SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 8, 1996
LILLY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-6953 35-0471010
(Commission File Number) (IRS Employer Identification No.)
733 South West Street
Indianapolis, Indiana 46225
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 687-6700
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Item 2. Acquisition or Disposition of Assets.
Pursuant to the terms and subject to the conditions of a Merger Agreement,
dated March 4, 1996 (the "Merger Agreement"), by and among Lilly Industries,
Inc., an Indiana corporation ("Lilly Industries"), LP Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of Lilly Industries ("LP"), and
Guardsman Products, Inc., a Delaware corporation ("Guardsman"), (i) LP acquired
9,322,583 shares, or approximately 96.5%, of the outstanding shares of Common
Stock, par value $1.00 per share (the "Shares"), of Guardsman, and the
associated Preferred Stock Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement, dated August 8, 1986, as amended, between Guardsman and
Chemical Bank, as Rights Agent, (unless the context otherwise requires, all
references to Shares shall include the Rights) pursuant to a cash tender offer
of $23 per share for all the outstanding stock of Guardsman (the "Offer"); and
(ii) subsequent to the acceptance of the Shares tendered in the Offer, LP was
merged with and into Guardsman (the "Merger"), with Guardsman surviving the
Merger. As a result of the Merger, the separate corporate existence of LP has
terminated, Guardsman is now a wholly-owned subsidiary of Lilly Industries and
all of the remaining outstanding Shares (other than any Shares held by Lilly
Industries or any wholly-owned subsidiary of Lilly Industries or in the treasury
of Guardsman or by any wholly-owned subsidiary of Guardsman) have been converted
into the right to receive $23 net per share in cash. The per Share purchase
price of $23.00 paid in the Offer and Merger was determined as a result of arms'
length negotiations between Lilly Industries and Guardsman.
The Offer expired on April 4, 1996; the Shares tendered in the Offer
were accepted for purchase on April 8, 1996; and the Merger was effectuated on
April 8, 1996.
To finance the Offer and Merger, Lilly Industries obtained commitments for
$300 million of senior secured credit facilities (the "Credit Facilities"). The
Credit Facilities, which were arranged through First Chicago Capital Markets and
syndicated to several financial institutions, consist of (i) a $175 million,
six-year term loan, (ii) a $50 million, seven and one-half year term loan, and
(iii) a $75 million revolving credit facility. Lilly Industries used
approximately $275 million of the proceeds from the Credit Facilities (the
"Proceeds") to pay-off existing debt and fund the initial purchase of Shares in
the Offer and to pay related expenses of the Offer. Additionally, Lilly
Industries expects to use approximately $15.0 million of the Proceeds during the
next 90 days to pay $23 per Share to the holders of the remaining outstanding
Shares pursuant to the terms of the Merger and to pay other related expenses.
Guardsman is engaged in the business of manufacturing, formulating and
selling industrial coatings and specialty chemical products to manufacturing and
industrial sectors, and the manufacture and distribution of various consumer
products. Guardsman's consumer products include furniture polishes, wood
treatments, dust clothes, cleaning fluids, paint sundries and other household
products. Lilly Industries intends to continue the business conducted by
Guardsman.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired:
The following audited consolidated financial statements of Guardsman
are filed herewith as Exhibit 99:
1. Report of Independent Public Accountants
2. Consolidated Balance Sheets as of December 31, 1995 and 1994
3. Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993
4. Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995, 1994 and 1993
5. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993
6. Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information:
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the pro forma financial information
required by this Item 7(b). Therefore, in accordance with Item 7(b)(2) of Form
8-K, such pro forma financial information will be filed by amendment to this
Form 8-K as soon as practicable, but no later than 60 days from the date of
filing of this Form 8-K (June 20, 1996).
(c) Exhibits:
The following exhibits are filed as a part of this report:
Exhibit 2 Merger Agreement, dated March 4, 1996, by and among
Lilly Industries, Inc., LP Acquisition Corporation,
and Guardsman Products, Inc.
