<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1996
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ------------------ to -----------
Commission File Number 1-7340
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KELLWOOD COMPANY
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2472410
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 KELLWOOD PARKWAY, P.O. BOX 14374, ST. LOUIS, MO 63178
- --------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314)576-3100
------------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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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. [X]
At June 24, 1996, Kellwood Company had 21,240,543 shares of Common
Stock, par value $.01, outstanding. While it is difficult to
determine the number of shares owned by nonaffiliates, the Company
estimates that the aggregate market value of the Common Stock on
June 24, 1996 (based upon the closing price of these shares on the
New York Stock Exchange) held by nonaffiliates was approximately
$387,640,000.
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DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended April 30, 1996
(Item 1 in Part I; Items 5, 6, 7 and 8 in Part II, and Part IV).
Proxy Statement for Annual Meeting of Shareowners to be held on
August 22, 1996 (Items 10, 11, 12 and 13 in Part III).
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) Kellwood Company and its subsidiaries (the "Company")
manufacture and market apparel and related soft goods. Kellwood
Company was founded in 1961 as the successor by merger of fifteen
independent suppliers to Sears.
During the second half of the 1980's and the first half
of the 1990's, the Company implemented a business strategy to
expand its branded label products, broaden its customer base,
increase its channels of distribution and further develop its
global product sourcing capability. Since 1985, Kellwood has
acquired the following 14 domestic companies.
<TABLE>
<CAPTION>
Company Name Date of Acquisition
------------ -------------------
<S> <C>
* Cape Cod-Cricket Lane, Inc.<F1> . . . . . . . March, 1985
* Parsons Place Apparel Company, Ltd. (Sag Harbor)<F1> June, 1986
* E Z Sportswear (Melrose)<F1> . . . . . . . . . December, 1986
* En Chante, Inc.<F1> . . . . . . . . . . . . . December, 1986
* Robert Scott Ltd., Inc. (Robert Scott/David
Brooks)<F1> . . . . . . . . . . . . . . . . July, 1987
David Brooks Ltd., Inc.,<F1>
and Andrew Harvey Ltd.<F1>
* American Recreation Products, Inc. . . . . . . November, 1988
* Slumberjack, Inc.<F1> . . . . . . . . . . . . September, 1989
* Crowntuft Manufacturing Corp.<F1> . . . . . . October, 1989
* decorp INC.<F1> . . . . . . . . . . . . . . . October, 1990
* California Ivy, Inc. (Ivy) <F1> . . . . . . . July, 1992
* A. J. Brandon, Inc.<F1>. . . . . . . . . . . . December, 1992
* Goodman Knitting Co., Inc.<F1> . . . . . . . . July, 1993
* Halmode Apparel, Inc.. . . . . . . . . . . . . September, 1994
* David Dart, Inc. . . . . . . . . . . . . . . . November, 1994
and Force One, Inc.
<FN>
<F1> Subsequent to acquisition, these companies were
liquidated and consolidated into Kellwood Company as
separate divisions except for Slumberjack, Inc. which
was liquidated and consolidated into American
Recreation Products, Inc. The purpose of these
consolidations was to simplify the Company's
organizational structure, and has no impact on the
operations of these divisions.
</TABLE>
These companies are principally marketers of branded
apparel except for American Recreation Products, Inc. and
Slumberjack which are manufacturers and marketers of branded
camping soft goods and Crowntuft Manufacturing Corp. which is a
vertically integrated manufacturer of chenille robes.
In addition to its domestic acquisitions, in the early
1980's, the Company acquired Smart Shirts Limited of Hong Kong, a
leading shirt and blouse manufacturer in the Far East. Smart
Shirts, since its acquisition, continued to diversify its
manufacturing capabilities from its principal base of Hong Kong to
the People's Republic of China, Sri Lanka, Saipan and Costa Rica.
During fiscal year 1996, the Company shut down the facilities in
Saipan and Costa Rica.
Kellwood has invested $291 million acquiring companies
since the inception of the acquisition program that began in 1985.
These investments were primarily financed by cash provided from
operations and short-term borrowings. Except for recent
acquisitions, Kellwood's short-term borrowings related to these
acquisitions were subsequently replaced with long-term notes due
insurance companies or repaid with cash repatriated from Kellwood's
Far East operations, other cash provided by operations, or cash
provided by the public sale of common stock. The total investment
in subsidiaries during 1996, 1995 and 1994 was approximately
$4,935,000, $55,218,000, and $28,324,000, respectively.
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As a result of the above business strategy, the Company
has redirected its focus from primarily the manufacturing of
private label apparel and home fashions for Sears to a marketing-
driven emphasis on branded apparel and related soft goods. The
Company's acquisition strategy has further diversified its customer
base and has broadened its channels of distribution. As a result
of these efforts, sales to Sears declined to 7% of total sales in
fiscal year 1996, compared to 50% in fiscal year 1985.
(b) All of the Company's operations are in the apparel and
related soft goods industry.
(c) The Company manufactures and markets apparel and other
soft goods products made from cloth or fabric or knitted from yarn.
These products are manufactured primarily domestically and in the
Far East.
(i) The Company's products include diversified lines of
men's, women's and children's clothing, sleeping bags, and other
soft goods. Products are mainly sold to retailers under either the
Company's or customer's brands and labels.
(ii) The Company anticipates no significant change in
products or new industry segments which would require a material
investment. However, business acquisitions within the apparel and
related soft goods industry are continually being considered, and
it is anticipated that external and internal demands will generate
increasing requirements for capital. The Company has negotiated a
new credit facility agreement in the amount of $300 million, of
which up to $200 million can be utilized for short-term loans and
up to $200 million can be utilized for letters of credit. The new
credit facility was effective May 31, 1996. The combined
operating, cash and equity position of the Company should continue
to provide the capital flexibility necessary to fund future
opportunities as well as to meet existing obligations.
(iii) The Company purchases the majority of its raw
materials directly from numerous textile mills and yarn producers
and converters. The Company has not experienced difficulty in
obtaining raw materials essential to its business.
(iv) The Company holds patents covering various aspects
of its products, the machinery used to manufacture its products,
and various manufacturing processes. The Company is a licensee of
certain trade names and patented machines and processes. The
expiration, or invalidation, of any of the patents or licenses
would not, in the opinion of management, have a material effect
upon the continuation of business.
(v) Although specific styles are seasonal, the Company's
various product lines are manufactured and sold on a year-round
basis. Products are primarily manufactured and sold prior to each
of the principal retail selling seasons including spring, summer,
fall and holiday.
(vi) Consistent with the seasonality of specific product
offerings, the Company carries necessary levels of inventory to
meet the anticipated delivery requirements of its customers.
(vii) Approximately $142,857,000 (10%) of the
Company's sales in the fiscal year ended April 30, 1996, were to J.
C. Penney Company, Inc. ("J. C. Penney"). No customer accounts for
more than 10% of the Company's revenues. Other information
relating to J. C. Penney is set forth in the Company's 1996 Annual
Report to Shareowners, under the caption "Significant Customers" in
the Notes to Consolidated Financial Statements, which information
is incorporated herein by reference. The Company's management
believes that the relationship with J. C. Penney will continue into
the foreseeable future.
(viii) Approximately 20% of the Company's domestic
sales are produced under contracts for distribution on a seasonal
basis. It is normal for the merchandise manufactured under these
contracts to be sold within 12 months after
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production. Because of this, the Company does not believe backlog is
important for this merchandise. In addition to these contracts, the
backlog for domestic operations totalled approximately $390 million as
of April 30, 1996 ($376 million - 1995). The backlog for Far East
operations totalled approximately $75 million ($77 million - 1995).
All of the Company's backlog is expected to be filled within 12
months.
(ix) Government contracts or subcontracts with the
Company are not material.
(x) The Company has substantial competition from
numerous manufacturers and marketers, but accurate statistics
relative to the competitive position of the Company are not
available.
(xi) The Company has a continuing program for the purpose
of improving its products and production machinery. The Company is
not engaged in any material customer-sponsored research and
development programs. Approximately $612,000 and $525,000 were
spent on research and development activities during fiscal years
1996 and 1995 respectively. The dollar amount spent in the
research and development activities during fiscal 1994 was not
material.
(xii) In the opinion of management, there will be no
material effect on the Company resulting from compliance with any
federal, state or local provisions which have been enacted or
adopted regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment.
(xiii) At the end of fiscal 1996, there were
approximately 16,500 people employed by the Company. Substantially
all of the work force is non-union, and the Company considers its
relations with its employees to be satisfactory.
(d) Except for its Far East operations, the Company's foreign
activities including foreign manufacturing operations and customers
have not been material. The Company owns all of the outstanding
shares of Smart Shirts Limited, a Hong Kong corporation engaged in
apparel manufacturing, and other Far East companies under Smart
Shirts' management. The sales, operating profit, and identifiable
assets attributable to each geographic area are set forth in the
Company's 1996 Annual Report to Shareowners, under the caption
"Industry Segment and Geographic Area Information" in the Notes to
Consolidated Financial Statements, which note is incorporated
herein by reference. The risk attendant to the Company's Far East
operations is slightly greater than that of domestic operations
primarily due to quota allocations and political instability.
Utilization of existing quota rights and diversification of Far
East manufacturing capacity to various countries help to mitigate
these risks.
ITEM 2. PROPERTIES
At April 30, 1996, the Company operated 30 production plants
and various distribution facilities. Domestic business operated 18
plants in 8 states, two plants in the Dominican Republic, one plant
in Honduras, one plant in El Salvador and one plant in Canada.
These domestically managed plants aggregated to approximately
3,100,000 square feet and were operating at an estimated 91% of
capacity at April 30, 1996. Sixteen of these domestically managed
plants were primarily producing private label goods and seven were
primarily producing branded goods. The Company's Far East
subsidiaries operated seven plants which aggregated to
approximately 650,000 square feet and were operating at an
estimated 90% of capacity. Far East subsidiaries manage operations
in Hong Kong, Sri Lanka and China.
In management's opinion, current facilities generally are well
maintained and provide adequate production capacity for future
operations. However, management continues to evaluate the need to
reposition the Company's portfolio of businesses and facilities to
meet the needs of the changing markets it serves and reflect the
international business environment.
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The Company's operating facilities are primarily leased under
long-term capital leases with renewal options at decreasing
rentals. Certain facilities are leased under operating leases that
generally contain renewal options. The Company also leases its
corporate space in St. Louis County, Missouri and major showrooms
in New York City, New York; Dallas, Texas; and Los Angeles,
California.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several routine lawsuits incidental
to the Company's business. Management and general counsel are of
the opinion that the ultimate disposition of such litigation should
have no material adverse effect on the Company's financial position
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JUNE 24, 1996
<CAPTION>
Name of Office and Employment During
Officer Age the Last Five Fiscal Years
- ------------------ --- ----------------------------------------------------------------
<C> <C> <S>
William J. McKenna 69 Chairman and Chief Executive Officer since November 22, 1994;
Chairman, President and Chief Executive Officer (1991-1994)
James C. Jacobsen 61 Vice Chairman since November 22, 1994; Executive Vice
President Administration (1989-1994)
Hal J. Upbin 57 President and Chief Operating Officer since November 22,
1994; Executive Vice President Corporate Development (1992-
1994); Vice President Corporate Development (1990-1992);
President of American Recreation Products, Inc. (subsidiary)
(1988-1992) and Director since May 1, 1991
Enoch Harding, Jr. 65 Executive Vice President Operations since April 3, 1995;
President of Kellwood Sportswear (1989-1995)
John R. Henderson 48 Vice President Merchandising since June 1, 1995; Director of
Merchandising (1993-1995); Executive Vice President Marketing
of Kellwood She Knows (1992-1993)
Harry B. Holding 59 Executive Vice President Marketing since May 30, 1991
Lawrence E. Hummel 53 Vice President Controller since February 25, 1992; Controller
(1983-1992)
Roger D. Joseph 54 Vice President Treasurer since February 25, 1992; Treasurer
(1986-1992)
Leon M. McWhite 54 Vice President Human Resources since June 1, 1995; Vice
President (1994-1995); President of Kellwood
Lingerie/Activewear (1989-1994)
Verner L. Page 65 Vice President since February 26, 1991
Thomas H. Pollihan 46 Vice President, Secretary and General Counsel since May 27,
1993; General Counsel and Secretary (1989-1993)
Paul M. Rivard 54 Vice President Information Services since May 27, 1993;
Director of Management Information Services (1990-1993)
John A. Turnage 50 Vice President Manufacturing and Sourcing since February 28,
1989
</TABLE>
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The information required by this Item is set forth in the
Company's 1996 Annual Report to Shareowners, at page 1 under the
caption "Common Stock Data," which information is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the
Company's 1996 Annual Report to Shareowners, at page 28 under the
caption "Supplemental Selected Financial Data," which information
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is set forth in the
Company's 1996 Annual Report to Shareowners, at pages 29 and 30
under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which information
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the
report thereon of Price Waterhouse LLP dated May 30, 1996,
appearing at pages 18 to 30 of the Company's 1996 Annual Report to
Shareowners, are incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this Item regarding
directors is set forth in the Company's Proxy Statement for the
1996 Annual Meeting of Shareowners, at pages 3 and 4 under the
captions "Nominees for Election to Serve Until 1998" and "Directors
Continuing to Serve Until 1997," which information is incorporated
herein by reference.
(b) Reference is made to "Executive Officers of the
Registrant as of June 24, 1996" in Part I after Item 4.
(c) The information called for with respect to the
identification of certain significant employees is not applicable
to the registrant.
(d) There are no family relationships between the directors
and executive officers listed above. There are no arrangements nor
understandings between any named officer and any other person
pursuant to which such person was selected as an officer.
(e) Each of the officers named in Part I was elected to
serve in the office indicated until the first meeting of the Board
of Directors following the Annual Meeting of Shareowners in August
1996 and until his successor is elected and qualified.
(f) There are no legal proceedings involving directors,
nominees for directors, or officers.
The information required by this Item regarding compliance
with Section 16(a) of the Exchange Act is set forth in the
Company's Proxy Statement for the
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<PAGE> 8
1996 Annual Meeting of Shareowners at page 14 under the caption
"Compliance with Section 16(a) of the Exchange Act," which information
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the
Company's Proxy Statement for the 1996 Annual Meeting of
Shareowners, at pages 7 through 14 under the captions
"Compensation of Executive Officers," "Retirement Program," and
"Other Officer Agreements," which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is set forth in the
Company's Proxy Statement for the 1996 Annual Meeting of
Shareowners, at pages 2 and 6 under the captions "Security
Ownership of Certain Beneficial Owners" and "Management Ownership
of the Company's Stock," which information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the
Company's Proxy Statement for the 1996 Annual Meeting of
Shareowners, at page 12 under the caption "Compensation Committee
Interlocks and Insider Participation," which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements, together with the
report thereon of Price Waterhouse LLP dated May 30, 1996,
appearing at pages 18 to 30 of the 1996 Annual Report to
Shareowners are incorporated by reference in this Form 10-K. With
the exception of the aforementioned information and information
incorporated in Items 1, 5, 6, 7 and 8, the 1996 Annual Report to
Shareowners is not to be deemed filed as part of this Form 10-K.
The following financial statement schedule should also be read in
conjunction with the financial statements in such 1996 Annual
Report to Shareowners. Financial statement schedules not included
in this Form 10-K have been omitted because they are not applicable
or the required information is shown in the financial statements or
notes thereto. Separate financial statements of 50% or less owned
persons accounted for by the equity method which are not shown
herein have been omitted because, if considered in the aggregate,
they would not constitute a significant subsidiary.
(i) Financial Statements:
Report of Independent Accountants
Consolidated Statement of Earnings, Years Ended
April 30, 1996, 1995 and 1994
Consolidated Balance Sheet, April 30, 1996 and 1995
Consolidated Statement of Cash Flows, Years Ended
April 30, 1996, 1995 and 1994
Consolidated Statement of Shareowners' Equity,
Years Ended April 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
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(ii) Report of Independent Accountants on Financial
Statement Schedule:
Financial Statement Schedule for the Years Ended
April 30, 1996, 1995 and 1994:
Valuation and Qualifying Accounts (Schedule VIII)
Consent of Independent Accountants
(iii) Exhibits:
Exhibits filed as part of this report are listed
below. Certain exhibits have been previously filed
with the Commission and are incorporated herein by
reference.
<TABLE>
<CAPTION>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
<C> <S>
3.1 - Restated Certificate of Incorporation of Kellwood
Company, as amended, incorporated herein by
reference to Form 10-Q for the quarter ended July
31, 1987, SEC File No. 1-7340.
3.2 - By-Laws, as amended through November 21, 1995,
filed herewith.
4.1 - Note Purchase Agreement dated December 29, 1986,
with exhibits, incorporated herein by reference
to Form 10-Q for the quarter ended January 31,
1987, SEC File No. 1-7340.
4.2 - Indenture between the Registrant and Centerre
Trust Company of St. Louis, and the 9%
Convertible Subordinated Debentures due 1999,
incorporated herein by reference to Registration
Statement on Form S-2, Registration No. 2-93522,
effective October 18, 1984.
4.3 - Note Agreement dated July 1, 1993, incorporated
herein by reference to Form 10-Q for the quarter
ended July 31, 1993, SEC File No. 1-7340.
4.4 - Rights to Acquire Series A Junior Preferred
Stock, pursuant to a Rights Agreement between the
registrant and Centerre Trust Company of St.
Louis, incorporated herein by reference to
Registration Statement on Form 8-A, effective
June 24, 1986 and Amendment dated August 21,
1990, incorporated herein by reference to Form
10-Q for the quarter ended October 31, 1990, and
Amendment dated May 31, 1996 incorporated herein
by reference to Form 8-A/A effective June 3,
1996, SEC File No. 1-7340.
4.5 - Note Purchase Agreement dated December 1, 1987,
with exhibits, incorporated herein by reference
to Form 10-Q for the quarter ended January 31,
1988, SEC File No. 1-7340.
4.6 - Note Purchase Agreement dated December 15, 1989,
with exhibits, incorporated herein by reference
to the Form 10-Q for the quarter ended January
31, 1990, SEC File No. 1-7340.
4.7 - Credit Agreement dated as of May 31, 1996 among
Kellwood Company, certain commercial lending
institutions, and The Bank of Nova Scotia, as
Administrative Agent and Syndication Agent, and
Bank of America National Trust and Savings
Association, as documentation Agent, filed
herewith.
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<PAGE> 10
<CAPTION>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
<C> <S>
10.2<F*> - Employment Agreement dated December 9, 1992,
between Kellwood Company and William J. McKenna,
effective December 1, 1992, incorporated herein
by reference to the Form 10-Q for the quarter
ended January 31, 1993, SEC File No. 1-7340, and
Amendment dated May 28, 1993, effective May 1,
1993, incorporated herein by reference to Form
10-K for the fiscal year ended April 30, 1993,
SEC File No. 1-7340.
10.3<F*> - Form of Employment Agreement dated November 30,
1984, between Kellwood Company and executive
officers, incorporated herein by reference to
Form 10-K for the fiscal year ended April 30,
1985, SEC File No. 1-7340.
10.4<F*> - 1995 Stock Option Plan For Nonemployee Directors
and 1995 Omnibus Incentive Stock Option Plan,
incorporated herein by reference to Appendixes A
& B to the Company's definitive proxy statement
dated July 13, 1995, SEC File No. 1-7340.
10.5<F*> - Deferred Compensation Retirement Benefit
Agreement dated November 14, 1991, between
Kellwood Company and Harry B. Holding,
incorporated herein by reference to Form 10-K for
the fiscal year ended April 30, 1992, SEC File
No. 1-7340.
10.6<F*> - Death Benefit Compensation Agreement dated
November 14, 1991, between Kellwood Company and
Harry B. Holding, effective July 17, 1991,
incorporated herein by reference to Form 10-K for
the fiscal year ended April 30, 1992, SEC File
No. 1-7340.
10.7<F*> - Corporate Development Incentive Plan of 1986 (As
Amended) formerly the Key Executive Long-Term
Incentive Plan of 1983, incorporated herein by
reference to Form 10-K for the fiscal year ended
April 30, 1994, SEC File No. 1-7340.
13 - Portions of the Annual Report to Shareowners for
the fiscal year ended April 30, 1996, which are
incorporated by reference at Item 1 in Part I,
Items 5, 6, 7 and 8 in Part II, and Part IV;
filed herewith.
21 - Subsidiaries of the Company
23 - Consent of Independent Accountants, appearing at
page 12 of this report.
24 - Powers of Attorney: Ms. Dickerson and Messrs.
Bentele, Bottum, Genovese, Hunter, Marcus, Upbin
and Wenzel; filed herewith.
27 - Financial Data Schedule, filed herewith.
<FN>
<F*> Denotes management contract or compensatory plan.
</TABLE>
(b) REPORTS ON FORM 8-K:
No reports were filed on Form 8-K during the three months
ended April 30, 1996.
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<PAGE> 11
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.
KELLWOOD COMPANY
Dated: June 25, 1996 /s/ Thomas H. Pollihan
--------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following on
behalf of Kellwood Company and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ William J. McKenna
- ------------------------ Director, Chairman of the June 25, 1996
William J. McKenna Board, Chief Executive Officer
(principal executive officer)
/s/ James C. Jacobsen
- ------------------------ Director, Vice Chairman June 25, 1996
James C. Jacobsen (principal financial and
accounting officer)
Hal J. Upbin Director, President and
Chief Operating Officer
Raymond F. Bentele Director
/s/ Thomas H. Pollihan
------------------------
Edward S. Bottum Director Thomas H. Pollihan
Attorney-in-fact
Kitty G. Dickerson Director June 25, 1996
Leonard A. Genovese Director
Jerry M. Hunter Director
James S. Marcus Director
Fred W. Wenzel Director
</TABLE>
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<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Kellwood Company
Our audits of the consolidated financial statements referred
to in our report dated May 30, 1996 appearing at page 18 of the
1996 Annual Report to Shareowners of Kellwood Company (which report
and consolidated financial statements are incorporated by reference
in this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a) of this Form 10-
K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial
statements.
/s/ PRICE WATERHOUSE LLP
St. Louis, Missouri
May 30, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 033-64847) of Kellwood
Company of our report dated May 30, 1996 appearing at page 18 of
the 1996 Annual Report to Shareowners which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation
by reference of our report on the Financial Statement Schedule,
which appears at page 12 on this Form 10-K.
/s/ PRICE WATERHOUSE LLP
St. Louis, Missouri
June 25, 1996
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- --------------------- -------- --------
Additions
---------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
----------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED APRIL 30, 1996:
Allowance for
doubtful accounts $5,709 $1,601 -- $2,085 <FB> $5,225
YEAR ENDED APRIL 30, 1995:
Allowance for
doubtful accounts 4,273 920 492 <FA> (24)<FB> 5,709
YEAR ENDED APRIL 30, 1994:
Allowance for
doubtful accounts 4,118 1,152 -- 997 <FB> 4,273
<FN>
<FA> Balance acquired with acquisition.
<FB> Write-off bad debts (recoveries), net
</TABLE>
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<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
S.E.C. Exhibit
Reference No. Description
- -------------- -----------
<C> <S>
3.1 - Restated Certificate of Incorporation of
Kellwood Company, as amended,
incorporated herein by reference to Form
10-Q for the quarter ended July 31, 1987,
SEC File No. 1-7340.
3.2 - By-Laws, as amended through November 21,
1995, filed herewith.
4.1 - Note Purchase Agreement dated December
29, 1986, with exhibits, incorporated
herein by reference to Form 10-Q for the
quarter ended January 31, 1987, SEC File
No. 1-7340.
4.2 - Indenture between the Registrant and
Centerre Trust Company of St. Louis, and
the 9% Convertible Subordinated
Debentures due 1999, incorporated herein
by reference to Registration Statement on
Form S-2, Registration No. 2-93522,
effective October 18, 1984.
4.3 - Note Agreement dated July 1, 1993,
incorporated herein by reference to Form
10-Q for the quarter ended July 31, 1993,
SEC File No. 1-7340.
4.4 - Rights to Acquire Series A Junior
Preferred Stock, pursuant to a Rights
Agreement between the registrant and
Centerre Trust Company of St. Louis,
incorporated herein by reference to
Registration Statement on Form 8-A,
effective June 24, 1986 and Amendment
dated August 21, 1990, incorporated
herein by reference to Form 10-Q for the
quarter ended October 31, 1990, and
Amendment dated May 31, 1996 incorporated
herein by reference to Form 8-A/A
effective June 3, 1996, SEC File No. 1-
7340.
4.5 - Note Purchase Agreement dated December 1,
1987, with exhibits, incorporated herein
by reference to Form 10-Q for the quarter
ended January 31, 1988, SEC File No. 1-
7340.
4.6 - Note Purchase Agreement dated December
15, 1989, with exhibits, incorporated
herein by reference to the Form 10-Q for
the quarter ended January 31, 1990, SEC
File No. 1-7340.
4.7 - Credit Agreement dated as of May 31, 1996
among Kellwood Company, certain
commercial lending institutions, and The
Bank of Nova Scotia, as Administrative
Agent and Syndication Agent, and Bank of
America National Trust and Savings
Association, as documentation Agent,
filed herewith.
-14-
<PAGE> 15
<CAPTION>
S.E.C. Exhibit
Reference No. Description
- -------------- -----------
<C> <S>
10.2<F*> - Employment Agreement dated December 9, 1992,
between Kellwood Company and William J.
McKenna, effective December 1, 1992,
incorporated herein by reference to the Form
10-Q for the quarter ended January 31, 1993,
SEC File No. 1-7340, and Amendment dated May
28, 1993, effective May 1, 1993, incorporated
herein by reference to Form 10-K for the fiscal
year ended April 30, 1993, SEC File No. 1-7340.
10.3<F*> - Form of Employment Agreement dated November 30,
1984, between Kellwood Company and executive
officers, incorporated herein by reference to
Form 10-K for the fiscal year ended April 30,
1985, SEC File No. 1-7340.
10.4<F*> - 1995 Stock Option Plan For Nonemployee
Directors and 1995 Omnibus Incentive Stock
Option Plan, incorporated herein by reference
to Appendixes A & B to the Company's definitive
proxy statement dated July 13, 1995, SEC File
No. 1-7340.
10.5<F*> - Deferred Compensation Retirement Benefit
Agreement dated November 14, 1991, between
Kellwood Company and Harry B. Holding,
incorporated herein by reference to Form 10-K
for the fiscal year ended April 30, 1992, SEC
File No. 1-7340.
10.6<F*> - Death Benefit Compensation Agreement dated
November 14, 1991, between Kellwood Company and
Harry B. Holding, effective July 17, 1991,
incorporated herein by reference to Form 10-K
for the fiscal year ended April 30, 1992, SEC
File No. 1-7340.
10.7<F*> - Corporate Development Incentive Plan of 1986
(As Amended) formerly the Key Executive Long-
Term Incentive Plan of 1983, incorporated
herein by reference to Form 10-K for the fiscal
year ended April 30, 1994, SEC File No. 1-7340.
13 - Portions of the Annual Report to Shareowners
for the fiscal year ended April 30, 1996, which
are incorporated by reference at Item 1 in Part
I, Items 5, 6, 7 and 8 in Part II, and Part IV;
filed herewith.
21 - Subsidiaries of the Company
23 - Consent of Independent Accountants, appearing
at page 12 of this report.
24 - Powers of Attorney: Ms. Dickerson and Messrs.
Bentele, Bottum, Genovese, Hunter, Marcus,
Upbin and Wenzel; filed herewith.
27 - Financial Data Schedule, filed herewith.
<FN>
<F*> Denotes management contract or compensatory plan.
</TABLE>
-15-
<PAGE> 1
Exhibit 3.2
As amended through
November 21, 1995
KELLWOOD COMPANY
----------------
BY-LAWS
-------
OFFICES
-------
Section 1.1. Principal Office. The principal
----------------
office shall be in the City of Wilmington, County of New Castle,
State of Delaware, and the name of the resident agent in charge
thereof is The Prentice Hall Corporation System, Inc. (As amended
February 22, 1994, by Executive Committee Resolution.)
Section 1.2. Other Offices. The Corporation may
-------------
also have an office in the City of Chicago, State of Illinois, and
also offices at such other places as the Board of Directors may
from time to time determine or the business of the Corporation may
require.
1
<PAGE> 2
STOCKHOLDERS' MEETINGS
----------------------
Section 2.1. Place of Meetings. All meetings of
-----------------
stockholders for the election of directors shall be held at such
place, within or without the State of Delaware as the Board of
Directors may fix by resolution, or if no place is so fixed, then
at the general office of the Company at 600 Kellwood Parkway in
St. Louis County, Missouri. All meetings of stockholders, other
than meetings for the election of directors, shall be held at such
place, within or without the State of Delaware as may from time to
time be fixed by the Board and specified in the respective notices
or waivers of notice thereof. (As amended May 30, 1974, by Board
Resolution.)
Section 2.2. Annual Meetings. An annual meeting
---------------
of stockholders, commencing with the meeting during the fiscal
year 1995, shall be held on the fourth Thursday in August in each
year if not a legal holiday, and if a legal holiday then on the
next secular day following, at 10:00 A.M.; at which time they
shall elect by a plurality vote, a Board of Directors, and
transact such other business as may properly be brought before the
meeting. (As amended May 31, 1978, and November 23, 1993, by
Board Resolution.)
Section 2.3. Notice of Meeting. Written notice
-----------------
of the annual meeting shall be served upon or mailed to each
stockholder entitled to vote thereat at the stockholder's address
as appears on the books of the Corporation, at least ten days
prior to the meeting, and shall state the place, date and hour of
the meeting. The notice must be given not less than ten nor more
than sixty days before the date of the meeting to each stockholder
entitled to vote at the meeting. (As amended February 26, 1991,
by Board Resolution.)
Section 2.4. Stockholders' List. At least ten
------------------
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder as
shown on the records of the Corporation and the number of voting
shares held by each stockholder, shall be prepared by the
Secretary. The list shall be kept, either at a place within the
city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at
the place where the meeting is to be held for a period of at least
ten days prior to the meeting. During the ten day period, the list
shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours. The list
shall also be produced and kept at the time and place of the meeting
the whole time thereof, and subject to the inspection of any stockholder
2
<PAGE> 3
who may be present. (As amended February 26, 1991, by Board
Resolution.)
Section 2.5. Special Meetings. Special meetings
----------------
of the stockholders, for any purpose or purposes, unless otherwise
prescribed by statute or by the certificate of incorporation, may
be called by the Chairman of the Board or Secretary at the request
in writing of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed meeting. (As
amended May 29, 1986, by Board Resolution.)
Section 2.6. Notice of Special Meetings.
--------------------------
Written notice of a special meeting of stockholders, stating the
time and place and object thereof, shall be served upon or mailed
to each stockholder entitled to vote thereat at such address as
appears on the books of the Corporation, at least five days before
such meeting.
Section 2.7. Quorum. The holders of a majority
------
of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall be requisite and
shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by
statute, by the Certificate of Incorporation or by these By-Laws.
If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the
power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as
originally notified.
Section 2.8. Voting. When a quorum is present
------
at any meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or
of the Certificate of Incorporation or of these By-Laws, a
different vote is required in which case such express provision
shall govern and control the decision of such question. Each
stockholder shall have one vote for each share of stock having
voting power, registered in his name on the books of the corporation.
Except where the transfer books of the corporation shall have
been closed or a date shall have been fixed as a record date for
the determination of its stockholders entitled to vote, no share
of stock shall be voted on at any election of directors which shall
have been transferred on the books of the corporation twenty days
3
<PAGE> 4
next preceding such election of directors.
Section 2.9. Proxies. At any meeting of the
-------
stockholders every stockholder having the right to vote shall be
entitled to vote in person, or by proxy appointed by an instrument
in writing subscribed by the stockholder and bearing a date not
more than three years prior to the meeting, unless the proxy
provides for a longer period.
Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy, a stockholder
may validly authorize another person or persons to act for him as
proxy by: (a) executing a writing to that effect, which execution
may be accomplished by the stockholder or his authorized officer,
director, employee or agent signing the writing or causing his
signature to be affixed to the writing by any reasonable means
including, but not limited to, by facsimile signature; or (b)
transmitting or authorizing the transmission of the telegram,
cablegram, or other means of electronic transmission to the person
who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any telegram, cablegram
or other means of electronic transmission must either set forth or
be submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was
authorized by the stockholder. If it is determined that any
telegram, cablegram or other electronic transmission submitted
pursuant to clause (b) above is valid, the inspectors shall
specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to the preceding sentence
may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a
complete reproduction of the entire original writing or
transmission. (As amended February 26, 1991, by Board
Resolution.)
Section 2.10. Stockholder Nominations and
---------------------------
Proposals.
- ---------
(a) At any meeting of the stockholders, no business shall be
conducted which has not been properly brought before the meeting.
To be properly brought before a meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii)
otherwise properly brought before
4
<PAGE> 5
the meeting by or at the direction of the Board of Directors,
or (iii) otherwise properly brought before the meeting by a
stockholder.
(b) For business to be properly brought before a meeting by a
stockholder, the Secretary of the Corporation must have received
written notice not less than sixty (60) days nor more than ninety
(90) days prior to the meeting; provided, however, that in the
event that less than seventy (70) days' notice or prior public
disclosure is given or made to stockholders, notice by the
stockholder to be timely must be received no later than the close
of business on the tenth (10th) day following the day on which
such notice of the date of the meeting was mailed or the public
disclosure was made.
(c) In the case of stockholder nominations for election to the
Board of Directors, the notice shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupations or
employment of each such nominee for the past five (5) years, (iii)
the number of shares of the Corporation which are beneficially
owned by each such nominee, (iv) other directorships held by each
nominee, (v) the names of business entities of which each such
nominee owns a ten percent (10%) or more beneficial interest, and
(vi) all other information with respect to the nominees required
by the Federal proxy rules in effect at the time the notice is
submitted. In addition, the notice shall be accompanied by a
statement, over the signature of each proposed nominee, that he
consents to being a nominee, if elected he intends to serve as a
director, and confirming the information with respect to him set
forth in the notice.
(d) In the case of stockholder proposals other than the election
of directors, the notice shall set forth (i) a brief description
of the business to be brought before the meeting, (ii) the name,
age, business and residence address of the stockholder submitting
the proposal, (iii) the principal occupation or employment of that
stockholder, (iv) the number of shares of the corporation which
are beneficially owned by the stockholder, and (v) any material
interest of the stockholder in the business. The chairman of the
meeting may, if the facts warrant, determine and declare to the
meeting that a stockholder nomination or proposal was not made in
accordance with the foregoing procedure and the defective
nomination or proposal shall be disregarded and the inspectors of
election shall not count any votes cast in favor thereof.
Notwithstanding anything in these By-Laws to the contrary, no
elections or other business shall be conducted at any meeting of
the stockholders except in accordance with the procedures set
5
<PAGE> 6
forth in this Section 2.10. (Added by Board Resolution on May 29,
1986.) (As amended February 26, 1991, by Board Resolution.)
Section 2.11. Voting Procedures and Inspectors of
-----------------------------------
Elections.
- ---------
(a) The Corporation, by action of the Secretary, shall, in
advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting of and make a written report
thereof. The Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the
shares represented at a meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and
retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v)
certify their determination of the number of shares represented at
the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of the
inspectors.
(c) The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or
votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless
the Court of Chancery upon application by a stockholder shall
determine otherwise.
(d) In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the
proxies, any information provided in accordance with clause (b) of
Section 2.9 of these By-Laws, ballots and the regular books and
records of the Corporation, except that the inspectors may
consider other reliable information for the limited purpose of
reconciling proxies and ballots submitted by or on behalf of
banks, brokers, their nominees or similar persons which represent
more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable
6
<PAGE> 7
information for the limited purpose permitted herein, the inspectors
at the time they make their certification pursuant to subsection
(b)(v) of this Section shall specify the specific information
considered by them including the person or persons from whom they
obtained the information, when the information was obtained, the
means by which the information was obtained and the basis for the
inspectors' belief that the information is accurate and reliable.
(Added by Board Resolution on February 26, 1991.)
7
<PAGE> 8
DIRECTORS
---------
Section 3.1. Number of Directors. The number of
-------------------
directors of the corporation shall be ten. Directors need not be
stockholders of the corporation. The Board of Directors shall be
divided into two classes as nearly equal in number as may be, with
the term of office of one class, after the initial classification
at the 1983 annual stock-holders' meeting, to expire in each year.
When the number of directors is changed, any newly created
directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly
equal in number as possible. Subject to the foregoing and to
Section 3.3 below, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire
shall be elected to hold office for a term expiring at the second
succeeding annual meeting. (As amended by the Stockholders on
August 2, 1983, and by Resolution on May 31, 1989, by Resolution
on May 27, 1993, by Resolution on June 1, 1995 and by Resolution
on November 21, 1995.)
Section 3.2. Place of Meeting. The directors
----------------
may hold their meetings outside of Delaware, at the office of the
corporation or at such other places as they may be from time to
time to determine, or as shall be fixed in the respective notices
or waivers of notice of such meetings.
Section 3.3. Vacancies. If the office of any
---------
director or directors becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office, or
otherwise, or a new directorship is created, a majority of the
remaining directors, though less than a quorum, shall choose a
successor or successors, or a director to fill the newly created
directorship. If a vacancy in the Board of Directors occurs by
reason of death, resignation, retirement, disqualification,
removal from office, or otherwise, the director elected to fill
the vacancy shall have the same term as his predecessor. If the
vacancy is as a result of an increase in the number of directors,
the director elected to fill the newly created directorship shall
have the same term as that of the other directors of the class of
which he shall be a member. (As amended by the Stockholders on
August 2, 1983.)
Section 3.4. General Powers. The property and
--------------
business of the corporation shall be managed by its Board of
Directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
8
<PAGE> 9
Section 3.5. Committees of Directors. The Board
-----------------------
of Directors may, by resolution or resolutions passed by a
majority of the whole Board, designate one or more committees,
each committee to consist of two or more of the directors of the
corporation, which, to the extent provided in said resolution or
resolutions, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the
corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board
of Directors. The committees shall keep regular minutes of their
proceedings and report the same to the Board when required.
Section 3.6. Compensation of Directors. By
-------------------------
resolution of the Board, an annual or other periodic fee for
members of the Board may be established and expenses of attendance
at Board meetings, if any, may be allowed. Nothing herein
contained shall be construed to preclude any director from serving
the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 3.7. Annual Meeting. The first meeting
--------------
of the Board of Directors held after the annual meeting of the
shareholders in each year shall constitute the annual meeting of
the Board, and officers shall be elected at this meeting. Notice
of such meeting, unless waived, shall be given by mail or telegram
to each director elected at such annual meeting, at his address as
the same may appear on the records of the corporation, or in the
absence of such address, at his residence or usual place of
business, at least three (3) days before the day on which such
meeting is to be held. Said meeting may be held at such place as
the Board may fix from time to time or as may be specified or
fixed in such notice or waiver thereof.
