112
12.11. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent, any Issuing Bank or any Lender in
the exercise of any power, right or privilege under any of the Loan Documents
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise
of any such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege. All rights and remedies
existing under the Loan Documents are cumulative to and not exclusive of any
rights or remedies otherwise available.
12.12. Termination. Upon the termination in whole of the
Commitments pursuant to the terms of this Agreement, Borrower shall pay to the
Agent for the benefit of the Lenders and the Issuing Banks an amount equal to
any and all Agreement Obligations then outstanding.
12.13. Marshalling; Recourse to Security; Payments Set Aside.
Neither any Lender nor the Agent shall be under any obligation to marshal any
assets in favor of Borrower or any other party or against or in payment of any
or all of the Obligations. Recourse to security shall not be required at any
time. To the extent that Borrower makes a payment or payments to the Agent or
the Lenders, or the Agent or the Lenders enforce their security interests or
exercise their rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, right and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
12.14. Severability. In case any provision in or obligation
under this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
12.15. Headings. Article and Section headings in this
Agreement and in the Table of Contents hereto are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
12.16. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT,
ON BEHALF OF ITSELF AND THE LENDERS, AT NEW YORK, NEW YORK BY ACKNOWLEDGING AND
AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT, ANY
LENDER, ANY ISSUING BANK OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL
BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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<PAGE> 113
12.17. Successors and Assigns; Subsequent Holders of Notes.
This Agreement and the other Loan Documents shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of the parties hereto and the successors and permitted assigns of the
Lenders. The terms and provisions of this Agreement shall inure to the benefit
of any assignee or transferee of the Loans and the Commitments of any Lender
(to the extent such assignment or transfer is effected in accordance with
Section 12.02), and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Lenders shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. Borrower's rights or any interest therein hereunder, and Borrower's
duties and Obligations hereunder, may not be assigned without the written
consent of all of the Lenders. All of Borrower's obligations and duties under
this Agreement and under each of the other Loan Documents shall be binding upon
each of Borrower's successors and assigns, including, without limitation, any
receiver, trustee or debtor-in-possession of or for Borrower.
12.18. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION
(B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK,
BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE
PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE
DISPUTE.
(B) OTHER JURISDICTIONS. BORROWER AGREES THAT THE AGENT, ANY
LENDER OR ANY ISSUING BANK SHALL HAVE THE RIGHT TO PROCEED AGAINST BORROWER OR
ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN
PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL
(INCLUDING, WITHOUT LIMITATION, THE REAL PROPERTY COLLATERAL) OR ANY OTHER
SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF SUCH PERSON. BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON
THE COLLATERAL (INCLUDING, WITHOUT LIMITATION, THE REAL PROPERTY COLLATERAL) OR
ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SUBSECTION.
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<PAGE> 114
(C) SERVICE OF PROCESS. BORROWER WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS,
IRREVOCABLY APPOINTS CT CORPORATION SYSTEM, BORROWER'S REGISTERED AGENT, WHOSE
ADDRESS IS 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS BORROWER'S AGENT FOR THE
PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. BORROWER
IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH
ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES
HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT LIMITATION, THE
REAL PROPERTY COLLATERAL) OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO
ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR
PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH
OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 12.18, WITH ITS COUNSEL.
12.19. Counterparts; Effectiveness; Inconsistencies. This
Agreement and any amendments, waivers, consents, or supplements may be executed
in counterparts, each of which when so executed and delivered shall be deemed
an original, but all such counterparts together shall constitute but one and
the same instrument. This Agreement shall become effective against each of
Borrower, each Lender and the Agent on the date when all of such parties have
duly executed and delivered this Agreement to each other (delivery by Borrower
to the Lenders and by any Lender to the Borrower and any other Lender being
deemed to have been made by
- 107 -
<PAGE> 115
delivery to the Agent). This Agreement and each of the other Loan Documents
shall be construed to the extent reasonable to be consistent one with the
other, but to the extent that the terms and conditions of this Agreement are
actually inconsistent with the terms and conditions of any other Loan Document,
this Agreement shall govern.