Exhibit 4 Credit Agreement, dated as of April 8, 1996, between
Lilly Industries, Inc.,the Lenders Signatory Thereto,
NBD Bank, N.A., as Agent, and Harris Trust and
Savings Bank, Comerica Bank, Mercantile Bank of St.
Louis, and Bank One, Indianapolis, N.A., as Co-Agents
Exhibit 23 Consent of Independent Public Accountnts.(To be filed
by amendment under cover of Form 8-K/A with the prO
forma financial information.)
Exhibit 99 Guardsman Products, Inc. Audited Consolidated
Financial Statements, Notes to Consolidated Financial
Statements, and report of Independent Public
Accountants as of December 31, 1995 and for the
period then ended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ Douglas W. Huemme
Douglas W. Huemme,
Chief Executive Officer
and President
Dated: April 22, 1996
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EXHIBIT 2
MERGER AGREEMENT
BY AND AMONG
LILLY INDUSTRIES, INC.
("PARENT"),
LP ACQUISITION CORP.,
("PURCHASER")
AND
GUARDSMAN PRODUCTS, INC.
("COMPANY")
DATED AS OF
MARCH 4, 1996
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 4, 1996 (the "Agreement"),
by and among GUARDSMAN PRODUCTS, INC., a Delaware corporation (the "Company"),
LP ACQUISITION CORPORATION, a Delaware corporation (the "Purchaser"), and LILLY
INDUSTRIES, INC., an Indiana corporation ("Parent"). The Company and the
Purchaser are hereinafter sometimes collectively referred to as the
"Constituent Corporations."
RECITALS
WHEREAS, the Boards of Directors of Parent, the Purchaser and the Company
have each approved the acquisition of the Company by Parent upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, the Purchaser and the Company have each approved the merger of the
Purchaser with and into the Company in accordance with the terms of this
Agreement and the General Corporation Law of the State of Delaware (the "DGCL")
and with any other applicable law;
WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein, (i) determined
that (x) the consideration to be paid for each Share in the Offer and the
Merger (as such terms are hereinafter defined) is fair to the stockholders of
the Company, and (y) the Offer and the Merger are otherwise in the best
interests of the Company and its stockholders, and (ii) resolved to approve and
adopt this Agreement and the transactions contemplated hereby and to recommend
acceptance of the Offer and approval and adoption by the stockholders of the
Company of this Agreement; and
WHEREAS, as a condition to Parent's willingness to enter into this
Agreement and make the Offer, Parent and certain stockholders of the Company
are simultaneously entering into and delivering letter agreements, dated the
date hereof, pursuant to which such stockholders have agreed, among other
things, to tender all the Shares beneficially owned by them into the Offer (the
"Letter Agreements").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
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ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article IX hereof and none of the events set
forth in Annex I hereto shall have occurred and be existing, as promptly
as practicable (but in no event later than five business days from the
date hereof) Purchaser shall commence (within the meaning of Rule 14d-2
under the Securities Exchange Act of 1934, as amended (including the rules
and regulations promulgated thereunder, the "Exchange Act")), and Parent
shall cause the Purchaser to commence and shall provide adequate financing
for, an offer to purchase all outstanding shares of Common Stock, par
value $1.00 per share (the "Shares"), of the Company (which shall include
the Shares held pursuant to the Escrow Agreement referenced in Section 5.2
hereof), including the associated Preferred Stock Purchase Rights issued
pursuant to the Rights Agreement dated as of August 8, 1986, as amended
(the "Rights Agreement") between the Company and Chemical Bank, as Rights
Agent (the "Rights"), at a price of $23.00 per Share net to the seller in
cash (the "Offer") and, subject to the conditions of the Offer, shall use
all reasonable efforts to consummate the Offer. Except where the context
otherwise requires, all references herein to the Shares shall include the
associated Rights. The obligation of the Purchaser to consummate the
Offer and to accept for payment and to pay for any Shares tendered
pursuant thereto shall be subject to only those conditions set forth in
Annex I hereto. The parties agree that, except for the Minimum Condition,
the conditions set forth in Annex I are for the sole benefit of the
Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to any such condition or, except as provided in
this Agreement, may be waived by the Purchaser, in whole or in part, at
any time and from time to time in its sole discretion, in each case
subject to the terms of this Agreement. The failure by the Purchaser at
any time to exercise any of the foregoing rights will not be deemed a
waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances will not be deemed a waiver with
respect to other facts or circumstances, and each such right will be
deemed an ongoing right that may be asserted at any time and from time to
time. The Company agrees that no Shares held by the Company or its
subsidiaries will be tendered in the Offer.