Section 3.8. Special Meetings. Special meetings
----------------
of the Board of Directors may be held at any time on the call of
the Chairman of the Board or at the request in writing of any two
(2) directors. Notice of any such meeting, unless waived, shall
be given by mail or telegram to each director at his address as
the same appears on the records of the corporation not less than
one (1) day prior to the day on which such meeting is to be held
if such notice is by telegram, and not less than two (2) days
prior to the day on which the meeting is to be held if such
notice is by mail. If the Secretary shall fail or refuse to
give such notice, then the notice may be given by the officer
or any one of the directors making the call.
9
<PAGE> 10
Notwithstanding the foregoing, for purposes of dealing with an
emergency situation, as conclusively determined by the directors or
officer calling the meeting, notice may be given in person, by
telegram or cable, by telephone or wireless, or by any other means
that reasonably may be expected to provide similar notice, not less
than two (2) hours prior to the meeting. Any such meeting may be
held at such place as the Board may fix from time to time or as may
be specified or fixed in such notice or waiver thereof. Notice may
be waived in writing by any director, either before or after the
meeting. Any meeting of the Board of Directors shall be a legal
meeting without any notice thereof having been given, if all the
directors shall be present thereat, and no notice of a meeting shall
be required to be given to any director who shall attend such
meeting. (As amended by Board Resolution, May 29, 1986.)
Section 3.9. Action Without Meeting. Any action
----------------------
required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a meeting,
if prior to such action a written consent thereto is signed by all
members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of
the Board or committee.
Section 3.10. Quorum and Manner of Action. Except
---------------------------
as otherwise provided in the Certificate of Incorporation or in
these By-Laws, a majority of the total number of directors as at
the time specified by the By-Laws shall constitute a quorum at any
regular or special meeting of the Board of Directors. Except as
otherwise provided by law or by the Certificate of Incorporation,
as amended, or by these By-Laws, the act of a majority of the
directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a
quorum, a majority of the directors present may adjourn the
meeting from time to time until a quorum be had. Notice of any
adjourned meeting need not be given. Any director may require the
"ayes" and "noes" to be taken on any questions and recorded in the
minutes. (As amended by the Stockholders on August 2, 1983.)
Section 3.11. Notices. Whenever, under the
-------
pro-visions of the statutes or of the Certificate of Incorporation
or of these By-Laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail,
by depositing the same in a post office or letter box, in a
post-paid sealed wrapper, or by delivery to a telegraph company,
addressed to such director or stockholder at such address as
appears on the books of the corporation, or, in default of other
address, to such
10
<PAGE> 11
director or stockholder at the General Post Office in the City of
Dover, Delaware, and such notice shall be deemed to be given at the
time when the same shall be thus mailed or delivered by a telegraph
company.
Section 3.12. Waivers of Notice. Whenever any
-----------------
notice is required to be given under the provisions of the
statutes or of the Certificate of Incorporation, or of these
By-Laws, a waiver thereof in writing signed by the person or
persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
11
<PAGE> 12
OFFICERS
--------
Section 4.1. Executive Officers. The executive
------------------
officers of the corporation shall be a Chairman of the Board,
President, such number of Vice Presidents as the Board of
Directors may determine, a Secretary and a Treasurer. One person
may hold any two of said offices except the office of President
and Secretary. Additional officers may from time to time be
appointed by the Board of Directors.
Section 4.2. Election, Term of Office and
----------------------------
Eligibility. The executive officers of the corporation shall be
- -----------
elected annually by the Board of Directors at its annual meeting
or at a special meeting held in lieu thereof. Each officer,
except such officers as may be appointed in accordance with the
provisions of Section 4.3 shall hold office until his successor
shall have been duly chosen and qualified or until his death,
resignation or removal. The Chairman of the Board and the
President shall be and remain members of the Board of Directors.
None of the other officers need be members of the Board.
Section 4.3. Subordinate Officers, etc. The
-------------------------
Board of Directors may appoint such Assistant Secretaries,
Assistant Treasurers, Auditor and other officers, such committees
in addition to the Executive Committee, and such agents as the
Board may determine, to hold office for such period, and with such
authority and to perform such duties as the Board may from time to
time determine. The Board may, by specific resolution, empower
the President or the Executive Committee to appoint any such
subordinate officers or agents.
Section 4.4. Removal. The Chairman of the
-------
Board, the President, any Vice President, the Secretary and/or the
Treasurer may be removed at any time, either with or without
cause, but only by the affirmative vote of the majority of the
total number of directors as at the time specified by the By-Laws.
Any subordinate officer appointed pursuant to Section 4.3 may be
removed at any time, either with or without cause, by the majority
vote of the directors present at any meeting of the Board or by
any committee or officer empowered so to do by resolution of the
Board.
Section 4.5. Resignations. Any officer may
------------
resign at any time by giving written notice to the Board of
Directors or to the Chairman of the Board or the Secretary of the
corporation. Any such resignation shall take effect at the time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
12
<PAGE> 13
Section 4.6. Vacancies. A vacancy in any office
---------
because of death, resignation, removal, disqualification, or any
other cause shall be filled for the unexpired portion of the term
in the same manner in which an officer to fill said office may be
chosen pursuant to Section 4.2 and/or 4.3.
Section 4.7A. The Chairman of the Board. The
-------------------------
Chairman of the Board shall be the chief executive officer of the
corporation. He shall have executive authority to see that all
orders and resolutions of the Board of Directors are carried into
effect, and, subject to the control vested in the Board of
Directors by statute, by the Certificate of Incorporation, as
amended, or by these By-Laws, shall administer and be responsible
for the overall management of, the business and affairs of the
corporation. He shall preside at all meetings of the stockholders
and of the Board of Directors; and in general shall perform all
duties incident to the office of the Chairman of the Board and
such other duties as from time to time may be assigned to him by
the Board of Directors. (Amended July 28, 1964.)
Section 4.7B. The President. The President shall
-------------
perform such duties as may from time to time be assigned by the
Board of Directors, or the Chairman of the Board, and in the
absence or disability of the Chairman of the Board, shall perform
the duties of the Chairman of the Board.
Section 4.8. The Vice Presidents. In the event
-------------------
of the absence or disability of the Chairman of the Board and the
President, each Vice President, in the order of his seniority,
which shall be in the order of his election, shall perform the
duties of the President. The Vice President shall also perform
such other duties as from time to time may be assigned to him by
the Board of Directors.
Section 4.9. The Secretary. The Secretary
-------------
shall:
(a) Keep the minutes of the meetings of the
stockholders and of the Board of Directors in books provided for
that purpose;
(b) See that all notices are duly given in
accordance with the provisions of these By-Laws or as required by
law;
(c) Be custodian of the records and of the seal
of the corporation and see that the seal or a facsimile or
equivalent thereof is affixed to or impressed or reproduced
on all stock certificates prior to their issue, and on all
documents, the execution of which on behalf of the
13
<PAGE> 14
corporation under its seal is duly authorized;
(d) Have charge of the stock record books of the
corporation and keep or cause to be kept the stock record and
transfer books in such manner as to show at any time the number of
shares of each class of the capital stock of the corporation
issued and outstanding, the names and addresses of the holders of
record thereof, and the number of shares held by each; and exhibit
or cause to be exhibited at all reasonable times to any officer or
director, upon application, the original or duplicate stock
ledger;
(e) See that the books, reports, statements,
certificates, and all other documents and records required by law
are properly made, kept and filed;
(f) In general, perform all duties incident to the
Office of Secretary, and such other duties as are provided by
these By-Laws and as from time to time are assigned to him by the
Board of Directors or by the Chairman of the Board.
Section 4.10. The Assistant Secretaries. If one or
-------------------------
more Assistant Secretaries shall be appointed pursuant to the
provisions of this Article respecting subordinate officers, then,
at the request of the Secretary, or in his absence or disability,
the Assistant Secretary designated by the Secretary (or in the
absence of such designations, then any one of such Assistant
Secretaries) shall perform the duties of the Secretary, and when
so acting shall have all the powers of, and be subject to all the
restrictions upon, the Secretary.
Section 4.11. The Treasurer. The Treasurer shall:
-------------
(a) Receive, have charge and custody of, and be
responsible for all funds of, and securities owned or held by the
corporation, and in connection therewith, among other things:
keep or cause to be kept full and accurate records and accounts of
receipts and disbursements in books belonging to the corporation;
deposit or cause to be deposited to the credit of the corporation,
all monies, funds and securities so received in such bank or other
depository as the Board of Directors or an officer designated by
the Board may from time to time establish; and disburse or
supervise the disbursement of the funds of the corporation as may
be properly authorized and take or cause to be taken proper
vouchers for such disbursements;
(b) Render to the Board of Directors at any
meeting thereof, or from time to time whenever the Board of
14
<PAGE> 15
Directors or the President may require, an account of all
transactions as Treasurer and an account of the financial condition
of the corporation, and render or cause to be rendered a full
financial report at the annual meeting of the shareholders, if
called upon to do so;
(c) In general, perform all the duties incident to
the Office of Treasurer and such other duties as from time to time
may be assigned to him by the Board of Directors or by the
Chairman of the Board.
Section 4.12. The Assistant Treasurers. If one or
------------------------
more Assistant Treasurers shall be appointed pursuant to the
provisions of this Article respecting subordinate officers, then,
at the request of the Treasurer, or in his absence or disability,
the Assistant Treasurer designated by the Treasurer (or in the
absence of such designation, then any one of such Assistant
Treasurers), shall perform all the duties of the Treasurer and
when so acting shall have all the powers of, and be subject to all
the restrictions upon, the Treasurer.
Section 4.13. Salaries. The salaries of the
--------
officers shall be fixed from time to time by the Board of
Directors, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the
corporation.
Section 4.14. Bonds. If the Board of Directors
-----
shall so require, the Treasurer, and any Assistant Treasurer
and/or any other officer or agent of the corporation shall give
bond to the corporation in such amount and with such surety as the
Board of Directors may deem sufficient, conditioned upon the
faithful performance of their respective duties and offices.
Section 4.15. Delegation of Duties. In case of the
--------------------
absence of any officer of the corporation or for any other reason
which may seem sufficient to the Board, the Board of Directors
may, for the time being, delegate his powers and duties, or any of
them, to any other officer or to any director.
15
<PAGE> 16
SHARES OF STOCK
---------------
Section 5.1. Regulation. Subject to the terms
----------
of any contract of the corporation, the Board of Directors may
make such rules and regulations as it may deem expedient
concerning the issue, transfer, and registration of certificates
for share of the stock of the corporation, including the issue of
new certificates for lost or destroyed certificates, and including
the appointment of transfer agents and registrars.
Section 5.2. Stock Certificates. Certificates
------------------
for shares of stock of the corporation shall be respectively
numbered serially for each class of shares, or series thereof, as
they are issued, shall be impressed with the corporate seal or a
facsimile thereof, and shall be signed by the Chairman of the
Board or President or a Vice President, and by the Secretary or
Treasurer, or an Assistant Secretary or an Assistant Treasurer.
Any or all of the signatures on any certificate, including those
of transfer agents and registrars, may be a facsimile. Each
certificate shall exhibit the name of the corporation, the class
(or series of any class) and number of shares represented thereby,
the name of the holder, the par value of the shares represented
thereby or that such shares are without par value. Each
certificate shall be otherwise in such form as may be prescribed
by the Board of Directors. (Amended May 29, 1973.)
Section 5.3. Transfer of Shares. The
------------------
corporation may from time to time enter into an agreement or
agreements with one or more if its stockholders restricting the
transferability of its stock in accord with the general corporate
purpose to have its stock owned by persons actively engaged in the
corporate business. Subject to the terms of any such agreement,
shares of the capital stock of the corporation shall be
transferable on the books of the corporation by the holder thereof
in person or by his duly authorized attorney, upon the surrender
and cancellation of a certificate or certificates for a like
number of shares. As against the corporation a transfer of shares
can be made only on the books of the corporation and in the manner
hereinabove provided, and the corporation shall be entitled to
treat the registered holder of any share as the owner thereof and
shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as
expressly provided by the statutes of the State of Delaware.
Section 5.4. Closing of Transfer Books. The
-------------------------
Board of Directors shall have the power to close the stock
16
<PAGE> 17
transfer books of the corporation for a period of not more than 60
or less than 10 days preceding the date of any meeting of
stockholders, or the date for payment of any dividends, or the
date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, or
for a period of not more than 60 or less than 10 days in
connection with obtaining the consent of stockholders for any
purpose; provided, however, that in lieu of closing the stock
transfer books as aforesaid, the Board of Directors may fix, in
advance, a date not more than 60 or less than 10 days preceding
the date of any meeting of stockholders or the date for any
payment of dividend, or the date for the allotment of rights, or
the date when any change or conversion or any exchange of capital
stock shall go into effect, or a date in connection with obtaining
such consent of stockholders for any purpose as a record date for
the determination of the stockholders entitled to notice of, and
to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to receive
any such allotment or rights, or to exercise the rights in respect
of any such change, conversion, or exchange of capital stock, or
to give such consent, and in such case such stockholders and only
such stockholders as shall be stockholders of record on the date
so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid. (As
amended by Board Resolution January 30, 1973.)
Section 5.5. Lost Certificates. Any stockholder
-----------------
claiming that a certificate representing shares of stock has been
lost or destroyed may make an affidavit or affirmation of the fact
and if the Board of Directors so requires, advertise the same in a
manner designated by the Board, and give the corporation a bond of
indemnity in form and with security for an amount satisfactory to
the Board, but not exceeding double the value of the shares
represented by said certificate; whereupon a new certificate may
be issued of the same tenor and representing the same number,
class and/or series of shares as were represented by the
certificate alleged to have been lost or destroyed.
17
<PAGE> 18
BOOKS AND RECORDS
-----------------
Section 6.1. Location. The books, accounts and
--------
records of the corporation may be kept at such place or places
within or without the State of Delaware as the Board of Directors
may from time to time determine. In case the original stock
ledger and transfer books of the corporation are kept without said
State, a duplicate of each thereof shall be kept at its principal
office in the State of Delaware.
Section 6.2. Inspection. Except as otherwise
----------
provided by statute, the books, accounts, and records of the
corporation shall be open to inspection by any member of the Board
of directors during usual business hours for any purpose
reasonably related to his position as director; and open to
inspection by the stockholders, in person or by attorney or other
agent, upon their written demand under oath directed to the
corporation at its registered office or at its principal place of
business, stating the purpose thereof, during usual business
hours, for any proper purpose reasonably related to such person's
interest as a stockholder, and subject to such regulations as the
Board of Directors may prescribe. If an attorney or other agent
shall be the person who seeks the right of inspection, the demand
under oath shall be accompanied by a power of attorney or other
writing authorizing the attorney or agent to act on behalf of the
stockholder. (As amended February 26, 1991, by Board Resolution.)
Section 6.3. Corporate Seal. The corporate seal
--------------
shall contain two concentric circles between which shall be the
name of the corporation and the word "Delaware" and in the center
shall be inscribed the words "Corporate Seal" and the year in
which the Certificate of Incorporation was issued.
18
<PAGE> 19
DIVIDENDS AND RESERVES
----------------------
Section 7.1. Dividends. Subject to the
---------
provisions of the Certificate of Incorporation, as amended and
other lawful commitments of the corporation, dividends upon the
shares of any class of stock, or series thereof, of the
corporation may be declared by the Board of Directors out of the
net assets of the corporation in excess of its capital or out of
its net profits at any regular or special meeting of the Board of
Directors. However, no dividend shall be declared or paid which
would impair the capital stock of the corporation.
Section 7.2. Reserves. Before declaring any
--------
dividend or making any distribution of net assets in excess of
capital or any distribution of net profits, the Board of
Directors, from time to time in their absolute discretion, may set
apart out of any funds of the corporation available for dividends,
a reserve or reserves for working capital, or to meet
contingencies, or for repairs or maintenance, or for any other
lawful purpose, and also, from time to time, may abolish or
decrease any such reserve or reserves.
19
<PAGE> 20
MISCELLANEOUS PROVISIONS
------------------------
Section 8.1. Fiscal Year. The fiscal year of
-----------
the corporation shall end on the 30th day of April in each year or
on such other date as the Board of Directors may from time to time
determine. (As amended by Audit Committee of Board of Directors
Resolution January 4, 1973, pursuant to Board of Directors
Resolution December 3, 1972.)
Section 8.2. Depositaries. The Board of
------------
Directors or an officer designated by the Board shall appoint
banks, trust companies, or other depositaries in which shall be
deposited from time to time the money or securities of the
corporation.
Section 8.3. Checks, Drafts, Notes, etc. All
--------------------------
checks, drafts, or other orders for the payment of money, and all
notes or other evidences of indebtedness issued in the name of the
corporation, shall be signed by such officer or officers or agent
or agents as shall from time to time be designated by resolution
of the Board of Directors or by an officer appointed by the Board.
Section 8.4. Contracts, etc., How Executed.
-----------------------------
Except as in the By-Laws otherwise provided, the Board of
Directors may authorize any officer, agent or agents, to enter
into any contract or execute and deliver any instrument in the
name and on behalf of the corporation, and such authority may be
general or confined to specific instances.
Section 8.5. Stock in Other Corporations. Any
---------------------------
shares of stock in any other corporation which may from time to
time be held by this corporation may be represented and voted at
any meeting of the shareholders of such corporation by the
Chairman of the Board, the President or a Vice President, or by
any other person or persons thereunto authorized by the Board of
Directors, or by any proxy designated by written instrument of
appointment executed in the name of this corporation by its
Chairman of the Board, the President or a Vice President and
attested by the Secretary or an Assistant Secretary. Shares of
stock belonging to the corporation need not stand in the name of
the corporation, but may be held for the benefit of the
corporation in the individual name of the Treasurer or of any
other nominee designated for the purpose by the Board of
Directors. Certificates for shares so held for the benefit of the
corporation shall be endorsed in blank or have proper stock powers
attached so that said certificates are at all times in due form
for transfer, and shall be held for safekeeping in such manner as
shall be determined from time to time by the Board of Directors.
20
<PAGE> 21
Section 8.6. Indemnification of Directors and
--------------------------------
Officers.
- --------
(a) Right to Indemnification. Each person who was
------------------------
or is a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer of
the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation
to the fullest extent permitted by the laws of Delaware against
all costs, charges, expenses, liabilities and losses (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to the
benefit of his heirs, executors and administrators. The right to
indemnification conferred in this paragraph (a) shall be a
contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition upon receipt by the
Corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately
be determined that the director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may,
by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and
effect as the foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim
-------------------------------
under paragraph (a) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense of
prosecuting such claim. It shall be a defense to any action
(other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered to
the Corporation) that the claimant has failed to meet a standard
of conduct which makes it permissible under Delaware law
for the Corporation to indemnify the claimant for the amount
21
<PAGE> 22
claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders)
to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the
circumstances because he has met such standard of conduct, nor an
actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
the claimant has not met such standard of conduct, nor the
termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall be a defense to the action or create a presumption that the
claimant has failed to meet the required standard of conduct.
(c) Non-Exclusivity of Rights. The right to
-------------------------
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain
---------
insurance, at its expense, to protect itself and any director,
officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against
such expense, liability or loss under Delaware law.
(e) Expenses as a Witness. To the extent that any
---------------------
director, officer, employee or agent of the Corporation is by
reason of such position, or a position with another entity at the
request of the Corporation, a witness in any proceeding, he shall
be indemnified against all costs and expenses actually and
reasonably incurred by him or on his behalf in connection
therewith.
(f) Indemnity Agreements. The Corporation may
--------------------
enter into indemnity agreements with the persons who are members
of its Board of Directors from time to time, and with such
officers, employees and agents as the Board may designate,
providing in substance that the Corporation shall indemnify such
persons to the fullest extent permitted by Delaware law.
(g) Effect of Amendment. Any amendment, repeal or
-------------------
modification of any provision of this Section by the stockholders
or the directors of the Corporation shall not
22
<PAGE> 23
adversely affect any right or protection of a director or officer of
the Corporation existing at the time of such amendment, repeal or
modification. (As amended May 28, 1987.)
Section 8.7. Amendment of By-Laws. In
--------------------
accordance with authority expressly contained in the Certificate
of Incorporation, these By-Laws may be added to, altered, amended,
or repealed, and new or other By-Laws may be made and adopted by
vote of a majority of the Board of Directors, at any regular or
special meeting of the Board, and without prior notices of intent
so to do. These By-Laws may also be added to, altered, amended or
repealed, and new or other By-Laws may be made and adopted by vote
of at least 75% of the shares entitled to vote thereon at any
regular or special meeting, and without prior notices of intent so
to do. (As amended by Stockholders on August 2, 1983.)
Section 8.8. Validity of Contracts, etc. No
--------------------------
contract or other transaction between the corporation and any
other corporation shall be affected or invalidated by the fact
that any one or more of the directors of this corporation is or
are interested in, or is a director or officer, or are directors
or officers of such other corporation, and any director or
directors, individually or jointly may be a party or parties to or
may be interested in any contract or transaction of this
corporation or in which this corporation is interested; and no
contract, act or transaction of this corporation with any person
or persons, firms or corporation, shall be affected or invalidated
by the fact that any director or directors of this corporation is
a party, or are parties to, or interested in, such contract, act
or transaction, or in any way connected with such person or
persons, firm or association, and each and every person who may
become a director of this corporation is hereby relieved from any
liability that may otherwise exist from contracting with the
corporation for the benefit of himself or any firm or corporation
in which he may be in any way interested; provided, however, that
in any such case the fact of such interest shall be disclosed to
other directors acting upon or in reference to such contract or
transaction.
Section 8.9. Selection of Public Accountants.
-------------------------------
Each year the Board of Directors shall select independent public
accountants to audit the books and accounts of the corporation.
(As amended by Board Resolution October 21, 1970.)
23
<PAGE> 24
GROUPS AND GROUP PERSONNEL
--------------------------
Section 9.1. Establishment of Groups. The Board
-----------------------
of Directors of this Corporation may cause all or a portion of the
business and operations of this Corporation to be divided into one
or more semiautonomous groups. Each group shall operate according
to a charter adopted by the Board of Directors which shall set out
the basic responsibilities, functions, and such other
characteristics of that group as the Board of Directors deems
appropriate. The Chief Executive Officer of this Corporation may
make such minor or temporary amendments of group charters as he
deems necessary and appropriate for the efficient operation of a
group. Each group may operate under a group name approved for
such purpose by the Chief Executive Officer. The Chief Executive
Officer may inter-change manufacturing or other facilities among
the several groups. Not less frequently than annually, the Chief
Executive Officer shall report to the Board of Directors regarding
all changes made in group charters and all inter-changes of
facilities among the groups.
Section 9.2. Group Personnel. The head of each
---------------
group shall be a group president appointed by the Board of
Directors to serve at the pleasure of the Board of Directors. A
group president shall have the same authority with respect to the
affairs of the group as the president of an independent
corporation has with respect to the affairs of that corporation.
The authority of a group president shall be exercised in
accordance with the limits defined by the Board of Directors or
delegated by the Chief Executive Officer. A group president may
sign contracts and other documents in the name of the group in the
furtherance of the approved and regular course of business of the
group, may cause the manufacturing and other facilities of the
group to be arranged or rearranged into divisions, and may appoint
all personnel for the group provided, however, that the Chief
Executive Officer of this Corporation shall approve the divisional
arrangement or re-arrangement of the group and the persons
appointed to the executive staff of the group and as the head of
any division within the group.
If one or more subsidiaries of this Corporation (or
subsidiaries of a corporation owned by this Corporation) comprise
a part of a group, the group president of the group shall be the
Chairman of the Board or President of each such subsidiary and
shall recommend to the Board of Directors of each such subsidiary
persons to be the officers of that subsidiary.
At least annually the Chief Executive Officer shall
report to the Board of Directors regarding the
24
<PAGE> 25
appointment of all group executive staff personnel, group division
heads and the election of all officers of subsidiaries. (As amended
October 29, 1969.)
25
<PAGE> 1
Exhibit 4.7
CREDIT AGREEMENT
dated as of May 31, 1996
among
KELLWOOD COMPANY,
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
and
THE BANK OF NOVA SCOTIA,
as Administrative Agent and Syndication Agent
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Documentation Agent
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
ARTICLE 1
<C> <S> <C>
DEFINITIONS AND ACCOUNTING TERMS 1
SECTION 1.1 Defined Terms 1
SECTION 1.2 Use of Defined Terms 22
SECTION 1.3 Cross-References 22
SECTION 1.4 Accounting and Financial Determinations 22
<CAPTION>
ARTICLE 2
<C> <S> <C>
COMMITMENTS, BORROWING PROCEDURES AND NOTES 23
SECTION 2.1 Commitments 23
SECTION 2.2 Reduction or Termination of the Commitments 24
SECTION 2.3 Extension of Stated Maturity Date 25
SECTION 2.4 Committed Loans Borrowing Procedure 28
SECTION 2.5 Continuation and Conversion Elections 29
SECTION 2.6 Procedures with Respect to Bid Rate Loans 29
SECTION 2.7 Funding 32
SECTION 2.8 Availability of Funds 32
SECTION 2.9 Reliance Upon Telephonic Notices 33
SECTION 2.10 Currency 33
SECTION 2.11 Conditions 33
SECTION 2.12 Notes 33
<CAPTION>
ARTICLE 3
<C> <S> <C>
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 34
SECTION 3.1 Repayments and Prepayments 34
SECTION 3.2 Interest Provisions 35
SECTION 3.2.1 Rates 35
SECTION 3.2.2 Default Rates 36
SECTION 3.2.3 Payment Dates 36
SECTION 3.3 Fees 37
SECTION 3.3.1 Facility Fee 37
SECTION 3.3.2 Letter of Credit Fees 37
SECTION 3.3.3 Administrative Agent's Fees 38
<CAPTION>
ARTICLE 4
<C> <S> <C>
LETTERS OF CREDIT 38
SECTION 4.1 Issuance Requests 38
SECTION 4.2 Issuances and Extensions 39
SECTION 4.3 Expenses 40
SECTION 4.4 Other Lenders' Participation 40
<PAGE> 3
SECTION 4.5 Disbursements 41
SECTION 4.6 Reimbursement 42
SECTION 4.7 Deemed Disbursements 42
SECTION 4.8 Nature of Reimbursement Obligations 43
<CAPTION>
ARTICLE 5
<C> <S> <C>
CERTAIN EURODOLLAR AND OTHER LOAN PROVISIONS 44
SECTION 5.1 Increased Cost 44
SECTION 5.2 Deposits Unavailable or Interest Rate
Unascertainable or Inadequate;
Impracticability 45
SECTION 5.3 Changes in Law Rendering Eurodollar Loans
Unlawful 46
SECTION 5.4 Discretion of the Lenders as to Manner of
Funding 47
SECTION 5.5 Funding Losses 47
SECTION 5.6 Increased Capital Costs 48
SECTION 5.7 Taxes 49
SECTION 5.8 Payments, Computations, etc 50
SECTION 5.9 Sharing of Payments 51
SECTION 5.10 Application of Certain Payments. 51
SECTION 5.11 Setoff 53
SECTION 5.12 Use of Proceeds. 53
SECTION 5.13 Replacement of Certain Lenders 53
<CAPTION>
ARTICLE 6
<C> <S> <C>
CONDITIONS TO BORROWING 54
SECTION 6.1 Initial Borrowing. 54
SECTION 6.1.1 Resolutions, etc. 54
SECTION 6.1.2 Delivery of Notes. 54
SECTION 6.1.3 This Agreement. 55
SECTION 6.1.4 Opinions of Counsel 55
SECTION 6.1.5 Consents, etc. 55
SECTION 6.1.6 Closing Fees, Expenses, etc. 55
SECTION 6.1.7 Forms from the Lenders. 55
SECTION 6.1.8 Termination of Certain Agreements 55
SECTION 6.1.9 No Material Adverse Change. 55
SECTION 6.1.10 Compliance Certificate. 55
SECTION 6.1.11 Other Documents 56
SECTION 6.2 All Extensions of Credit. 56
SECTION 6.2.1 Compliance with Warranties, No Default, etc. 56
SECTION 6.2.2 Extension of Credit Request. 57
SECTION 6.2.3 Satisfactory Legal Form. 57
<PAGE> 4
<CAPTION>
ARTICLE 7
<C> <S> <C>
REPRESENTATIONS AND WARRANTIES 57
SECTION 7.1 Organization, etc. 57
SECTION 7.2 Due Authorization, Non-Contravention, etc. 58
SECTION 7.3 Government Approval, Regulation, etc. 58
SECTION 7.4 Validity, etc. 58
SECTION 7.5 Financial Information. 58
SECTION 7.6 No Material Adverse Change; No Default 59
SECTION 7.7 Litigation, Labor Controversies, etc. 59
SECTION 7.8 Subsidiaries. 59
SECTION 7.9 Ownership of Properties. 59
SECTION 7.10 Taxes. 60
SECTION 7.11 Pension and Welfare Plans. 60
SECTION 7.12 Environmental Warranties. 60
SECTION 7.13 Regulations G, U and X. 61
SECTION 7.14 Insurance. 61
SECTION 7.15 Indebtedness. 61
SECTION 7.16 Accuracy of Information. 61
SECTION 7.17 Material Subsidiary. 62
<CAPTION>
ARTICLE 8
<C> <S> <C>
COVENANTS 62
SECTION 8.1 Corporate Existence, etc. 62
SECTION 8.2 Insurance. 62
SECTION 8.3 Taxes, Claims for Labor and Materials,
Compliance With Laws. 62
SECTION 8.4 Maintenance, etc. 63
SECTION 8.5 Nature of Business. 63
SECTION 8.6 Interest Coverage Ratio. 64
SECTION 8.7 Leverage Ratio. 64
SECTION 8.8 Consolidated Shareholder's Equity. 64
SECTION 8.9 Confirmation of Senior Debt Rating. 64
SECTION 8.10 Limitations on Indebtedness. 64
SECTION 8.11 Liens and Negative Pledges. 65
SECTION 8.11.1 Limitation on Liens. 65
SECTION 8.11.2 Restrictive Agreements, etc. 67
SECTION 8.12 Acquisitions. 68
SECTION 8.13 Mergers, Consolidations and Sales of Assets. 68
SECTION 8.13.1 Mergers, Consolidations and Dispositions. 68
SECTION 8.13.2 Issuance or Sale of Stock by Subsidiaries. 69
SECTION 8.13.3 Sale of Stock in Subsidiaries. 69
SECTION 8.14 Guaranties. 70
SECTION 8.15 Compliance with Applicable Law. 70
SECTION 8.16 Transactions with Affiliates. 70
SECTION 8.17 ERISA Compliance. 71
SECTION 8.18 Reports and Rights of Inspection. 71
SECTION 8.19 Environmental Covenant. 75
<PAGE> 5
<CAPTION>
ARTICLE 9
<C> <S> <C>
EVENTS OF DEFAULT 76
SECTION 9.1 Listing of Events of Default. 76
SECTION 9.1.1 Non-Payment of Obligations. 76
SECTION 9.1.2 Breach of Warranty. 76
SECTION 9.1.3 Non-Performance of Covenants and Obligations. 76
SECTION 9.1.4 Default on Other Indebtedness. 77
SECTION 9.1.5 Judgments. 78
SECTION 9.1.6 Pension Plans. 78
SECTION 9.1.7 Bankruptcy, Insolvency, etc. 78
SECTION 9.1.8 Change of Control Event. 79
SECTION 9.1.9 Environmental Matters. 79
SECTION 9.2 Action if Bankruptcy. 79
SECTION 9.3 Action if Other Event of Default. 80
<CAPTION>
ARTICLE 10
<C> <S> <C>
THE AGENTS 80
SECTION 10.1 Actions. 80
SECTION 10.2 Funding Reliance, etc. 81
SECTION 10.3 Exculpation. 81
SECTION 10.4 Successor. 82
SECTION 10.5 Loans or Reimbursement Obligations by the
Agents or issuers. 83
SECTION 10.6 Credit Decisions. 83
SECTION 10.7 Copies, etc. 83
<CAPTION>
ARTICLE 11
<C> <S> <C>
MISCELLANEOUS PROVISIONS 83
SECTION 11.1 Waivers, Amendments, etc. 83
SECTION 11.2 Notices. 84
SECTION 11.3 Payment of Costs and Expenses. 85
SECTION 11.4 Indemnification. 85
SECTION 11.5 Survival. 86
SECTION 11.6 Severability. 87
SECTION 11.7 Headings. 87
SECTION 11.8 Execution in Counterparts, Effectiveness, etc. 87
SECTION 11.9 Governing Law; Entire Agreement. 87
SECTION 11.10 Successors and Assigns. 87
SECTION 11.11 Sale and Transfer of Loans or Reimbursement
Obligations; Participations in Loans or
Reimbursement Obligations. 87
SECTION 11.11.1 Assignments. 88
SECTION 11.11.2 Participations. 89
SECTION 11.12 Confidentiality. 90
SECTION 11.13 Other Transactions. 91
<PAGE> 6
SECTION 11.14 Choice of Forum; Consent to Service of
Process and Jurisdiction. 91
SECTION 11.15 Waiver of Jury Trial. 92
SECTION 11.16 Letters of Credit 92
SECTION 11.17 Judgment 92
SECTION 11.18 Waiver 93
SECTION 11.19 Existing Agreements 93
SCHEDULE I - Commitments
SCHEDULE II - Addresses and Telephone and Facsimile
Numbers
SCHEDULE III- Letters of Credit
EXHIBIT A-1 - Form of Committed Note
EXHIBIT A-2 - Form of Bid Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Continuation/Conversion Notice
EXHIBIT B-3 - Form of Bid Request
EXHIBIT B-4 - Form of Invitation for Competitive Bid Quotes
EXHIBIT C-1 - Form of Bid
EXHIBIT C-2 - Form of Bid Rate Loan Acknowledgment
EXHIBIT C-3 - Form of Bid Rate Loan Confirmation
EXHIBIT D-1 - Form of Certificate of Kellwood Company
EXHIBIT D-2 - Form of Certificate of Designated Subsidiaries
EXHIBIT E - Forms of Opinions of Counsel to the Company
EXHIBIT F - Form of Opinion of Counsel to the Administrative
Agent
EXHIBIT G - Schedule of Litigation
EXHIBIT H - Schedule of Subsidiaries
EXHIBIT I - Schedule of Tax Matters
EXHIBIT J - Schedule of Plans
EXHIBIT K - Schedule of Environmental Matters
EXHIBIT L - Schedule of Indebtedness
EXHIBIT M - Schedule of Designated Subsidiaries
EXHIBIT N - Schedule of Existing Liens
EXHIBIT O - Form of Annual Consolidating Summary
EXHIBIT P - Form of Lender Assignment Agreement
EXHIBIT Q - Form of Confidentiality Letter
EXHIBIT R - Form of Continuing Commercial Letter of Credit Agreement
EXHIBIT S - List of Persons Authorized to Give Instructions
</TABLE>
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 31, 1996 (as amended,
supplemented, restated or otherwise modified from time to time, this
"Agreement"), is by and among KELLWOOD COMPANY, a Delaware corporation (the
---------
"Company"), the various financial institutions as are or may become parties
-------
hereto (collectively, the "Lenders", and, individually, a "Lender"), and
------- ------
THE BANK OF NOVA SCOTIA, a Canadian chartered bank ("Scotiabank"), as
----------
administrative agent and syndication agent (in such capacity, the
"Administrative Agent") for the Lenders and BANK OF AMERICA NATIONAL TRUST
--------------------
AND SAVINGS ASSOCIATION, a national banking association ("BofA"), as
----
documentation agent (in such capacity, the "Documentation Agent") for the
-------------------
Lenders.
W I T N E S S E T H:
WHEREAS, the Company has requested the Lenders to make loans to the
Company, and/or issue or participate in letters of credit for the account of,
the Company and certain Designated Subsidiaries, and the Lenders have agreed
to extend a revolving credit facility to the Company upon the terms and
conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Defined Terms. The following terms (whether or not
-------------
underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"Acquiring Person" is defined in "Change of Control Event."
---------------- -----------------------
"Administrative Agent" is defined in the preamble and includes each
-------------------- --------
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 10.4.
------------
"Administrative Agent Fee Letter" means the confidential fee letter
-------------------------------
agreement, dated February 29, 1996, between the Company and Scotiabank, as
the same may be amended, modified or supplemented from time to time, together
with any substitutions therefor or replacements thereof.
<PAGE> 8
"Affected Lender" means any Lender that notifies the Administrative
---------------
Agent of (i) any obligation of the Company to pay any amount to such Lender
pursuant to Section 5.1 or 5.7 or (ii) the occurrence of any
----------- ---
circumstances of the nature described in Section 5.2 or 5.3.
----------- ---
"Affiliate" means any Person (other than a Subsidiary) (i) which
---------
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 15% or more of any class of the Voting Stock of
the Company, or (iii) 15% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 15% or more of the equity interest) of
which is beneficially owned or held by the Company or a Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to
-------
direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Agents" means collectively the Administrative Agent and the
------
Documentation Agent.
"Aggregate Outstanding Liabilities" means, as of any date of
---------------------------------
determination thereof and without duplication, the sum of (a) the aggregate
principal amount of all outstanding Committed Loans plus (b) the aggregate
----
principal amount of all outstanding Bid Rate Loans plus (c) the Dollar
----
Amount of the aggregate principal amount of all Letter of Credit
Outstandings.
"Agreement" is defined in the preamble.
--------- --------
"Alternate Base Rate" means, on any date and with respect to all Base
-------------------
Rate Loans, a fluctuating rate of interest per annum equal to the higher of
---------
(a) the rate of interest most recently announced by
Scotiabank at Atlanta, Georgia as its base rate for Dollar loans in the
United States; or
(b) the Federal Funds Effective Rate most recently
determined by the Administrative Agent plus 0.50%.
----
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Scotiabank in connection with extensions of credit.
Changes in the rate of interest determined by reference to the Alternate Base
Rate will take effect simultaneously with each change in the Alternate Base
Rate. The Administrative Agent will give notice promptly to the Company and
the Lenders of changes in the Alternate Base Rate; provided that the
--------
failure to so notify shall not affect the Alternate Base Rate.