12.20. Performance of Obligations. Borrower agrees that the
Agent may, but shall have no obligation to, make any payment or perform any act
required of Borrower under any Loan Document or take any other action which the
Agent in its discretion deems necessary or desirable to protect or preserve the
Collateral, including, without limitation, any action to (i) pay or discharge
taxes, liens, security interests or other encumbrances levied or placed on or
threatened against any Collateral, (ii) effect any repairs or obtain any
insurance called for by the terms of any of the Loan Documents and to pay all
or any part of the premiums therefor and the costs thereof and (iii) pay any
rents payable by Borrower which are more than 30 days past due, or as to which
the landlord has given notice of termination, under any lease. The Agent shall
use its best efforts to give Borrower notice of any action taken under this
Section 12.20 prior to the taking of such action or promptly thereafter
provided the failure to give such notice shall not affect Borrower's
obligations in respect thereof. The Borrower agrees to pay the Agent, upon
demand, the principal amount of all funds advanced by the Agent under this
Section 12.20, together with interest thereon at the rate from time to time
applicable to Base Rate Loans from the date of such advance until the
outstanding principal balance thereof is paid in full. If the Borrower fails
to make payment in respect of any such advance under this Section 12.20 within
one (1) Business Day after the date the Borrower receives written demand
therefor from the Agent, the Agent shall promptly notify each Lender and each
Lender agrees that it shall thereupon make available to the Agent, in Dollars
in immediately available funds, the amount equal to such Lender's Pro Rata
Share of such advance. If such funds are not made available to the Agent by
such Lender within one (1) Business Day after the Agent's demand therefor, the
Agent will be entitled to recover any such amount from such Lender together
with interest thereon at the Federal Funds Rate (as such term is defined in the
definition of Alternate Base Rate) for each day during the period commencing on
the date of such demand and ending on the date such amount is received. The
failure of any Lender to make available to the Agent its Pro Rata Share of any
such unreimbursed advance under this Section 12.20 shall neither relieve any
other Lender of its obligation hereunder to make available to the Agent such
other Lender's Pro Rata Share of such advance on the date such payment is to be
made nor increase the obligation of any other Lender to make such payment to
the Agent. All outstanding principal of, and interest on, advances made under
this Section 12.20 shall constitute Obligations secured by the Collateral until
paid in full by the Borrower.
12.21. ENTIRE AGREEMENT. THIS WRITTEN CREDIT AGREEMENT
REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AS TO ITS SUBJECT MATTER AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS AMONG THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES.
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<PAGE> 116
IN WITNESS WHEREOF, this Agreement has been duly executed on the
date set forth above.
ANIXTER INC.,
as Borrower
By:______________________________
Name:_______________________
Title:______________________
CHEMICAL BANK,
as Agent
By:______________________________
Name:_______________________
Title:______________________
- S1-
<PAGE> 1
Amendment Exhibit 10.20(b)
to
Agreement
Rod F. Dammeyer ("Executive") and Itel Corporation ("Company") for
good and valuable consideration, receipt of which is hereby acknowledged,
hereby agree to amend their Agreement of January 1, 1992 as follows:
The first subparagraph of Section 3 of the Agreement is
amended to read: "Annual salary of $625,000".
The second subparagraph of Section 3 of the Agreement is
amended to read: "Annual bonus opportunity of 50% to 112.5%
of salary with a target of 75% of salary."
This Agreement shall be effective as of January 1, 1994 and shall
apply to services provided on and after that date.
Itel Corporation
By: /s/ JAMES E. KNOX /s/ ROD F. DAMMEYER
_______________________________ ____________________________________
James E. Knox Rod F. Dammeyer
<PAGE> 1
AGREEMENT Exhibit 10.20(c)
Rod F. Dammeyer ("Executive") and Itel Corporation ("Company") hereby
agree as follows:
1. Company will employ Executive and Executive will be employed
by Company as an executive officer of Company and such of its subsidiaries as
the Company shall designate from time to time. Designation of a subsidiary of
the Company as an employer of Executive ("Designated Employer") shall not be
affected by whether that employer continues to be a subsidiary of the Company.
2. The term of employment under this Agreement shall begin on
January 1, 1995 and shall end on the earlier of (a) the date specified in a
written notice by one party to the other, which date must be at least 2 years
after the date such notice is given, or (b) December 31, 2000."
3. Minimum compensation of Executive shall be as follows:
o Annual salary of $625,000.
o Annual bonus opportunity of 50% to 112.5% of salary
with a target of 75% of salary.
o Such long-term incentive opportunities as the
Compensation Committee of the Board of Directors in
its good faith judgment shall determine from time to
time to be appropriate.
o Other benefits equal to those currently provided by
the Company or its subsidiary, Anixter Inc., as those
benefits may be modified from time to time.
4. Offset against the compensation otherwise payable to Executive
by the Company shall be the compensation payable to the Executive by any
Designated Employer.
5. Upon completion of his employment pursuant to this Agreement
and the concurrent or subsequent termination, by resignation or otherwise, of
his employment by the Company, but not otherwise not withstanding the
provisions of the Agreement between the parties, dated January 1, 1992, Mr.
Dammeyer (a) shall be fully vested in all options granted to him by the Company
prior to 1995, shall be protected by adjustment of exercise prices and number
of covered shares against dilution by any extraordinary cash dividends or other
actions as provided in the warrants previously granted directors of the
Company, and shall have until the earlier of the specific expiration date
stated in each option granted to him by
<PAGE> 2
the Company prior to 1995 or the date two years after termination of his
employment to exercise that option; (b) shall receive a vested benefit in the
Company's Supplemental Executive Retirement Plan as if a "change of control"
shall have occurred at such time; (c) shall receive the split dollar life
insurance policy on his life now owned by the Company if the policy has not
previously been delivered to him; and(d) shall be vested in any regular or
supplemental pension or savings plans in which he has participated.
6. Performance of the obligations under this Agreement shall
discharge the Company and any Designated Employer from any other obligation
they may have to Executive in connection with any termination of his employment
by the Company and any Designated Employer.