(b) Without the prior written consent of the Company, the
Purchaser shall not (i) decrease the price per Share or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares
sought, (iii) amend or waive satisfaction of the Minimum Condition (as
defined in Annex I) or (iv) impose additional conditions to the
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Offer or amend any other term of the Offer in any manner adverse
to the holders of Shares. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and
purchase, as soon as permitted under the terms of the Offer, all
Shares validly tendered and not withdrawn prior to the expiration
of the Offer (it being agreed that the Offer shall expire as soon
as is permissible under the Exchange Act and the rules and
regulations of the New York Stock Exchange, Inc., subject to
subsection (d) and Section 9.1(b) below). The Purchaser reserves
the right to increase the price per Share payable in the Offer.
(c) Each of Parent and the Purchaser, on the one hand, and
the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the documents filed by
Parent and the Purchaser with the Securities and Exchange
Commission (the "SEC") in connection with the Offer (the "Offer
Documents") if and to the extent that it shall have become false
or misleading in any material respect, and Parent and the
Purchaser further agree to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be
disseminated to stockholders of the Company, in each case as and
to the extent required by applicable federal securities laws.
(d) Parent and the Purchaser agree that the Purchaser shall
not terminate or withdraw the Offer or extend the expiration date
of the Offer unless at the expiration date of the Offer the
conditions to the Offer described in Annex I hereto shall not have
been satisfied or earlier waived; provided, however, that
Purchaser shall be allowed to extend the Offer for up to a total
of 10 days.
SECTION 1.2. COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer
and represents that (i) the Board, at a meeting duly called and
held, has, in light of and subject to the terms and conditions set
forth herein, unanimously (x) determined that the consideration to
be paid for each Share in the Offer and the Merger is fair to the
stockholders of the Company and the Offer and the Merger are
otherwise in the best interests of the Company and its
stockholders and (y) approved and adopted this Agreement and the
transactions contemplated hereby, including the Offer and the
Merger, and resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger and the
other transactions contemplated hereby by the stockholders of the
Company and (ii) Goldman Sachs & Co., the Company's financial
advisor, has rendered to the Board its opinion that the
consideration to be received by the stockholders of the Company
pursuant to the Offer and the Merger is fair to such stockholders.
(b) The Company hereby agrees promptly to prepare and, after
review by the Purchaser, to file with the SEC and to mail to its
stockholders, a
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Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer (together with any amendments or supplements
thereto, the "Schedule 14D-9") containing the recommendation
described in Section 1.2(a) hereof and to disseminate the Schedule
14D-9 as required by Rule 14d-9 promulgated under the Exchange
Act; provided, however, that, subject to the provisions of Article
IX, such recommendation may be withdrawn, modified or amended to
the extent that the Board deems it necessary to do so in the
exercise of its fiduciary and other legal obligations after being
so advised in writing by outside counsel. Each of the Company, on
the one hand, and Parent and the Purchaser, on the other hand,
agree promptly to correct any information provided by either of
them for use in the Schedule 14D-9 if and to the extent that it
shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to
be disseminated to the stockholders of the Company, in each case
as and to the extent required by applicable federal securities
laws.
(c) In connection with the Offer, the Company will promptly
furnish the Purchaser with mailing labels, security position
listings and any available listing or computer files containing
the names and addresses of the record holders of Shares as of the
most recent practicable date and will furnish the Purchaser with
such information (which subject to applicable law shall be held in
confidence) and assistance as the Purchaser or its agents or
representatives may reasonably request in connection with the
preparation of the Offer and communicating the Offer to the record
and beneficial holders of the Shares.