2
<PAGE> 9
"Applicable Eurodollar Margin", "Applicable Facility Fee
---------------------------- -----------------------
Percentage", and "Applicable Commercial Letter of Credit Margin",
- ---------- ---------------------------------------------
respectively mean, during any Pricing Period, the amount set forth below for
such Applicable Eurodollar Margin, Applicable Facility Fee Percentage or
Applicable Commercial Letter of Credit Margin, as the case may be, depending
upon the Leverage Ratio as of the last day of the fiscal quarter most
recently ended prior to the first day of such Pricing Period:
<TABLE>
<CAPTION>
Applicable Applicable
Applicable Facility Commercial
Leverage Eurodollar Fee Letter of
Ratio Margin Percentage Credit Margin
- ----- ---------- ---------- -------------
<S> <C> <C> <C>
Less than or equal
to 0.25 to 1.00 0.225% 0.125% 0.100%
Greater than 0.25 to
1.00, but less than
or equal to 0.35 to 1.00 0.275% 0.150% 0.100%
Greater than 0.35 to
to 1.00, but less than
or equal to .50 to 1.00 0.300% 0.175% 0.100%
Greater than .50 to 1.00 0.350% 0.250% 0.150%
</TABLE>
; provided that, if and only for so long as the Company is in default of
--------
its obligation to deliver (which delivery may be by facsimile transmission) a
compliance certificate under Section 8.18(g), the Applicable Eurodollar
---------------
Margin shall be 0.350%, the Applicable Facility Fee Percentage shall be
0.250% and the Applicable Commercial Letter of Credit Margin shall be 0.150%,
respectively; and provided, further, that notwithstanding anything
-------- -------
contained herein to the contrary, if and for each day that the Company
receives a senior unsecured non-credit enhanced long-term debt rating (a
"Senior Debt Rating") from a Rating Agency, the Applicable Eurodollar
------------------
Margin, the Applicable Facility Fee Percentage and the Applicable Commercial
Letter of Credit Margin, respectively, for such day shall be the amount set
forth below for such Applicable Eurodollar Margin, Applicable Fee Percentage
and the Applicable Commercial Letter of Credit Margin, as the case may be,
depending on the Senior Debt Rating of the Company for such day:
3
<PAGE> 10
<TABLE>
<CAPTION>
Applicable Applicable
Applicable Facility Commercial
Senior Debt Eurodollar Fee Letter of
Rating Margin Percentage Credit Margin
- ------ ---------- ---------- -------------
<S> <C> <C> <C>
Greater than or equal 0.225% 0.125% 0.100%
to either A- or A3
Greater than or equal 0.275% 0.150% 0.100%
to either BBB+ or Baa1
Greater than or equal 0.300% 0.175% 0.100%
to either BBB or Baa2
Less than BBB and Baa2 0.350% 0.250% 0.150%
</TABLE>
If the Company receives a Senior Debt Rating from more than one Rating
Agency, the lowest Senior Debt Rating received by the Company shall be used
to determine each of the Applicable Eurodollar Margin, the Applicable
Facility Fee Percentage and the Applicable Commercial Letter of Credit
Margin. The Company shall immediately notify the Administrative Agent of a
change in the Senior Debt Rating. Any change in the Applicable Eurodollar
Margin, the Applicable Facility Fee Percentage or the Applicable Commercial
Letter of Credit Margin resulting from a change in the Senior Debt Rating
shall be effective as of the opening of business on the day on which such
change in the Senior Debt Rating becomes effective.
"Applicant" means, with respect to any Letter of Credit, the party
---------
executing the applicable Issuance Request which may be the Company, the
Company and a Designated Subsidiary as co-applicants, or a Designated
Subsidiary; it being understood that by its signature hereto the Company
-------------------
shall be deemed to be an account party to each and every Issuance Request as
if it had actually executed such Issuance Request, whether such Issuance
Request is actually executed by the Company, any Designated Subsidiary or any
Designated Subsidiary and the Company jointly.
"Assignee Lender" is defined in Section 11.11.1.
--------------- ---------------
"Available Currency means Dollars, HK Dollars and Japanese Yen so
------------------
long as (x) such currency is then freely available in the international
interbank market and/or the foreign exchange and deposit market, (y) such
currency is then freely transferable and freely convertible in the
international interbank market into Dollars and (z) such currency is then
readily utilized for the settlement of private international debt
transactions; provided, however, that the definition of "Available
-------- -------
Currency" may include any other currency designated by the Company in writing
to the Administrative Agent so long as (i) such currency is then freely
available in the international interbank market and/or the
4
<PAGE> 11
foreign exchange and deposit market, (ii) such currency is then freely
transferable and freely convertible in the international interbank market into
Dollars, (iii) such currency is then readily utilized for the settlement of
private international debt transactions, and (iv) neither the Administrative
Agent nor any Lender has notified the Company and the Administrative Agent in
writing that such currency is no longer acceptable as an "Available Currency".
"BAI" means Bank of America Illinois, an Illinois banking
---
corporation.
"Base Rate Loan" means a Committed Loan bearing interest at a rate
--------------
determined by reference to the Alternate Base Rate.
"Bid" means one or more offers by a Lender to make one or more Bid
---
Rate Loans, submitted to the Administrative Agent no later than the relevant
Submission Deadline on a duly completed and executed form substantially
similar to Exhibit C-1, personally delivered or transmitted by facsimile to
-----------
the Administrative Agent.
"Bid Notes" and "Bid Note" respectively mean (a) the promissory
--------- --------
notes of the Lender, substantially in the form of Exhibit A-2, duly
-----------
completed, evidencing Bid Rate Loans made to the Company by a Lender, and
(b) a single such promissory note.
"Bid Rate" means, relative to any Bid Rate Loan of any Lender, the
--------
fixed rate of interest (expressed to the nearest 1/10,000 of 1%), in each
case offered by such Lender in its Bid offering to make such Bid Rate Loan
and, if the context so requires, accepted by the Company.
"Bid Rate Loan" is defined in Section 2.1(b).
------------- --------------
"Bid Rate Loan Acknowledgment" means an acknowledgment, duly executed
----------------------------
by an authorized officer of the Company, of the Company's acceptance of a
Bid, substantially in the form of Exhibit C-2.
-----------
"Bid Rate Loan Confirmation" means a notice by the Administrative
--------------------------
Agent to each Lender of a Borrowing of Bid Rate Loans, substantially in the
form of Exhibit C-3.
-----------
"Bid Request" means a request by the Company for Bids, submitted to
-----------
the Administrative Agent by telephone no later than the time specified in
Section 2.6(a), promptly confirmed in writing on the same day on a duly
- --------------
completed and executed form substantially similar to Exhibit B-3, and
-----------
personally delivered or transmitted by facsimile to the Administrative Agent.
"BofA" is defined in the preamble.
---- --------
5
<PAGE> 12
"BofA Reimbursement Agreement" means the Reimbursement Agreement
----------------------------
dated December 30, 1994 among the Company, various financial institutions,
BAI, as issuing bank, and BofA, as agent, together with the Continuing L/C
Agreement (as defined in such Reimbursement Agreement).
"Borrowing" means a borrowing by the Company from the Lenders (or any
---------
of them) pursuant to Section 2.1(a) or 2.1(b).
-------------- ------
"Borrowing Request" means a loan request and certificate duly
-----------------
executed by an authorized officer of the Company, substantially in the form
of Exhibit B-1 hereto and delivered pursuant to Section 2.4.
----------- -----------
"Business Day" means any day which is neither a Saturday or Sunday
------------
nor a legal holiday on which banks are authorized or required to be closed in
Atlanta, Georgia, New York, New York, or Chicago, Illinois and (i) relative
to the making, continuing, prepaying or repaying of any Eurodollar Loans, any
day on which dealings are carried on in the London interbank eurodollar
market and (ii) with respect to disbursements and payments in and
calculations pertaining to any Available Currency, a day on which commercial
banks are open for foreign exchange business in London, England, and on which
dealings in the relevant Available Currency are carried on in the applicable
offshore foreign exchange and/or interbank market in which disbursement of or
payment in such Available Currency will be made or received hereunder.
"Capital Expenditures" means, with respect to any Person, for any
--------------------
period the aggregate of all expenditures incurred by such Person during such
period on a consolidated basis (whether or not paid in cash and including
that portion of Capitalized Leases which is capitalized on the consolidated
balance sheet of such Person during such period) which expenditures are
required to be included in, or reflected by, the property, plant or equipment
or similar fixed asset accounts on the balance sheet of such Person prepared
in accordance with GAAP.
"Capitalized Lease" means any lease the obligation for Rentals with
-----------------
respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"Capitalized Rentals" means as of the date of any determination the
-------------------
amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which the Company or any Subsidiary is a lessee
would be reflected as a liability on a consolidated balance sheet of the
Company and its Subsidiaries.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended.
6
<PAGE> 13
"Change of Control Event" means the earlier to occur of (a) the date
-----------------------
of a public announcement that a Person or group of affiliated or associated
Persons (an "Acquiring Person") has acquired, or has obtained the right to
----------------
acquire, legal or beneficial ownership of 50% or more of the Voting Stock of
the Company, (b) the date an Acquiring Person acquires all or substantially
all of the assets of the Company (for purposes hereof, the term "Acquiring
Person" shall not include the Company, any of its Subsidiaries or any
employee benefit plan (or related trust), sponsored or maintained by the
Company or any of its Subsidiaries) or (c) the date on which a majority of
the board of directors of the Company shall consist of Persons other than
Continuing Directors (for purposes of this definition, "Continuing
----------
Director" means any member of the board of directors of the Company on the
- --------
date hereof and any other member of the board of directors of the Company who
shall be nominated or elected to succeed a Continuing Director by at least a
majority of the Continuing Directors who are then members of the board of
directors of the Company).
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of the Code also include any successor sections.
"Commercial Letter of Credit Commitment" means, relative to any
--------------------------------------
Lender or Issuer, the Dollar Amount of such Lender's or Issuer's obligation
to issue or participate in commercial (trade) Letters of Credit pursuant to
Section 2.1(c) as set forth on Schedule I, as amended from time to time,
- -------------- ----------
or as set forth in the applicable Lender Assignment Agreement executed and
delivered pursuant to Section 11.11, reduced by the amount of any permanent
-------------
reduction(s) in such amount pursuant to this Agreement.
"Commercial Letter of Credit Commitment Amount" means, on any date,
---------------------------------------------
the Dollar Amount of $200,000,000, as such amount may be reduced from time to
time pursuant to Section 2.2.
-----------
"Commitment" means, relative to any Lender, the Dollar Amount of such
----------
Lender's Loan Commitment, Standby Letter of Credit Commitment and Commercial
Letter of Credit Commitment.
"Commitment Termination Date" means the earliest of
---------------------------
(a) the Stated Maturity Date;
(b) the date on which the Total Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2; and
-----------
(c) the date on which any Commitment Termination Event
occurs.
7
<PAGE> 14
"Commitment Termination Event" means
----------------------------
(a) the occurrence of any Default described in clauses
-------
(a) through (d) of Section 9.1.7; or
- --- --- -------------
(b) the occurrence and continuance of any other Event of
Default and the declaration of the Obligations to be due and payable
and the Commitments to be terminated pursuant to Section 9.3.
-----------
"Committed Loans" is defined in Section 2.1(a).
--------------- --------------
"Committed Notes" and "Committed Note" respectively mean (a) the
--------------- --------------
promissory notes of the Company, substantially in the form of Exhibit A-1,
-----------
duly completed, evidencing Committed Loans made to the Company by a Lender,
and (b) a single such promissory note.
"Company" is defined in the preamble.
------- --------
"Consolidated Debt" means, as of the date of any determination
-----------------
thereof and without duplication, (a) all "Indebtedness" of the Company and
its Subsidiaries described in clauses (i), (ii), (iii), (iv),
------- --- ---- ----- ----
(vi) and (vii) (to the extent that such Indebtedness constitutes
- ---- -----
reimbursement obligations with respect to drawn letters of credit) of the
definition of such term, and (b) Guaranties of Indebtedness of other Persons,
except Subsidiaries.
"Consolidated Net Income" for any period means the sum of (i) any cash
-----------------------
consideration received with respect to sales of export quota rights and (ii)
gross revenues of the Company and its Subsidiaries for such period less all
----
expenses and other proper charges (including taxes on income), determined on
a consolidated basis in accordance with GAAP consistently applied and after
eliminating earnings or losses attributable to outstanding Minority
Interests. The following items shall not be included in the computation of
Consolidated Net Income:
(a) any gains or losses on the sale or other disposition
of investments or fixed or capital assets (other than sales or other
dispositions, in addition to sales of export quota rights included
pursuant to clause (i) above, which do not (x) in any one case,
----------
result in a gain or loss in excess of $100,000 or (y) when aggregated
with all other such sales or dispositions made in the same fiscal year
of the Company, result in an aggregate gain or loss in excess of
$300,000), and any taxes on such excluded gains and any tax deductions
or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
8
<PAGE> 15
(c) net earnings and losses of any Subsidiary accrued
prior to the date it became a Subsidiary;
(d) net earnings and losses of any corporation (other
than a Subsidiary), substantially all the assets of which have been
acquired in any manner, realized by such other corporation prior to the
date of such acquisition;
(e) net earnings and losses of any corporation (other
than a Subsidiary) with which the Company or a Subsidiary shall have
consolidated or which shall have merged into or with the Company or a
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
the Company or such Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of dividends to the
Company or any other Subsidiary;
(h) earnings resulting from any reappraisal, revaluation
or write-up of assets;
(i) any deferred or other credit representing any excess
of the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition, retirement or
disposition of any Securities of the Company or any Subsidiary; and
(k) any reversal of any contingency reserve, except to
the extent that provision for such contingency reserve shall have been
made from income arising during such period.
"Consolidated Net Tangible Assets" means, as of the date of any
--------------------------------
determination thereof, the total amount of all assets of the Company and its
Subsidiaries (less depreciation, depletion and other properly deductible
valuation reserves) after deducting, without duplication, the sum of: (i)
goodwill, patents, trade names, trademarks, copyrights, franchises,
experimental expense, organization expense, unamortized debt discount and
expense, the excess of cost of shares acquired over book value of related
assets and such other assets as are properly classified as "intangible
assets" in accordance with GAAP; and (ii) all deferred assets and prepaid
expenses, including prepaid insurance and prepaid taxes, determined in
accordance with GAAP.
9
<PAGE> 16
"Consolidated Shareholder's Equity" means, as of the date of any
---------------------------------
determination thereof, the amount that would be reflected as shareholders'
equity upon a consolidated balance sheet of the Company and its Subsidiaries
determined in accordance with GAAP.
"Continuation/Conversion Notice" means a notice of continuation or
------------------------------
conversion and certificate duly executed by an authorized officer of the
Company, substantially in the form of Exhibit B-2 hereto.
-----------
"Continuing Director" is defined in "Change of Control Event."
------------------- -----------------------
"Continuing Commercial Letter of Credit Agreement" means the
------------------------------------------------
Continuing Letter of Credit Agreement (Electronic Access-Confirm L/C Express)
attached hereto as Exhibit R and the related Master Confirm Agreement and
---------
Software Sublicense Agreement, pursuant to which the Company or its
Designated Subsidiaries will give Issuance Requests to an Issuer.
"Controlled Group" means all members of a controlled group of
----------------
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA.
"Default" means any Event of Default or any Unmatured Event of
-------
Default.
"Default Rate" is defined in Section 3.2.2.
------------ -------------
"Depreciation" means, with respect to any period, the total amounts
------------
added to depreciation, obsolescence, amortization, valuation and other proper
reserves during such period, as reflected in the consolidated balance sheet
of the Company and its Subsidiaries in order to provide a reasonable method
for systematically allocating the cost of the depreciable asset over its
estimated useful life in accordance with GAAP.
"Designated Subsidiaries" means, initially, the Material Subsidiaries
-----------------------
set forth on Exhibit M hereto, and thereafter such Material Subsidiaries
---------
together with any other Material Subsidiary of the Company designated as a
"Designated Subsidiary" by the Company.
"Disbursement Date" is defined in Section 4.5.
----------------- -----------
"Documentation Agent" is defined in the preamble.
------------------- --------
"Dollar" and the sign "$" mean lawful money of the United States.
------ -
10
<PAGE> 17
"Dollar Amount" means (a) with respect to Dollars or an amount
-------------
denominated in Dollars, such amount and (b) with respect to an amount of any
other Available Currency or an amount denominated in such Available Currency,
the amount of Dollars into which the Administrative Agent could, in
accordance with its practice from time to time in the interbank foreign
exchange market, convert such amount of Available Currency at its spot rate
of exchange (which includes all related costs of conversion) applicable to
the relevant transaction at or about 11:00 A.M., Atlanta time, on the date on
which such calculation would be necessary for the delivery of Dollars on the
applicable date contemplated in this Agreement.
"Effective Date" means May 31, 1996.
--------------
"Eligible Assignee" means any Lender or any Affiliate thereof or a
-----------------
commercial bank or other financial institution (but excluding any mutual fund
or insurance company) which, in the case of commercial banks or other
financial institutions, have been approved by each of the Company, the
Administrative Agent and each Issuer at the time of such requested approval
(which approval shall not be unreasonably withheld or delayed by any such
Person).
"Environmental Laws" means all applicable federal, state or local
------------------
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders to which the Company or any Subsidiary is a
party) relating to public health and safety and protection of the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also include any successor sections.
"Eurocurrency Reserve Requirement" means, with respect to any
--------------------------------
Eurodollar Loan for any Interest Period, a percentage equal to the daily
average during such Interest Period of the percentages in effect on each day
of such Interest Period, as prescribed by the F.R.S. Board, for determining
the aggregate maximum reserve requirements (including all basic,
supplemental, marginal and other reserves) applicable to "Eurocurrency
liabilities" pursuant to Regulation D or any other then applicable regulation
of the F.R.S. Board which prescribes reserve requirements applicable to
"Eurocurrency liabilities," as defined in Regulation D. Without limiting the
effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any
other reserves required to be maintained by Scotiabank against (i) any category
of liabilities that includes deposits by reference to which the Eurodollar
Rate (Adjusted) is to be determined, or (ii) any category of extensions of
credit or other assets that includes Eurodollar Loans. For purposes of this
11
<PAGE> 18
Agreement, any Eurodollar Loans hereunder shall be deemed to be funded with the
proceeds of "Eurocurrency liabilities," as defined in Regulation D, and, as
such, shall be deemed to be subject to such reserve requirements without the
benefit of, or credit for, proration, exceptions or offsets which may be
available to Scotiabank from time to time under Regulation D.
"Eurodollar Loan" means a Committed Loan bearing interest at a rate
---------------
determined by reference to the Eurodollar Rate (Adjusted).
"Eurodollar Office" means, relative to any Lender, the office of such
-----------------
Lender designated from time to time by such Lender as the office which shall
be making or maintaining the Eurodollar Loans of such Lender hereunder or
through which such Lender will be determining the Eurodollar Rate. A
Lender's Eurodollar Office may be, at such Lender's option, either a domestic
office or a foreign office.
"Eurodollar Rate" means, with respect to each Interest Period for a
---------------
Eurodollar Loan, the average rate per annum at which Dollar deposits in
--- -----
immediately available funds are offered to the London office of Scotiabank
two Business Days prior to the beginning of such Interest Period by major
banks in the London interbank eurodollar market at or about 11:00 a.m.,
London time, for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount equal to the amount of the
Eurodollar Loan of Scotiabank to be outstanding during such Interest Period.
"Eurodollar Rate (Adjusted)" means, with respect to each Interest
--------------------------
Period for a Eurodollar Loan, a rate per annum (rounded upward, if
--- -----
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
(Adjusted) ------------------------
1-Eurocurrency Reserve
Requirement
"Event of Default" is defined in Section 9.1.
---------------- -----------
"Existing Agreements" means (i) the Long-Term Credit Agreement dated
-------------------
as of June 24, 1994, as amended or otherwise modified from time to time prior
to the date hereof, among the Company, certain commercial lending
institutions party thereto, and Scotiabank, as agent, and (ii) the Short-Term
Credit Agreement dated as of June 24, 1994, as amended or otherwise modified
from time to time prior to the date hereof, among the Company, certain
commercial lending institutions party thereto, and Scotiabank, as agent.
"Extension of Credit" means the making of a Loan or the issuance or
-------------------
Stated Expiry Date extension by an Issuer of a Letter of Credit.
12
<PAGE> 19
"Extension of Credit Request" means any of a Borrowing Request, a Bid
---------------------------
Request or an Issuance Request.
"Facility Fee" is defined in Section 3.3.1.
------------ -------------
"FDIC" means the Federal Deposit Insurance Corporation, and its
----
successors and assigns.
"Federal Funds Effective Rate" means, for any day, an interest rate
----------------------------
per annum equal to the weighted average of the rates on overnight Federal
- --- -----
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such 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 Scotiabank from three Federal funds brokers of recognized
standing selected by it.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
------------
System or any successor thereto.
"GAAP" is defined in Section 1.4.
---- -----------
"Guaranties" by any Person means all obligations (other than
----------
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation, of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, w thout limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (i) to purchase such Indebtedness
or obligation or any property or assets constituting security therefor, (ii)
to advance or supply funds (y) for the purchase or payment of such
Indebtedness or obligation, or (z) to maintain working capital or other
balance sheet condition or fixed charge coverage or otherwise to advance or
make available funds for the purchase or payment of such Indebtedness or
obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss
in respect thereof. For the purposes of all the computations made under this
Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall
be deemed to be Indebtedness equal to the principal amount of such
Indebtedness for borrowed money which has been guaranteed, and a Guaranty in
respect of any other obligation or liability or any dividend shall be deemed
to be Indebtedness equal to the reasonably anticipated maximum aggregate
amount of such obligation, liability or dividend.
13
<PAGE> 20
"Hazardous Material" means
------------------
(a) any "hazardous substance," as defined by CERCLA;
(b) any "hazardous waste," as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within the meaning of any
other applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders to
which the Company or any Subsidiary is a party) relating to or imposing
liability or standards of conduct concerning any hazardous or toxic
waste, substance or material, all as amended or hereafter amended.
"HK Dollars" means lawful money of Hong Kong.
----------
"Impermissible Qualification" means, relative to the opinion or
---------------------------
certification of any independent public accountant as to any financial
statement, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Company to be in default of any of its
obligations under this Agreement.
"Indebtedness" of any Person means, without duplication, all (i)
------------
obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets or which are evidenced
by bonds, notes, debentures or other similar instruments, (ii) obligations
secured by any lien or other charge upon property or assets owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and
remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of property, (iv)
Capitalized Rentals payable by such Person under any Capitalized Lease,
(v) Guaranties of such Person, (vi) amounts of indebtedness which
14
<PAGE> 21
represent recourse liabilities to such Person with respect to any structured
financing or off-balance sheet financing that would be included on a balance
sheet of such Person in accordance with GAAP if such financing were
characterized as Indebtedness rather than a sale of assets, and (vii) all
obligations, contingent or otherwise, with respect to letters of credit
(whether or not drawn) issued for the account of such Person (including,
without limitation, the Letters of Credit).
"Indemnified Liabilities" is defined in Section 11.4.
----------------------- ------------
"Indemnified Parties" is defined in Section 11.4.
------------------- ------------
"Interest Charges" for any period means all interest and all
----------------
amortization of debt discount and expense on all Indebtedness of the Company
and its Subsidiaries. Computations of Interest Charges on a pro forma basis
for Indebtedness having a variable interest rate shall be calculated at the
rate in effect on the date of any determination.
"Interest Coverage Ratio" means, as at any date of determination,
-----------------------
with respect to any period for the Company and its Subsidiaries, the ratio of
(a) Consolidated Net Income for the previous twelve-month consecutive period
ending as of the date of determination plus (to the extent deducted in
----
determining Consolidated Net Income) Depreciation, Interest Charges, all
provisions for any federal, state or other income taxes and all other
non-cash charges made for the same period less Capital Expenditures for the
----
same period to (b) Interest Charges for the same period.
"Interest Period" (a) with respect to any Eurodollar Loan, means the
---------------
period beginning on and including the date on which such Loan is made or
continued as or converted into a Eurodollar Loan and ending one, two, three
or six months thereafter as the Company shall specify in the related notice
pursuant to Section 2.4 or 2.5, and (b) with respect to any Bid Rate
----------- ---
Loan, means the period from the Borrowing date for such Bid Rate Loan and
ending not less than seven (7) days nor more than one hundred seventy-nine
(179) days thereafter (which final day must be a Business Day) as specified
by the Company in the applicable Bid Request; provided that:
--------
(A) if the Company does not specify any Interest Period
for any Eurodollar Loan in the related notice pursuant to Section 2.4
-----------
or 2.5, such Interest Period shall be the period starting on the
---
Borrowing date or the last day of the prior Interest Period, as the
case may be, for such Eurodollar Loan and ending one month thereafter;
(B) if an Interest Period for any Eurodollar Loan would
otherwise end on a day which is not a Business Day, such Interest
Period shall end on the next succeeding
15
<PAGE> 22
Business Day (unless such next succeeding Business Day is the first Business
Day of a calendar month, in which case such Interest Period shall end on the
next preceding Business Day);
(C) no Interest Period may end later than the Stated
Maturity Date; and
(D) in the case of an Interest Period for a Eurodollar
Loan, if there exists no day numerically corresponding to the first day
of such Interest Period in the month in which the last day of such
Interest Period would otherwise fall, such Interest Period shall end on
the last Business Day of such month.
"Invitation for Competitive Bid Quotes" means a notice to Lenders by
-------------------------------------
the Administrative Agent inviting Bids, substantially in the form of
Exhibit B-4, completed and delivered pursuant to Section 2.6(a).
- ----------- --------------
"Issuance Request" means (i) a properly completed application for a
----------------
Letter of Credit on the applicable Issuer's standard form, executed by an
authorized financial officer of the applicable Applicant(s) or (ii) a request
given in accordance with the terms of this Agreement and Continuing
Commercial Letter of Credit Agreement, to issue, amend, modify, extend or
renew a Letter of Credit.
"Issuer" means any Affiliate, unit or agency of Scotiabank and/or
------
BAI.
"Japanese Yen" means lawful money of Japan.
------------
"Lender" and "Lenders" are defined in the preamble.
------ ------- --------
"Lender Assignment Agreement" means an Assignment and Assumption
---------------------------
Agreement substantially in the form of Exhibit P hereto.
---------
"Letter of Credit" has the meaning assigned to that term in
----------------
Section 4.1.
- -----------
"Letter of Credit Commitment" means, relative to any Lender or
---------------------------
Issuer, such Lender's Standby Letter of Credit Commitment and Commercial
Letter of Credit Commitment.
"Letter of Credit Outstandings" means, at any time, a Dollar Amount
-----------------------------
equal to the sum of
(a) the aggregate Stated Amount at such time of all
Letters of Credit then outstanding and undrawn (as such aggregate
Stated Amount shall be adjusted, from time to
16
<PAGE> 23
time, as a result of drawings, the issuance of Letters of Credit, or
otherwise),
plus
- ----
(b) the aggregate Dollar Amount at such time of all unpaid
and outstanding Reimbursement Obligations.
"Leverage Ratio" means the ratio of (a) Consolidated Debt to (b) the
--------------
sum of (i) Consolidated Debt plus (ii) Consolidated Shareholder's Equity.
----
"Lien" means any security interest, mortgage, pledge, hypothecation,
----
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan Commitment" means, relative to any Lender, the amount of such
---------------
Lender's obligation to make Committed Loans pursuant to Section 2.1(a) as
--------------
set forth on Schedule I, as amended from time to time, or as set forth in
----------
the applicable Lender Assignment Agreement executed and delivered pursuant to
Section 11.11, reduced by the amount of any permanent reduction(s) in such
- -------------
amount pursuant to this Agreement.
"Loan Commitment Amount" means, on any date, $200,000,000, as such
----------------------
amount may be reduced from time to time pursuant to Section 2.2.
-----------
"Loans" and "Loan" respectively mean (a) all loans (including
----- ----
Committed Loans and Bid Rate Loans) made by the Lenders or a single Lender
(as the context requires) to the Company pursuant to Article 2, and (b) a
---------
single such Committed or Bid Rate Loan made by any Lender.
"Loan Document" means this Agreement, the Notes, the Administrative
-------------
Agent Fee Letter, the Issuance Requests and each other relevant agreement,
document or instrument delivered in connection with this Agreement, the
Notes, the Issuance Requests, the Continuing Commercial Letter of Credit
Agreement and the Administrative Agent Fee Letter.
"Material Compliance" means compliance to the extent that any
-------------------
non-compliance does not have a material adverse effect on the financial
condition, operations, assets, business or properties of the Company and its
Subsidiaries taken as a whole or the ability of the Company to pay or perform
any of the monetary Obligations or the enforceability of any of the Loan
Documents.
"Material Subsidiary" means (i) each Subsidiary listed on Exhibit H
------------------- ---------
hereto which is designated therein as a "Material
17
<PAGE> 24
Subsidiary"; (ii) any Subsidiary that the Company designates as a "Material
Subsidiary" by updating Exhibit H hereto in a written notice delivered (which
---------
may be by facsimile transmission) to the Administrative Agent from time to
time; and (iii) any Subsidiary which is acquired or created or party to a
merger or some other corporate reorganization or otherwise acquires all or
substantially all of the assets of another Person following the Effective Date
and meets any of the following conditions:
(a) the assets of such Subsidiary (valued at the greater
of book or fair market) as at the end of the immediately preceding
fiscal year exceed $1,000,000; or
(b) the aggregate sum of all assets (valued at the
greater of book or fair market) of such Subsidiary, when combined with
the assets of all other Subsidiaries to which clauses (a) through
-----------
(d) of Section 9.1.7 would have applied if not for the limitations
- --- -------------
set forth in this definition during the 3-year period immediately
preceding the date of such determination, exceeds $1,000,000; or
(c) the sum of the portion of Consolidated Net Income of
the Company and its Subsidiaries which were contributed by such
Subsidiary during the immediately preceding fiscal year exceeds
$1,000,000.
"Maximum Offer" is defined in Section 2.6(b).
------------- --------------
"Maximum Request" is defined in Section 2.6(a).
--------------- --------------
"Minority Interests" means any shares of stock of any class of a
------------------
Subsidiary (other than directors' qualifying shares as required by law) that
are not owned by the Company and/or one or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority
Interests in preferred stock.
"Notes" and "Note" respectively mean (a) the Bid Notes and the
----- ----
Committed Notes, and (b) a single such Note.
"Obligations" means all obligations (monetary or otherwise) of the
-----------
Company arising under or in connection with this Agreement, the Notes, the
Letters of Credit and each other Loan Document.
"Overnight Rate" means, for any day, the rate of interest per annum
--------------
at which overnight deposits in the Available Currency,
18
<PAGE> 25
in an amount approximately equal to the amount with respect to which such rate
is being determined, would be offered for such day by Scotiabank's London
Branch to major banks in the London or other applicable offshore interbank
market. The Overnight Rate for any day which is not a Business Day shall be
the Overnight Rate for the preceding Business Day.
"Participant" is defined in Section 11.11.2.
----------- ---------------
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined in
------------
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which
the Company or any corporation, trade or business that is, along with the
Company, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning
of Section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
----------
on Schedule I hereto, as amended from time to time, or set forth in the
----------
applicable Lender Assignment Agreement, as such percentage may be adjusted
from time to time pursuant to Lender Assignment Agreement(s) executed by such
Lender and its Assignee Lender(s) and delivered pursuant to Section 11.11.
-------------
"Permits" is defined in Section 8.15.
------- ------------
"Person" means any natural person, corporation, limited liability
------
company, partnership, firm, association, trust, government, governmental
agency or any other entity, whether acting in an individual, fiduciary or
other capacity.
"Portion" is defined in Section 2.6(b).
------- --------------
"Potential Extension Date" means each October 31, or the next
------------------------
Business Day if such day is not a Business Day, in each year, beginning in
1997, during the term of this Agreement.
"Pricing Period" means the period commencing on the forty-fifth day
--------------
after the end of a fiscal quarter and ending on the forty-fourth day after
the end of the succeeding fiscal quarter.
"Pro Rata Distribution Event" is defined in Section 5.10(c).
--------------------------- ---------------
"Purchasing Lender" is defined in Section 2.3(b).
----------------- --------------
19
<PAGE> 26
"Quarterly Payment Date" means the last day of each January, April,
----------------------
July and October or, if any such day is not a Business Day, the next
succeeding Business Day.
"Rating Agency" means Standard & Poor's Ratings Group, Inc., Moody's
-------------
Investors Services, Inc. or Duff & Phelps Corporation, as the case may be,
provided that a Senior Debt Rating from Duff & Phelps Corporation shall
- --------
only be effective for purposes of determining the Applicable Eurodollar
Margin, the Applicable Facility Fee Percentage and the Applicable Commercial
Letter of Credit Margin at a time when the Company has also concurrently
received, from another Rating Agency, a Senior Debt Rating that is not
greater than that given by Duff & Phelps Corporation.
"Reimbursement Obligation" has the meaning assigned to that term in
------------------------
Section 4.6.
- -----------
"Release" means a "release", as such term is defined in CERCLA.
-------
"Rentals" means and includes all fixed rents (including as such all
-------
payments which the lessee is obligated to make to the lessor on termination
of the lease or surrender of the property) payable by the Company or a
Subsidiary, as lessee or sublessee under a lease of real or personal
property, but shall be exclusive of any amounts required to be paid by the
Company or a Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
"Required Lenders" means, at any time, Lenders with an aggregate
----------------
Percentage of at least 66-2/3%; provided that after the Commitments shall
--------
have been irrevocably terminated, "Required Lenders" shall mean Lenders
----------------
holding at least 66-2/3% of the Aggregate Outstanding Liabilities.
"Resource Conservation and Recovery Act" means the Resource
--------------------------------------
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as
amended. ------
"Responsible Officer" means the President, Chief Executive Officer,
-------------------
Executive Vice President-Administration, Vice President-Controller, Vice
President-Treasurer or General Counsel of the Company.
"Scotiabank" is defined in the preamble.
---------- --------
"Security" has the same meaning as in Section 2(1) of the Securities
--------
Act of 1933, as amended.
20
<PAGE> 27
"Senior Debt Rating" is defined in "Applicable Eurodollar Margin".
------------------ ----------------------------
"Standby Letter of Credit Commitment" means, relative to any Lender
-----------------------------------
or Issuer, the Dollar Amount of such Lender's or Issuer's obligation to issue
or participate in standby Letters of Credit pursuant to Section 2.1(c) as
--------------
set forth on Schedule I, as amended from time to time, or as set forth in
----------
the applicable Lender Assignment Agreement executed and delivered pursuant to
Section 11.11, reduced by the amount of any permanent reduction(s) in such
- -------------
amount pursuant to this Agreement.
"Standby Letter of Credit Commitment Amount" means, on any date, the
------------------------------------------
Dollar Amount of $50,000,000, as such amount may be reduced from time to time
pursuant to Section 2.2.
-----------
"Stated Amount" of each outstanding Letter of Credit means the
-------------
maximum Dollar Amount that thereafter could be drawn under such Letter of
Credit.
"Stated Expiry Date" has the meaning assigned to that term in
------------------
Section 4.1.
- -----------
"Stated Maturity Date" means October 30, 1999, or such anniversary
--------------------
thereof (or the next Business Day if such day is not a Business Day) to which
the Stated Maturity Date shall be extended pursuant to Section 2.3.
-----------
"Submission Deadline" is defined in Section 2.6(b).
------------------- --------------
"Subsidiary" means any corporation, partnership, association, limited
----------
liability company, or other business entity of which 50% or more of the
Voting Stock is at the time directly or indirectly owned by the Company, by
the Company and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Taxes" is defined in Section 5.7.
----- -----------
"Terminating Lender" means any Lender that has given or is deemed to
------------------
have given a Termination Notice.
"Termination Notice" means a notice by a Lender to the Administrative
------------------
Agent and the Company in writing pursuant to Section 2.3 that such Lender
-----------
does not desire to extend the Stated Maturity Date; provided that any
--------
Lender that fails to respond to a request by the Company to extend the Stated
Maturity Date within the applicable response time shall be deemed to have
given a Termination Notice to the Company and the Administrative Agent.
"Total Commitment Amount" means, on any date, the Dollar Amount of
-----------------------
$300,000,000, as such amount may be reduced from time to time pursuant to
Section 2.2.
- -----------
21
<PAGE> 28
"Type" means, relative to any Committed Loan, the portion thereof, if
----
any, being maintained as a Base Rate Loan or a Eurodollar Loan.
"Unmatured Event of Default" means any condition, occurrence or event
--------------------------
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Voting Stock" means Securities of any class or classes the holders
------------
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar
functions).
"Welfare Plan" means a "welfare plan", as such term is defined in
------------
Section 3(1) of ERISA.
"Wholly-owned" when used in connection with any Subsidiary means a
------------
Subsidiary of which all of the issued and outstanding shares of stock or
other equity interests (except shares required as directors' qualifying
shares) shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.
SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the
--------------------
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Notes and each Borrowing
Request, Issuance Request, Continuation/Conversion Notice, Loan Document,
notice and other communication delivered from time to time in connection with
this Agreement or any other Loan Document.
SECTION 1.3 Cross-References. Unless otherwise specified,
----------------
references in this Agreement and in each other Loan Document to any Article
or Section are references to such Article or Section of this Agreement or
such other Loan Document, as the case may be, and, unless otherwise
specified, references in any Article, Section or definition to any clause are
references to such clause of such Article, Section or definition.
SECTION 1.4 Accounting and Financial Determinations. Unless
---------------------------------------
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder shall be made, and all financial statements required
to be delivered hereunder or thereunder shall be prepared in accordance with,
those generally accepted accounting principles ("GAAP") applied in the
----
preparation of the financial statements referred to in Section 7.5.
-----------
22
<PAGE> 29
ARTICLE 2
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1 Commitments.
-----------
(a) From time to time on any Business Day occurring prior
to the Commitment Termination Date, each Lender, severally and for
itself alone, agrees to make loans ("Committed Loans") to the Company
---------------
equal to the product of (i) such Lender's Percentage and (ii) the
aggregate amount of the Borrowing of Committed Loans requested by the
Company to be made on such Business Day; provided that (x) at no time
--------
shall any Lender's Percentage of the aggregate principal amount of all
Committed Loans exceed such Lender's Loan Commitment, (y) the aggregate
principal amount of all outstanding Committed Loans shall not at any
time exceed an amount which, when added (without duplication) to the
sum of all other Aggregate Outstanding Liabilities on such day (after
giving effect to the incurrence or repayment of any Aggregate
Outstanding Liabilities on such day), would exceed the Total Commitment
Amount and (z) the sum of (i) the aggregate principal amount of all
outstanding Committed Loans plus (ii) the aggregate outstanding
----
principal amount of all Bid Rate Loans shall not exceed the Loan
Commitment Amount. Within the foregoing limits, and subject to the
terms and conditions hereinafter set forth, the Company may borrow,
prepay and reborrow Committed Loans.