7. If necessary, to avoid the limitation of Section 162(m) of the
Internal Revenue Code on the deductibility by the Company of the Executive's
compensation, a sufficient amount of the Executive's bonus may be deferred,
with fair interest, to such time that the deduction for the Executive's
compensation is not so limited.
Dated as of January 27, 1994
Itel Corporation
By /s/ JAMES E. KNOX /s/ ROD F. DAMMEYER
____________________________ ______________________________
James E. Knox Rod F. Dammeyer
<PAGE> 1
ITEL CORPORATION AND SUBSIDIARIES Exhibit 21.1
AS OF 12/31/93
ANIXTER, INC.
Anixter Canada, Inc.
Anixter de Mexico S.A. de C.V.
Anixter Holdings, Inc.
Anixter International, Inc.
Anixter Europe Holdings, B.V.
Anixter Netzwerke Gmbh
Anixter Belgium, N.V.
Anixter Deutschland GmbH
Anixter Espana S.A.
Anixter France, S.A.
Anixter Greece, L.L.C.
Anixter International N.V./S.A.
Anixter Italia S.r.l.
Anixter Int'l., Ltd. U.K.
Anixter U.K. Ltd.
Anixter Nederland NV
Anixter Norge AS
Anixter Portugal Lda
Anixter Switzerland SA/AG
Anixter Sweden AB
Conducter AB
Conducter Component AB
Component Vast AB
Component SYD AB
Conducter Communication AB
Component & Cable Trading AB
Conductor Consult AB
Anixter Australia Pty. Ltd.
Anixter Singapore PTE
Anixter Hong Kong
Anixter Puerto Rico, Inc.
Wirexpress, Inc.
Anixter Real Estate, Inc.
Anixter - Cincinnati
Anixter - Rotelcom
Anixter - Lincoln
ONE NETWORK PLACE, INC.
B.E.L. CORPORATION
CODCO, INC.
FOREIGN INVESTMENTS, INC.
GL HOLDING OF DELAWARE, INC.
Itel Containers International Corporation
Itel Container Corporation International
ITEL CONTAINER VENTURES INC.
ICV GP Inc.
ICV LP Inc.
Americontainer Limited Partnership
Container Concepts, Inc.
ITEL DISTRIBUTION SYSTEMS, INC.
Itel Transportation Services Corp.
<PAGE> 2
ITEL RAIL HOLDINGS CORPORATION
Itel HG, Inc.
Signal Capital Holdings Corporation
ITL Funding, Inc.
Itel Quadrum, Inc.
Quadrum, S.A. de C.V.
Administradora Quadrum, S.A. de C.V.
Arrendadora Financiera Quadrum, S.A. de C.V.
Administracion Quadrum, S.A. de C.V.
Carros de Ferrocarril de Durango
Endasa S.A. de C.V.
Factor Quadrum, S.A. de C.V.
Factor Quadrum de Mexico, S.A. de C.V.
General de Telecommunicaciones, S.A. de C.V.
Quadrum Telecommunications, Inc.
Quadrum Telecom, S.A. de C.V.
Maquinas y Servicios Especializados Q.M., S.A. de C.V.
Servicios Electronicos Quadrum, S.A. de C.V.
Servicios Profesionales Quadrum, S.A. de C.V.
Unidades de Mantenimiento Ferroviario
Itel Rail Corporation
Southern Railway of British Columbia, Ltd.
Fox River Valley Railroad Corporation
Green Bay and Western Railroad Company
Michigan & Western Railroad Company
Hartford and Slocomb Railroad Company
McCloud River Railroad Company
Rex Leasing, Inc.
Rex Railways, Inc.
Railcar Trust No. 1992-1
Railcar Associates, L.P.
Signal Capital Corporation
LMS Acquisition Corp.
SC Arizona, Inc.
SC Florida, Inc.
SC Connecticut, Inc.
Richdale, Ltd.
Signal Capital Projects, Inc.
Signal Capital Norwalk, Inc.
Pacific Precision Metal, Inc.
Tubing Seal Cap International
Sirena, Inc.
PLAINSBORO HOLDING CORPORATION
ANTEC CORPORATION
Itel Holdings, Inc.
Optical Networks, Inc.
Regal Technologies, Ltd.
Electronic Connector Corporation of Illinois
Anixter CATV Industries, Inc.
M.S.O. Supply Co.
Home Satellite Systems
- 2 -
<PAGE> 1
POWER OF ATTORNEY Exhibit 24.1
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Itel Corporation, a Delaware corporation (the "Corporation"), which
is about to file an annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, on Form 10-K hereby constitutes
and appoints Gary M. Hill, Rod F. Dammeyer, and James E. Knox, and each of
them, his or her true and lawful attorney-in-fact and agents, with full power
and all capacities, to sign the Corporation's Form 10-K and any or all
amendments thereto, and any other documents in connection therewith, to be
filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned and hereto set her or his hand and
seal as of the 25th day of March 1994.
/s/ Bernard F. Brennan /s/ Jerome Jacobson
/s/ F. Philip Handy /s/ John R. Petty
/s/ Harold Haynes /s/ John A. Pigott
/s/ Melvyn N. Klein /s/ Sheli Rosenberg
/s/ Samuel Zell