SECTION 1.3. DIRECTORS.
(a) Subject to compliance with the DGCL, the Company's
Certificate of Incorporation and other applicable law, promptly
upon the payment by the Purchaser for Shares purchased pursuant to
the Offer constituting at least a majority of the outstanding
Shares, and from time to time thereafter, the Company shall, upon
request of Parent, promptly take all actions necessary to cause
the Board to include a number of Parent's designees such that
Parent's designees constitute a percentage of the Board as nearly
equal as practicable to the percentage of the outstanding Shares
beneficially owned by Parent (which shall be at least a majority
of the Board). Such necessary actions may include accepting the
resignations of those incumbent directors designated by the
Company or increasing the size of the Board and causing Parent's
designees to be elected; provided, however, that the Company shall
use its reasonable best effort to comply with the foregoing
without increasing the size of the Board above twelve members; and
provided, further, that Parent agrees that the Company may retain,
and the Parent shall cause to be retained, at least three
incumbent directors on the Board prior to the Effective Time (as
hereinafter defined). If any of the
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incumbent directors become unavailable or unwilling to serve for
any reason, Parent shall cause such vacancy or vacancies to be
promptly filled by other incumbent directors willing to serve in
such capacity, or their designees. The date on which Purchaser's
designees constitute at least a majority of the Board is herein
referred to as the "Control Date." Upon written request by the
Purchaser, the Company will use its reasonable best efforts to
cause the designees of the Purchaser to constitute a percentage as
nearly equal as practicable to the percentage of representation on
the Board of Directors after giving effect to this Section 1.3 on
(i) each committee of the Board of Directors; (ii) the board of
directors of each subsidiary of the Company; and (iii) each
committee of such subsidiaries' boards of directors.
(b) In satisfying its obligations to appoint Parent's
designees to the Board, the Company shall comply with Section
14(f) of the Exchange Act and Rule 14f-1 thereunder, if
applicable. The Company shall promptly take all actions required
pursuant to such Section and Rule in order to fulfill its
obligations under this Section 1.3 and shall include in the
Schedule l4D-9 such information with respect to the Company and
its officers and directors as is required under such Section and
Rule in order to fulfill its obligations under this Section 1.3.
Parent will supply to the Company complete and accurate
information with respect to itself and its officers, directors and
affiliates required by such Section and Rule.
(c) Following the election or appointment of Parent's
designees pursuant to this Section 1.3 and prior to the Effective
Time, any amendment or termination of this Agreement by the
Company or the Board, any extension by the Company or the Board of
the time for the performance of any of the obligations or other
acts of Parent or the Purchaser or waiver of any of the Company's
rights hereunder, or any consent, approval or recommendation of
the Company or Board required hereunder, will (if there are any
then serving directors not affiliated with or designated by
Parent) require the concurrence of, and shall be effective if and
only if approved by, a majority of the directors of the Company
then in office who are not affiliated with Parent and were not
designated by Parent.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER.
(a) In accordance with the provisions of this Agreement and
the DGCL, at the Effective Time, the Purchaser shall be merged
with and into the
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Company (the "Merger"), and the Company shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") and
shall continue its corporate existence under the laws of the State of
Delaware. At the Effective Time the separate existence of the Purchaser
shall cease. At the election of Parent or the Purchaser, any direct or
indirect wholly-owned subsidiary of Parent may be substituted for the
Purchaser as a constituent corporation in the Merger.
(b) The name of the Surviving Corporation shall be "Guardsman
Products, Inc."
(c) The Merger shall have the effects on the Company and the
Purchaser as Constituent Corporations of the Merger as provided under
the DGCL. As of the Effective Time, the Company shall be a wholly-owned
direct or indirect subsidiary of Parent.
SECTION 2.2. EFFECTIVE TIME. The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger
(the "Certificate of Merger") (or, if applicable, a certificate of ownership
and merger), in the form required by and executed in accordance with the DGCL,
filed with the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") in accordance with the provisions of Section 251 of the
DGCL (or in the event Section 3.4 hereof is applicable, Section 253 of the
DGCL). The date and time when the Merger shall become effective is herein
referred to as the "Effective Time."