(b) From time to time on any Business Day occurring prior
to the Commitment Termination Date, each Lender, severally and for
itself alone, on the terms and subject to the conditions hereinafter
set forth, hereby agrees to make loans (the "Bid Rate Loans") to the
--------------
Company in amounts equal to such Lender's Bids which have been accepted
as provided in, and as more particularly described in,
Section 2.6(c). No Lender shall be obligated to make any Bid. The
- --------------
aggregate principal amount of Bid Rate Loans which the Company may
request to be made on any Business Day shall not exceed an amount
which, (x) when added (without duplication) to the sum of all other
Aggregate Outstanding Liabilities on such Business Day (after giving
effect to the incurrence or repayment of any Aggregate Outstanding
Liabilities on such day), would exceed the Total Commitment Amount (y)
when added (without duplication) to the sum of all outstanding
Committed Loans on such Business Day (after giving effect to the
incurrence or repayment of any Bid Rate Loans or Committed Loans on
such day), would exceed the Loan Commitment Amount and (z) when added
(without duplication) to the sum of all other outstanding Bid Rate
Loans on such date (after giving effect to the incurrence or repayment
of any Bid Rate Loans on such date), would exceed $100,000,000.
23
<PAGE> 30
(c) From time to time on any Business Day, each Issuer,
severally and for itself alone, on the terms and subject to the
conditions hereinafter set forth, hereby agrees to issue, and each
Lender, severally and for itself alone, on the terms and subject to the
conditions hereinafter set forth, hereby agrees to participate in, the
Letters of Credit, in accordance with Article 4; provided, that
--------- -------- ----
(v) at no time shall any Lender's Percentage of Letter of Credit
Outstandings with respect to standby Letters of Credit exceed such
Lender's Standby Letter of Credit Commitment, (w) at no time shall any
Lender's Percentage of Letter of Credit Outstandings with respect to
commercial (trade) Letters of Credit exceed such Lender's Commercial
Letter of Credit Commitment, (x) the sum of (i) Letter of Credit
Outstandings plus (ii) all other Aggregate Outstanding Liabilities
----
shall not exceed the Total Commitment Amount, (y) the Letter of Credit
Outstandings with respect to commercial (trade) Letters of Credit shall
not exceed the Commercial Letter of Credit Commitment Amount and (z)
the Letter of Credit Outstandings with respect to standby Letters of
Credit shall not exceed the Standby Letter of Credit Commitment Amount.
SECTION 2.2 Reduction or Termination of the Commitments. The
-------------------------------------------
Company shall have the right, at any time and from time to time, to reduce
permanently in part, or to terminate in whole, without penalty or premium,
the Total Commitment Amount, the Loan Commitment Amount, the Standby Letter
of Credit Commitment Amount or the Commercial Letter of Credit Commitment
Amount, upon not less than (3) Business Days' prior notice (by facsimile, or
by telephone (confirmed in writing promptly thereafter)) received by the
Administrative Agent (which shall promptly advise each Lender thereof), which
notice shall designate the date (which shall be a Business Day) of such
reduction or termination and the Dollar Amount of any partial reduction of
the Total Commitment Amount, the Loan Commitment Amount, the Standby Letter
of Credit Commitment Amount or the Commercial Letter of Credit Commitment
Amount; provided that the Company may not reduce (w) the Total Commitment
--------
Amount to a Dollar Amount which is less than the Aggregate Outstanding
Liabilities outstanding on the effective date specified in such notice, (x)
the Loan Commitment to an amount which is less than the aggregate unpaid
principal amount of Loans outstanding on the effective date specified in such
notice, (y) the Standby Letter of Credit Commitment Amount to a Dollar Amount
which is less than the Letter of Credit Outstanding with respect to standby
Letters of Credit, and (z) the Commercial Letter of Credit Commitment Amount
to a Dollar Amount which is less than the Letter of Credit Outstandings with
respect to commercial (trade) Letters of Credit. Any such partial reduction
or termination of the Total Commitment Amount, the Loan Commitment Amount,
the Standby Letter of Credit Commitment Amount or the Commercial Letter of
Credit Commitment Amount shall be in a minimum Dollar Amount of $5,000,000
and integral multiples of a
24
<PAGE> 31
Dollar Amount of $1,000,000 in excess thereof and shall, in the case of any such
reduction, reduce each Lender's applicable Commitment by a Dollar Amount equal
to the product of (a) such Lender's Percentage and (b) the aggregate reduction
in such Loan Commitment Amount, Standby Letter of Credit Commitment Amount or
Commercial Letter of Credit Commitment Amount. Such partial reduction or
termination of the Loan Commitment Amount, Commercial Letter of Credit
Commitment Amount, Standby Letter of Credit Commitment Amount or Total
Commitment Amount shall be effective on the date specified in the Company's
aforesaid notice. The Company may only terminate the Total Commitment Amount
upon payment in full of all Aggregate Outstanding Liabilities and all other
Obligations. The Company may only terminate the Loan Commitment Amount upon
payment in full of all outstanding Loans. The Company may only terminate the
Standby Letter of Credit Commitment Amount upon the cash collateralization
(which may be satisfied by providing back-up letters of credit from banks
acceptable to the Lenders) in full, pursuant to documentation in form and
substance satisfactory to the Lenders, of all Letter of Credit Outstandings with
respect to standby Letters of Credit. The Company may only terminate the
Commercial Letter of Credit Commitment Amount upon the cash collateralization
(which may be satisfied by providing back-up letters of credit from banks
acceptable to the Lenders) in full, pursuant to documentation in form and
substance satisfactory to the Lenders, of all Letter of Credit Outstanding
with respect to commercial (trade) Letters of Credit. All reductions in the
Total Commitment Amount, the Loan Commitment Amount, the Standby Letter of
Credit Commitment Amount or the Commercial Letter of Credit Commitment Amount
shall be pro rata among the Lenders according to their respective
Percentages.
SECTION 2.3 Extension of Stated Maturity Date.
---------------------------------
(a) Provided that no Default shall have occurred and be
continuing, and that all of the representations and warranties
contained in the Loan Documents are true and correct in all material
respects as of the date of such request, at least sixty (60) but not
more than ninety (90) days before the Potential Extension Date in 1997,
1998, 1999, and, if the Stated Maturity Date has been previously
extended, 2000, the Company may provide the Administrative Agent with
written notice that it desires to extend the Stated Maturity Date for
an additional year; provided that the Stated Maturity Date may not be
--------
extended more than twice.
(b) Upon receipt of written notice requesting extension
of the Stated Maturity Date from the Company, the Administrative Agent
will promptly provide copies of such notice to the Lenders. Each Lender
shall notify (but in any event within fifteen (15) Business Days) the
Administrative Agent of its consent to or rejection of the extension of the
25
<PAGE> 32
Stated Maturity Date (by facsimile or by telephone (confirmed in writing
promptly thereafter)) on or before thirty (30) days prior to the applicable
Potential Extension Date. The failure of any Lender to timely notify the
Administrative Agent of its consent or rejection pursuant to this clause (b)
----------
shall be deemed to be a rejection by such Lender of such extension request, and
such Lender shall be a Terminating Lender hereunder. Promptly after the
applicable response date, the Administrative Agent shall give each
non-Terminating Lender and the Company notice of its receipt (or deemed receipt)
or non-receipt of Termination Notices. If the Administrative Agent has
notified the Company of its receipt (or deemed receipt) of any
Termination Notices, the Company shall then have the right to have the
Terminating Lender's Commitments, Committed Loans and participation
interests in Letters of Credit assigned to and assumed by (which right
shall expire one (1) Business Day prior to the applicable Potential
Extension Date) one or more Assignee Lenders (which may be
non-Terminating Lenders) as purchasing banks under this Agreement (in
such capacity, each a "Purchasing Lender") to replace such
-----------------
Terminating Lender(s); provided that (i) no Purchasing Lender may
--------
have Commitments greater than the then Commitments of the Lender
(including its Affiliates) which is then the Administrative Agent
without the approval of such Lender and (ii) if such Terminating Lender
is an Issuer then another Lender other than the Purchasing Lender which
is replacing such Terminating Lender may be designated by the Company
and the Administrative Agent as a replacement Issuer.
(c) On any applicable Potential Extension Date, if (i) the
aggregate Percentage of the Total Commitment Amount of the Terminating
Lenders (excluding the Percentage of the Total Commitment Amount of any
Terminating Lender to the extent that such Terminating Lender's
Commitments are purchased by a Purchasing Lender) is less than 33%,
(ii) no Default has occurred and is continuing on and as of such date,
and (iii) the representations and warranties contained in the Loan
Documents are true and correct in all material respects on and as of
such date, then the Administrative Agent shall so notify the Company,
and if the Company affirmatively requests the Administrative Agent in
writing (which may be by facsimile) to extend the Stated Maturity Date,
then the following shall occur on such Potential Extension Date: (1)
the Stated Maturity Date shall be automatically extended for one year for
all of the Lenders other than the Terminating Lenders, (2) the Terminating
Lender(s) (upon payment in full of all of the Obligations (including,
without limitation, any outstanding Bid Rate Loans of any such Terminating
Lender) owed to them on and as of such date by the Company and/or the
Purchasing Lenders) shall cease to be Lenders hereunder, (3) the
Purchasing Lenders shall be Lenders hereunder, (4) the Total Commitment
26
<PAGE> 33
Amount shall be automatically reduced by the aggregate Percentage of
the Total Commitment Amount of the Terminating Lenders (excluding the
Percentage of the Total Commitment Amount of any Terminating Lender to
the extent that such Terminating Lender's Commitments are purchased by
a Purchasing Lender); provided that the then Aggregate Outstanding
--------
Liabilities shall not exceed the resulting Total Commitment Amount,
(5) the Loan Commitment Amount shall be reduced by an amount equal to
the reduction in the Total Commitment Amount, (6) the Loan Commitment
of each non-Terminating Lender and each Purchasing Lender shall be equal
to the Percentage of each such Lender multiplied by the reduced Loan
Commitment Amount, (7) the Standby Letter of Credit Commitment of each
non-Terminating Lender and each Purchasing Lender shall be equal to the
Percentage of each such Lender multiplied by the Standby Letter of
Credit Commitment Amount, and (8) the Commercial Letter of Credit
Commitment of each non-Terminating Lender and each Purchasing Lender
shall be equal to the Percentage of each such Lender multiplied by the
Commercial Letter of Credit Commitment Amount. The transfer of
Commitments, outstanding Committed Loans and participations in Letters
of Credit from Terminating Lenders to Purchasing Lenders shall take
place as of the applicable Potential Extension Date, and pursuant to the
execution, delivery, acceptance and recording of a Lender Assignment
Agreement in accordance with the procedures set forth in Section 11.11.1;
---------------
it being understood, however, that if any Purchasing Lender is also a
- ------------------- -------
non-Terminating Lender then neither such Purchasing Lender nor the
related Terminating Lender shall be required to pay any processing or
recordation fees to the Administrative Agent pursuant to such Section
11.11.1. -------
- -------
(d) On any applicable Potential Extension Date, if (i) the
aggregate Percentage of the Total Commitment Amount of the Terminating
Lenders (excluding the Percentage of the Total Commitment Amount of any
Terminating Lender to the extent that such Terminating Lender's
Commitments are purchased by a Purchasing Lender) is greater than 33%,
(ii) a Default has occurred and is continuing on and as of such date,
(iii) the representations and warranties contained in the Loan
Documents are not true and correct in all material respects on and as
of such date, (iv) any Terminating Lender shall not have been fully
paid all of the Obligations owed to it by the Company on and as of such
date, (v) the Aggregate Outstanding Liabilities would be greater than
the reduced Total Commitment Amount, or (vi) if the conditions
contained in Section 2.3(c) are satisfied, but the Company fails to
--------------
affirmatively request the Administrative Agent in writing (which may be
by facsimile) to extend the Stated Maturity Date for an additional
year, then the Stated Maturity Date shall not be so extended and,
irrespective of whether a Lender has sent or has not sent a Termination
27
<PAGE> 34
Notice as provided in Section 2.3(b), the Stated Maturity Date of
--------------
each Lender shall not be extended on such Potential Extension Date and
no Purchasing Lender shall assume a Commitment pursuant to this
Section 2.3 and no Lender shall be a Terminating Lender.
- -----------
(e) Each Terminating Lender shall have no further rights
or obligations or Commitments hereunder following the date on which it
is terminated as a Lender under this Agreement as provided herein other
than any rights or obligations accruing on or prior to such date on
which it is terminated as a Lender under this Agreement as provided
herein; provided, however, that if any Issuer is a Terminating
-------- -------
Lender the Letters of Credit issued by such Issuer prior to the date on
which it is terminated as a Lender under this Agreement shall remain
outstanding notwithstanding the termination of the Commitments of such
Terminating Lender. The non-Terminating Lenders and the Purchasing
Lenders shall have a 100% participation interest in all such
outstanding Letters of Credit all as more particularly set forth in
this Section 2.3.
-----------
SECTION 2.4 Committed Loans Borrowing Procedure. By delivering a
-----------------------------------
Borrowing Request to the Administrative Agent, the Company may from time to
time irrevocably request that a Borrowing of Committed Loans be made in a
minimum amount of $5,000,000 and an integral multiple of $1,000,000 in excess
thereof or in the unused amount of the Loan Commitments but shall not exceed
an amount which, on the proposed date of the Borrowing, when added (without
duplication) to the sum of all other Aggregate Outstanding Liabilities on
such date (after giving effect to the incurrence or repayment of any
Aggregate Outstanding Liabilities on such date) would exceed the Total
Commitment Amount or the limits set forth in Section 2.1. Such Borrowing
-----------
Request, in the case of a Borrowing of Base Rate Loans, shall be delivered to
the Administrative Agent on or before 11:00 a.m., Atlanta time, on a Business
Day (which may be the same day as the date requested for the Borrowing), and,
in the case of a Borrowing of Eurodollar Loans, shall be delivered to the
Administrative Agent on or before 11:00 a.m., Atlanta time, on a Business Day
that is at least three (3) but no more than five (5) Business Days prior to
the date requested for such Borrowing. On the terms and subject to the
conditions of this Agreement, each Borrowing of Committed Loans shall be
comprised of the Type of Loans, and shall be made on the Business Day,
specified in such Borrowing Request. On or before 3:00 p.m., Atlanta time,
in the case of a Borrowing of Base Rate Loans, or on or before 12:00 noon,
Atlanta time, in the case of a Borrowing of Eurodollar Loans, on such
Business Day each Lender shall deposit with the Administrative Agent same day
funds in an amount equal to the product of (i) such Lender's Percentage and
(ii) the amount of the requested Borrowing. Such deposit will be made to an
account which the Administrative Agent shall specify from time to time by
28
<PAGE> 35
notice to the Lenders. To the extent funds are received from the Lenders
(subject to the provisions of Section 2.8), the Administrative Agent shall
-----------
make such funds available to the Company by wire transfer to the accounts the
Company shall have specified in its Borrowing Request. No Lender's
obligation to make any Committed Loan shall be affected by any other Lender's
failure to make any Committed Loan. All Borrowings, repayments and
prepayments of Committed Loans shall, except as otherwise required by
Section 5.10(b) following the occurrence of a Pro Rata Distribution Event,
- ---------------
be made so that after giving effect thereto all Committed Loans shall be pro
rata among the Lenders according to their respective Percentages.
SECTION 2.5 Continuation and Conversion Elections. By delivering
-------------------------------------
a Continuation/Conversion Notice to the Administrative Agent on or before
11:00 a.m., Atlanta time, on a Business Day, the Company may from time to
time irrevocably elect, on not less than three (3) nor more than five (5)
Business Days' notice, that all, or any portion in an aggregate minimum
amount of $5,000,000 and an integral multiple of $1,000,000 in excess
thereof, of any Committed Loans be, in the case of Base Rate Loans, converted
into Eurodollar Loans or, in the case of Eurodollar Loans, be converted into
a Base Rate Loan or continued as a Eurodollar Loan (in the absence of
delivery of a Continuation/Conversion Notice with respect to any Eurodollar
Loan at least three (3) Business Days but no more than five (5) Business Days
before the last day of the then current Interest Period with respect thereto,
such Eurodollar Loans shall, on such last day, automatically convert to a
Base Rate Loan); provided that (w) each such conversion or continuation
--------
shall be pro-rated among the applicable outstanding Committed Loans of all
Lenders, (x) no portion of the outstanding principal amount of any Committed
Loans may be continued as, or be converted into, Eurodollar Loans less than
one (1) month prior to the Stated Maturity Date or when any Default has
occurred and is continuing, (y) any conversion into, or continuation of, any
Eurodollar Loans on a day other than the last day of the then current
Interest Period with respect thereto shall be subject to the provisions of
Section 5.5, and (z) after giving effect to any continuation or conversion,
- -----------
the aggregate principal amount of any Eurodollar Loans having a particular
Interest Period shall be at least $5,000,000 and an integral multiple of
$1,000,000 in excess thereof.
SECTION 2.6 Procedures with Respect to Bid Rate Loans.
-----------------------------------------
(a) The Company may make Bid Requests by 11:00 a.m.,
Atlanta time, at least one (1) Business Day prior to the proposed date
of Borrowing for one or more Bid Rate Loans. Each Bid Request shall be
given to the Administrative Agent (which shall promptly on the same day
give notice thereof to each Lender by facsimile of an Invitation For
Competitive Bid Quotes if the Bid Request is not rejected pursuant
to this Section), by telephone (confirmed in writing promptly
-------
29
<PAGE> 36
on the same day by the delivery of a Bid Request, signed by an authorized
officer of the Company), and shall specify (i) the proposed date of
Borrowing, which shall be a Business Day; provided that there shall
--------
be no more than five (5) Bid Requests in any one calendar month,
(ii) the aggregate amount of the proposed Bid Rate Loans (the "Maximum
-------
Request") which shall not (A) exceed an amount which, on the proposed
- -------
date of Borrowing, when added (without duplication) to the sum of all
other Aggregate Outstanding Liabilities on such date (after giving
effect to the incurrence or repayment of any Aggregate Outstanding
Liabilities on such date) would exceed the Total Commitment Amount, (B)
exceed an amount which, on the proposed date of Borrowing, when added
to the sum of all Committed Loans on such date (after giving effect to
the incurrence or repayment of any Loans on such date) would exceed the
Loan Commitment Amount, or (C) exceed an amount which, on the proposed
date of Borrowing, when added (without duplication) to the sum of all
other Bid Rate Loans on such date (after giving effect to the
incurrence or repayment of any Bid Rate Loans on such date) would
exceed $100,000,000, or (D) be less than $1,000,000 or, for amounts in
excess thereof, an integral multiple of $500,000, (iii) the Interest
Period(s) therefor, and (iv) if more than one Interest Period is so
specified, the principal amount (not less than $1,000,000 or, for
amounts in excess thereof, an integral multiple of $500,000) allocable
to each such Interest Period. A Bid Request that does not conform
substantially to the form of Exhibit B-3 shall be rejected, and the
-----------
Administrative Agent shall promptly notify the Company of such
rejection.
(b) Each Lender in its sole discretion may (but is not
obligated to) submit a Bid or Bids to the Administrative Agent not
later than 10:00 a.m., Atlanta time (or, upon reasonable prior notice
to the Lenders, such other time as the Company and the Administrative
Agent may agree), on the proposed date of the Borrowing specified in
such Bid Request (such 10:00 a.m. time (or agreed other time) being
herein called the "Submission Deadline"), by facsimile or in writing,
-------------------
and thereby irrevocably offer to make all or any part (any such part
referred to as a "Portion") of any Bid Rate Loan described in the
-------
relevant Bid Request at a Bid Rate specified therein in an aggregate
principal amount of $1,000,000 and, for amounts in excess thereof, an
integral multiple of $500,000; provided that Bids submitted by the
--------
Administrative Agent may only be submitted if the Administrative Agent
notifies the Company of the terms of its Bid not later than fifteen
(15) minutes prior to the Submission Deadline. Multiple Bids may be
delivered to the Administrative Agent. The aggregate Portions of Bid
Rate Loans for any or all Interest Periods offered by a Lender in its
Bid may exceed the Maximum Request contained in the relevant Bid
Request; provided that each Bid shall set forth
--------
30
<PAGE> 37
the maximum aggregate amount of the Bid Rate Loans offered thereby which
the Company may accept (the "Maximum Offer"), which Maximum Offer shall
-------------
not exceed the Maximum Request.
(c) The Administrative Agent shall promptly give notice
by telephone (promptly confirmed in writing) to the Company of all
complying Bids received by the Administrative Agent prior to the
Submission Deadline. The Company shall, in its sole discretion but
subject to Section 2.6(d), irrevocably accept or reject any such
--------------
complying Bid (or any Portion offered by such Bid) not later than 11:00
a.m., Atlanta time, on the proposed Borrowing date by notice to the
Administrative Agent by telephone (confirmed in writing in the form of
a Bid Rate Loan Acknowledgment promptly the same day). Promptly on the
day of the Submission Deadline, the Administrative Agent will give
notice to each Lender that submitted a Bid as to the extent, if any,
that such Lender's Bid has been accepted. If the Administrative Agent
fails to receive notice from the Company of its acceptance or rejection
of any Bids at or prior to 11:00 a.m., Atlanta time, on such day, all
such Bids shall be deemed to have been rejected by the Company, and the
Administrative Agent will give to each Lender which submitted a Bid
notice of such rejection by telephone on such day. In due course
following the acceptance of any Bid, the Administrative Agent shall
notify each Lender that submitted a Bid, in the form of a Bid Rate Loan
Confirmation, of the amount, maturity date and Bid Rate for each Bid
Rate Loan.
(d) If the Company accepts a Portion of a proposed Bid
Rate Loan for a single Interest Period at the Bid Rate provided
therefor in a Lender's Bid, such Portion shall be in a principal amount
of $1,000,000 (subject to such lesser allocation as may be made
pursuant to the provisions below in this clause (d)) or, for amounts
----------
in excess thereof, in integral multiples of $500,000. The aggregate
principal amount of Bid Rate Loans accepted by the Company following
Bids responding to a Bid Request shall not exceed the Maximum Request.
The aggregate principal amount of Bid Rate Loans accepted by the
Company pursuant to a Lender's Bid shall not exceed the Maximum Offer
therein contained. If the Company accepts any Bid Rate Loans or
Portion offered in any Bid, the Company must accept Bids (and Bid Rate
Loans and Portions thereby offered) based exclusively upon the
successively lowest Bid Rates within each Interest Period and no other
criteria. If two (2) or more Lenders submit Bids with identical Bid
Rates for the same Interest Period and the Company accepts any thereof,
the Company shall, subject to the first three sentences of this
clause (d), accept all such Bids as nearly as possible in proportion
- ----------
to the amounts of such Lenders' respective Bids with identical Bid
Rates for such Interest Period; provided that if the amount of Bid
--------
Rate Loans to be so allocated is not
31
<PAGE> 38
sufficient to enable each such Lender to make such Bid Rate Loan (or
Portions thereof) in an aggregate principal amount of $1,000,000, or for
amounts in excess thereof, an integral multiple of $500,000, the Company
shall round the Bid Rate Loans (or Portions thereof) allocated to such
Lender or Lenders as the Company shall select as necessary to a minimum
of $500,000 and the nearest multiple of $100,000.
(e) Not later than 1:00 p.m., Atlanta time, on the
relevant Borrowing date, each Lender whose Bid was accepted by the
Company shall make available to the Administrative Agent at its head
office in Atlanta, Georgia, in immediately available funds, the
proceeds of such Lender's Bid Rate Loan(s). Promptly upon receipt
thereof by the Administrative Agent (subject to the provisions of
Section 2.8) and fulfillment (or, as provided herein, waiver) of the
- -----------
conditions and against receipt of the documents, if any, specified in
Article 6 with respect to the relevant Borrowing, the Administrative
- ---------
Agent shall make available to the Company (at an account with the
Administrative Agent or elsewhere as the Company may from time to time
instruct the Administrative Agent in writing) on the relevant Borrowing
date the proceeds of such Borrowing, in immediately available funds.
Each Borrowing of Bid Rate Loans shall be on a Business Day.
SECTION 2.7 Funding. Each Lender may, if it so elects, fulfill
-------
its obligation to make, continue or convert Eurodollar Loans hereunder by
causing one of its foreign branches or affiliates (or an international
banking facility created by such Lender) to make or maintain such Eurodollar
Loan; provided that such Eurodollar Loan shall nonetheless be deemed to
--------
have been made and to be held by such Lender, and the obligation of the
Company to repay such Eurodollar Loan shall nevertheless be to such Lender
for the account of such foreign branch, affiliate or international banking
facility.
SECTION 2.8 Availability of Funds. Unless the Company or a
---------------------
Lender, as the case may be, notifies the Administrative Agent prior to the
date on which it is scheduled to make payment to the Administrative Agent,
that it does not intend to make such payment, the Administrative Agent may
assume that such payment has been made. The Administrative Agent may, but
shall not be obligated to, make the amount of such payment available to the
intended recipient in reliance upon such assumption. If such Lender or the
Company, as the case may be, has not in fact made such payment to the
Administrative Agent, the recipient of such payment shall, on demand by the
Administrative Agent, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers
such amount at a rate per annum equal to (i) if the
--- -----
32
<PAGE> 39
recipient is a Lender, the Federal Funds Effective Rate for such day, or
(ii) if the recipient is the Company, the applicable interest rate
otherwise payable by the Company in respect of such Loan (or at the
Default Rate if payment to the Company was not to be made in respect of
a Loan).
SECTION 2.9 Reliance Upon Telephonic Notices. The Administrative
--------------------------------
Agent and each Issuer may rely and act upon notice given by telephone by
individuals reasonably believed by the Administrative Agent or such Issuer to
be those individuals designated on Exhibit S or otherwise designated by the
---------
Company to the Administrative Agent or such Issuer in writing from time to
time to possess authority to give such notice, without waiting for such
receipt of written confirmation thereof, and the Company hereby indemnifies
and holds harmless the Administrative Agent and each Issuer from and against
any and all losses, costs, expenses, damages, claims, actions and other
proceedings relating to such reliance, except for such losses, costs,
expenses, damages, claims, actions and proceedings resulting from acts or
omissions constituting gross negligence or willful misconduct on the part of
the Administrative Agent or the relevant Issuer. If a written confirmation
differs in any respect from the action taken by the Administrative Agent or
the relevant Issuer, the records of the Administrative Agent or such Issuer
shall govern absent manifest error.
SECTION 2.10 Currency. All Loans shall be denominated in Dollars
--------
and all Letters of Credit shall be denominated in an Available Currency. The
Administrative Agent will determine the Dollar Amount with respect to (i) any
issuance of a Letter of Credit as of the requested date of issuance, (ii) any
drawing under a Letter of Credit as of the related date of such drawing, and
(iii) all Letter of Credit Outstandings as of the last Business Day of each
month.
SECTION 2.11 Conditions. Notwithstanding any other provision of
----------
this Agreement, (a) no Lender or Issuer shall be obligated to make any
Extension of Credit and (b) no Lender shall be obligated to convert into or
permit the continuation at the end of the applicable Interest Period of any
Eurodollar Loan if, in any such case, a Default exists or would result
therefrom. The making of any Extension of Credit and the conversion into or
continuation at the end of the applicable Interest Period of any Eurodollar
Loan shall be deemed to be a certification by the Borrower that the
applicable conditions under Section 6.2 have been satisfied.
-----------
SECTION 2.12 Notes.
-----
(a) The Committed Loans of each Lender shall be evidenced
by a Committed Note payable to the order of such Lender in the
principal amount of the original Loan Commitment of such Lender.
33
<PAGE> 40
(b) The Bid Rate Loans of each Lender shall be evidenced
by a Bid Note payable to the order of such Lender in the principal
amount of $100,000,000.
(c) Each Lender shall record in its records, or at its
option on the schedule attached to its applicable Notes, the date and
amount of each Loan made by such Lender thereunder, each repayment or
prepayment thereof, and the dates on which any Interest Period for such
Loan shall begin and end. Prior to any transfer or assignment of any
of its Notes, each Lender shall record on the schedule attached thereto
the then outstanding principal amount thereof and the date through
which interest has been paid. The aggregate unpaid principal amount so
recorded shall be rebuttable, presumptive evidence of the principal
amount owing and unpaid on such Note. The failure to so record, or any
error in so recording, any such amount on such schedule shall not,
however, limit or otherwise affect the obligations of the Company
hereunder or under any Note to repay the outstanding principal amount
of its Loans together with all interest accruing thereon, nor shall
such failure or error affect the Company's obligations under any other
Loan Document.
ARTICLE 3
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 Repayments and Prepayments. The Company shall repay
--------------------------
in full the unpaid principal amount of each Loan upon the Commitment
Termination Date. Prior thereto, the Company
(a) shall repay each Bid Rate Loan on the last day of the
Interest Period for such Bid Rate Loan; and
(b) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any Committed Loans; provided that
--------
(i) any such prepayment shall be made pro rata
--- ----
among Loans of the same Type (whether Base Rate Loans or Eurodollar
Loans) and, if applicable, having the same Interest Period of all
Lenders;
(ii) no such prepayment of any Eurodollar Loan
may be made on any day other than the last day of the Interest
Period for such Eurodollar Loan unless the Company shall pay all
amounts, if any, required by Section 5.5;
-----------
(iii) all such voluntary prepayments shall
require at least three (3) but no more than five (5)
34
<PAGE> 41
Business Days' prior written notice to the Administrative Agent; and
(iv) all such voluntary partial prepayments
shall be in an aggregate minimum amount of $5,000,000 and an
integral multiple of $1,000,000 in excess thereof.
If at any time the Administrative Agent shall determine that the
aggregate Dollar Amount of the Aggregate Outstanding Liabilities exceeds (as
a result of fluctuations in applicable foreign exchange rates or otherwise)
the Total Commitment Amount then in effect, or at any time the Administrative
Agent shall determine that the aggregate Dollar Amount of the Letter of
Credit Outstandings with respect to commercial (trade) Letters of Credit
exceeds (as a result of fluctuations in the applicable foreign exchange rates
or otherwise) the Commercial Letter of Credit Commitment Amount, or at any
time the Administrative Agent shall determine that the aggregate Dollar
Amount of the Letter of Credit Outstandings with respect to standby Letters
of Credit exceeds (as a result of fluctuations in applicable foreign exchange
rates or otherwise) the Standby Letter of Credit Commitment Amount, shall
immediately make a mandatory prepayment of the Loans and/or deliver to the
Administrative Agent cash collateral with respect to the Letters of Credit in
an aggregate Dollar Amount at least equal to each such excess.
Each prepayment of any Loans made pursuant to this Section 3.1 shall
-----------
be without premium or penalty, except as may be required by Section 5.5.
-----------
No voluntary prepayment of principal of any Loans shall cause a reduction in
the Total Commitment Amount or the Loan Commitment. No Bid Rate Loan may be
prepaid to a Lender prior to the last day of its applicable Interest Period
without the prior written consent of the Lender holding such Bid Rate Loan,
which consent may be given or withheld at such Lender's sole and absolute
discretion. Any such prepayment of a Bid Rate Loan prior to the end of its
applicable Interest Period shall be subject to the payments, if any, required
by Section 5.5.
-----------
SECTION 3.2 Interest Provisions. Interest on the outstanding
-------------------
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
- -----------
SECTION 3.2.1 Rates. The Company hereby promises to pay interest
-----
(calculated in Dollars) on the unpaid principal amount of each Loan of each
Lender at a rate per annum as follows:
--- -----
(a) if such Loan is a Base Rate Loan, interest at a rate
per annum equal to the Alternate Base Rate from time to time in effect;
- --- -----
(b) if such Loan is a Eurodollar Loan, interest at a rate
per annum equal to the Eurodollar Rate (Adjusted)
- --- -----
35
<PAGE> 42
applicable to the Interest Period therefor, plus the Applicable
----
Eurodollar Margin for each day during such period; and
(c) if such Loan is a Bid Rate Loan, interest at a rate
per annum equal to the applicable Bid Rate accepted by the Company
- --- -----
in accordance with Section 2.6.
-----------
All Base Rate Loans shall bear interest from and including the date
such Base Rate Loan is made or the date a Eurodollar Loan is converted into
such Base Rate Loan to (but not including) the date such Base Rate Loan is
paid. All Eurodollar Loans and Bid Rate Loans shall bear interest from and
including the first day of the applicable Interest Period to (but not
including) the last day of such Interest Period at the interest rate
determined by the Administrative Agent as applicable to such Eurodollar Loan
or at the applicable Bid Rate accepted by the Company, as the case may be.
Each determination by the Administrative Agent of the interest rate
applicable to any Loan shall be conclusive and binding upon the parties
hereto, in the absence of manifest error. At the request in writing of the
Company, however, the Administrative Agent shall deliver to the Company a
statement showing the computations used by the Administrative Agent in
determining such interest rate.
SECTION 3.2.2 Default Rates. After the date any principal amount
-------------
of, or to the extent permitted by law during the existence of an Event of
Default arising under Section 9.1.1, the interest on, any Loan is due and
-------------
payable (whether on the Commitment Termination Date, upon acceleration or
otherwise), the Company shall pay interest (after as well as before judgment)
on such principal or interest from the due date therefor until such principal
or interest is paid, at a rate per annum equal to the Alternate Base
--- -----
Rate, from time to time in effect (but not less than the Alternate Base Rate,
Eurodollar Rate (Adjusted) or Bid Rate, as the case may be, in effect at such
due date) plus 2.0% per annum (the "Default Rate").
---- --- ----- ------------
SECTION 3.2.3 Payment Dates. Interest accrued on each Loan shall be
-------------
payable, without duplication:
(a) on the Commitment Termination Date;
(b) on the date of any payment or prepayment, in whole or
in part, of principal outstanding on such Loan (other than Base Rate
Loans);
(c) with respect to Base Rate Loans, on each Quarterly
Payment Date occurring after the Effective Date;
(d) with respect to Eurodollar Loans on the last day of
each applicable Interest Period for such Eurodollar Loans and, if such
Interest Period shall exceed three months, on
36
<PAGE> 43
the day of the third month of such Interest Period numerically
corresponding to the first day of such Interest Period (or, if there is
no such numerically corresponding day in such third month, on the last
Business Day of such third month);
(e) with respect to Bid Rate Loans, on the last day of
each applicable Interest Period for such Bid Rate Loans; and
(f) with respect to any Base Rate Loans converted into
Eurodollar Loans on a day when interest would not otherwise have been
payable pursuant to clause (c), on the first Quarterly Payment Date
----------
occurring after the date of such conversion.
Interest accrued on Loans or other monetary Obligations after the date such
amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3 Fees. The Company agrees to pay the fees set forth in
----
this Section 3.3. All such fees shall be non-refundable.
-----------
SECTION 3.3.1 Facility Fee. The Company agrees to pay to the
------------
Administrative Agent, for the account of each Lender, a facility fee (the
"Facility Fee") in an amount equal to the product of (i) the Applicable
------------
Facility Fee Percentage multiplied by (ii) the Total Commitment Amount
minus the Letter of Credit Outstandings with respect to commercial (trade)
- -----
Letters of Credit for the period commencing on the Effective Date and
continuing through the final Commitment Termination Date. The Facility Fee
shall be calculated for each day and be payable by the Company in arrears on
each Quarterly Payment Date, commencing with the first such day following the
Effective Date, and on the Commitment Termination Date.
SECTION 3.3.2 Letter of Credit Fees. (a) The Company agrees to pay
---------------------
to the Administrative Agent, for the account of the Lenders, a fee for each
Letter of Credit (computed for the actual number of days elapsed on the basis
of a 360-day year) for the period from and including the date of the issuance
of such Letter of Credit to (but not including) the date upon which such
Letter of Credit expires or is fully drawn, of (i) the Applicable Commercial
Letter of Credit Margin per annum of the Stated Amount of each commercial
(trade) Letter of Credit and (ii) the Applicable Eurodollar Margin per annum
of the Stated Amount of each standby Letter of Credit. Such fees shall be
payable by the Company in arrears on each Quarterly Payment Date, and on the
Commitment Termination Date for any period then ending for which such fee
shall not theretofore have been paid, commencing on the first such date after
the issuance of each such Letter of Credit.
37
<PAGE> 44
(b) The Company agrees to pay to each Issuer such fees as are agreed
to between the Company and each such Issuer.
SECTION 3.3.3 Administrative Agent's Fees. The Company agrees to
---------------------------
pay to the Administrative Agent for its own account all other fees in the
amounts and at the times required pursuant to the Administrative Agent Fee
Letter.
ARTICLE 4
LETTERS OF CREDIT
-----------------
SECTION 4.1 Issuance Requests. By delivering an Issuance Request
-----------------
to the applicable Issuer (i) on or before 12:00 noon, Chicago time, not less
than three (3) Business Days prior to the proposed date of issuance, an
Applicant may request, from time to time prior to the Commitment Termination
Date, in the case of standby Letters of Credit or (ii) at or before 3:00
p.m., Chicago time, on such proposed date of issuance in the case of
commercial (trade) Letters of Credit, that such Issuer issue an irrevocable
standby or commercial (trade) letter of credit in such form as may be
requested by such Applicant and approved by such Issuer (each a "Letter of
---------
Credit"), in support of financial obligations of such Applicant incurred in
- ------
such Applicant's ordinary course of business and which are described in such
Issuance Request. Each Letter of Credit shall by its terms (a) be issued in
a Stated Amount of not less than $2,500 and which, when added (without
duplication) to the sum of all other Aggregate Outstanding Liabilities on
such day (after giving effect to the incurrence or repayment of any Aggregate
Outstanding Liabilities on such day) would not exceed the Total Commitment
Amount; (b) in the case of commercial (trade) Letters of Credit, be issued in
a Stated Amount which, when added (without duplication) to the sum of all
other Letter of Credit Outstandings with respect to commercial (trade)
Letters of Credit on such day (after giving effect to the incurrence or
repayment of any other Letter of Credit Outstandings with respect to
commercial (trade) Letters of Credit on such day) would not exceed the
Commercial Letter of Credit Commitment Amount; (c) in the case of standby
Letters of Credit, be issued in a Stated Amount which, when added (without
duplication) to the sum of all other Letter of Credit Outstandings with
respect to standby Letters of Credit on such day (after giving effect to the
incurrence or repayment of any other Letter of Credit Outstandings with
respect to standby Letters of Credit on such day) would not exceed the
Standby Letter of Credit Commitment Amount; (d) in the case of commercial
(trade) Letters of Credit, be stated to expire on a date (its "Stated Expiry
-------------
Date") no later than the earlier of 364 days from its date of issuance and
- ----
the Commitment Termination Date so long as the aggregate Stated Amount of all
commercial (trade) Letters of Credit stated to expire on a date longer than
180 days from its date of issuance or extension does not exceed a Dollar Amount
38
<PAGE> 45
of $30,000,000 at any time; (e) in the case of standby Letters of Credit,
be stated to expire on a date no later than the earlier of 728 days from
its date of issuance and the Commitment Termination Date so long as the
aggregate Stated Amount of all standby Letters of Credit stated to expire on
a date longer than 364 days from its date of issuance or extension does not
exceed a Dollar Amount of $5,000,000. So long as no Default has occurred and
is continuing, by delivery to the applicable Issuer of an Issuance Request
(i) at least three (3) Business Days prior to the Stated Expiry Date of any
Letter of Credit, in the case of standby Letters of Credit or (ii) by 3:00
p.m., Chicago time, on the Stated Expiry Date of any Letter of Credit, in the
case of commercial (trade) Letters of Credit, the Borrower may request such
Issuer to extend the Stated Expiry Date of such Letter of Credit for an
additional period not to exceed the earlier of 180 days (in the case of
commercial (trade) Letters of Credit) or 364 days (in the case of standby
Letters of Credit) from its date of extension and the Commitment Termination
Date; provided, however, that the Stated Expiry Date of such Letters of
-------- -------
Credit may be extended for an additional period not to exceed 364 days (in
the case of commercial (trade) Letters of Credit) or 728 days (in the case of
standby Letters of Credit) so long as, in the case of commercial (trade)
Letters of Credit, the aggregate Stated Amount of all commercial (trade)
Letters of Credit stated to expire longer than 180 days from its date of
issuance or extension does not exceed a Dollar Amount of $30,000,000 at any
time and, in the case of standby Letters of Credit, the aggregate Stated
Amount of all standby Letters of Credit stated to expire longer than 364 days
from its date of issuance or extension does not exceed a Dollar Amount of
$5,000,000 at any time. The Issuer of commercial (trade) Letters of Credit
shall be entitled to require that only one set of original negotiable
documents (not consigned to any Applicant or its agent) shall be issued with
respect to any commercial (trade) Letter of Credit.