SECTION 2.3. CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING
CORPORATION. Subject to Section 2.1 (b), the Certificate of Incorporation and
By-Laws of the Purchaser shall be the Certificate of Incorporation and By-Laws
of the Surviving Corporation until thereafter amended as provided by law.
SECTION 2.4. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) Subject to applicable law, the directors of the Purchaser
immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier
death, resignation or removal.
(b) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are
duly elected and qualified, or their earlier death, resignation or
removal.
SECTION 2.5. FURTHER ASSURANCES. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any
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of the rights, properties or assets of either of the Constituent Corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of each of the Constituent Corporations
or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement in accordance with its terms.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. EFFECT ON SHARES AND THE PURCHASER'S CAPITAL STOCK.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, each Share issued
and outstanding immediately prior to the Effective Time (other than any
Shares held by Parent, the Purchaser or any wholly-owned subsidiary of
Parent or the Purchaser or in the treasury of the Company or by any
wholly-owned subsidiary of the Company, which Shares, by virtue of the
Merger and without any action on the part of the holder thereof, shall be
canceled and retired and shall cease to exist with no payment being made
with respect thereto, and other than any Dissenting Shares (as hereinafter
defined)) shall be converted into the right to receive $23.00 net to the
holder in cash or any higher price per Share paid in the Offer (the
"Merger Price"), payable to the holder thereof, without interest thereon,
as set forth in Section 4.2 hereof.
(b) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, each share of
capital stock of the Purchaser issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Surviving Corporation.
SECTION 3.2. COMPANY OPTION PLANS.
(a) As of the Effective Time, the Company shall take, and
Parent shall cause the Company to take, such actions to provide that by
virtue of the Merger and without any action on the part of the holders
thereof, each option to purchase Shares (the "Option") that is outstanding
immediately before the Effective Time shall be cancelled and, in
consideration of such cancellation, each holder of an Option shall receive
an amount equal to the product of (i) the excess, if any, by
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which the Merger Price exceeds the exercise price of the Option and
(ii) the number of Shares subject thereto, such amount to be paid to the
holder in cash on the Effective Date of the Merger as set forth in Section
4.2 hereof.
(b) Except as provided herein or as otherwise agreed to by
the parties (i) the Option Plans shall terminate as of the Effective Time
and the provisions in any other plan, program or arrangement, providing
for the issuance or grant by the Company or any of its subsidiaries of any
interest in respect of the capital stock of the Company or any of its
subsidiaries shall be deleted as of the Effective Time and (ii) following
the Effective Time no holder of Options or any participant in the Option
Plans or any other such plans, programs or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any subsidiary thereof.
SECTION 3.3. STOCKHOLDERS' MEETING.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through the Board, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting")
as soon as practicable following the purchase of and payment
for Shares by the Purchaser pursuant to the Offer for the
purpose of considering and adopting this Agreement and such
other matters as may be necessary to consummate the
transactions contemplated herein;
(ii) prepare and file with the SEC a preliminary proxy
statement relating to the matters to be considered at the
Special Meeting pursuant to this Agreement and use its
reasonable best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation
with Parent, to respond promptly to any comments made by the
SEC with respect to the preliminary proxy statement and to
cause a definitive proxy statement (the "Proxy Statement")
to be mailed to its stockholders and (y) to obtain the
necessary approvals of this Agreement and such other matters
as may be necessary to consummate the transactions
contemplated hereby by its stockholders; and
(iii) subject to the fiduciary obligations of the Board
under applicable law as advised by outside counsel, include
in the Proxy Statement the recommendation of the Board that
stockholders of the Company vote in favor of the approval of
the Merger and adoption of this Agreement and such other
matters as may be necessary to consummate the transactions
contemplated hereby.
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(b) Parent agrees that it will vote, or cause to be voted,
all of the Shares then owned by it, the Purchaser or any of its
other subsidiaries in favor of the approval and adoption of this
Agreement and such other matters as may be necessary to consummate
the transactions contemplated hereby.