SECTION 4.2 Issuances and Extensions. On the terms and subject to
------------------------
the conditions of this Agreement (including Article 6), the applicable
----------
Issuer shall issue Letters of Credit, and extend the Stated Expiry Dates of
outstanding Letters of Credit, in accordance with the Issuance Requests made
therefor. Upon such issuance or extension of standby Letters of Credit, the
Issuer of such standby Letters of Credit shall promptly notify the
Administrative Agent thereof. The Issuer of commercial (trade) Letters of
Credit shall send the Administrative Agent a report at the end of each
Business Day on which it issues, extends or amends any such Letter of Credit
or honors a drawing with respect to any such Letter of Credit or on which any
such Letter of Credit expires, which report shall set forth the Dollar Amount
of all commercial (trade) Letters of Credit issued, extended or expiring on
such Business Day and the Dollar Amount of all drawings made with respect to
commercial (trade) Letters of Credit on such Business Day. Each Issuer will
make available the original of each Letter of Credit which it issues in
39
<PAGE> 46
accordance with the Issuance Request therefor to the beneficiary thereof and
will notify the beneficiary under any Letter of Credit of any extension of
the Stated Expiry Date thereof.
SECTION 4.3 Expenses. The Company agrees to pay to the applicable
--------
Issuer(s) all administrative expenses of such Issuer(s) in connection with
the issuance, maintenance, modification (if any) and administration of each
Letter of Credit issued by such Issuer(s) as agreed to between the Company
and each such Issuer.
SECTION 4.4 Other Lenders' Participation. Each Letter of Credit
----------------------------
issued pursuant to Section 4.2 shall, effective upon its issuance and
-----------
without further action, be issued on behalf of all Lenders (including the
Issuer thereof) pro rata according to their respective Percentages. Each
--- ----
Lender shall, to the extent of its Percentage, be deemed irrevocably to have
purchased an undivided participation interest in such Letter of Credit and
shall be responsible to reimburse promptly the Issuer thereof for
Reimbursement Obligations which have not been reimbursed by the Company in
accordance with Section 4.5, or which have been reimbursed by the Company
-----------
but must be returned, restored or disgorged by such Issuer for any reason,
and each Lender shall, to the extent of its Percentage, be entitled to
receive from the Administrative Agent a ratable portion of the letter of
credit fees received by the Administrative Agent pursuant to
Section 3.3.2(a) with respect to each Letter of Credit. In the event that
- ----------------
the Company shall fail to reimburse any Issuer, and if for any reason
Committed Loans shall not be made to fund any Reimbursement Obligation, all
as provided in Section 4.5 and in a Dollar Amount equal to the Dollar
-----------
Amount of any drawing honored by such Issuer under a Letter of Credit issued
by it, or in the event such Issuer must for any reason return or disgorge all
or any portion of such reimbursement, such Issuer shall promptly notify the
Administrative Agent who shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to such Issuer,
whether or not any Default shall have occurred and be continuing, and whether
or not any other conditions specified in Section 6.2 are satisfied, an
-----------
amount equal to its Percentage of such unreimbursed amount in same day or
immediately available funds in the Available Currency in which such
unreimbursed drawing was made at the office of such Issuer specified in such
notice not later than 1:00 P.M., New York time, on the Business Day (under
the laws of the jurisdiction of the specified office of such Issuer) after
the date notified by such Issuer. In the event that any Lender fails to make
available to such Issuer the amount of such Lender's participation in such
Letter of Credit (or part thereof) as provided herein, such Issuer shall be
entitled to recover such amount on demand from such Lender together with
interest at (i) in the case of an unreimbursed drawing in Dollars, the daily
average Federal Funds Rate or (ii) in the case of an unreimbursed drawing in an
40
<PAGE> 47
Available Currency other than Dollars, the daily average Overnight Rate
for such Available Currency. Nothing in this Article 4 shall be deemed to
---------
prejudice the right of any Lender to recover from any Issuer any amounts made
available by such Lender to such Issuer pursuant to this Article 4 in the
---------
event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit by such Issuer in respect of which
payment was made by such Lender constituted gross negligence or wilful
misconduct on the part of such Issuer. Each Issuer shall distribute to each
other Lender which has paid all amounts payable by it under this Article 4
---------
with respect to any Letter of Credit issued by such Issuer, such other
Lender's Percentage of all payments received by such Issuer from the Company
or the applicable Applicant in reimbursement of drawings honored by such
Issuer under such Letter of Credit when such payments are received and in the
same funds as received by such Issuer. If any Issuer fails to make available
to any such Lender the amount required to be paid to such Lender by such
Issuer pursuant to the previous sentence, such Lender shall be entitled to
recover such amount on demand from such Issuer together with interest at (i)
in the case of amounts in Dollars, the daily average Federal Funds Rate or
(ii) in the case of amounts in an Available Currency other than Dollars, the
daily average Overnight Rate for such Available Currency.
SECTION 4.5 Disbursements. Each Issuer will notify the Company
-------------
and the Administrative Agent promptly of the presentment for payment under or
draw upon any Letter of Credit, together with notice of the date (a
"Disbursement Date") such payment shall be made; provided, however,
----------------- -------- -------
that the failure of such Issuer to so notify the Company and the
Administrative Agent shall not affect the rights of such Issuer or the
Lenders in any manner whatsoever. Subject to the terms and provisions of
such Letter of Credit, the applicable Issuer shall make such payment to the
beneficiary (or its designee) of such Letter of Credit; it being understood
-------------------
that no Issuer shall be required to make any such payment prior to 72 hours
following the time at which presentment is made for payment under such Letter
of Credit. Prior to 12:00 noon, New York time, on the second Business Day
after the Disbursement Date, the Company will reimburse the applicable Issuer
for all amounts which it has disbursed under such Letter of Credit and in the
Available Currency in which such drawing was made. The Company's
Reimbursement Obligation shall accrue interest from and including the
Disbursement Date to but excluding the date such Reimbursement Obligation is
paid in full at the Default Rate (or, in the case of any Reimbursement
Obligation denominated in an Available Currency other than Dollars, at a rate
per annum equal to the Overnight Rate for such Available Currency plus (ii)
the Applicable Eurodollar Margin plus (iii) 2%), payable on demand;
provided, however, that if any Reimbursement Obligation is paid in full
- -------- -------
in cash on the applicable Disbursement Date then no interest shall be
payable on the amount so paid. In the event the applicable Issuer is not
41
<PAGE> 48
reimbursed by the Company or the applicable Applicant on the second Business
Day after the Disbursement Date, or if such Issuer must for any reason return
or disgorge such reimbursement, or prior to the second Business Day after the
Disbursement Date if requested by the applicable Issuer, the Lenders
(including such Issuer) shall, on the terms and subject to the conditions of
this Agreement (including the availability under the Loan Commitments), fund
the Reimbursement Obligation therefor by making, on the next Business Day,
Committed Loans which are Base Rate Loans as provided in Section 2.4 (the
-----------
Company being deemed to have given a timely Borrowing Request therefor for
such amount) that shall be payable on demand and that shall accrue interest
until paid in full at the Alternate Base Rate.
SECTION 4.6 Reimbursement. The Company's obligation (a
-------------
"Reimbursement Obligation") under Section 4.5 to reimburse an Issuer with
------------------------ -----------
respect to each payment or disbursement (including interest thereon) and to
repay Committed Loans pursuant to Section 4.5 and each Lender's obligation
-----------
to make participation payments in each drawing which has not been reimbursed
by the Company, shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim, or defense to
payment which the Company may have or have had against any Lender or any
beneficiary of a Letter of Credit, including any defense based upon the
occurrence of any Default, any draft, demand or certificate or other document
presented under a Letter of Credit proving to be forged, fraudulent, invalid
or insufficient (even if notified thereof by the Company or the applicable
Applicant), the failure of any payment or disbursement to conform to the
terms of the applicable Letter of Credit (if, in the applicable Issuer's good
faith opinion, such payment or disbursement is determined to be appropriate)
or any non-application or misapplication by the beneficiary of the proceeds
of such payment or disbursement, or the legality, validity, form, regularity,
or enforceability of such Letter of Credit; provided, however, that
-------- -------
nothing herein shall adversely affect the right of the Company or the
applicable Applicant to commence any proceeding against the applicable Issuer
for any wrongful payment or disbursement made by such Issuer under a Letter
of Credit as a result of acts or omissions constituting gross negligence or
wilful misconduct on the part of such Issuer.
SECTION 4.7 Deemed Disbursements. Upon the occurrence of the
--------------------
Commitment Termination Date, a Dollar Amount equal to that portion of Letter
of Credit Outstandings attributable to outstanding and undrawn Letters of
Credit shall automatically, without demand upon or notice to the Company, be
deemed to have been paid or disbursed by each Issuer under its applicable
Letters of Credit (notwithstanding that such amount may not in fact have been
so paid or disbursed), and the Company shall be immediately obligated to
reimburse such Issuer in the same Available Currencies in which such Letters
of Credit are denominated (or provide back-up letters of credit in such amount
42
<PAGE> 49
from banks acceptable to the Lenders) the amount deemed to have been so
paid or disbursed by such Issuer. Any amounts so received by such Issuer
from the Company pursuant to this Section 4.7 shall be held as collateral
-----------
security for the repayment of the Company's obligations in connection with
the Letters of Credit issued by such Issuer pursuant to documentation in form
and substance satisfactory to the Administrative Agent. At any time when
such Letters of Credit shall terminate and all Obligations of each Issuer are
either terminated or paid or reimbursed to such Issuer in full, the
Obligations of the Company under this Section 4.7 shall be reduced
-----------
accordingly (subject, however, to reinstatement in the event any payment in
respect of such Letters of Credit is recovered in any manner from such
Issuer), and such Issuer will return to the Company the excess, if any, of
(a) the aggregate Dollar Amount deposited by the Company
with such Issuer and not theretofore applied by such Issuer to any
Reimbursement Obligation
over
- ----
(b) the aggregate Dollar Amount of all Reimbursement
Obligations to such Issuer pursuant to this Section 4.7, as so adjusted.
-----------
All amounts on deposit (other than in the form of back-up letters of credit)
pursuant to this Section 4.7 shall, until their application to any
-----------
Reimbursement Obligation or their return to the Company, as the case may be,
bear interest at (i) in the case of amounts in Dollars, the daily average
Federal Funds Rate from time to time in effect and (ii) in the case of
amounts in any Available Currency other than Dollars, the daily average of
the Overnight Rate with respect to such Available Currency from time to time
in effect, which interest shall, in each case, be held by the applicable
Issuer as additional collateral security for the repayment of the Obligations
in connection with the Letters of Credit issued by such Issuer.
SECTION 4.8 Nature of Reimbursement Obligations. The applicable
-----------------------------------
Applicant shall assume all risks of the acts, omissions, or misuse of any
Letter of Credit by the beneficiary thereof. Neither any Issuer nor any
Lender (except to the extent of its own gross negligence or wilful
misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any Letter of Credit or any document
submitted by any party in connection with the application for and
issuance of a Letter of Credit, even if it should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent,
or forged;
43
<PAGE> 50
(b) the form, validity, sufficiency, accuracy,
genuineness, or legal effect 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;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
(d) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex, or otherwise; or
(e) any loss or delay in the transmission or otherwise of
any document or draft required in order to make a payment or
disbursement under a Letter of Credit or of the proceeds thereof.
None of the foregoing shall affect, impair, or prevent the vesting of any of
the rights or powers granted any Issuer or any Lender hereunder. In
furtherance and extension, and not in limitation or derogation, of any of the
foregoing, any action taken or omitted to be taken by any Issuer in good
faith shall be binding upon the applicable Applicant and shall not put such
Issuer under any resulting liability to the Company or any other applicable
Applicant.
ARTICLE 5
CERTAIN EURODOLLAR AND OTHER LOAN PROVISIONS
SECTION 5.1 Increased Cost. If, as a result of any law, rule,
--------------
regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof, or compliance by any Lender or
Issuer with any request or directive (whether or not having the force of law)
from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to its
Commitments, its Loans, its Notes, its Letters of Credit or any
Lender's Loan or obligation to make Loans or the obligation of any
Lender to issue or participate in Letters of Credit is imposed,
modified or deemed applicable, or the basis of taxation of payments to
any Lender of any Letter of Credit or the principal of, or interest on,
any Loan (other than taxes imposed on the overall net income of such
Lender by the jurisdiction in which such Lender has its principal
office) is changed;
44
<PAGE> 51
(b) any reserve, special deposit, special assessment or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender is imposed, modified or deemed
applicable, excluding any reserve contained in the computation of
"Eurodollar Rate (Adjusted)"; or
(c) any other condition affecting this Agreement or any
Loan or Letter of Credit is imposed on any Lender or the interbank
eurodollar market;
and any Lender or Issuer determines that, by reason thereof, the cost
to such Lender or Issuer of making or maintaining or issuing its
Commitment or any Loan or Letter of Credit is increased, or the amount
of any sum receivable by such Lender or Issuer hereunder or under its
Notes or its Letters of Credit is reduced; then, the Company shall,
----
within thirty (30) days of demand therefor (such demand to be
accompanied by the detailed notice of such Lender or Issuer described
below), pay directly to such Lender or Issuer such additional amount or
amounts as will compensate such Lender or Issuer for such additional
cost or reduction. Without limiting the foregoing, the Company may be
required to reimburse any Lender or Issuer for FDIC assessments or
other direct or indirect costs related to FDIC insurance or
continuation of FDIC insurance, including, without limitation, the
costs of purchasing equity interests of, or other investments in, the
FDIC, on Loans or Letters of Credit, whether or not such Lender or
Issuer shall fund such Loans with deposits subject to FDIC insurance.
The affected Lender or Issuer shall promptly notify the Company in
writing of the occurrence of any such event, such notice to state, in
reasonable detail, the reasons therefor and the additional amount
required fully to compensate such Lender or Issuer for such increased
cost or reduced amount. Determinations by any Lender or Issuer for
purposes of this Section 5.1 of the additional amounts required to
-----------
compensate such Lender or Issuer in respect of the foregoing shall be
conclusive in the absence of manifest error. In determining such
amounts, such Lender or Issuer may use any reasonable averaging,
attribution and allocation methods.
SECTION 5.2 Deposits Unavailable or Interest Rate Unascertainable
-----------------------------------------------------
or Inadequate; Impracticability. If the Company has any Eurodollar Loan
- -------------------------------
outstanding, or has notified the Administrative Agent of its intention to
borrow a Eurodollar Loan as provided herein, then in the event that, prior to
any Interest Period, the Administrative Agent shall have determined (or the
Lenders holding at least 50% of the Commitments shall have notified the
Administrative Agent that such Lenders have determined) (which determination
shall be conclusive and binding on the parties hereto absent manifest error)
that:
(a) deposits of the necessary amount for the relevant
Interest Period are not available to any Lender in the
45
<PAGE> 52
interbank eurodollar market or that, by reason of circumstances affecting
such market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period;
(b) the Eurodollar Rate (Adjusted) will not adequately
and fairly reflect the cost to the Lenders of making or funding the
Eurodollar Loans for such Interest Period; or
(c) the making or funding of Eurodollar Loans has become
impracticable as a result of any event occurring after the date of this
Agreement which, in the opinion of the Administrative Agent, materially
and adversely affects such Loans or any Lender's obligation to make
such Loans or the interbank eurodollar market;
the Administrative Agent shall promptly give notice of such
determination to the Company, and, until the Administrative Agent shall
notify the Company that the circumstances causing such determination no
longer exist, (i) any notice of a new Eurodollar Loan given by the
Company and not yet borrowed or converted shall be deemed to be a
notice to make a Base Rate Loan, and (ii) the Company shall be
obligated to either prepay in full any outstanding Eurodollar Loans on
the last day of the then current Interest Period with respect thereto
or convert any such Loans to Base Rate Loans on such last day.
SECTION 5.3 Changes in Law Rendering Eurodollar Loans Unlawful.
--------------------------------------------------
If at any time due to the adoption of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority, agency or
instrumentality, or comparable agency charged with the interpretation or
administration thereof, or for any other reason arising subsequent to the
date hereof, it shall become unlawful or impossible for any Lender to make or
fund any Eurodollar Loan which it is committed to make hereunder, the
obligation of all Lenders to provide Eurodollar Loans shall, upon the
happening of such event, forthwith be suspended for the duration of such
illegality or impossibility, and any notice of a new Eurodollar Loan given by
the Company and not yet borrowed or converted shall be deemed to be a notice to
make a Base Rate Loan. If any such event shall make it unlawful or impossible
for any Lender to continue any Eurodollar Loans previously made by it hereunder,
such Lender shall, upon the happening of such event, notify the Company and the
Administrative Agent thereof in writing, and the Company shall, on the earlier
of (i) the last day of the then current Interest Period with respect thereto,
or (ii) if required by such law, rule, regulation, treaty, directive or
interpretation, on such date as shall be specified in such notice, either
convert all Eurodollar Loans to Base Rate Loans or prepay in full all Eurodollar
Loans, together with accrued interest thereon, without any premium or penalty
(except as
46
<PAGE> 53
provided in Section 5.5). Before any Lender shall give any notice to the
-----------
Administrative Agent or the Company regarding the illegality or impossibility of
such Lender's making or continuing any Eurodollar Loans, such Lender shall
designate a different Eurodollar Office if such designation will avoid the need
for giving such notice and will not, in the sole judgment of such Lender, be
otherwise materially disadvantageous to such Lender. If conditions subsequently
change so that the foregoing conditions no longer exist, such Lender shall
promptly notify the Company and the Administrative Agent thereof, and upon the
Administrative Agent's receipt of such notice the obligation of the Lenders
to make Eurodollar Loans shall be reinstated.
SECTION 5.4 Discretion of the Lenders as to Manner of Funding.
-------------------------------------------------
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of the
Loans in any manner it sees fit; it being understood, however, that for
-------------------
purposes of this Agreement, all determinations hereunder shall be made as if
such Lender had actually funded and maintained each Eurodollar Loan during
the Interest Period for such Loan through the purchase of deposits having a
term corresponding to such Interest Period and bearing an interest rate equal
to the Eurodollar Rate (Adjusted) for such Interest Period (whether or not
such Lender shall have granted any participations in such Loan). Each Lender
shall use reasonable efforts (consistent with its internal policies and legal
and regulatory restrictions) to take appropriate action, including the
selection of a jurisdiction of its Eurodollar Office or the changing of the
jurisdiction of its Eurodollar Office, as the case may be, so as to avoid any
illegality of the type referred to in Section 5.3 or the imposition of any
-----------
increased costs or Taxes or to limit the amount of any such increased costs
or Taxes which may thereafter accrue; provided, that no such selection or
-------- ----
change of the jurisdiction for its Eurodollar Office shall be made if, in the
reasonable judgment of such Lender, such selection or change would be
disadvantageous to such Lender.
SECTION 5.5 Funding Losses. In the event any Lender shall
--------------
sustain or incur any loss or expense (including any loss or expense sustained
or incurred in obtaining, liquidating or employing deposits or other funds
acquired by such Lender to make, continue or maintain any portion of any
Loan) as a result of
(a) any failure of the Company to make any payment when
due of any amount due hereunder or under any Note;
(b) any conversion or repayment or prepayment of the
principal amount of any Eurodollar Loans or Bid Rate Loans on a date
other than the scheduled last day of the Interest Period applicable
thereto, whether pursuant to Section 3.1 or otherwise;
-----------
47
<PAGE> 54
(c) any failure of the Company to borrow any Loans in
accordance with the Borrowing Request therefor or pursuant to any Bid
accepted, as the case may be; or
(d) any failure of the Company to continue or convert any
Loans in accordance with the Continuation/Conversion Notice therefor;
then, upon the written notice of such Lender to the Company (with a
copy to the Administrative Agent) (but in any event within 120 days
after such Lender obtains actual knowledge of such loss or expense, and
the Company shall not be liable for any such loss or expense that
accrues between the latest date such notification is required to be
given and the date it was actually given), the Company shall, within
five (5) days of its receipt thereof, pay directly to such Lender such
amount as will (in the reasonable determination of such Lender)
reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the Company.
SECTION 5.6 Increased Capital Costs. If any change in, or
-----------------------
the introduction, application, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, note, directive,
guideline, decision, request, treaty or guideline (whether or not having the
force of law) of any court, central bank, regulator or other governmental
authority (including, without limitation, application of or changes to
Regulation H and Regulation Y of the F.R.S. Board issued by the F.R.S. Board
on January 19, 1989 and regulations of the Comptroller of the Currency,
Department of the Treasury, 12 CFR Part 3, Appendix A, issued by the
Comptroller of the Currency on January 27, 1989) affects or would affect the
amount of capital required or expected to be maintained by any Lender or
Issuer or any Person controlling such Lender or Issuer, and such Lender or
Issuer determines (in its reasonable discretion) that the rate of return on
its or such controlling Person's capital as a consequence of its Commitments,
the Loans made or the Letters of Credit issued or participated in by such
Lender or Issuer is reduced to a level below that which such Lender or Issuer
or such controlling Person could have achieved but for the occurrence of any
such circumstance, then, in any such case upon notice from time to time by
such Lender or Issuer to the Company (but in any event within 120 days after
such Lender or Issuer obtains actual knowledge of such event, and the Company
shall not be liable for any such reduced return that accrues between the
latest date such notification is required to be given and the date it was
actually given), the Company shall, within thirty (30) days of demand
therefor (such demand to be accompanied by the statement of such Lender set
forth below), pay directly to such Lender or Issuer additional amounts
sufficient to compensate such Lender or Issuer or such controlling Person for
such reduction in rate of return. A statement of such Lender or Issuer as to
any such additional
48
<PAGE> 55
amount or amounts (including calculations thereof in reasonable detail) shall,
in the absence of manifest error, be conclusive and binding on the Company. In
determining such amount, such Lender or Issuer may take into consideration the
policies of such Lender or Issuer or any Person controlling such Lender or
Issuer with respect to capital requirements and may use any method of averaging
and attribution that it (in its reasonable discretion) shall deem applicable.
SECTION 5.7 Taxes. All payments by the Company of principal of,
-----
and interest on, the Loans, Letters of Credit, Reimbursement Obligations, and
all other amounts payable hereunder shall be made free and clear of and
without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges
of any nature whatsoever imposed by any taxing authority, but excluding
franchise taxes and taxes imposed on or measured by any Lender's or Issuer's
net income or receipts imposed by any jurisdiction where such Lender or
Issuer maintains an office (such non-excluded items being called "Taxes").
-----
In the event that any withholding or deduction from any payment to be made by
the Company hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Company will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an
official receipt or other documentation satisfactory to the
Administrative Agent evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of
the Lenders or the Issuers such additional amount or amounts as is
necessary to ensure that the net amount actually received by each
Lender or Issuer will equal the full amount such Lender or Issuer would
have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative
Agent, any Issuer or any Lender with respect to any payment received by the
Administrative Agent, such Issuer or such Lender hereunder, the
Administrative Agent, such Issuer or such Lender may pay such Taxes and the
Company will promptly pay such additional amounts (including any penalties,
interest or expenses) as is necessary in order that the net amount received
by such person after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such person would have received had
not such Taxes been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the
49
<PAGE> 56
Administrative Agent, for the account of the respective Lenders, the required
receipts or other required documentary evidence, the Company shall indemnify the
Lenders and the Issuers for any incremental Taxes, interest or penalties that
may become payable by any Lender or Issuer as a result of any such failure. For
purposes of this Section 5.7, a distribution hereunder by the Administrative
-----------
Agent, any Lender or any Issuer to or for the account of any Lender or Issuer
shall be deemed a payment by the Company.
Upon the request of the Company or the Administrative Agent, each
Lender or Issuer that is organized under the laws of a jurisdiction other
than the United States shall, prior to the due date of any payments under any
Note, execute and deliver to the Company and the Administrative Agent, on or
about the first scheduled payment date in each calendar year, one or more (as
the Company or the Administrative Agent may reasonably request) United States
Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents (or successor forms or documents), appropriately completed, as may
be applicable to establish the extent, if any, to which a payment to such
Lender or Issuer is exempt from withholding or deduction of Taxes.
SECTION 5.8 Payments, Computations, etc. Unless otherwise
---------------------------
expressly provided, all payments by the Company pursuant to this Agreement,
the Notes or any other Loan Document shall be made by the Company to the
Administrative Agent for the pro rata account of the Lenders entitled to
--- ----
receive such payment. All such payments required to be made to the
Administrative Agent shall be made, without setoff, deduction, recoupment or
counterclaim, not later than 12:00 noon, Atlanta time, on the date due, in
same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the
Company. Funds received after that time shall be deemed to have been
received by the Administrative Agent on the next succeeding Business Day.
The Administrative Agent shall promptly remit in same day funds to each
Lender its share, if any, of such payments received by the Administrative
Agent for the account of such Lender. All interest on Base Rate Loans
(except when the Federal Funds Effective Rate component of the Alternate Base
Rate is effective) shall be computed on the basis of the actual number of
days (including the first day but excluding the last day) occurring during
the period for which such interest or fee is payable over a year comprised of
365 or, if appropriate, 366 days. All interest on Eurodollar Loans and Base
Rate Loans (when the Federal Funds Effective Rate component of the Alternate
Base Rate is effective) and all per annum fees shall be computed on the
--- -----
basis of the actual number of days (including the first day but excluding the
last day) occurring during the period for which such interest is payable over
a year comprised of 360 days. Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (B) of the definition of the term
----------
50
<PAGE> 57
"Interest Period" with respect to Eurodollar Loans) be made on the next
---------------
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 5.9 Sharing of Payments. Except for payments made to the
-------------------
Administrative Agent pursuant to the cost and expenses provision of Section
-------
11.3 and to or for the benefit of any Lender pursuant to the indemnity or
- ----
additional compensation provisions of Article 5, Section 11.3 or
--------- ------------
Section 11.4, if any Lender shall receive, out of the assets of the Company
- ------------
or otherwise, any payment on account of (a) prior to any Pro Rata
Distribution Event, its Committed Loans or participation interest in Letters
of Credit, and (b) after any Pro Rata Distribution Event, any Obligations in
excess of such Lender's pro rata share of the total sums received by the
--- ----
Lenders as payments on account of the Committed Loans and Letters of Credit
or the Obligations, as the case may be, whether the same be paid, received or
applied voluntarily, involuntarily or by operation of law, by application of
offset on any debt or otherwise, then such Lender shall purchase for cash
from the other Lenders an undivided participating interest in all the
Committed Loans, Letters of Credit or Obligations, as the case may be, of the
same class in a Dollar Amount which shall result in each Lender receiving its
pro rata share of such total sums; provided that if any such purchase
- --- ---- --------
is made and the excess payment (or portion thereof) requiring such purchase
is thereafter recovered (in whole or in part) from the purchasing Lender,
then such purchase shall be pro tanto rescinded and the applicable
--- -----
portion of the purchase price restored to the purchasing Lender, without
interest. The Company agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 5.9 may, to the fullest extent
-----------
permitted by law, exercise all its rights of payment (including pursuant to
Section 5.10) with respect to such participation as fully as if such Lender
- ------------
were the direct creditor of the Company in the amount of such participation.
If under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a setoff to which this Section
applies, such Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of the
Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim. It is expressly understood and agreed by the Company
and the Lenders that the provisions of Section 11.11 shall not apply to any
-------------
participations purchased or sold pursuant to this Section.
SECTION 5.10 Application of Certain Payments.
-------------------------------
(a) Prior to the occurrence and continuation of a Pro
Rata Distribution Event, each payment of principal shall be applied to
such of the Loans or Reimbursement Obligations as the Company shall
direct by notice to be received by the Administrative Agent on or
before the date of such payment;
51
<PAGE> 58
provided that any Loans or Reimbursement Obligations of the Company maturing the
- --------
same day shall be paid pro rata among such Loans or Reimbursement Obligations.
--- ----
The Administrative Agent shall remit each such payment by the Company in
accordance therewith ratably among the applicable Lenders holding such
Loans or Reimbursement Obligations based upon the Dollar Amount of such
Loans or Reimbursement Obligations due on such day. Concurrently with
each remittance to any Lender of its share of any such payment, the
Administrative Agent shall advise each Lender as to the application of
such payment.
(b) Following the occurrence and during the continuation
of a Pro Rata Distribution Event, the Administrative Agent and the
Lenders shall apply all collections and recoveries of the Loans and the
other Obligations (after payment of any costs and expenses to the
Administrative Agent pursuant to Section 11.3) first, to the
------------ -----
payment of principal of and interest on the outstanding Loans and
Reimbursement Obligations on a pro rata basis to each Lender based
--- ----
on the respective Dollar Amounts of such principal of and accrued
interest on, such Loans and Reimbursement Obligations owed to such
Lender (whether or not matured and currently payable), second, to
------
payment of the remaining outstanding Obligations owed to each Lender on
a pro rata basis to each Lender based on the respective remaining
--- ----
Dollar Amounts of such Obligations owed to each Lender (whether or not
matured and currently payable) and third, to the remaining
-----
outstanding Obligations owed to any other Person pursuant to the
indemnification provisions of Section 11.4 on a pro rata basis to
------------ --- ----
each such Person based on the respective Dollar Amounts of such
Obligations owed to such Person.
(c) For purposes hereof, a "Pro Rata Distribution
---------------------
Event" means the first to occur of (i) an Event of Default under
- -----
Section 9.1.1 or 9.1.7 or (ii) any other Event of Default if the
- ------------- -----
Required Lenders shall have instructed the Administrative Agent that
payments shall be applied as provided in Section 5.10(b) above. The
---------------
Administrative Agent shall promptly notify the Company and each Lender
of the occurrence of a Pro Rata Distribution Event but failure to so
notify shall not affect the occurrence of such Pro Rata Distribution
Event.
(d) The Lenders and the Administrative Agent agree that if
any distribution shall be made by the Administrative Agent contrary to
this Section 5.10 (whether because the Administrative Agent shall
------------
not, at the time of distribution, have been aware of the occurrence of
any Event of Default or otherwise), the Lenders shall cooperate with
the Administrative Agent to redistribute payments, collections or
recoveries in accordance with this Section 5.10.
------------
52
<PAGE> 59
SECTION 5.11 Setoff. Each Lender shall, upon the occurrence of
------
any Default described in clauses (a) through (d) of Section 9.1.7 or,
----------- --- -------------
with the consent of the Required Lenders, upon the occurrence of any other
Event of Default, have the right to appropriate and apply to the payment of
the Obligations owing to it (whether or not then due), and (as security for
such Obligations) the Company hereby grants to each Lender a continuing
security interest in, any and all balances, credits, deposits, accounts or
moneys of the Company then or thereafter maintained with such Lender solely
for such purposes; provided that any such appropriation and application
--------
shall be subject to the provisions of Sections 5.9 and 5.10. Each Lender
------------ ----
agrees promptly to notify the Company and the Administrative Agent after any
such setoff and application made by such Lender; provided that the failure
--------
to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section 5.11 are in
------------
addition to other rights and remedies (including other rights of setoff under
applicable law or otherwise) which such Lender may have.
SECTION 5.12 Use of Proceeds. The Company shall use the proceeds
---------------
of each Extension of Credit for general corporate purposes; without limiting
the foregoing, no proceeds of any Extension of Credit will be used to acquire
any equity security of a class which is registered pursuant to Section 12 of
the Securities Exchange Act of 1934 (except as otherwise permitted pursuant
to Section 8.12) or any "margin stock", as defined in F.R.S. Board
------------
Regulation U.
SECTION 5.13 Replacement of Certain Lenders. In the event that
------------------------------
any Lender(s) shall be and remain an Affected Lender for more than thirty
(30) days, such Lender(s) shall accept a purchase offer as described
hereinafter. If the Company shall find one or more Eligible Assignees that
unconditionally offer in writing (with a copy to the Administrative Agent)
collectively to assume all of such Lender's obligations hereunder and to
purchase all of such Lender's rights and obligations hereunder and principal
and interest in the Loans owing to such Lender(s) and fees with respect to
Letters of Credit and Loans and the Notes held by such Lender(s) and its
participations in Letters of Credit without recourse, representation or
warranty (other than as provided in the related Lender Assignment Agreement)
for an amount to be received by such Lender(s) equal to the principal amount
of such Notes plus interest and fees accrued thereon to the date of such
----
purchase plus any other amounts then payable or owed to such Lender(s)
----
hereunder on a date therein specified, then upon acceptance of such purchase
offer, the Company shall be obligated to pay such amounts or Taxes owed to
such Lender as an Affected Lender to the date of such purchase (at which time
such Lender shall cease to be a Lender hereunder except for purposes of
Sections 5.1 through 5.7 and Sections 10.1, 11.3 and 11.4);
- ------------ --- ------------- ---- ----
provided, that if a Lender accepts the proposed purchase offer and the
- -------- ----
proposed purchasing bank(s) fails to purchase such rights
53
<PAGE> 60
and interest and to assume such obligations on such specified date in accordance
with the terms of such offer, the Company shall continue to be obligated to pay
such amounts or Taxes owed to such Lender as an Affected Lender.
ARTICLE 6
CONDITIONS TO BORROWING
SECTION 6.1 Initial Borrowing. The obligations of the Lenders
-----------------
and the Issuers to make the initial Extension of Credit shall be subject to
the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 6.1.
-----------
SECTION 6.1.1 Resolutions, etc. The Administrative Agent shall
----------------
have received each of the following:
(a) an executed officer's certificate (with a signed copy
for each Lender) substantially in the form of Exhibit D-1 from the
-----------
Company, certifying as to (i) a true and correct copy of the Company's
certificate of incorporation and all amendments as filed with the
Secretary of State of its state of incorporation, (ii) duly adopted
resolutions of the Company's Board of Directors, stating that such
resolutions are true and correct, have not been altered or repealed,
and are in full force and effect, approving the execution, delivery and
performance of the Loan Documents to which the Company is a party, and
the transactions contemplated herein and therein, (iii) a true and
correct copy of the Company's bylaws as in effect on the Effective
Date, (iv) incumbency and specimen signatures of the officers of the
Company executing the Loan Documents to which the Company is a party,
and (v) the satisfaction of the conditions set forth in Section 6.2.
-----------
The Administrative Agent, the Issuers and the Lenders may conclusively
rely on such certificate until the Administrative Agent shall receive a
further certificate cancelling or amending the prior certificate and
submitting the signatures of the officers named in such further
certificate;
(b) a certified copy of the certificate of incorporation
and a good standing certificate issued with respect to the Company by
the Secretary of State of the state of incorporation of the Company.
SECTION 6.1.2 Delivery of Notes. The Administrative Agent shall
-----------------
have received, for the account of each Lender, the Bid Notes and the
Committed Notes duly executed and delivered by the Company.
54
<PAGE> 61
SECTION 6.1.3 This Agreement. The Administrative Agent shall
--------------
have received an executed counterpart of this Agreement from each of the
parties hereto.
SECTION 6.1.4 Opinions of Counsel. The Administrative Agent shall
-------------------
have received opinions, each dated a date satisfactory to the Administrative
Agent and addressed to the Agents and all Lenders, from
(a) McDermott, Will & Emery, counsel to the Company,
substantially in the form set forth in Exhibit E hereto; and
---------
(b) Mayer, Brown & Platt, counsel to the Administrative
Agent, substantially in the form of Exhibit F hereto.
---------
SECTION 6.1.5 Consents, etc. The Administrative Agent shall have
-------------
received certified copies of all documents evidencing any necessary action,
consents and approvals of other Persons with respect to this Agreement, the
Notes and the other Loan Documents.
SECTION 6.1.6 Closing Fees, Expenses, etc. The Administrative
---------------------------
Agent shall have received for its own account, or for the account of each
Lender, as the case may be, all fees, costs and expenses due and payable
pursuant to Sections 3.3 and 11.3, if then invoiced.
------------ ----
SECTION 6.1.7 Forms from the Lenders. The Administrative Agent
----------------------
shall have received Forms 4224 or Forms 1001 required to be furnished
pursuant to Section 5.7 duly executed by the applicable Lenders.
-----------
SECTION 6.1.8 Termination of Certain Agreements. The
---------------------------------
Administrative Agent shall have received satisfactory evidence of the
termination of the BofA Reimbursement Agreement and the Existing Agreements
and the payment of all obligations thereunder and that the letters of credit
issued under the Reimbursement Agreement shall be deemed to have been issued
under this Agreement as set forth in Section 11.16 of this Agreement.
-------------
SECTION 6.1.9 No Material Adverse Change. The Administrative Agent
--------------------------
shall have received evidence that no event shall have occurred since January
31, 1996 and no condition shall exist which has had or could reasonably be
expected to have a material adverse effect on the financial condition of the
Company and its Subsidiaries, taken as a whole, or the ability of the Company
to perform its obligations under any of the Loan Documents.
SECTION 6.1.10 Compliance Certificate. The Administrative Agent
----------------------
shall have received a compliance certificate referred to in
55
<PAGE> 62
Section 8.18(g) as of the end of the fiscal quarter ended January 31, 1996, duly
- ---------------
executed by an authorized officer of the Company.
SECTION 6.1.11 Other Documents. The Administrative Agent shall have
---------------
received such other documents as the Administrative Agent shall have
reasonably requested.
SECTION 6.2 All Extensions of Credit. The obligation of each
------------------------
Lender and Issuer to make any Extension of Credit (including the initial
Extension of Credit) shall be subject to the satisfaction of each of the
conditions precedent set forth in this Section 6.2.
-----------
SECTION 6.2.1 Compliance with Warranties, No Default, etc. Both
-------------------------------------------
before and after giving effect to any Extension of Credit (but, if any
Default of the nature referred to in Section 9.1.4 shall have occurred with
-------------
respect to any other Indebtedness, without giving effect to the application,
directly or indirectly, of the proceeds thereof) the following statements
shall be true and correct:
(a) the representations and warranties set forth in
Article 7 (excluding, however, those contained in Section 7.7)
- --------- -----------
shall be true and correct in all material respects with the same effect
as if then made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true and
correct as of such earlier date);
(b) except as disclosed by the Company to the
Administrative Agent and the Lenders pursuant to Section 7.7:
-----------
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be pending or,
to the knowledge of the Company, threatened against the Company
or any of its Subsidiaries which might materially adversely
affect the Company's consolidated business, operations, assets,
revenues, properties or prospects or which purports to affect the
legality, validity or enforceability of this Agreement, the Notes
or any other Loan Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 7.7 which
-----------
might materially adversely affect the Company's consolidated business,
operations, assets, revenues, properties or prospects or which purports
to affect the legality, validity or enforceability of this
56
<PAGE> 63
Agreement, the Notes or any other Loan Document; and
(c) no Default shall have then occurred and be continuing,
and neither the Company nor any of its Subsidiaries are in material
violation of any law or governmental rule or regulation or court or
administrative order or decree.
SECTION 6.2.2 Extension of Credit Request. The Administrative
---------------------------
Agent shall have received an Extension of Credit Request for such Extension
of Credit. The delivery of an Extension of Credit Request, and the
acceptance by the Company of the proceeds of such Extension of Credit shall
constitute a representation and warranty by the Company that on the date of
such Extension of Credit (both immediately before and after giving effect to
such Extension of Credit and the application of the proceeds thereof) the
statements made in Section 6.2.1 are true and correct.
-------------
SECTION 6.2.3 Satisfactory Legal Form. All documents executed or
-----------------------
submitted pursuant hereto by or on behalf of the Company or any of its
Subsidiaries shall be satisfactory in form and substance to the
Administrative Agent and its counsel; and the Administrative Agent and its
counsel shall have received all information, approvals, opinions, documents
or instruments as the Administrative Agent or its counsel may reasonably
request.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuers and the Agents to enter
into this Agreement and to make Extensions of Credit hereunder, the Company
represents and warrants unto the Agents, the Issuers and each Lender as set
forth in this Article 7.
---------
SECTION 7.1 Organization, etc. Each of the Company and each of
-----------------
its Material Subsidiaries is a corporation validly organized and existing and
in good standing under the laws of its jurisdiction of incorporation and is
duly licensed or qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the failure to so qualify
would have a materially adverse effect on the financial condition,
operations, assets, business or properties of the Company and its
Subsidiaries on a consolidated basis. Each of the Company and each of its
Material Subsidiaries has full power and authority and holds all requisite
governmental licenses, permits and other approvals to own and hold under
lease and operate its property and to conduct its business substantially as
currently conducted by it.
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SECTION 7.2 Due Authorization, Non-Contravention, etc. The
-----------------------------------------
execution, delivery and performance by the Company of this Agreement and the
Notes and the execution, delivery and performance by the Company of each
other Loan Document executed or to be executed by it are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action, and do not (a) contravene the Company's articles of incorporation or
by-laws; (b) contravene any indenture or loan or credit agreement or any
other contractual agreement or instrument, or law or governmental rule or
regulation or court or administrative decree or order binding on or affecting
the Company or any of its properties or (c) result in, or require the
creation or imposition of, any Lien on any properties of the Company or any
of its Subsidiaries.
SECTION 7.3 Government Approval, Regulation, etc. No
------------------------------------
authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other Person is
required for the due execution, delivery or performance by the Company of
this Agreement or the Notes or by the Company of any other Loan Document to
which it is a party. The Company and its Subsidiaries are in Material
Compliance with all laws, governmental rules and regulations, and court and
administrative decrees and orders applicable to them. Neither the Company
nor any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
SECTION 7.4 Validity, etc. This Agreement constitutes, and the
-------------
Notes and each other Loan Document executed by the Company will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies.
SECTION 7.5 Financial Information. The Company's audited
---------------------
consolidated financial statement as of April 30, 1995, and the Company's
unaudited consolidated financial statement as of January 31, 1996, and the
related balance sheets and statements of earnings and cash flow of the
Company and each of its Subsidiaries relating to each such financial
statement, copies of which have been furnished to the Administrative Agent
and each Lender, have been prepared in accordance with GAAP consistently
applied, and present fairly the consolidated financial condition of the
corporations covered thereby as at the dates thereof and the results of
their operations for the periods then ended,
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<PAGE> 65
subject (in the case of the interim financial statement) to year-end audit
adjustments.
SECTION 7.6 No Material Adverse Change; No Default. Since
--------------------------------------
January 31, 1996, there has been no material adverse change in the financial
condition, operations, assets, business, properties or prospects of the
Company or any of its Affiliates or the ability of the Company to perform its
monetary obligations under any of the Loan Documents. Neither the Company
nor any of its Material Subsidiaries is in default under or in violation of
its organizational documents or any law, governmental rule or regulation or
any agreement or instrument to which the Company or any Material Subsidiary
is a party or by which any of their respective properties or assets is bound
or affected, which default might materially and adversely affect the
financial condition or operations of the Company and its Subsidiaries taken
as a whole or which purports to affect the legality, validity or
enforceability of any Loan Document. No Default has occurred and is
continuing.
SECTION 7.7 Litigation, Labor Controversies, etc. There
------------------------------------
is no pending or, to the knowledge of the Company, threatened litigation,
action, proceeding, or labor controversy affecting the Company or any of its
Material Subsidiaries, or any of their respective properties, businesses,
assets or revenues, which may materially adversely affect the financial
condition, operations, assets, business, properties or prospects of the
Company and its Material Subsidiaries, taken as a whole, or which purports to
affect the legality, validity or enforceability of this Agreement, the Notes
or any other Loan Document, except as disclosed in Exhibit G hereto. Other
---------
than any liability incident to such litigation or proceeding, neither the
Company nor any of its Material Subsidiaries has any material contingent
liability not provided for or disclosed in the financial statements referred
to in Section 7.5.
-----------
SECTION 7.8 Subsidiaries. As of the date of this Agreement, the
------------
Company has no Subsidiaries except those Subsidiaries which are identified in
Exhibit H hereto, which Exhibit H identifies each Subsidiary which is a
- --------- ---------
Material Subsidiary, and states the jurisdiction of incorporation of each
Subsidiary and the percentage of its voting stock owned by the Company and/or
its Subsidiaries.
SECTION 7.9 Ownership of Properties. The Company and each of its
-----------------------
Material Subsidiaries has good and marketable title to all of its properties
and assets, real and personal, tangible and intangible, of any nature
whatsoever (including shares of stock of Material Subsidiaries (all of which
shares have been duly issued and are fully paid and non-assessable), patents,
trademarks, trade names, service marks and copyrights), free and clear of all
Liens, charges or claims (including infringement claims with respect to
patents, trademarks, copyrights and the
59
<PAGE> 66
like) except (a) as permitted pursuant to Section 8.11, or (b) as sold or
------------
otherwise disposed of in the ordinary course of business.
SECTION 7.10 Taxes. The Company and each of its Subsidiaries has
-----
filed all tax returns and reports required by law to have been filed by it
and, except as disclosed in Exhibit I hereto, has paid all taxes and
---------
governmental charges thereby shown to be owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall
have been set aside on its books. The federal income tax liability of the
Company and its Material Subsidiaries has been audited by the Internal
Revenue Service and, except as disclosed in Exhibit I hereto, has been
---------
finally determined and satisfied (or the time for audit has expired) for all
tax years up to and including the tax year ended April 30, 199-. Except as
disclosed in Exhibit I hereto, the Company is not aware of any proposed
---------
assessment against the Company or any of its Material Subsidiaries for
additional taxes (or any basis for any such assessment) which might be
material to the Company and its Material Subsidiaries taken as a whole.
SECTION 7.11 Pension and Welfare Plans. Except as disclosed in
-------------------------
Exhibit J hereto, during the twelve-consecutive-month period immediately
- ---------
prior to the date of the execution and delivery of this Agreement and prior
to the date of any Extension of Credit hereunder, no steps have been taken to
terminate any Pension Plan, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. Except as disclosed in Exhibit J hereto, no condition
---------
exists or event or transaction has occurred with respect to any Pension Plan
which might result in the incurrence by the Company or any member of the
Controlled Group of any material liability, fine or penalty. Except as
disclosed in Exhibit J hereto, neither the Company nor any member of the
---------
Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 7.12 Environmental Warranties. The Company and its
------------------------
Subsidiaries are, to the best knowledge of the Company, each in Material
Compliance with all Environmental Laws (a) now applicable to the Company or
any Subsidiary, or (b) which will be applicable (or, if not in Material
Compliance with such laws and regulations referred to in this clause (b),
----------
the Company or such Subsidiary is taking appropriate action diligently
pursued to be in Material Compliance therewith on a timely basis or to be
exempt from compliance). Except as disclosed on Exhibit K, neither the
---------
Company nor any Subsidiary has any knowledge of any (i) presently outstanding
allegations by governmental officials that the Company or any of its
Subsidiaries is now or at any time prior to the date hereof was in material
violation of such
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<PAGE> 67
Environmental Laws, (ii) material administrative or judicial proceedings
presently pending against the Company or any of its Subsidiaries pursuant to
such Environmental Laws, and (iii) material claim presently outstanding against
the Company or any of its Subsidiaries which was asserted pursuant to such laws
or regulations that in each case would reasonably be expected to result in a
liability to the Company or any Subsidiary in excess of $10,000,000 or
$10,000,000 in the aggregate for all such claims (net in each case of actual
uncontested insurance coverage or effective uncontested indemnifications with
respect thereto). Except as disclosed in Exhibit K, the Company reasonably
---------
believes that no facts or circumstances known to it or any Subsidiary could form
the basis for the assertion of any material claim against the Company or any
Subsidiary relating to environmental matters, including any material claim
arising from past or present environmental practices asserted under any
Environmental Laws that in each case would reasonably be expected to result in a
liability to the Company or any Subsidiary in excess of $10,000,000 or
$10,000,000 in the aggregate for all such claims (net in each case of actual
uncontested insurance coverage or effective uncontested indemnifications with
respect thereto).
SECTION 7.13 Regulations G, U and X. The Company is not engaged
----------------------
in the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Extension of Credit will be used for a
purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board
Regulation G, U or X or any regulations substituted therefor, as from time to
time in effect, are used in this Section with such meanings.
SECTION 7.14 Insurance. The Company and each of its Material
---------
Subsidiaries maintain insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as are customary
for corporations of established reputation engaged in the same or a similar
business and owning and operating similar properties in similar locations.
SECTION 7.15 Indebtedness. Except as disclosed on Exhibit L
------------ ---------
hereto or as otherwise permitted pursuant to Section 8.10, as of the date
------------
hereof, neither the Company nor any Subsidiary has any Indebtedness, and said
Exhibit L indicates which of such Indebtedness described therein is
- ---------
secured.
SECTION 7.16 Accuracy of Information. All factual information
-----------------------
heretofore or contemporaneously furnished by or on behalf of the Company in
writing to the Administrative Agent, any Issuer or any Lender for purposes of
or in connection with this Agreement or any transaction contemplated hereby
(including the copies of the various note agreements entered into by the
Company with various insurance companies, true and complete copies of which
were furnished to the Administrative Agent and each Lender
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<PAGE> 68
in connection with its execution and delivery hereof) is, and all other such
factual information hereafter furnished by or on behalf of the Company to the
Agents, any Issuer or any Lender will be, true and accurate in every material
respect on the date as of which such information is dated or certified and as of
the date of execution and delivery of this Agreement by the Agents, such Issuer
and such Lender, and such information is not, or shall not be, as the case may
be, incomplete by omitting to state any material fact necessary to make such
information not misleading.
SECTION 7.17 Material Subsidiary. The Company and its Material
-------------------
Subsidiaries together account for more than 85% of each of (a) the sum of all
assets (valued at the greater of book or fair market) of the Company and its
Subsidiaries as of the end of the most recently completed fiscal quarter, and
(b) the Consolidated Net Income of the Company and its Subsidiaries, as of
the end of the most recently completed fiscal quarter, for the immediately
preceding 12-month consecutive period.
ARTICLE 8
COVENANTS
The Company agrees with the Agents, each Issuer and each Lender that,
until all Commitments have terminated, all Obligations have been paid and
performed in full and all Letters of Credit have been terminated:
SECTION 8.1 Corporate Existence, etc. The Company will preserve
------------------------
and maintain, and cause each Subsidiary to preserve and maintain (except for
any sale, dissolution, liquidation or merger not otherwise prohibited
hereby), its existence, rights, privileges and franchises in the jurisdiction
of its incorporation or other formation; and qualify and remain qualified as
a foreign Person authorized to do business in each other jurisdiction in
which the failure to so qualify would reasonably be expected to have a
materially adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to perform its monetary obligations
under any of the Loan Documents.
SECTION 8.2 Insurance. The Company will maintain, and will cause
---------
each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties in similar
locations.
SECTION 8.3 Taxes, Claims for Labor and Materials, Compliance with
------------------------------------------------------
Laws. The Company will promptly pay and
- ----
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discharge, and will cause each Subsidiary promptly to pay and discharge, all
lawful taxes, assessments and governmental charges or levies imposed upon the
Company or such Subsidiary, respectively, or upon or in respect of all or any
part of the property or business of the Company or such Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, if the failure to pay or discharge such
tax, assessment, charge, levy, account payable or claim could result in any
material lien or charge upon any property of the Company or any Material
Subsidiary; provided that the Company or such Subsidiary shall not be required
--------
to pay any such tax, assessment, charge, levy, account payable or claim if (a)
the validity, applicability or amount thereof is being contested in good faith
by appropriate actions or proceedings which will prevent the forfeiture or sale
of any property of the Company or such Subsidiary or any material
interference with the use thereof by the Company or such Subsidiary, and (b)
the Company or such Subsidiary shall set aside on its books, reserves or
accruals deemed by it to be adequate with respect thereto. The Company will
promptly comply, and will cause each Subsidiary to comply, with all laws,
ordinances or governmental rules and regulations to which it is subject (but
excluding all Environmental Laws), the violation of which would materially
and adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Material
Subsidiaries taken as a whole or could result in any material lien or charge
upon any property of the Company or any Material Subsidiary.
SECTION 8.4 Maintenance, etc. The Company will maintain,
----------------
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its material properties which are used or useful in the conduct of its
business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency
thereof shall be maintained, the failure to maintain, preserve or keep of
which would be reasonably likely to materially and adversely affect the
properties, business, prospects, profits or condition (financial or
otherwise) of the Company and its Material Subsidiaries taken as a whole or
could result in any material Lien or charge upon any property of the Company
or any Material Subsidiary.
SECTION 8.5 Nature of Business. Neither the Company nor any
------------------
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in
by the Company and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Company and its Subsidiaries
taken as a whole on the date of this Agreement.
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SECTION 8.6 Interest Coverage Ratio. The Company will as of the
-----------------------
last day of each fiscal quarter have an Interest Coverage Ratio at not less
than 2.25 to 1.0.
SECTION 8.7 Leverage Ratio. The Company will at all times keep
--------------
and maintain the Leverage Ratio at not more than 0.55 to 1.00.
SECTION 8.8 Consolidated Shareholder's Equity. The Company will
---------------------------------
at all times keep and maintain Consolidated Shareholder's Equity in an amount
not less than $250,000,000.
SECTION 8.9 Confirmation of Senior Debt Rating. The Company will
----------------------------------
cause each Rating Agency that has issued a Senior Debt Rating to the Company
at any time during the last twelve consecutive calendar months to confirm the
Senior Debt Rating given to the Company at least once during any consecutive
six- month period and at any other time reasonably requested by the
Administrative Agent, but no more than two additional times in any
consecutive twelve-month period; provided that the Company shall not be
--------
required to cause any Rating Agency to confirm its Senior Debt Rating given
to the Company if (a) such Rating Agency no longer issues a Senior Debt
Rating to the Company or (b) if the Applicable Eurodollar Margin is not
determined by reference to the Senior Debt Rating at such time; it being
--------
understood that the Company will not have to cause any Rating Agency to
- ----------
comply with this Section 8.9 so long as such Rating Agency is providing its
-----------
credit assessment monitoring service to the Company on a basis the same as
(in the case of Standard & Poor's Ratings Group) or similar to (in the case
of each other Rating Agency) the credit assessment monitoring service offered
by Standard & Poor's Ratings Group to the Company as of the date of this
Agreement.
SECTION 8.10 Limitations on Indebtedness. The Company will not
---------------------------
and will not permit any Subsidiary to create, assume or incur or in any
manner be or become liable in respect of any Indebtedness, except:
(a) Indebtedness of the Company and its Subsidiaries
outstanding as of the date of this Agreement and described in Exhibit L
---------
hereto (including any extensions, renewals or refinancings thereof
not to exceed 100% of the amount of such Indebtedness or commitments
for such Indebtedness immediately prior to such extension renewal or
refinancing);
(b) unsecured Consolidated Debt (excluding reimbursement
obligations in respect of letters of credit) of the Company that is
pari passu with, or subordinate in right of payment to, the Obligations
- ---- -----
created, assumed or incurred after the date hereof; provided that at the
--------
time of creation, assumption or incurrence thereof and after giving
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<PAGE> 71
effect thereto and to the application of the proceeds thereof, no Default
shall have occurred and be continuing;
(c) unsecured Consolidated Debt (excluding reimbursement
obligations in respect of letters of credit) of any Subsidiary that
contains terms and conditions no more favorable to the lender than the
terms and conditions set forth herein, created, assumed or incurred
after the date hereof; provided that at the time of creation,
--------
assumption or incurrence thereof and after giving effect thereto and to
the application of the proceeds thereof, no Default shall have occurred
and be continuing; and provided further that the aggregate amount
-------- -------
of such Debt (including such Debt existing as of the date of this
Agreement) at any time outstanding shall not exceed 20% of Consolidated
Net Tangible Assets;
(d) Capitalized Rentals, not to exceed $50,000,000 in the
aggregate at any one time outstanding;
(e) Consolidated Debt of a Subsidiary to the Company or to
a Wholly-owned Subsidiary; and
(f) (i) the Letters of Credit and (ii) unsecured
reimbursement obligations in respect of any letters of credit (other
than any Letter of Credit) so long as the sum of (x) the maximum Dollar
Amount that thereafter could be drawn under such letters of credit
(other than the Letters of Credit) plus (y) the aggregate Dollar Amount
drawn but unreimbursed with respect to all such letters of credit does
not exceed a Dollar Amount of $20,000,000.
SECTION 8.11 Liens and Negative Pledges.
--------------------------
SECTION 8.11.1 Limitation on Liens. The Company will not, and will
-------------------
not permit any Subsidiary to, create or incur, or suffer to be incurred or to
exist, any Lien of any kind on its or their property or assets, whether now
owned or hereafter acquired, or upon any income or profits therefrom, or
transfer any property for the purpose of subjecting the same to the payment
of obligations in priority to the payment of its or their general creditors,
or acquire or agree to acquire, or permit any Subsidiary to acquire, any
property or assets upon conditional sales agreements or other title retention
devices, except:
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demand of mechanics and
materialmen; provided that payment thereof is not at the time required
--------
by Section 8.3;
-----------
(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which
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<PAGE> 72
shall not have expired, or in respect of which the Company or a
Subsidiary shall at any time in good faith be prosecuting an appeal or
proceeding for a review and in respect of which a stay of execution
pending such appeal or proceeding for review shall have been secured,
and any pledges or deposits for the purpose of securing such appeal or
stay; provided that the aggregate amount secured by said Liens, pledges
--------
and deposits does not at any time exceed $10,000,000;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including warehousemen's and
attorneys' liens, statutory landlords' liens and liens on inventory
securing short term obligations due to the party selling such
inventory) and deposits, pledges or Liens to secure the performance of
bids, tenders or trade contracts, or to secure statutory obligations,
surety or appeal bonds or other Liens of like general nature incurred
in the ordinary course of business and not in connection with the
borrowing of money; provided that, in each case, the obligation
--------
secured is not overdue, or, if overdue, is being contested in good
faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially impair
their use in the operation of the business of the Company and its
Subsidiaries;
(e) Liens of the Company and its Subsidiaries outstanding as
of the date hereof and described on Exhibit N hereto;
---------
(f) Liens, mortgages, conditional sales contracts, security
interests, or other arrangements for the retention of title (including
Capitalized Leases) incurred after the date hereof and given to secure
the payment of the purchase price incurred in connection with the
acquisition or construction of fixed assets useful and intended to be
used in carrying on the business of the Company or a Subsidiary,
including Liens existing on such fixed assets at the time of
acquisition thereof or at the time of acquisition by the Company or a
Subsidiary of any business entity then owning such fixed assets,
whether or not such existing Liens were given to secure the payment of
the purchase price of the fixed assets to which they attach so long as
they were not incurred, extended or renewed in contemplation of such
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<PAGE> 73
acquisition; provided that (i) the Lien or charge shall attach solely
--------
to the property acquired or purchased, (ii) at the time of acquisition
of such fixed assets, the aggregate amount remaining unpaid on all
Indebtedness secured by Liens on such fixed assets whether or not
assumed by the Company or a Subsidiary shall not exceed an amount equal
to the lesser of the total purchase price or fair market value at the
time of acquisition of such fixed assets (as determined in good faith
by the Board of Directors of the Company), (iii) all such Indebtedness
shall have been incurred within the applicable limitations provided in
Section 8.10, and (iv) the aggregate unpaid principal amount of all
- ------------
such Indebtedness so secured and at any time outstanding shall not
exceed 15% of Consolidated Net Tangible Assets; and
(g) Liens incurred by the Company or any Subsidiary in
addition to those described in clauses (a) through (f) above;
----------- ---
provided that (i) the aggregate amount of all Indebtedness secured by
- --------
Liens pursuant to this clause (g) shall not at any time exceed 3% of
----------
Consolidated Net Tangible Assets, and (ii) all such Indebtedness shall
have been incurred within the applicable limitations provided in
Section 8.10.
- ------------
In case any property or asset is subjected to a Lien not otherwise
permitted by this Section 8.11.1, the Company will make or cause to be made
--------------
provision whereby the Obligations will be secured, to the fullest extent
permitted under applicable law, equally and ratably with all other
obligations secured thereby, and in any case the Obligations shall (but only
upon the occurrence of such condition precedent) have the benefit, to the
full extent that the holders may be entitled thereto under applicable law, of
an equitable lien equally and ratably securing the Obligations. Compliance
with the provisions of this paragraph shall not be deemed to constitute a
waiver of, or consent to, any violation of the foregoing provisions of this
Section 8.11.1.
- --------------
SECTION 8.11.2 Restrictive Agreements, etc. The Company will not,
---------------------------
and will not permit any of its Subsidiaries to, enter into any agreement
(excluding this Agreement and any other Loan Document) prohibiting
(a) the ability of the Company to amend or otherwise
modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Company by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
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<PAGE> 74
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Company.
SECTION 8.12 Acquisitions. The Company and its Subsidiaries will
------------
not, in one transaction or a series of transactions, directly or indirectly,
consolidate or be a party to a merger with, another Person, or purchase or
otherwise acquire all or substantially all of the assets of another Person or
more than 50% of any Securities of another Person if (a) such Person and the
Company do not engage in the same business, (b) such consolidation, merger,
purchase or acquisition is opposed by such Person's board of directors or
other governing body or by a shareholder or shareholders or other Person or
Persons controlling more than 25% of the Voting Stock of such Person, (c) the
Company or any Subsidiary knows of facts or circumstances that would make it
reasonably likely that such purchase or other acquisition would be hostile,
or (d) at the time of such consolidation, merger, purchase or acquisition and
after giving effect thereto, a Default shall have occurred and be continuing.
SECTION 8.13 Mergers, Consolidations and Sales of Assets.
-------------------------------------------
SECTION 8.13.1 Mergers, Consolidations and Dispositions. The
----------------------------------------
Company will not, and will not permit any Subsidiary to (i) consolidate with
or be a party to a merger with any other corporation, or (ii) sell, lease or
otherwise dispose of all or, except in the ordinary course of business, any
part of the assets of the Company and its Subsidiaries, provided that:
--------
(a) any Subsidiary may merge or consolidate with or into
the Company or any Wholly-owned Subsidiary so long as in any merger,
consolidation or sale involving the Company, the Company or the
Wholly-owned Subsidiary, as the case may be, shall be the surviving or
continuing corporation;
(b) any Subsidiary may sell, lease or otherwise dispose
of all or any substantial part of its assets to the Company or any
Wholly-owned Subsidiary;
(c) the Company may consolidate or merge with any other
corporation if (i) the Company is the surviving or continuing
corporation, (ii) at the time of such consolidation or merger and after
giving effect thereto no Default shall have occurred and be continuing,
and (iii) such consolidation or merger would not be prohibited by
Section 8.12; and
- ------------
(d) the Company or any Subsidiary may sell, lease or
otherwise dispose of any assets for fair value if such assets (valued
at the greater of book or fair market), when added to all other assets
sold, leased or otherwise disposed of by the Company and its Subsidiaries
(other than in the ordinary course of business) during the immediately
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<PAGE> 75
preceding four consecutive fiscal quarters, do not exceed 20% of
consolidated assets of the Company and its Subsidiaries (determined as
of the end of the immediately preceding fiscal quarter in accordance
with GAAP), and also do not contribute more than 20% of the
consolidated gross revenues of the Company and its Subsidiaries
(determined as of the end of the immediately preceding four consecutive
fiscal quarters in accordance with GAAP).
For purposes of Section 8.13.1(d):
-----------------
(A) the sale or discount of any receivable for fair
value consistent with industry custom and without recourse shall be
deemed to be "in the ordinary course of business," and
(B) the sale or discount of any receivable for fair
value consistent with industry custom and with recourse shall be deemed
to be "in the ordinary course of business" to the extent that all such
recourse obligations of the Company at any one time outstanding do not
exceed an amount equal to 2% of Consolidated Shareholder's Equity.
Notwithstanding anything contained herein to the contrary, any merger,
consolidation or disposition permitted under Section 8.13.1 shall not be
--------------
deemed to trigger a Change of Control Event under clause (a) or (b) of
---------- ---
the definition thereof.
SECTION 8.13.2 Issuance or Sale of Stock by Subsidiaries. The
-----------------------------------------
Company will not permit any Subsidiary to issue or sell any shares of stock
of any class (including as "stock" for the purposes of this Section 8.13,
------------
any warrants, rights or options to purchase or otherwise acquire stock or
other Securities exchangeable for or convertible into stock) of such
Subsidiary to any Person other than the Company or a Wholly-owned Subsidiary,
except for the purpose of qualifying directors, or except in satisfaction of
the validly pre-existing preemptive rights of minority shareholders in
connection with the simultaneous issuance of stock to the Company and/or a
Subsidiary whereby the Company and/or such Subsidiary maintain their same
proportionate interests in such Subsidiary.
SECTION 8.13.3 Sale of Stock in Subsidiaries. The Company will not
-----------------------------
sell, transfer or otherwise dispose of any shares of stock in any Subsidiary
(except to qualify directors) or any Indebtedness of any Subsidiary, and will
not permit any Subsidiary to sell, transfer or otherwise dispose of (except
to the Company or a Wholly-owned Subsidiary) any shares of stock or any
Indebtedness of any other Subsidiary, unless:
(a) any of the conditions of Section 8.13.1 shall have
--------------
been satisfied;
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(b) simultaneously with such sale, transfer, or
disposition, all shares of stock and all Indebtedness of such
Subsidiary at the time owned by the Company and by every other
Subsidiary shall be sold, transferred or disposed of as an entirety;
(c) the Board of Directors of the Company shall have
determined, as evidenced by a resolution thereof, that the retention of
such stock and Indebtedness is no longer in the best interests of the
Company;
(d) such stock and Indebtedness is sold, transferred or
otherwise disposed of to a Person, for fair value and on terms
reasonably deemed by the Board of Directors to be adequate and
satisfactory; and
(e) the Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Subsidiary not being
simultaneously disposed of.
SECTION 8.14 Guaranties. The Company will not, and will not
----------
permit any Subsidiary to, become or be liable in respect of any Guaranty
except Guaranties which are limited in amount to a stated maximum dollar
exposure and are incurred in compliance with this Agreement to guaranty
obligations permissible under this Agreement.
SECTION 8.15 Compliance with Applicable Law. The Company will
------------------------------
comply, and cause each Subsidiary to comply, in all material respects with
all laws, rules and regulations binding or affecting the Company or such
Subsidiary (it being understood that compliance with Environmental Laws shall
be governed by Section 8.19 and not this Section 8.15), the failure to
------------ ------------
comply with which would be reasonably expected to have a materially adverse
effect on the financial condition of the Company and its Subsidiaries taken
as a whole or the ability of the Company to perform its monetary obligations
under any of the Loan Documents; and the Company shall obtain and maintain,
and cause each Subsidiary to obtain and maintain, all permits, licenses and
approvals (collectively, "Permits") necessary to construct, own, operate,
-------
use and maintain their respective property and assets to conduct their
respective businesses, except where the failure to obtain or maintain such
Permit would not reasonably be expected to have a materially adverse effect
on the financial condition of the Company and its Subsidiaries taken as a
whole or the ability of the Company to perform its monetary obligations under
any of the Loan Documents.
SECTION 8.16 Transactions with Affiliates. The Company will not,
----------------------------
and will not permit any Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or
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for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person other
than an Affiliate.
SECTION 8.17 ERISA Compliance.
----------------
(a) The Company will not permit the present value of all
employee benefits vested under all "employee pension benefit plans," as
such term is defined in Section 3 o ERISA, maintained by the Company
or any of its Subsidiaries to exceed the present value of the assets
allocable to such vested benefits.
(b) All assumptions and methods used to determine the
present value of vested employee benefits under employee benefit plans
and the present value of assets of employee pension benefit plans shall
be reasonable in the good faith judgment of the Company and shall
comply with all requirements of law.
(c) Neither the Company nor any Subsidiary will cause any
employee pension benefit plan maintained or participated in by it to:
(i) engage in any "prohibited transaction,"
as such term is defined in Section 4975 of the Code, which,
either itself or because of any excise tax or other penalty which
may be imposed, involves the possibility of materially affecting
the business, prospects, profits, properties or condition
(financial or otherwise) of the Company and its Subsidiaries
taken as a whole;
(ii) incur any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA,
whether or not waived; or
(iii) terminate in a manner which results in
the imposition of a lien or charge of any kind on the property or
assets of the Company or any Subsidiary pursuant to Section 4068
of ERISA.
SECTION 8.18 Reports and Rights of Inspection. The Company will
--------------------------------
keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of or in relation to the
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business and affairs of the Company or such Subsidiary, in accordance with
GAAP (except for changes in application disclosed in the financial statements
furnished to the Administrative Agent and each Lender pursuant to this Section
-------
8.18 and not resulting in an Impermissible Qualification by the independent
- ----
public accountants referred to in Section 8.18(b)) and will furnish to the
---------------
Administrative Agent and each Lender (in duplicate if so specified below or
otherwise requested):
(a) Quarterly Statements. As soon as available and in
--------------------
any event within 45 days after the end of each quarterly fiscal period
(except the last) of each fiscal year of the Company, duplicate copies
of:
(i) a consolidated balance sheet of the
Company and its Subsidiaries as of the close of such quarterly
fiscal period,
(ii) consolidated statements of income and
retained earnings of the Company and its Subsidiaries for such
quarterly fiscal period and for the portion of the fiscal year
ending with such quarterly fiscal period, and
(iii) consolidated statements of cash flows of
the Company and its Subsidiaries for such quarterly fiscal period
and for the portion of the fiscal year ending with such quarterly
fiscal period, in each case setting forth in comparative form the
consolidated figures for the preceding fiscal year, all in
reasonable detail and accompanied by a certificate of an
authorized financial officer of the Company to the effect that
the consolidated financial statements have been prepared in
accordance with GAAP and present fairly the financial condition
of the Company and its Subsidiaries;
(b) Annual Statements. As soon as available and in any
-----------------
event within 120 days after the close of each fiscal year of the
Company, duplicate copies of:
(i) a consolidated balance sheet of the
Company and its Subsidiaries, as of the close of such fiscal
year, and
(ii) consolidated statements of income and
shareowners' equity and cash flows of the Company and its
Subsidiaries, for such fiscal year, setting forth in comparative
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<PAGE> 79
form the consolidated figures for the preceding fiscal year, all
in reasonable detail and accompanied by a report thereon of a
firm of independent public accountants of recognized national
standing selected by the Company to the effect that the
consolidated financial statements have been prepared in
accordance with GAAP and present fairly the financial condition
of the Company and its Subsidiaries and of the Company and its
consolidated subsidiaries, and that the examination of such
accountants in connection with such financial statements has been
made in accordance with GAAP and accordingly includes such tests
of the accounting records and such other auditing procedures as
were considered necessary in the circumstances;
(c) Annual Consolidating Summary. As soon as available
----------------------------
and in any event within 120 days after the close of each fiscal year of
the Company, a consolidating summary of business unit sales, operating
income, assets and investments of the Company and its Material
Subsidiaries prepared by an authorized financial officer of the Company
and substantially in the form set forth in Exhibit O hereto;
---------
(d) Audit Reports. Promptly upon receipt thereof, one
-------------
copy of each interim or special audit, if any, made by independent
accountants of the books of the Company or any Subsidiary;
(e) SEC and Other Reports. Promptly upon their becoming
---------------------
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to stockholders generally and of
each regular or periodic report, and any registration statement or
prospectus filed by the Company or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries;
(f) Notice of Litigation and Judgment. Promptly upon
---------------------------------
any officer of the Company becoming aware thereof, written notice of
any proceedings threatened or pending against or affecting the Company
or any Subsidiary in any court or before any governmental authority or
arbitration board or tribunal which claim, if decided against the
Company or any Subsidiary, could reasonably be expected to expose the
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<PAGE> 80
Company or any Subsidiary to liability in an amount equal to $2,000,000
or more;
(g) Officers' Certificates. Within the periods provided
----------------------
in paragraphs (a) and (b) above, a certificate of an authorized
-------------- ---
financial officer of the Company stating that such officer has reviewed
the provisions of this Agreement and (i) setting forth the information
and computations (in sufficient detail), to the extent applicable,
required in order to establish whether the Company was in compliance
with the requirements of Sections 8.6 through 8.17, inclusive, at
------------ ----
the end of the period covered by the financial statements then being
furnished, and (ii) stating whether there existed as of the end of such
fiscal period and whether, to the best of such officer's knowledge,
there exists on the date of the certificate or existed at any time
during such fiscal period any Default and, if any such condition or
event existed during such period or exists on the date of the
certificate, specifying the nature and period of existence thereof and
the action the Company has taken or is taking and proposes to take with
respect thereto;
(h) Accountants' Certificates. Within the period
-------------------------
provided in paragraph (b) above, a certificate of the accountants who
-------------
render an opinion with respect to such financial statements, stating
that they have reviewed this Agreement and stating further whether, in
making their audit, such accountants have become aware of any Default
under any of the terms or provisions of this Agreement insofar as any
such terms or provisions pertain to accounting matters or
determinations and, if any such condition or event then exists,
specifying the nature and period of existence thereof;
(i) Notice of Default. As soon as possible and in any
-----------------
event within three (3) days after any officer of the Company shall have
become aware of the occurrence of each Default, a statement of a
Responsible Officer of the Company setting forth the details of such
Default and the action which the Company has taken and proposes to take
with respect thereto;
(j) Notices Regarding Pension Plans. Immediately upon
-------------------------------
becoming aware of the institution of any steps by the Company or any
other Person to terminate any Pension Plan, or the failure to make a
required contribution to any Pension Plan if such failure is sufficient
to give rise to a Lien under Section 302(f) of ERISA, or the taking of
any action with respect to a Pension Plan which could result in the
requirement that the Company furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the Company
of any material
74
<PAGE> 81
liability, fine or penalty, or any material increase in the contingent
liability of the Company with respect to any post-retirement Welfare Plan
benefit, notice thereof and copies of all documentation relating thereto;
(k) Notices Regarding Subsidiaries. Promptly from time
------------------------------
to time, upon request of the Administrative Agent, a written report of
any change in the list of Material Subsidiaries set forth on Exhibit H
---------
hereto or any change in the designation of any Subsidiary as or to
"Material";
(l) Notice of Material Adverse Change. Immediately
---------------------------------
upon becoming aware of the occurrence of a material adverse change in
the financial condition, operations, business, prospects or properties
of the Company and its Subsidiaries taken as a whole or the occurrence
of any event which materially and adversely impairs the prospect of
payment or performance of the Obligations, notice thereof and copies of
all documentation relating thereto; and
(m) Requested Information. With reasonable promptness,
---------------------
such other data and information as the Administrative Agent, any Issuer
or any Lender may reasonably request.
Without limiting the foregoing, the Company will permit the Administrative
Agent and each Lender (or such Persons as may be designated by the
Administrative Agent or any Lender) to visit and inspect any of the
properties of the Company or any Subsidiary, to examine all their books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts
with their respective officers, employees, and independent public accountants
(and by this provision the Company authorizes said accountants to discuss
with the Administrative Agent and each Lender the finances and affairs of the
Company and its Subsidiaries) all at such reasonable times and as often as
may be reasonably requested. The Company shall be required to pay or
reimburse the Administrative Agent and each Lender for all reasonable
expenses which the Administrative Agent or such Lender may incur in
connection with any such visitation or inspection if an Event of Default
shall exist or be continuing at the time of such visitation or inspection.
SECTION 8.19 Environmental Covenant. The Company will, and will
----------------------
cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
Material Compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in Material Compliance
75
<PAGE> 82
therewith, and handle all Hazardous Materials in Material Compliance with
all applicable Environmental Laws;
(b) immediately notify the Administrative Agent and
provide copies upon receipt of all written claims, complaints or
notices relating to the failure of the Company to be in Material
Compliance with Environmental Laws, and shall promptly cure or settle
and have dismissed with prejudice any actions and proceedings relating
to the failure of the Company to be in Material Compliance with
Environmental Laws; provided that nothing in the preceding clause
--------
shall be deemed to prohibit the Company from contesting any such action
expeditiously, in good faith and through appropriate proceedings, so
long as (i) the Company sets aside on its books such reserves as are
required by GAAP in connection with such matters and (ii) such contest
shall not impair the validity or enforceability of this Agreement; and
(c) provide such information which the Administrative
Agent may reasonably request from time to time to evidence compliance
with this Section 8.19.
------------
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.1 Listing of Events of Default. Each of the following
----------------------------
events, occurrences or conditions described in this Section 9.1 shall
-----------
constitute an "Event of Default."
----------------
SECTION 9.1.1 Non-Payment of Obligations. The Company shall default
--------------------------
in the payment when due of any principal of any Loan or of any Reimbursement
Obligation, or the Company shall default (and such default shall continue
unremedied for a period of three (3) Business Days) in the payment when due
of any facility fee, letter of credit fee or other fee or of any interest on
any Loan and/or other Obligation.