SECTION 3.4. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding
Section 3.3 hereof, in the event that Parent, the Purchaser or any other
subsidiary of Parent shall acquire at least 90 percent of the outstanding
Shares pursuant to the Offer or otherwise, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer without a meeting of stockholders of the
Company in accordance with Section 253 of the DGCL.
SECTION 3.5. CONSUMMATION OF THE MERGER. As soon as practicable after
the satisfaction or waiver of the conditions set forth in Article VIII hereof,
the Surviving Corporation shall execute in the manner required by the DGCL and
file with the Delaware Secretary of State the Certificate of Merger (or, in the
event Section 3.4 hereof is applicable, the Purchaser shall execute in the
manner required by the DGCL and file with the Delaware Secretary of State a
certificate of ownership and merger), and the parties shall take such other and
further actions as may be required by law to make the Merger effective as
promptly as is practicable.
ARTICLE IV
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 4.1. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with Section 262 of the DGCL, if such Section 262 provides for
appraisal rights for such Shares in the Merger ("Dissenting Shares"), shall not
be converted into the right to receive the Merger Price, as provided in Section
3.1 hereof, unless and until such holder fails to perfect or withdraws or
otherwise loses such holder's right to appraisal and payment under the DGCL.
If, after the Effective Time, any such holder fails to perfect or withdraws or
loses such holder's right to appraisal, such Dissenting Shares shall thereupon
be treated as if they had been converted as of the Effective Time into the
right to receive the Merger Price to which such holder is entitled, without
interest or dividends thereon. The Company shall give Parent prompt notice of
any demands received by the Company for appraisal of Shares and Parent shall
have the right to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent
of Parent, make any voluntary payment with respect to, or settle or offer to
settle, any such demands.
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SECTION 4.2. PAYMENT FOR SHARES; STOCK OPTIONS.
(a) From and after the Effective Time, a bank or trust
company designated by Parent and reasonably acceptable to the
Company shall act as paying agent (the "Paying Agent") in
effecting the payment of the Merger Price for certificates (the
"Certificates") formerly representing Shares and entitled to
payment of the Merger Price pursuant to Section 3.1 hereof. At
the Effective Time and from time to time thereafter, Parent or the
Purchaser shall deposit, or cause to be deposited, in trust with
the Paying Agent sufficient funds to permit the Paying Agent to
make the payments contemplated by this Section 4.2 and Section
3.2.
(b) Promptly after the Effective Time, Parent shall cause the
Paying Agent to mail to each record holder of Certificates that
immediately prior to the Effective Time represented Shares (other
than Certificates representing Shares held by Parent or the
Purchaser, any wholly-owned subsidiary of Parent or the Purchaser
or in the treasury of the Company or by any wholly-owned
subsidiary of the Company) a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent and instructions
for use in surrendering such Certificates and receiving the Merger
Price therefor. Upon the surrender of each such Certificate, the
Paying Agent shall pay the holder of such Certificate in exchange
therefor cash in an amount equal to the Merger Price multiplied by
the number of Shares formerly represented by such Certificate, and
such Certificate shall forthwith be canceled. Until so
surrendered, each such Certificate (other than Certificates
representing Dissenting Shares and Certificates representing
Shares held by Parent or the Purchaser, any wholly-owned
subsidiary of Parent or the Purchaser or in the treasury of the
Company or by any wholly-owned subsidiary of the Company) shall
represent solely the right to receive the aggregate Merger Price
relating thereto. No interest shall be paid or accrued on such
Merger Price.
(c) Promptly following the date which is nine months after
the Effective Time, the Paying Agent shall deliver to Parent all
cash, Certificates and other documents in its possession relating
to the transactions described in this Agreement, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a Share (other than Certificates
representing Dissenting Shares and Certificates representing
Shares held by Parent or the Purchaser, any wholly-owned
subsidiary of Parent or the Purchaser or in the treasury of the
Company or by any wholly-owned subsidiary of the Company) may
surrender such Certificate to Parent and (subject to applicable
abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price relating
thereto, without any interest or dividends thereon. Neither
Parent, the Purchaser nor the Surviving Corporation will be liable
to any holder
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of Shares for any amount paid to a public official in accordance
with applicable abandoned property, escheat or similar laws.
(d) The Merger Price shall be net to each holder of
Certificates in cash, subject to reduction only for any applicable
federal back-up withholding or, as set forth in Section 4.2(e),
stock transfer taxes payable by such holder.
(e) If payment of cash in respect of any Certificate is to be
made to a person other than the person in whose name such
Certificate is registered, it shall be a condition to such payment
that the Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other
taxes required by reason of such payment in a name other than that
of the registered holder of the Certificate surrendered or shall
have established to the satisfaction of Parent or the Paying Agent
that such tax either has been paid or is not payable.
(f) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any
Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates formerly
representing Shares (other than Certificates representing Shares
held by Parent or the Purchaser, any wholly-owned subsidiary of
Parent or the Purchaser or in the treasury of the Company or by
any wholly-owned subsidiary of the Company) are presented to
Parent, the Surviving Corporation or the Paying Agent, they shall
be surrendered and canceled in return for the payment of the
aggregate Merger Price relating thereto, without interest, as
provided in this Article IV, subject to applicable law in the case
of Dissenting Shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as
follows, except as previously disclosed by the Company to Parent and the
Purchaser in a Disclosure Letter dated of even date herewith, including the
materials referenced therein (the "Disclosure Letter"):
SECTION 5.1. ORGANIZATION. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdictions of incorporation and the Company and each
of its subsidiaries has all requisite corporate power and authority to own,
lease and operate their respective properties and to carry on their respective
businesses as now being conducted. The Company and each of its subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted
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by it makes such qualification necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, assets, condition (financial or otherwise), results of
operations or prospects of the Company and its subsidiaries taken as a whole (a
"Company Material Adverse Effect"). Copies of the Certificate of Incorporation
and Bylaws of the Company and the articles or certificate of incorporation and
bylaws of each of its subsidiaries, including all amendments, have been
delivered to Parent and the Purchaser and such copies are accurate and
complete. The Company owns directly or indirectly all of the outstanding
capital stock of each of its subsidiaries, free and clear of any claim, lien or
encumbrance.
SECTION 5.2. CAPITALIZATION. The authorized capital stock of the Company
consists of 30,000,000 Shares and 1,000,000 shares of preferred stock, par
value $1.00 per share ("Company Preferred Stock"). As of February 28, 1996,
there were 9,599,775 Shares and no shares of Company Preferred Stock issued and
outstanding, 38,888 Shares (which for purposes of this Agreement shall be
deemed outstanding) held pursuant to the Escrow Agreement dated as of January
30, 1995, by and among the Company, Michael P. Connolly and First of America
Bank-Michigan, as Escrow Agent (a copy of which has been provided by the
Company to Parent and the Purchaser), and no Shares or shares of Company
Preferred Stock held in the Company's treasury. As of February 28, 1996, there
were outstanding options to purchase 597,970 Shares under the Option Plans and
the Company has provided to Parent and the Purchaser an accurate summary of
such Options, including applicable exercise prices, terms and conditions.
Except for the Rights granted pursuant to the Rights Agreement, and Options
under the Option Plans (which shall be cancelled as provided in Section 3.2(a)
hereof), there are not as of the date hereof, and at all times thereafter
through the Effective Date there will not be, any existing options, warrants,
calls, subscriptions, or other rights or other agreements or commitments
obligating the Company or any of its subsidiaries to issue, transfer, sell or
vote any shares of capital stock of the Company or any of its subsidiaries or
any other securities convertible into or evidencing the right to subscribe for
any such shares. All issued and outstanding Shares, and all outstanding shares
of capital stock of each subsidiary, are duly authorized and validly issued,
fully paid, nonassessable and free of preemptive rights with respect thereto.