SECTION 9.1.2 Breach of Warranty. Any representation or warranty of
------------------
the Company made or deemed to be made hereunder or in any other Loan Document
or any other writing or certificate furnished by or on behalf of the Company
to the Administrative Agent, any Issuer or any Lender for the purposes of or
in connection with this Agreement or any such other Loan Document (including
any certificates delivered pursuant to Article 6) is or shall be incorrect
---------
when made in any material respect.
SECTION 9.1.3 Non-Performance of Covenants and Obligations. The
--------------------------------------------
Company shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document, and such default
shall continue unremedied for a period
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<PAGE> 83
of thirty (30) days after the earlier of (x) notice thereof shall have
been given to the Company by the Administrative Agent or any Lender, or
(y) any Responsible Officer of the Company shall have obtained knowledge
of the occurrence of such default.
SECTION 9.1.4 Default on Other Indebtedness.
-----------------------------
(a) (i) A default shall have occurred and be continuing,
for the grace period, if any, applicable thereto, in the payment when
due, whether by acceleration or otherwise, of (A) any Indebtedness
(other than any Obligation constituting Indebtedness) of, or (B) any
payment obligation in respect of any Guaranty issued by, the Company or
any of its Subsidiaries, which Indebtedness is in a principal amount,
individually or in the aggregate for all of the foregoing items in
clauses (A) through (B), at any one time in default equal to or in
- ----------- ---
excess of Five Million Dollars ($5,000,000), or (ii) a default shall
occur in the performance or observance of any obligation or condition
with respect to any Indebtedness (other than any Obligation
constituting Indebtedness) or any Guaranty, which, in the case of any
such Indebtedness, letter of credit or Guaranty, is in a principal
amount, individually or in the aggregate for all such Indebtedness and
Guaranties, at any time equal to or in excess of Five Million Dollars
($5,000,000), if (1) the effect of such default is (x) to accelerate
the maturity of any such Indebtedness or any obligation which is
supported by any such Guaranty or (y) to require the advance payment or
cash collateralization of any such letter of credit reimbursement
obligation, or (2) such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or holders of
any such Indebtedness or obligation, or the issuer of any such letter
of credit, or any trustee or agent for any such Person, to cause such
Indebtedness or obligation to become due and payable prior to its
expressed maturity or to cause the advance payment or cash
collateralization of any such letter of credit reimbursement
obligation;
(b) Any default, termination event or like event by or
relating to the Company or any of its Subsidiaries shall have occurred
under any agreement (other than any Loan Document) that involves a
commitment of Five Million Dollars ($5,000,000) or more and provides
for (i) the sale, assignment or factoring of accounts receivable or
(ii) any other structured financing or off-balance sheet financing and,
in the case of any such default, termination event or like event, shall
have continued for the grace period, if any, applicable thereto, and as
a result (A) in the case of clause (i) next above, the obligation to
----------
purchase, take by assignment or factor such receivables shall have been
terminated or the transferee of receivables shall have the right (with
or without the passage of time or the giving of
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<PAGE> 84
notice, or both) to terminate such obligation prior to the stated maturity
date therefor or (B) in the case of clause (ii) next above, the
-----------
obligations of the other party or parties to such other structured
financing or off-balance sheet financing shall terminate or such other
party or parties shall have the right to terminate obligations prior to
the stated maturity date therefor;
SECTION 9.1.5 Judgments. Any final judgment or judgments for the
---------
payment of money aggregating in excess of $2,000,000 is or are outstanding
against the Company or any Subsidiary or against the property or assets of
either and any one of such judgments has remained unpaid, unvacated, unbonded
or unstayed by appeal or otherwise for a period of 30 days from the date of
its entry; provided that in lieu of such 30-day period, a period of 90 days
--------
shall apply to any such judgment that is fully bonded by a reputable
insurance company which has acknowledged its obligation for such judgment and
which is accorded a rating by A.M. Best Company, Inc. of A+.
SECTION 9.1.6 Pension Plans. Any of the following events shall occur
-------------
with respect to any Pension Plan
(a) the institution of any steps by the Company, any
member of its Controlled Group or any other Person to terminate a
Pension Plan if, as a result of such termination, the Company or any
such member could be required to make a contribution to such Pension
Plan, or could reasonably expect to incur a liability or obligation to
such Pension Plan, in excess of $5,000,000; or
(b) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA.
SECTION 9.1.7 Bankruptcy, Insolvency, etc. The Company or
---------------------------
any of its Material Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit
in writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver or other custodian for the Company
or any of its Material Subsidiaries or any property of any thereof, or
make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any of its
Material Subsidiaries or for a substantial part of the property of any
thereof, and such
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<PAGE> 85
trustee, receiver, sequestrator or other custodian shall not be discharged
within sixty (60) days; provided that the Company and each Material
--------
Subsidiary hereby expressly authorizes the Administrative Agent, each
Issuer and each Lender to appear in any court conducting any relevant
proceeding during such thirty-day period to preserve, protect and defend
their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Company or any
of its Material Subsidiaries, and, if any such case or proceeding is
not commenced by the Company or such Material Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Company or
such Material Subsidiary or shall result in the entry of an order for
relief or shall remain for sixty (60) days undismissed; provided that
--------
the Company and each Material Subsidiary hereby expressly authorizes
the Administrative Agent, each Issuer and each Lender to appear in any
court conducting any such case or proceeding during such sixty-day
period to preserve, protect and defend their rights under the Loan
Documents; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 9.1.8 Change of Control Event. A Change of Control Event
-----------------------
shall occur.
SECTION 9.1.9 Environmental Matters. The Company or any of its
---------------------
Subsidiaries shall be the subject of any proceeding or investigation
pertaining to the release by the Company or any of its Subsidiaries, or any
other Person, of any Hazardous Material, or any violation of or
non-compliance with any Environmental Laws, which would, in either case, have
a materially adverse effect on the Company and its Subsidiaries taken as a
whole or the ability of the Company to perform any of the Loan Documents.
SECTION 9.2 Action if Bankruptcy. If any Event of Default
--------------------
described in clauses (a) through (d) of Section 9.1.7 shall occur, the
------------ --- -------------
Commitments (if not theretofore terminated) shall automatically terminate,
the outstanding principal amount of all outstanding Loans or Reimbursement
Obligations and all other Obligations shall automatically be and become
immediately due and payable and the Company shall become immediately
obligated to deliver to each Issuer in accordance with Section 4.7 cash
-----------
collateral in a Dollar Amount equal to the Stated Amount of all Letters of
Credit of such Issuer then outstanding, without notice or demand.
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<PAGE> 86
SECTION 9.3 Action if Other Event of Default. If any Event of
--------------------------------
Default (other than any Event of Default described in clauses (a) through
-----------
(d) of Section 9.1.7) shall occur for any reason, whether voluntary or
- --- -------------
involuntary, and be continuing, the Administrative Agent, upon the direction
of the Required Lenders, shall declare the outstanding principal amount of
the Loans or Reimbursement Obligations and other Obligations to be due and
payable and the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans or Reimbursement Obligations
and other Obligations shall be and become immediately due and payable, the
Commitments shall immediately terminate and the Company shall become
immediately obligated to deliver to each Issuer in accordance with Section
-------
4.7 cash collateral in the amount set forth in Section 4.7, all without
- --- -----------
notice, demand or presentment. The Administrative Agent shall promptly
advise the Company of any such declaration, but failure to do so shall not
impair the effect of such declaration.
ARTICLE 10
THE AGENTS
SECTION 10.1 Actions. Each Lender hereby appoints Scotiabank as
-------
its Administrative Agent under and for purposes of this Agreement, the Notes
and each other Loan Document. Each Lender authorizes the Administrative
Agent to act on behalf of such Lender under this Agreement, the Notes and
each other Loan Document and, in the absence of other written instructions
from the Required Lenders received from time to time by the Administrative
Agent (with respect to which the Administrative Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise advised
by counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto. Each Lender hereby indemnifies (which indemnity shall
survive any termination of this Agreement) each Agent, pro rata according
--- ----
to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, or reasonable out-of-pocket costs or
expenses of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against, such Agent in any way relating to or
arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees, and as to which such Agent is not
reimbursed by the Company; provided that no Lender shall be liable for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
claims, costs or expenses which have resulted solely from such Agent's gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, each Lender hereby agrees, to the extent of such Lender's
Percentage, to reimburse the Administrative Agent promptly following the
Administrative
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<PAGE> 87
Agent's demand, for any reasonable out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred by the Administrative
Agent in connection with the administration and enforcement of the Loan
Documents, and not reimbursed to the Administrative Agent by the Company
except to the extent such expenses are caused by the gross negligence or
willful misconduct of the Administrative Agent. If and to the extent that
the foregoing undertaking may be unenforceable for any reason, each Lender
hereby agrees to make the maximum contribution, to the extent of such
Lender's Percentage, to the payment and satisfaction of each of such amounts
which is permissible under applicable law. Notwithstanding any other
provision hereof, each Lender's obligations under this Section 10.1 shall
------------
survive the termination of such Lender's Commitment and this Agreement and
the discharge of the Company's obligations hereunder but only with respect to
such matters which occurred prior to the time such Lender ceased to be a
Lender hereunder. The Administrative Agent shall not be required to take any
action hereunder, under the Notes or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its satisfaction.
If any indemnity in favor of the Administrative Agent shall be or become, in
the Administrative Agent's determination, inadequate, the Administrative
Agent may call for additional indemnification from the Lenders and cease to
do the acts indemnified against hereunder until such additional indemnity is
given.
SECTION 10.2 Funding Reliance, etc. Unless the Administrative
---------------------
Agent shall have been notified by telephone, confirmed in writing, by any
Lender by 12:00 noon, Atlanta time, on the day of a Borrowing that such
Lender will not make available the amount which would constitute its
Percentage of such Borrowing on the date specified therefor, the
Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent and, in reliance upon such assumption,
make available to the Company a corresponding amount. If and to the extent
that such Lender shall not have made such amount available to the
Administrative Agent, such Lender and the Company severally agree to repay
the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date the Administrative
Agent made such amount available to the Company to the date such amount is
repaid to the Administrative Agent, at the Federal Funds Effective Rate.
SECTION 10.3 Exculpation. Neither any Agent nor any Issuer nor
-----------
any of its respective directors, officers, employees or agents shall be
liable to any Lender for any action taken or omitted to be taken by it under
this Agreement or any other Loan Document, or in connection herewith or
therewith, except for its own willful misconduct or gross negligence, nor
responsible for any recitals or warranties herein or therein, nor for the
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<PAGE> 88
effectiveness, enforceability, validity or due execution of this Agreement or
any other Loan Document, nor to make any inquiry respecting the performance
by the Company of its obligations hereunder or under any other Loan Document.
Any such inquiry which may be made by any Agent or any Issuer shall not
obligate it to make any further inquiry or to take any action. The Agents
and the Issuers shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which any such Agent or Issuer, as the case may be, believes to be genuine
and to have been presented by a proper Person.
SECTION 10.4 Successor. The Administrative Agent may resign as
---------
such at any time upon at least thirty (30) days' prior notice to the Company
and all Lenders. If the Administrative Agent at any time shall resign, the
Required Lenders may appoint another Lender as a successor Administrative
Agent (which prior to the occurrence and continuation of a Default shall be
acceptable to the Company) which shall thereupon become the Administrative
Agent hereunder. If no successor Administrative Agent so acceptable to the
Company shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within thirty (30) days after the retiring
Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial
banking institution organized under the laws of the U.S. (or any State
thereof) or a U.S. branch or agency of a commercial banking institution, and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall be
entitled to receive from the retiring Administrative Agent such documents of
transfer and assignment as such successor Administrative Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of:
(a) this Article 10 shall inure to its benefit as to
----------
any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to
------------ ------------
inure to its benefit.
The Documentation Agent, in such capacity hereunder, shall have no
duties hereunder and shall not be replaced if it resigns.
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<PAGE> 89
SECTION 10.5 Loans or Reimbursement Obligations by the Agents or
---------------------------------------------------
Issuers. Each Agent and each Issuer shall have the same rights and powers
- -------
with respect to (x) the Loans or Reimbursement Obligations made by it or any
of its affiliates, (y) the Letters of Credit issued by or participated in by
it or any of its affiliates and (z) the interest in the Notes held by it or
any of its affiliates as any other Lender and may exercise the same as if it
were not the Agent or an Issuer, as the case may be. Each Agent and each
Issuer and its respective affiliates may accept deposits from, lend money to,
issue letters of credit for the account of and generally engage in any kind
of business with the Company or any Subsidiary or affiliate of the Company as
if it were not an Agent or an Issuer hereunder.
SECTION 10.6 Credit Decisions. Each Lender acknowledges that it
----------------
has, independently of the Agents or the Issuers and each other Lender, and
based on such Lender's review of the financial information of the Company,
this Agreement, the other Loan Documents (the terms and provisions of which
being satisfactory to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitment. Each Lender also acknowledges that it
will, independently of the Agents, the Issuers and each other Lender, and
based on such other documents, information and investigations as it shall
deem appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 10.7 Copies, etc. The Administrative Agent shall give
-----------
prompt notice to each Lender and Issuer of each notice or request required or
permitted to be given to the Administrative Agent by the Company pursuant to
the terms of this Agreement (unless concurrently delivered to the Lenders or
Issuers by the Company). Upon request by any Lender or Issuer, the
Administrative Agent will distribute to each Lender and Issuer each document
or instrument received for its account and copies of all other communications
received by the Administrative Agent from the Company for distribution to the
Lenders and the Issuers by the Administrative Agent in accordance with the
terms of this Agreement.
ARTICLE 11
MISCELLANEOUS PROVISIONS
SECTION 11.1 Waivers, Amendments, etc. The provisions of this
------------------------
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing
and consented to by the
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<PAGE> 90
Company and the Required Lenders; provided that no such amendment,
--------
modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify Section 2.3 (as it pertains to percentages of
-----------
the Total Commitment Amount), Section 5.10 or this Section 11.1,
------------ ------------
change the definitions of "Applicable Eurodollar Margin,"
----------------------------
"Applicable Facility Fee Percentage," "Applicable Commercial Letter
---------------------------------- ----------------------------
of Credit Margin" and "Required Lenders," increase the Total
- ---------------- ----------------
Commitment Amount, the Loan Commitment Amount, the Commercial Letter of
Credit Commitment Amount, or the Standby Letter of Credit Commitment
Amount or the Commitment or Percentage of any Lender, reduce any fees
described in Article 3, or extend the Stated Maturity Date (except as
---------
contemplated by Section 2.3) shall be made without the consent of
-----------
each Lender and each holder of the Notes;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of accrued interest or rate of
interest on any Loan) shall be made without the consent of the Lender
holding such Loan; or
(d) affect adversely the interests, rights or obligations
of the Administrative Agent qua the Administrative Agent without
---
consent of the Administrative Agent or the Issuer qua the Issuer
---
without consent of the Issuer.
No failure or delay on the part of the Administrative Agent, any Issuer, any
Lender or any holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or
right. No notice to or demand on the Company in any case shall entitle it to
any notice or demand in similar or other circumstances. No waiver or
approval by any Agent, any Issuer, any Lender or any holder of any Note under
this Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent transactions.
No waiver or approval hereunder shall require any similar or dissimilar
waiver or approval thereafter to be granted hereunder.
SECTION 11.2 Notices. All notices and other communications
-------
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by facsimile. Any notice, if mailed and properly
addressed with postage prepaid or if
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<PAGE> 91
properly addressed and sent by prepaid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted. Unless otherwise specified in a notice in writing sent in
accordance with the foregoing provisions of this Section 11.2, notices and
------------
other communications shall be given to or made upon the respective parties
hereto at their respective addresses (or to their respective facsimile numbers)
shown on Schedule II hereto.
-----------
SECTION 11.3 Payment of Costs and Expenses. The Company agrees
-----------------------------
to pay on demand all reasonable expenses of the Administrative Agent
(including the reasonable fees and other expenses of counsel to the
Administrative Agent and of local counsel, if any, who may be retained by
counsel to the Administrative Agent) in connection with
(a) the negotiation, preparation, execution and delivery
of this Agreement and of each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Loan Document as may
from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated,
(b) the preparation and review of the form of any
document or instrument relevant to this Agreement or any other Loan
Document, and
(c) the negotiation of any restructuring or "work-out,"
whether or not consummated, of any Obligations.
The Company further agrees to pay, and to save the Agents, the Issuers and
the Lenders harmless from all liability for, any stamp or other taxes which
may be payable in connection with the execution or delivery of this
Agreement, the borrowings hereunder, or the issuance of the Notes or any
other Loan Documents. The Company also agrees to reimburse the Agents, the
Issuers and each Lender upon demand for all reasonable expenses (including
reasonable attorneys' fees (including, without limitation, the allocated
costs of internal legal counsel to the extent not duplicative) and other
expenses) incurred by the Agents, the Issuers or such Lender in connection
with any "workout," whether or not consummated, of any Obligations or the
enforcement of any Obligations.
SECTION 11.4 Indemnification. In consideration of the execution
---------------
and delivery of this Agreement by each Agent, each Lender and each Issuer and
the extension of the Commitments, the Company hereby indemnifies, exonerates
and holds each Agent, each Issuer and each Lender and each of their
respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all
-------------------
actions, causes of action, suits, losses, costs, liabilities and damages,
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<PAGE> 92
and expenses incurred in connection therewith (irrespective of whether any
such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
-----------------------
Parties or any of them as a result of, or arising out of, or relating to:
(a) this Agreement or any Loan Document or any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Loan;
(b) any investigation, litigation or proceeding related
to any acquisition or proposed acquisition by the Company or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not any Agent, any Issuer or such Lender is party
thereto;
(c) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the Release by the
Company or any of its Subsidiaries of any Hazardous Material; or
(d) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releasing from,
any real property owned or operated by the Company or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Company or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable
law.
SECTION 11.5 Survival. The obligations of the Company under
--------
Sections 5.1, 5.5, 5.6, 5.7, 11.3 and 11.4, and the obligations
- ------------ --- --- --- ---- ----
of the Lenders under Section 10.1, shall in each case survive any
------------
termination of this Agreement, the payment in full of all Obligations and the
termination of all Commitments. The representations and warranties made by
the Company in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan
Document.
SECTION 11.6 Severability. Any provision of this Agreement or
------------
any other Loan Document which is prohibited or unenforceable
86
<PAGE> 93
in any jurisdiction shall, as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such Loan Document
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.7 Headings. The various headings of this Agreement
--------
and of each other Loan Document are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 11.8 Execution in Counterparts, Effectiveness, etc. This
---------------------------------------------
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 11.9 Governing Law; Entire Agreement. THIS AGREEMENT,
-------------------------------
THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This
Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 11.10 Successors and Assigns. This Agreement shall be
----------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided that:
--------
(a) the Company may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent, the Issuers and all Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 11.11.
-------------
SECTION 11.11 Sale and Transfer of Loans or Reimbursement
-------------------------------------------
Obligations; Participations in Loans or Reimbursement Obligations. Each
- -----------------------------------------------------------------
Lender may make assignments of, or have outstanding at any time
participations in, its Loans, participation interest in Letters of Credit,
Reimbursement Obligations and Commitments to one other Person in accordance
with this Section 11.11; provided that the provisions of this Section shall
------------- --------
not apply to any participations purchased or sold pursuant to Section 5.9.
-----------
SECTION 11.11.1 Assignments. Any Lender (including without
-----------
limitation any Assignee Lender):
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<PAGE> 94
(a) with the written consents of the Company and the
Administrative Agent (which consents shall not be unreasonably delayed
or withheld and which consent, in the case of the Company, shall be
deemed to have been given in the absence of a written notice delivered
by the Company to the Administrative Agent, on or before the fifth
Business Day after receipt by the Company of such Lender's written
request for consent) may at any time assign and delegate to a
commercial bank or other Person (other than a mutual fund or insurance
company), and
(b) with notice to the Company and the Administrative
Agent, but without the consent of the Company or the Administrative
Agent, may assign and delegate to any of its affiliates or to any other
Lender (each Person described in either of the foregoing clauses as
being the Person to whom such assignment and delegation is to be made,
being hereinafter referred to as an "Assignee Lender"), a fraction of
---------------
such Lender's total Committed Loans, participation interest in Letters
of Credit, Reimbursement Obligations and Commitments such that the
amount of such assignment shall be in a minimum Dollar Amount of
$10,000,000 (or if less the total Dollar Amount of such Lender's
Committed Loans, participation interest in Letters of Credit and
Reimbursement Obligations and Commitments); provided that the Lender
--------
constituting the Administrative Agent may not make any such assignment
hereunder if following such assignment the sum of the Total Dollar
Amount of such Lender's Committed Loans, participation interest in
Letters of Credit and Reimbursement Obligations and Commitments would
be less than $10,000,000 unless the Administrative Agent is
concurrently resigning as Administrative Agent and such Lender is
assigning all of its interests hereunder; provided further, that
-------- -------
any such Assignee Lender will comply, if applicable, with the
provisions contained in the last sentence of Section 5.7; and
-----------
provided further, that the Company and the Administrative Agent
- ----------------
shall be entitled to continue to deal solely and directly with such
Lender in connection with the interests so assigned and delegated to an
Assignee Lender until
(x) such Assignee Lender shall have executed and delivered
to the Administrative Agent and if appropriate, the Company, a Lender
Assignment Agreement, accepted by the Administrative Agent, and such
Lender and Assignee Lender and
(y) the processing fees described below shall have been
paid to the Administrative Agent, and the Administrative Agent shall
have so notified the Company.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (i) the Assignee Lender
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<PAGE> 95
thereunder shall be deemed automatically to have become a party hereto and to
the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee Lender in connection with such Lender Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and under
the other Loan Documents, and (ii) the assignor Lender, to the extent that
rights and obligations hereunder have been assigned and delegated by it in
connection with such Lender Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents. Promptly after the
recording of such Lender Assignment Agreement, the Company, at its own expense,
shall execute and deliver to the Administrative Agent in exchange for the
surrendered Note or Notes a new Committed Note payable to the order of such
Assignee Lender in an amount equal to the Loan Commitment assumed by it
pursuant to such Lender Assignment Agreement and a Bid Note for such Assignee
Lender, and, if the assigning Lender has retained a Commitment hereunder, a
new Committed Note payable to the order of the assigning Lender in an amount
equal to the Loan Commitment retained by it hereunder in substitution for
such assigning Lender's old Committed Note and not in payment thereof. Such
Committed Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Committed Note, and together
with the Bid Note for such Assignee Lender shall be dated the effective date
of such Lender Assignment Agreement (or such earlier date as shall be
acceptable to such Persons) and shall otherwise be in substantially the form
of Exhibit A-1 and Exhibit A-2, as appropriate. Such assignor Lender or
----------- -----------
such Assignee Lender must also pay a processing fee to the Administrative
Agent upon delivery of any Lender Assignment Agreement in the amount of
$2,500 (for which the Company shall have no reimbursement obligation). Any
attempted assignment and delegation not made in accordance with this Section
-------
11.11.1 shall be null and void.
- -------
Notwithstanding anything contained in this Section 11.11.1 to the
---------------
contrary, each Lender shall have the unrestricted right to assign its rights
hereunder to any Federal Reserve Bank to secure such Lender's borrowing from
such Federal Reserve Bank.
SECTION 11.11.2 Participations. Any Lender may at any time sell to
--------------
a commercial bank or other Person (other than a mutual fund or insurance
company) (each of such commercial banks and other Persons being herein called
a "Participant") participating interests in any of the Loans, participation
-----------
interest in Letters of Credit, Reimbursement Obligations, Commitments, or
other interests of such Lender hereunder in the aggregate amount of a Dollar
Amount of $5,000,000 or greater; provided that:
--------
(a) no participation contemplated in this Section 11.11
-------------
shall relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document,
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<PAGE> 96
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Company and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each
of the other Loan Documents,
(d) no Participant, unless such Participant is an
affiliate of such Lender, or is itself a Lender, shall be entitled to
require such Lender to take or refrain from taking any action hereunder
or under any other Loan Document, except that such Lender may agree
with any Participant that such Lender will not, without such
Participant's consent, take any actions of the type described in
clause (b) or (c) of Section 11.1,
- ---------- --- ------------
(e) the Company shall not be required to pay any amount
under Section 5.7 that is greater than the amount which it would have
-----------
been required to pay had no participating interest been sold, and
(f) no Participant may further participate in any
interest hereunder (and each participation agreement shall contain a
restriction to the effect).
The Company acknowledges and agrees, subject to the foregoing provisions of
this Section 11.11.2, that each Participant, for purposes of Sections 5.1,
--------------- ------------
5.5, 5.6, 5.7, 5.9, 5.10, 11.3 and 11.4, shall be considered a Lender; provided
- --- --- --- --- ---- ---- ---- --------
that no Participant shall receive any payment under such Sections greater than
the Lender from whom such Participant purchased such participation would have
received if such Lender had not sold such participation.
SECTION 11.12 Confidentiality. The Lenders shall hold all
---------------
non-public information (which has been identified as such by the Company)
obtained pursuant to the requirements of this Agreement in accordance with
their customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices, and in any
event the Lenders may make disclosure (i) to any of their examiners,
affiliates, outside auditors, counsel and other professional advisors who
have a need to know such information in connection with this Agreement, or
(ii) as required by any governmental agency or representative thereof or
pursuant to legal process, or (iii) in order to preserve, protect or enforce
any of the Lenders' rights and remedies hereunder or under any of the other
Loan Documents, or (iv) to any actual or prospective transferee or assignee;
provided that:
- --------
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<PAGE> 97
(a) unless specifically prohibited by applicable law or
court order, each Lender shall notify the Company of any request by any
governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition of
such Lender by such governmental agency) or other requests made
pursuant to legal process for disclosure of any such non-public
information prior to disclosure of such information;
(b) each Lender shall give prompt notice to the Company
after any disclosure given by such Lender pursuant to clause (iii)
------------
above;
(c) prior to any such disclosure to an actual or
prospective transferee or assignee or participant pursuant to this
Section 11.12, each Lender shall require any such transferee,
- -------------
assignee or participant receiving a disclosure of non-public
information to execute a letter substantially in the form of Exhibit Q
---------
hereto; and
(d) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, upon the
request of the Company each Lender shall be obligated or required to
return any such materials furnished by the Company or any Subsidiary
unless such Lender informs the Company upon such request, that such
Lender is required to retain such materials pursuant to any applicable
law, regulation or internal policy of such Lender.
SECTION 11.13 Other Transactions. Nothing contained herein shall
------------------
preclude the Agents, the Issuers or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Company or any of its Affiliates in which the Company
or such Affiliate is not restricted hereby from engaging with any other
Person.
SECTION 11.14 CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND
--------------------------------------------------
JURISDICTION. ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY WITH
- ------------
RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS OR ANY
JUDGMENT ENTERED BY A COURT IN RESPECT THEREOF, MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AS THE LENDERS, THE ISSUERS AND THE AGENTS IN
THEIR DISCRETION MAY ELECT AND THE COMPANY HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT,
ACTION OR PROCEEDING. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THE LOAN DOCUMENTS BROUGHT IN THE COURTS FOR THE
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<PAGE> 98
STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 11.15 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENTS, EACH
--------------------
ISSUER AND EACH LENDER HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM
OR RELATING TO ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
SECTION 11.16 Letters of Credit. On the date of the initial
-----------------
Loans, each letter of credit issued under the BofA Reimbursement Agreement
and listed on Schedule III hereto shall be deemed to have been issued
------------
hereunder and to be subject to all terms and provisions hereof.
SECTION 11.17 Judgment. If, for the purposes of obtaining
--------
judgment in any court, it is necessary to convert a sum due hereunder or any
other Loan Document in one currency into another currency, the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the first currency with
such other currency on the Business Day preceding that on which final
judgment is given. The obligation of the Company or any Lender in respect of
any such sum due from it to the Administrative Agent or any Issuer hereunder
or under any other Loan Document shall, notwithstanding any judgment in a
currency (the "Judgment Currency") other than that in which such sum is
-----------------
denominated in accordance with the applicable provisions of this Agreement
(the "Agreement Currency"), be discharged only to the extent that on the
------------------
Business Day following receipt by the Administrative Agent or such Issuer, as
the case may be, of any sum adjudged to be so due in the Judgment Currency,
the Administrative Agent may in accordance with normal banking procedures
purchase the Agreement Currency with the Judgment Currency. If the amount of
the Agreement Currency so purchased is less than the sum originally due to
the Administrative Agent or such Issuer in the Agreement Currency, each of
the Company and each Lender (as applicable) agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify the Administrative Agent
or the Person to whom such obligation was owing against such loss. If the
amount of the Agreement Currency so purchased is greater than the sum
originally due to the Administrative Agent or such Issuer in such
currency, the Administrative Agent agrees to return the amount of
any excess to the Company or such Lender, as the case may be (or
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<PAGE> 99
to any other Person who may be entitled thereto under applicable law).
SECTION 11.18 Waiver. The Company hereby expressly waives: (a)
------
notice of the acceptance by any Agent, any Issuer or any Lender of the
obligations of the Company under any Issuance Request executed by a
Designated Subsidiary, (b) notice of the existence or creation or non-payment
of all or any of the obligations of any Designated Subsidiary under any
Issuance Request, (c) presentment, demand, notice of dishonor, protest, and
all other notices whatsoever with respect to any such obligations, and (d)
all diligence in collection or protection of or realization upon any
obligations of any Designated Subsidiary under any Issuance Request or any
security for or guaranty thereof.
SECTION 11.19 Existing Agreements. Upon the satisfaction of the
-------------------
conditons set forth in Section 6, the Existing Agreements and the BofA
---------
Reimbursement Agreement shall be terminated and shall be of no further force
or effect except for the provisions thereof which by their terms survive
termination thereof.
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<PAGE> 100
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
KELLWOOD COMPANY
By /s/ James C. Jacobsen
---------------------------------
Name: James C. Jacobsen
Title: Vice Chairman
THE BANK OF NOVA SCOTIA,
individually, as an Issuer and as
Administrative Agent
By /s/ A. S. Norsworthy
---------------------------------
Name: A. S. Norsworthy
Title: Sr. Team Leader - Loan
Operations
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Documentation Agent
By /s/ Raju N. Patel
----------------------------------
Name: Raju N. Patel
Title: Vice President
BANK OF AMERICA ILLINOIS,
individually and as an Issuer
By /s/ Raju N. Patel
---------------------------------
Name: Raju N. Patel
Title: Vice President
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By /s/ C. Susan Taylor
---------------------------------
Name: C. Susan Taylor
Title: Vice President
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<PAGE> 101
CHEMICAL BANK
By /s/ Susan H. Atha
---------------------------------
Name: Susan H. Atha
Title: Vice President
CREDIT SUISSE
By /s/ G. M. Craig
---------------------------------
Name: Geoffrey M. Craig
Title: Member of Senior
Management
By /s/ K. R. Kristinsson
---------------------------------
Name: Kristinn R. Kristinsson
Title: Associate
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By /s/ T. Hemmi
---------------------------------
Name: Takeshi Hemmi
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ William R. Madden
---------------------------------
Name: William R. Madden
Title: Senior Vice President
MERCANTILE BANK OF ST. LOUIS N. A.
By /s/ Karl J. Dunajcik
---------------------------------
Name: Karl J. Dunajcik
Title: Vice President
NATIONSBANK, N.A.
By /s/ Louise C. Comiskey
---------------------------------
Name: Louise C. Comiskey
Title: Vice President
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<PAGE> 102
UNION BANK OF SWITZERLAND
By /s/ Michelle Moreno
---------------------------------
Name: Michelle A. Moreno
Title: Vice President
By /s/ J. T. Shortly
---------------------------------
Name: J. Timothy Shortly
Title: Managing Director and
Branch Manager
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Terry L. Akins
---------------------------------
Name: Terry L. Akins
Title: Senior Vice President
SOCIETE GENERALE
By /s/ Seth F. Asofsky
---------------------------------
Name: Seth F. Asofsky
Title: Vice President
MELLON BANK, N.A.
By /s/ Reginald T. Overton
---------------------------------
Name: Reginald T. Overton
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Noboru Kobayashi
---------------------------------
Name: Noboru Kobayashi
Title: Deputy General Manager
96
<PAGE> 1
1 Exhibit 13
Kellwood Company and Subsidiaries
FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share data)
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED APRIL 30, 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales........................................... $ 1,466,036 $ 1,364,766 $ 1,203,086
=========== =========== ===========
Net Earnings........................................ $ 28,024 $ 11,096 $ 35,614
=========== =========== ===========
Per Share Data:
Net Earnings:
Primary.......................................... $ 1.32 $ .53 $ 1.71
=========== =========== ===========
Fully diluted.................................... $ 1.31 $ .52 $ 1.68
=========== =========== ===========
Cash Dividends Declared............................. $ .60 $ .60 $ .55
=========== =========== ===========
</TABLE>
COMMON STOCK DATA
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
Fiscal 1996 Fiscal 1995
- ------------------------------------------------------------------------------------------
Stock Price Stock Price
------------- Dividends --------------- Dividends
High Low Paid High Low Paid
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter (July 31)......... $20 $16 7/8 $.15 $24 5/8 $20 $.15
Second Quarter (October 31)..... 22 7/8 18 .15 25 1/4 20 .15
Third Quarter (January 31)...... 20 7/8 13 7/8 .15 21 1/8 18 3/8 .15
Fourth Quarter (April 30)....... 16 3/4 13 3/4 .15 19 5/8 16 5/8 .15
</TABLE>
Common stock of Kellwood Company is traded on the New York Stock Exchange,
ticker symbol KWD. At June 7, 1996, there were approximately 1,753
shareowners of record and 3,422 shareowners in the Dividend Investment Plan.
All per share and common stock data have been adjusted to reflect stock
splits. The current annual dividend rate per year is $.60.
<PAGE> 2
18
REPORTS OF MANAGEMENT AND INDEPENDENT ACCOUNTANTS
REPORT OF MANAGEMENT
- --------------------
The management of Kellwood Company is responsible for the fair
presentation of the financial statements and other financial information
included in this report. The financial statements have been prepared in
conformity with generally accepted accounting principles applying estimates
and management's best judgments as required to present fairly Kellwood
Company's financial position, results of operations and cash flows.
The accounting systems and internal accounting controls of Kellwood are
designed to provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining accountability
for assets and that, in all material respects, assets are safeguarded against
loss from unauthorized use or disposition. Qualified personnel throughout
the organization maintain and monitor these internal accounting controls on
an ongoing basis, and internal auditors systematically review the adequacy
and effectiveness of the controls. Price Waterhouse LLP also studies and
evaluates internal controls for the purpose of establishing a basis for
reliance thereon relative to the scope of their audits of the financial
statements. It is management's opinion that the Company has an effective
system of internal accounting controls.
The Board of Directors, through its Audit Committee consisting solely of
nonmanagement directors, meets periodically with management, the internal
auditors and Price Waterhouse LLP to discuss audit and financial reporting
matters. Both the internal auditors and Price Waterhouse LLP have direct
access to the Audit Committee.
/s/ William J. McKenna
Chairman and Chief Executive Officer
/s/ James C. Jacobsen
Vice Chairman
/s/ Hal J. Upbin
President and Chief Operating Officer
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
TO THE SHAREOWNERS AND BOARD OF DIRECTORS OF KELLWOOD COMPANY:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of cash flows and of
shareowners' equity present fairly, in all material respects, the financial
position of Kellwood Company and its subsidiaries at April 30, 1996 and 1995,
and the results of their operations and their cash flows for each of the
three years in the period ended April 30, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Kellwood's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
St. Louis, Missouri
May 30, 1996
<PAGE> 4
19
<TABLE>
Kellwood Company and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands except per share data)
- ----------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED APRIL 30, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales............................... $1,466,036 $1,364,766 $1,203,086
Costs and Expenses:
Cost of products sold................. 1,175,139 1,093,508 949,075
Selling, general and administrative
expenses............................. 206,058 196,918 170,232
Provision for business and facilities
realignment.......................... 14,000
Amortization of intangible assets..... 15,467 15,214 12,808
Gain on disposal of assets............ (104) (3,047)
Interest expense...................... 22,937 19,116 15,634
Interest income and other, net........ (2,089) (2,382) (2,630)
---------- ---------- ----------
Earnings Before Income Taxes............ 48,524 28,496 61,014
Income Taxes............................ 20,500 17,400 25,400
---------- ---------- ----------
Net Earnings............................ $ 28,024 $ 11,096 $ 35,614
========== ========== ==========
Earnings Per Share:
Primary............................... $ 1.32 $ .53 $ 1.71
========== ========== ==========
Fully diluted......................... $ 1.31 $ .52 $ 1.68
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 5
20
<TABLE>
Kellwood Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands except per share data)
- ------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED APRIL 30, 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including time deposits of $15,457
($2,758 in 1995).................................... $ 25,043 $ 11,082
Receivables, net..................................... 235,108 240,045
Inventories.......................................... 264,583 239,461
Prepaid taxes and expenses........................... 19,624 20,687
--------- ---------
Total Current Assets............................... 544,358 511,275
Property, Plant and Equipment........................... 170,344 173,424
Less accumulated depreciation and amortization....... (106,536) (109,795)
--------- ---------
63,808 63,629
Intangible Assets, net.................................. 120,401 131,527
Other Assets............................................ 68,121 61,706
--------- ---------
$ 796,688 $ 768,137
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current portion of long-term debt.................... $ 18,198 $ 8,276
Notes payable........................................ 128,765 124,267
Accounts payable..................................... 98,148 77,863
Accrued expenses..................................... 61,179 63,947
--------- ---------
Total Current Liabilities.......................... 306,290 274,353
Long-Term Debt.......................................... 125,443 144,793
Deferred Income Taxes and Other......................... 39,763 40,794
Commitments and Contingencies........................... - -
Shareowners' Equity:
Common stock, par value $.01 per share, authorized
50,000,000 shares; issued and outstanding
21,228,599 shares (21,128,819 in 1995).............. 94,562 93,400
Retained earnings.................................... 269,060 253,736
Cumulative translation adjustment.................... (8,800) (8,861)
--------- ---------
354,822 338,275
Less treasury stock, at cost......................... (29,630) (30,078)
--------- ---------
325,192 308,197
--------- ---------
$ 796,688 $ 768,137
========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 6
21
<TABLE>
Kellwood Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands except per share data)
- ---------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED APRIL 30, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings....................................... $ 28,024 $ 11,096 $ 35,614
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization.................... 28,183 28,291 25,113
Provision for business and facilities realignment - 14,000 -
Gain on disposal of assets....................... - (104) (3,047)
Increase in prepaid pension costs................ (7,597) (7,396) (6,967)
Deferred income taxes............................ 794 1,326 (540)
Other............................................ 864 (605) 767
-------- -------- --------
50,268 46,608 50,940
Changes in noncash working capital components,
net of effects of acquisitions:
Receivables........................................ 4,937 (27,014) 6,147
Inventories........................................ (25,122) (21,880) 7,419
Prepaid expenses................................... 362 (1,446) 522
Accounts payable and accrued expenses.............. 17,517 (13,700) 2,549
-------- -------- --------
Net cash provided by (used for)
operating activities........................... 47,962 (17,432) 67,577
-------- -------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment......... (16,411) (11,658) (12,464)
Proceeds from disposal of assets................... 2,750 4,724 3,047
Investment in subsidiaries......................... (4,935) (55,218) (28,324)
Other investing activities......................... 615 1,342 1,084
-------- -------- --------
Net cash (used for) investing activities........ (17,981) (60,810) (36,657)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from (reduction of) notes payable, net.... 4,498 90,439 (95,389)
Proceeds from issuance of long-term debt........... - 395 60,000
Reduction of long-term debt........................ (9,428) (9,256) (8,569)
Stock transactions under incentive plans........... 1,610 2,730 2,995
Dividends paid..................................... (12,700) (12,650) (11,469)
-------- -------- --------
Net cash (used for) provided by financing
activities..................................... (16,020) 71,658 (52,432)
-------- -------- --------
Net increase (decrease) in cash and time deposits..... 13,961 (6,584) (21,512)
Cash and time deposits - beginning of year............ 11,082 17,666 39,178
-------- -------- --------
Cash and time deposits - end of year.................. $ 25,043 $ 11,082 $ 17,666
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 7
22
<TABLE>
Kellwood Company and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Treasury Cumulative
Common Stock Stock Retained Translation
Shares Amount Amount Earnings Adjustment
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 1, 1993........... 20,712,742 $85,851 $(28,254) $231,145 $(8,882)
Net earnings................ 35,614
Cash dividends declared,
$.55 per share............. (11,469)
Shares issued under stock
plans...................... 292,579 4,585 71
Treasury stock acquired in
conjunction with incentive
plans...................... (80,627) (1,882)
Debentures converted........ 35,981 221
Currency translation
adjustment................. (44)
---------- ------- -------- -------- -------
Balance, April 30, 1994........ 20,960,675 90,657 (30,065) 255,290 (8,926)
Net earnings................ 11,096
Cash dividends declared,
$.60 per share............. (12,650)
Shares issued under stock
plans...................... 153,177 2,504 455
Treasury stock acquired in
conjunction with incentive
plans...................... (23,077) (468)
Debentures converted........ 38,044 239
Currency translation
adjustment................. 65
---------- ------- -------- -------- -------
Balance, April 30, 1995........ 21,128,819 93,400 (30,078) 253,736 (8,861)
Net earnings................ 28,024
Cash dividends declared,
$.60 per share............. (12,700)
Shares issued under stock
plans...................... 112,782 1,127 752
Treasury stock acquired in
conjunction with incentive
plans...................... (17,894) (304)
Debentures converted........ 4,892 35
Currency translation
adjustment................. 61
---------- ------- -------- -------- -------
Balance, April 30, 1996........ 21,228,599 $94,562 $(29,630) $269,060 $(8,800)
========== ======= ======== ======== =======
See notes to consolidated financial statements.
</TABLE>
<PAGE> 8
23
Kellwood Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries.
Substantially all foreign subsidiaries are consolidated based upon a fiscal
year ending March 31. All significant intercompany accounts and transactions
have been eliminated.
2. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires that management make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates and assumptions.
3. INVENTORIES AND REVENUE RECOGNITION: Inventories are stated at the
lower of cost or market. The first-in, first-out (FIFO) method is used to
determine the value of 46% of the domestic inventories, and the last-in,
first-out (LIFO) method is used to value the remaining domestic inventories.
Inventories of foreign subsidiaries are valued using the specific
identification method. Sales are recognized when goods are shipped.
4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated
at cost. A significant portion of domestic manufacturing facilities and some
machinery and equipment are leased under long-term capital leases which are
recorded at the beginning of the lease term at the present value of the
minimum lease payments.
Depreciation is computed generally on the declining balance method over
estimated useful lives of 15 to 40 years for buildings and of 3 to 10 years
for machinery and equipment. Leasehold improvements are amortized
principally on the straight-line basis over the shorter of their estimated
useful lives or the remaining lease term.
5. INTANGIBLE ASSETS: The excess costs over net tangible assets of
businesses acquired are recorded as intangible assets. These intangibles are
amortized using the straight-line method over their estimated useful lives
which range from 1 to 20 years.
6. IMPAIRMENT OF ASSETS: The Company periodically reviews long-lived
assets, goodwill and other intangibles to assess recoverability from future
operations using undiscounted cash flows. Impairment losses are recognized
in operating results when a permanent decrease in value has occurred.
7. INCOME TAXES: Income taxes are based upon income for financial
reporting purposes. Deferred income taxes are recognized for the effect of
temporary differences between financial and tax reporting in accordance with
the requirements of Statement of Financial Accounting Standards No. 109.
8. FOREIGN CURRENCY TRANSLATION: Foreign currency financial statements and
transactions are translated into United States dollars using period-end rates
of exchange for assets and liabilities and monthly average rates of exchange
for sales, costs and expenses. Gains and losses resulting from translation
are accumulated in the Cumulative Translation Adjustment component of
Shareowners' Equity. Gains or losses from foreign currency transactions are
included in income in the period in which they occur. The net foreign
currency gains and losses recognized in 1996, 1995 and 1994 were not
significant.
9. EARNINGS PER SHARE: Primary earnings per share are computed by dividing
net earnings by the weighted average number of shares of common stock
outstanding of 21,170,220 for the year ended April 30, 1996 (21,079,698 for
1995 and 20,851,328 for 1994). Common stock equivalents are excluded from
the primary earnings per share computation because their dilutive effect is not
<PAGE> 9
significant. During 1996, 4,892 shares of common stock were issued upon
conversion of 9% convertible subordinated debentures. Had the conversions
taken place on May 1, 1995, primary earnings per share for 1996 would not
have been significantly different.
The calculation of fully diluted earnings per share includes common
stock equivalents in addition to the weighted average shares outstanding as
defined above and assumes that all convertible debentures were converted to
common stock at the beginning of the year. The average number of shares used
in the fully diluted computation was 21,380,273 in 1996 (21,366,121 in 1995
and 21,251,760 in 1994). Net earnings are increased by the after tax
interest on the convertible debentures in the computation of fully diluted
earnings per share.
10. STOCK-BASED COMPENSATION: Kellwood Company intends to continue to use
the intrinsic value method for measuring stock-based compensation cost.
Under this method, compensation cost is the excess, if any, of the quoted
market price of Kellwood's common stock at the grant date over the amount the
employee must pay for the stock. Kellwood's policy is to grant stock options
at fair market value at the date of grant.
<PAGE> 10
24
ACQUISITIONS:
All of the capital stock of Halmode Apparel, Inc. and Goodman Knitting Co.,
Inc. was purchased for cash on September 30, 1994 and July 1, 1993,
respectively. Both companies design and market branded apparel. The
acquisitions have been accounted for using the purchase method and,
accordingly, the results of operations are included in the Consolidated
Statement of Earnings from the dates of acquisition. Assets acquired and
liabilities assumed were recorded at their estimated fair market value, and
the excess costs over net tangible assets are being amortized over the
estimated useful lives of the related intangible assets. Had the purchases
taken place May 1, 1993, unaudited pro forma consolidated net sales would
have been $1,426,278 and $1,347,887 for the years ended April 30, 1995 and
1994, respectively. Consolidated net earnings and earnings per share would
not have been significantly different.
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
The allowance for doubtful accounts at April 30, 1996, was $5,225 ($5,709 at
April 30, 1995).
INVENTORIES:
Inventory valued under the LIFO method totaled $122,549 at April 30, 1996
($81,450 at April 30, 1995). The remainder of the inventory was valued using
the FIFO and specific identification methods. If LIFO inventories had been
valued at current replacement costs, they would have totalled $132,688 at
April 30, 1996 ($89,345 at April 30, 1995).
<TABLE>
<CAPTION>
April 30,
------------------------
1996 1995
------------------------
<S> <C> <C>
Finished goods................................... $ 110,207 $ 108,656
Work in process.................................. 91,682 64,180
Raw materials.................................... 62,694 66,625
--------- ---------
$ 264,583 $ 239,461
========= =========
<CAPTION>
PROPERTY, PLANT AND EQUIPMENT:
April 30,
------------------------
1996 1995
------------------------
<S> <C> <C>
Land.............................................. $ 3,511 $ 3,348
Buildings and improvements........................ 79,598 76,239
Machinery and equipment........................... 87,235 93,837
--------- ---------
170,344 173,424
Less accumulated depreciation
and amortization................................. (106,536) (109,795)
--------- ---------
$ 63,808 $ 63,629
========= =========
</TABLE>
The amounts above include the cost and accumulated amortization of assets
under capital leases (primarily buildings) of $12,512 and $11,348 at
April 30, 1996, and $16,065 and $13,655 at April 30, 1995.
Certain machinery and equipment are leased under operating leases having
remaining terms ranging up to 6 years. Rent expense under all operating
leases for the year ended April 30, 1996 totalled $15,969 ($14,327 for 1995
and $11,615 for 1994).
<PAGE> 11
The future minimum lease payments under capital and operating leases at
April 30, 1996, were as follows:
<TABLE>
<CAPTION>
----------------------
Capital Operating
----------------------
<S> <C> <C>
1997............................................... $ 599 $ 13,513
1998............................................... 538 10,558
1999............................................... 431 7,773
2000............................................... 370 5,630
2001............................................... 585 4,040
Later years........................................ 930 6,853
------- --------
Total minimum lease payments....................... 3,453 $ 48,367
========
Less amount representing interest.................. (798)
-------
Present value of net minimum lease payments........ $ 2,655
=======
</TABLE>
Minimum lease payments were not reduced for future minimum sublease rentals
of $1,460.
<TABLE>
INTANGIBLE ASSETS:
<CAPTION>
April 30,
-------------------------
1996 1995
-------------------------
<S> <C> <C>
Goodwill.......................................... $ 100,765 $ 99,032
Other identifiable intangibles.................... 90,840 90,910
--------- ---------
191,605 189,942
Less accumulated amortization..................... (71,204) (58,415)
--------- ---------
$ 120,401 $ 131,527
========= =========
</TABLE>
Other identifiable intangible assets consist primarily of trademarks,
customer lists, contractor networks and agreements not to compete.
NOTES PAYABLE AND LONG-TERM DEBT:
1. NOTES PAYABLE: Revolving credit agreements dated June 24, 1994, and
totaling $120,000 expire June 22, 1996 ($50,000), and June 24, 1997
($70,000). Each borrowing under the agreements bears interest at one of
several specified rates dependent upon several factors including the
Company's leverage ratio, senior debt rating and the applicable Eurodollar
margin. Facility fees can range from .1% to .25% of the committed amount
outstanding. Covenants are substantially the same as those currently
existing for Kellwood's notes due insurance companies. At April 30, 1996,
unused committed credit under these agreements totalled $120,000, and unused
uncommitted lines of credit totalled $36,500 with various banks at rates less
than prime.
<PAGE> 12
25
During the year ended April 30, 1996, the highest level of borrowings
under all lines was $191,446 ($160,000 for 1995). For the year, the average
daily short-term borrowings were $153,100 ($76,847 for 1995) and the weighted
average interest rate was 6.2% (6.0% for 1995).
The Company is currently renegotiating a new credit facility agreement
in the amount of $300,000 of which up to $200,000 can be utilized for short-
term loans and up to $200,000 can be utilized for letters of credit. The new
credit facility will become effective June, 1996.
2. LONG-TERM DEBT:
<TABLE>
<CAPTION>
April 30,
------------------------
1996 1995
------------------------
<S> <C> <C>
Notes due insurance companies, 5.34% - 10.77%..... $ 140,165 $ 147,975
Capital lease obligations, 4.9% - 10.2%........... 2,655 4,242
9% convertible subordinated debentures............ 821 852
--------- ---------
143,641 153,069
Less current maturities........................... (18,198) (8,276)
--------- ---------
$ 125,443 $ 144,793
========= =========
</TABLE>
Aggregate maturities on long-term debt for the next five years are as
follows: 1997 - $18,198; 1998 - $15,408; 1999 - $15,329; 2000 - $16,112;
2001 - $10,532.
Notes payable to insurance companies are due in quarterly and semiannual
installments from June 1996 through September 2005. Restrictive covenants of
these notes include the maintenance of minimum working capital and certain
key ratios as well as a limitation on the payment of dividends and the
repurchase of Company stock. Under the most restrictive covenants, future
dividends and purchases of Company stock are limited to $56,270 plus 45% of
net earnings after April 30, 1996, excluding gains and losses on the disposal
of capital assets.
The 9% convertible subordinated debentures may be converted into common
stock by debenture holders at a rate of $6.33 per share at any time prior to
maturity on October 15, 1999, subject to certain restrictions. Also, subject
to certain restrictions, the debentures are redeemable, in whole or in part,
at the option of the Company at predetermined redemption prices.
<TABLE>
ACCRUED EXPENSES:
<CAPTION>
April 30,
-----------------------
1996 1995
-----------------------
<S> <C> <C>
Salaries and employee benefits.............. $ 28,924 $ 31,054
Income taxes................................ 323 731
Other accrued expenses...................... 31,932 32,162
-------- --------
$ 61,179 $ 63,947
======== ========
</TABLE>
<PAGE> 13
EMPLOYEE BENEFIT PLANS:
1. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS: Various contributory and
noncontributory retirement plans cover substantially all domestic and certain
foreign employees. Benefits under pension plans are generally based on years
of service and compensation. Pension plans are funded in accordance with the
applicable laws and regulations plus such amounts, if any, as the actuarial
consultants advise to be appropriate. Company contributions under the
contributory retirement plan are determined based on formulas defined in the
plan.
The total credit under all retirement plans was $(3,626), $(3,593), and
$(3,569) in 1996, 1995, and 1994, respectively. The total credits reflect
$(7,240), $(7,109), and $(6,638) for defined benefit plans.
The net credit for defined benefit plans included the following
components:
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Current service cost........................ $ 1,790 $ 1,715 $ 1,793
Interest cost on projected benefit
obligation................................. 4,052 3,989 3,970
Return on assets:
Actual return............................. (23,968) (8,386) (9,943)
Deferred actuarial gain (loss)............ 14,957 (355) 1,593
-------- -------- --------
Assumed return...................... (9,011) (8,741) (8,350)
Amortization of transition asset and
prior service costs........................ (4,071) (4,072) (4,051)
-------- -------- --------
Net pension credit................ $ (7,240) $ (7,109) $ (6,638)
======== ======== ========
</TABLE>
The funded status of the defined benefit plans at April 30 was as follows:
<TABLE>
<CAPTION>
------------------------
1996 1995
------------------------
<S> <C> <C>
Plan assets at fair value........................... $ 137,540 $ 116,909
--------- ---------
Actuarial present value of benefit obligation:
Vested benefits................................... 45,809 40,507
Nonvested benefits................................ 3,285 3,533
--------- ---------
Accumulated benefit obligation.................... 49,094 44,040
Impact of future salary increases................. 4,689 4,701
--------- ---------
Projected benefit obligation......................... 53,783 48,741
--------- ---------
Plan assets in excess of projected benefit obligation 83,757 68,168
Unamortized transition asset......................... (7,424) (11,352)
Unamortized prior service costs...................... (465) (609)
Unrecognized actuarial gains......................... (13,809) (1,746)
--------- ---------
Prepaid pension costs included in other assets. $ 62,059 $ 54,461
========= =========
</TABLE>
<PAGE> 14
26
The discount rate used in determining the projected benefit obligation
was 8.0% for 1996 and 8.25% for 1995 and 1994. The rate of increase in
future compensation levels was 5% for 1996 and 5.5% for 1995 and 1994. The
assumed long-term rate of return on plan assets was 8% in each year. The
assets of the retirement plans consist primarily of marketable equity
securities, U.S. Government obligations, corporate debt obligations and
short-term marketable debt securities.
The Company provides health care insurance benefits to certain employees
upon retirement. The annual costs of these benefits in 1996, 1995 and 1994
were not significant.
2. INCENTIVE COMPENSATION PLANS: Options to purchase common stock have
been granted to key employees under various plans at option prices not less
than the fair market value on the date of the grant. At April 30, 1996, 146
officers and other key employees held options to purchase shares. The
options expire 10 years after grant on dates ranging from May 1996 to
February 2006 and are exercisable in cumulative installments only after
stated intervals of time and are conditional upon active employment, except
for periods following disability or retirement.
Stock options outstanding under all plans were as follows:
<TABLE>
<S> <C>
Shares under option:
Balance, May 1, 1995.......................................... 1,262,638
Granted, ranging from $20.31 to $20.75 per share.............. 380,500
Lapsed........................................................ (225)
Exercised, ranging from $6.04 to $19.96 per share............. (25,800)
---------
Balance, April 30, 1996....................................... 1,617,113
=========
Shares exercisable at April 30, 1996:
Number of shares exercisable.................................. 598,093
=========
Price range of options: From.................................. $ 6.04
=========
To.................................... $ 24.88
=========
Average exercise price........................................ $ 16.16
=========
</TABLE>
The amended Restricted Stock Compensation Plan of 1969 and the Corporate
Development Incentive Plan of 1986 provide for the granting of common stock
to key employees as performance and incentive bonuses. The shares granted
may not be transferred, sold, pledged or otherwise disposed of prior to the
lapse of certain restrictions. Under the plans, $112 was charged to earnings
in 1996 (zero in 1995 and $1,459 in 1994). At April 30, 1996, 395,099 shares
were available to be granted under these plans to qualified employees.
CAPITAL STOCK:
The reported outstanding shares of common stock have been reduced by treasury
stock totalling 3,145,398 shares at April 30, 1996 (3,207,385 at April 30,
1995, and 3,232,992 at April 30, 1994).
The Board of Directors declared a three-for-two split of the common
stock effective March 18, 1994. All share and per share data for the periods
presented in the consolidated financial statements and notes thereto have
been adjusted to reflect the split.
Authorized capital includes 500,000 shares of preferred stock, none of
which have been issued. Nonvoting share purchase rights, exercisable only
upon satisfaction of certain conditions, entitle the holder to purchase
Series A Junior Preferred Stock (160,000 shares reserved) or, under certain
conditions, common shares at prices specified in the rights agreement. None
of the rights were exercisable as of April 30, 1996.
<PAGE> 15
PROVISION FOR BUSINESS AND FACILITIES REALIGNMENT:
In the fourth quarter of the year ended April 30, 1995, Kellwood Company
recorded a $14,000 provision for business and facilities realignment related
to the shut-down of its Saipan facility. Due to the net operating loss
position of the subsidiary, the shutdown did not result in any significant
tax deductions. In October, 1995 the Company received $2,750 in proceeds
from the sale of assets in Saipan. The costs of the divestiture have
remained in line with the provision established last year. The main cash
components of the provision were $1,300 for employee termination costs
consisting principally of severance pay and $900 for exit costs consisting
principally of the losses on contractual obligations including lease
termination losses. The remaining $11,800 of charges relates principally to
non-cash asset write-offs. At April 30, 1996, $325 of the provision remained
as a liability on the Company's balance sheet. Unaudited net sales from the
Saipan operations were $6,600, $17,800 and $23,900 for the years ended
April 30, 1996, 1995 and 1994, respectively. Unaudited net operating losses
from Saipan operations were $2,300, $11,600 and $3,000 for the years ended
April 30, 1996, 1995 and 1994, respectively.
GAIN ON DISPOSAL ASSETS:
The gain on disposal of assets represents gains on the sale of certain excess
export quota rights.
<PAGE> 16
27
INTEREST INCOME AND OTHER, NET:
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------------------
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Interest income........................... $ 412 $ 437 $ 839
Other, net................................ 1,677 1,945 1,791
------- ------- -------
$ 2,089 $ 2,382 $ 2,630
======= ======= =======
</TABLE>
INCOME TAXES:
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Current:
Domestic:
Federal.............................. $ 15,521 $ 15,314 $ 19,784
State................................ 3,000 3,000 3,000
Foreign................................ 795 (712) 3,156
-------- -------- --------
19,316 17,602 25,940
Deferred (primarily federal).............. 1,184 (202) (540)
-------- -------- --------
$ 20,500 $ 17,400 $ 25,400
======== ======== ========
</TABLE>
Current income taxes are the amounts payable under the respective tax
regulations on each year's earnings and on foreign earnings remitted during
the year. Deferred income taxes included the following:
<TABLE>
<CAPTION>
Year ended April 30,
----------------------------------------
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Employee related costs.................... $ 2,635 $ 3,280 $ 1,671
Depreciation and amortization............. (2,022) (1,580) (299)
Allowance for asset valuations............ 437 (2,356) (1,235)
Provision for business and
facilities realignment................... (347) 551 76
Other..................................... 481 (97) (753)
---------- ---------- ---------
$ 1,184 $ (202) $ (540)
========== ========== =========
</TABLE>
A reconciliation of the federal statutory income tax rate to the effective
tax rate (provision for taxes) was as follows:
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Statutory rate................................ 35.0% 35.0% 35.0%
Foreign tax differences....................... (.8) (.9) -
Amortization of intangible assets............. 5.7 9.2 5.6
Deductible acquisition costs.................. - (5.2) -
Provision for business and facilities
realignment................................ - 17.2 -
State tax..................................... 4.0 6.8 3.2
Other......................................... (1.7) (1.0) (2.2)
---- ---- ----
42.2% 61.1% 41.6%
==== ==== ====
</TABLE>
<PAGE> 17
Deferred income tax liabilities and assets consisted of the following:
<TABLE>
<CAPTION>
April 30,
------------------------
1996 1995
------------------------
<S> <C> <C>
Employee related costs...................... $ 17,871 $ 15,303
Depreciation and amortization............... 14,765 17,329
Allowance for asset valuations.............. (8,091) (8,454)
Other ...................................... (1,620) (2,047)
--------- ---------
$ 22,925 $ 22,131
========= =========
Included in:
Prepaid taxes and expenses............... $ (15,166) $ (15,867)
Deferred income taxes and other.......... 38,091 37,998
--------- ---------
$ 22,925 $ 22,131
========= =========
</TABLE>
Earnings before income taxes included $802 of Far East losses in 1996.
Earnings before income taxes included $3,579 of Far East losses and a $14,000
provision for business and facilities realignment in 1995.
Federal income taxes are provided on earnings of foreign subsidiaries
except to the extent that such earnings are expected to be indefinitely
reinvested abroad. Undistributed foreign earnings considered to be
indefinitely reinvested abroad totaled $68,132 through April 30, 1996.
CASH FLOWS:
For purposes of the Consolidated Statement of Cash Flows, all highly liquid
short-term time deposits maintained under cash management activities are
considered cash equivalents. The effect of foreign currency exchange rate
fluctuations on cash and time deposits was not significant for the years
ended April 30, 1996, 1995 and 1994.
Interest paid in 1996 was $22,853 ($18,213 in 1995 and $ 14,838 in 1994)
and income taxes paid were $22,386 ($31,532 in 1995 and $18,700 in 1994).
Liabilities assumed in connection with the Investment in Subsidiaries totaled
$57,323 in 1995 and $16,491 in 1994.
SIGNIFICANT CUSTOMERS:
Sales to J.C. Penney Company, Inc., totaled $142,857 for the year ended
April 30, 1996 ($134,523 for 1995 and $150,130 for 1994). Receivables
included $17,095 due from J.C. Penney at April 30, 1996 ($15,325 at April 30,
1995).
<PAGE> 18
28
COMMITMENTS AND CONTINGENCIES:
There are various lawsuits and other legal proceedings against the Company.
Management and general counsel are of the opinion that the ultimate
disposition of such litigation will have no material adverse effect on the
Company's financial position or results of operations.
<TABLE>
SELECTED QUARTERLY DATA (UNAUDITED):
<CAPTION>
Quarter
------------------------------------------------
First Second Third Fourth
------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1996:
Net sales.................... $ 340,625 $ 425,635 $ 288,490 $ 411,286
Gross profit................. 69,417 88,453 52,650 80,377
Net earnings (loss).......... 5,644 14,019 (2,044) 10,405
Earnings (loss) per share:
Primary................... .27 .66 (.10) .49
Fully diluted............. .26 .65 (.09) .49
Fiscal 1995:
Net sales.................... $ 300,937 $ 376,024 $ 291,493 $ 396,312
Gross profit................. 66,319 75,415 51,509 78,015
Net earnings (loss).......... 10,711 11,117 (2,019) (8,713)
Earnings (loss) per share:
Primary................... .51 .53 (.10) (.41)
Fully diluted............. .50 .52 (.09) (.41)
</TABLE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION:
All operations are in the apparel and related soft goods industry. A summary
of operations by geographic area is presented in the column to the right.
Substantially all Domestic and Far East sales are to U.S. customers. Sales
and transfers between geographic areas were not significant and intercompany
accounts have been eliminated.
<PAGE> 19
<TABLE>
<CAPTION>
Year ended April 30,
-----------------------------------------
1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
Net sales to customers:
Domestic.......................... $ 1,316,656 $ 1,211,151 $ 1,044,409
Far East.......................... 149,380 153,615 158,677
----------- ----------- -----------
$ 1,466,036 $ 1,364,766 $ 1,203,086
=========== =========== ===========
Operating profit (loss):
Domestic.......................... $ 91,271 $ 85,554 $ 78,208
Far East.......................... 654 (2,879) 14,375
----------- ----------- -----------
91,925 82,675 92,583
Provision for business and
facilities realignment............. - (14,000) -
Gain on disposal of assets.......... - 104 3,047
Interest expense.................... (22,937) (19,116) (15,634)
General corporate expense........... (20,464) (21,167) (18,982)
----------- ----------- -----------
Earnings before income taxes........ $ 48,524 $ 28,496 $ 61,014
=========== =========== ===========
Assets at end of year:
Domestic.......................... $ 627,253 $ 606,638 $ 475,639
Far East.......................... 89,225 89,394 103,269
Corporate......................... 80,210 72,105 62,949
----------- ----------- -----------
$ 796,688 $ 768,137 $ 641,857
=========== =========== ===========
Capital expenditures:
Domestic.......................... $ 13,477 $ 7,486 $ 6,666
Far East.......................... 2,296 3,827 5,368
Corporate......................... 638 345 430
----------- ----------- -----------
$ 16,411 $ 11,658 $ 12,464
=========== =========== ===========
Depreciation and amortization:
Domestic.......................... $ 23,085 $ 22,600 $ 19,745
Far East.......................... 3,590 4,579 4,038
Corporate......................... 1,508 1,112 1,330
----------- ----------- -----------
$ 28,183 $ 28,291 $ 25,113
=========== =========== ===========
</TABLE>
All of the gains on disposal of assets were Far East gains.
<TABLE>
SUPPLEMENTAL SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
<CAPTION>
- --------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales......... $ 1,466,036 $ 1,364,766 $ 1,203,086 $ 1,077,655 $ 914,926
Net earnings...... 28,024 11,096 35,614 28,694 22,837
Earnings per
share:
Primary........ 1.32 .53 1.71 1.39 1.26
Fully diluted.. 1.31 .52 1.68 1.36 1.23
Cash dividends
declared per
share............ .60 .60 .55 .53 .53
Working capital... 238,068 236,922 262,406 197,518 218,931
Total assets...... 796,688 768,137 641,857 636,455 537,992
Long-term debt.... 125,443 144,793 153,014 102,923 110,566
Total debt........ 272,406 277,336 170,940 203,808 126,589
Shareowners'
equity........... 325,192 308,197 306,956 279,860 260,033
Equity per
share............ 15.32 14.59 14.64 13.51 12.66
NOTE: All per share data have been adjusted to reflect stock splits.
</TABLE>
<PAGE> 20
29
SUPPLEMENTAL DATA:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (UNAUDITED)
Domestic operations include marketing-oriented branded businesses offering
apparel and camping soft goods, and manufacturing-oriented private label
units offering apparel products. Domestic operations produce goods in the
United States, the Caribbean, and Canada. Far East operations produce high
quality, competitively priced, private label cotton and cotton-blended shirts
and blouses in Hong Kong, China and Sri Lanka. In addition to the Company's
owned and leased plants, products are sourced through contracting
relationships with other manufacturers in various countries. The Company
sells its products through multiple channels of distribution, including
national retail chains, department stores, specialty stores, mass merchants,
mail order houses, sporting goods stores and other manufacturers.
RESULTS OF OPERATIONS
FISCAL 1996 In a difficult retail apparel climate, Kellwood was able to
grow its business by $101 million, or 7%, to $1.466 billion. Womenswear
represents 82% of Kellwood's total apparel volume and grew at 11% in fiscal
year 1996. Of greater significance was a 16% growth in sales to the
Company's top 20 accounts. These accounts represent the retailers who
dominate their respective channels of distribution, and who are gaining
market share as the retail industry continues to consolidate. Kellwood's top
20 customers represent 63% of sales.
Sales by Domestic branded operations increased 12% for the year. The
increase in branded sales is principally attributable to the acquisitions of
Halmode Apparel and David Dart. Sales from the branded portfolio accounted
for 73% of Kellwood's total volume for the year ended April 30, 1996. This
compares to 70% last year and moves the Company closer to achieving its goal
of 75% from the branded sector. The Domestic branded operations, with their
overall higher margins, contributed significantly to total company earnings.
Sales by Domestic private label operations declined 3% for the year.
Adjusting last year's volume for the Home Fashions division which was sold in
December, 1994, Domestic private label sales were up 4%. Operating profits
in the Domestic private label portfolio were improved as a result of several
successful private label programs with key customers as well as from the
divestiture of the Home Fashions division.
Sales by Far East operations were down 3% for the year due primarily to
the shut down of the Saipan and Costa Rica facilities. Despite the decline in
volume, operating profits improved as production shifted from the closed
plant in Saipan to more efficient plants in Hong Kong/China and Sri Lanka.
In October, the Company received $2.7 million in proceeds from the sale of
assets in Saipan. The costs of the divestiture have remained in line with
the provision established in the fourth quarter last year.
After adjusting fiscal 1995 for the $14 million shutdown provision, the
Company achieved a 12% increase in consolidated net earnings on a 7% increase
in sales for the year because of changes in sourcing, leveraging overhead
spending and efficient operation of the private label facilities. The
increase in interest expense correlates with the increase in average
outstanding debt.
FISCAL 1995 Sales by Domestic branded operations were up $157 million or
20%. The increase in branded sales was principally attributable to the
recent acquisitions of Halmode and David Dart. Within the branded group,
operating results were mixed causing an overall decline in margins. In
response to this decline two relatively small underperforming divisions
(California Ivy and de'corp) were consolidated with larger units to create
synergies as well as generate future savings in overhead. In addition, the
Company repositioned two other branded units (AJ Brandon and Melrose) to
strengthen their merchandising, sourcing, management and overall direction.
Sales by Domestic private label operations increased 4% or $10 million
over the prior year. Apparel sales, which accounted for over 90% of the
Domestic private label sales, were up a strong 16% for the year due primarily
to growth in the private label programs with several key retailers.
Operating profits in the Domestic private label portfolio were improved as a
result of these successful programs. The Home Fashions business which
represented the remaining portion of the Domestic private label portfolio was
sold in December 1994 at an after tax loss of approximately $1 million.
Sales by Far East operations were down 3% or $5 million for fiscal 1995.
Weak demand for woven dress shirts, intense margin pressure, and production
difficulties
<PAGE> 21
all contributed to significantly lower Far East margins. Included in the
results for the year and the loss for the fourth quarter is a $14 million, or
$0.65 per share, charge for closing Smart Shirts' plant in Saipan.
Fiscal 1994's results were favorably impacted by a $3 million gain on
the disposal of certain excess export quota rights. The value of Hong Kong
quota has subsequently dropped. As a result, Kellwood only sold a small
amount of excess quota in 1995 realizing a negligible gain of $0.1 million.
<PAGE> 22
30
The increase in amortization expense results from increased intangible
assets associated with recent acquisitions. The increase in interest expense
correlates with the increase in average outstanding debt. The increase in
the effective tax rate is primarily due to the shut-down of the Saipan
facility which closed in a net operating loss position and therefore did not
result in any significant tax deductions.
FISCAL 1994 Sales by Domestic branded operations were up $175 million or
28% reflecting the continued success of Kellwood's acquisition strategy. The
increase in branded sales is approximately 55% attributable to acquisitions
with the remaining 45% from internal growth of existing business units. The
internal growth was attributable to increased volume with existing and new
accounts as well as several marketing programs initiated in 1994. The growth
in the Domestic branded operations with their overall higher margins
contributed significantly to the improvement in total Company earnings.
Sales by Domestic private label operations were down 16%, or $45
million, below the level reported last year principally because Sears closed
its catalog operation. Operating profits in the Domestic private label
portfolio were adversely affected by the decline in sales and by continuing
margin pressure, especially in the lingerie market.
Sales by Far East operations decreased $4 million, or 3% below the prior
year. The decline in sales was caused by changes in capacity as production
was shifted among plants. During 1994, Kellwood's manufacturing capacity was
expanded in China and Sri Lanka, and productivity was improved in Hong Kong.
Far East operating margins improved significantly from 1993 because of these
changes.
Improved earnings were achieved as the result of greater sales volume,
more effective sourcing, increased branded product sales, and a reduction in
the overall effective tax rate. The increase in amortization expense results
from increased intangible assets associated with recent acquisitions. The
increase in interest expense correlates with the increase in average
outstanding debt. The decrease in the effective tax rate is due to changes
in the earnings mix.
FINANCIAL CONDITION
The current ratio was 1.8 to 1 at April 30, 1996 as compared to 1.9 to 1 at
April 30, 1995. The decrease in the current ratio was partially due to
increased short-term debt as an additional $10 million of scheduled
maturities on long-term debt shifted to current status. Inventory levels have
also increased because of a significant increase in the amount of product
sourced offshore. In 1996, Kellwood increased its mix of product sourced
offshore to 54% from 46% the previous year. The increase in accounts payable
correlates with the increase in inventory.
Cash used for investing activities and cash provided by financing
activities were both substantially higher last year because of the
acquisition of Halmode Apparel in September, 1994. Capital expenditures,
excluding acquisitions and related payments, were $16 million in 1996
compared with $12 million in both 1995 and 1994. There are no material
commitments for capital expenditures as of April 30, 1996. No funds were
repatriated from Far East operations in 1996 nor 1995, compared with $10
million in 1994.
Total debt represents 46% of capitalization at April 30, 1996 as
compared to 47% at April 30, 1995. In June, 1994 Kellwood negotiated a $120
million fully committed revolving credit agreement. At April 30, 1996 the
entire $120 million was available for future borrowings. The Company is
currently renegotiating a new credit facility agreement in the amount of $300
million of which up to $200 million can be utilized for short-term loans and
up to $200 million can be utilized for letters of credit. The new credit
facility will become effective in June, 1996.
Cash provided by operations and borrowings under various lines of credit
are the primary sources of liquidity. The combined operating, cash and
equity position of the Company should continue to provide the capital
flexibility necessary to fund future opportunities as well as to meet
existing obligations.
OUTLOOK
The demand for popular-to-moderately priced women's apparel has been weak,
and the retail apparel climate has been difficult. The retail community has
been and will continue to be in a mode of consolidation resulting in more
store closings, continued price deflation and margin pressure throughout the
entire supply chain.
Kellwood has responded by realigning its assets and internal
capabilities with the requirements of its retail customers and the ultimate
consumer. These steps are likely to result in lower sales volume. However,
operating margins are expected to
<PAGE> 23
continue to improve through reduced overhead, improved sourcing, and a more
rationalized product and customer mix.
<PAGE> 1
EXHIBIT 21
PARENTS AND SUBSIDIARIES
The Company and its subsidiaries<F*> as of June 24, 1996 are as
follows:
<TABLE>
<CAPTION>
State (Country) of Percentage of Voting
Name of Company Incorporation Securities Owned
- --------------- ------------------ --------------------
<S> <C> <C>
Kellwood Company Delaware Parent
American Recreation Products, Inc. Delaware 100%
Kellwood Asia Limited Hong Kong 100%
Smart Shirts Limited Hong Kong 100%
Keeta Company Limited Hong Kong 100%
South Asia Garment Limited Hong Kong 100%
KWD Holdings, Inc. Delaware 100%
Robert Scott & David Brooks
Outlet Stores, Inc. Delaware 100%
Tri-W Corporation North Carolina 100%
Halmode Apparel, Inc. Delaware 100%
David Dart, Inc. California 100%
Force One, Inc. California 100%
<FN>
<F*> Some of the above subsidiaries also have subsidiaries which are
not listed because, in the aggregate, they are not considered to be
significant.
</TABLE>
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
The undersigned, a director of Kellwood Company (the "Company"), does
hereby constitute and appoint Thomas H. Pollihan his/her true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1996, and
to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto the attorney-in-fact full power and authority to sign such document on
behalf of the undersigned and to make such filing, as fully to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that the attorney-in-fact, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: May 30, 1996
/s/ Raymond F. Bentele /s/ James C. Jacobsen
- ---------------------------------- -----------------------------------
Raymond F. Bentele James C. Jacobsen
/s/ Edward S. Bottum /s/ James S. Marcus
- ---------------------------------- -----------------------------------
Edward S. Bottum James S. Marcus
/s/ Kitty G. Dickerson /s/ William J. McKenna
- ---------------------------------- -----------------------------------
Kitty G. Dickerson William J. McKenna
/s/ Leonard A. Genovese /s/ Hal J. Upbin
- ---------------------------------- -----------------------------------
Leonard A. Genovese Hal J. Upbin
/s/ Jerry M. Hunter /s/ Fred W. Wenzel
- ---------------------------------- -----------------------------------
Jerry M. Hunter Fred W. Wenzel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Kellwood
Company and Subsidiaries Condensed Consolidated Balance Sheet at April 30,
1996, and from the Condensed Consolidated Statement of Earnings and Condensed
Consolidated Statement of Cash Flows for the year ended April 30, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 25,043
<SECURITIES> 0
<RECEIVABLES> 240,333
<ALLOWANCES> 5,225
<INVENTORY> 264,583
<CURRENT-ASSETS> 544,358
<PP&E> 170,344
<DEPRECIATION> 106,536
<TOTAL-ASSETS> 796,688
<CURRENT-LIABILITIES> 306,290
<BONDS> 125,443
<COMMON> 94,562
0
0
<OTHER-SE> 230,630
<TOTAL-LIABILITY-AND-EQUITY> 796,688
<SALES> 1,466,036
<TOTAL-REVENUES> 1,466,036
<CGS> 1,175,139
<TOTAL-COSTS> 1,175,139
<OTHER-EXPENSES> 219,436
<LOSS-PROVISION> 1,601
<INTEREST-EXPENSE> 22,937
<INCOME-PRETAX> 48,524
<INCOME-TAX> 20,500
<INCOME-CONTINUING> 28,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,024
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.31
</TABLE>