SECTION 5.3. AUTHORITY. The Company has full corporate power and
authority to execute and deliver this Agreement and, subject to the approval of
its stockholders, if required, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Board, and other than the approval by its stockholders, if
required, no other corporate proceedings are necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes a legal, valid and binding agreement of the
other parties hereto, it constitutes a legal, valid and binding agreement of
the Company, enforceable against it in accordance with its terms. The
affirmative vote of holders of a majority of the Shares is the only vote of
holders of any class or series of the Company's capital stock necessary to
approve the Merger.
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SECTION 5.4. NO VIOLATIONS; CONSENTS AND APPROVALS.
(a) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will
(i) violate any provision of its or any of its subsidiaries'
articles or certificate of incorporation or by-laws, (ii) result
in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default, or give rise to any
right of termination, cancellation or acceleration or any right
which becomes effective upon the occurrence of a merger,
consolidation or change in control or ownership, under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture or other instrument of indebtedness for money borrowed
to which the Company or any of its subsidiaries is a party, or by
which the Company or any of its subsidiaries or any of their
respective properties is bound, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of
time or both) a default, or give rise to any right of termination,
cancellation or acceleration or any right which becomes effective
upon the occurrence of a merger, consolidation or change in
control or ownership, under, any of the terms, conditions or
provisions of any license, franchise, permit or agreement to which
the Company or any of its subsidiaries is a party, or by which the
Company or any of its subsidiaries or any of their respective
properties is bound, or (iv) violate any statute, rule,
regulation, order or decree of any public body or authority by
which the Company or any of its subsidiaries or any of their
respective properties is bound, excluding from the foregoing
clauses (ii), (iii) and (iv) violations, breaches, defaults or
rights which either would not individually or in the aggregate
have a Company Material Adverse Effect or materially impair the
Company's ability to consummate the transactions contemplated
hereby or for which the Company has received or, prior to the
consummation of the Offer, shall have received appropriate
consents or waivers.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any governmental entity is
required in connection with the execution and delivery of this
Agreement by the Company, or the consummation by the Company of
the transactions contemplated hereby, except (i) expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) in connection, or in
compliance, with the provisions of the Exchange Act, (iii) the
filing of the Certificate of Merger with the Delaware Secretary of
State, (iv) such filings and consents as may be required under
any environmental law pertaining to any notification, disclosure
or required approval triggered by the Merger or the transactions
contemplated by this Agreement, (v) filing with, and approval of,
the New York Stock Exchange, Inc. and the SEC with respect to the
delisting and deregistration of the Shares and (vi) such other
consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings not obtained or made prior
to the
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consummation of the Offer the failure of which to be obtained or
made would not, individually or in the aggregate, have a Company
Material Adverse Effect, or materially impair the Company's
ability to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
SECTION 5.5. SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) The Company has made available to Parent and the
Purchaser accurate and complete copies of each registration
statement, report, proxy statement, information statement or
schedule, together with all amendments thereto, that were required
to be filed with the SEC by the Company since January 1, 1993 (the
"SEC Documents"), each of which was timely filed with the SEC. As
of their respective dates, the Company's SEC Documents complied,
or will comply, in all material respects with the applicable
requirements of the Securities Act of 1933, as amended, and the
Exchange Act, as the case may be, and none of such SEC Documents
contained, or will contain, any untrue statement of a material
fact or omitted, or will omit, to state a material fact required
to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were or are made,
not misleading.
(b) Neither the Company nor any of its subsidiaries, nor any
of their respective assets, businesses, or operations, is a party
to, or is bound or affected by, or receives benefits under any
contract or agreement or amendment thereto, that in each case was
required to be filed as an exhibit to a Form 10-K that has not
been, or timely will not be, filed as an exhibit to an SEC
Document.
(c) As of their respective dates, the consolidated financial
statements of the Company included in the SEC Documents were, or
will be, prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods
(except as may be indicated therein or in the notes thereto) and
fairly presented, or will fairly present, the Company's
consolidated financial position and that of its consolidated
subsidiaries as at the dates thereof and the consolidated results
of their operations and statements of cash flows for the periods
then ended (subject, in the case of unaudited statements, to the
lack of footnotes thereto, to normal year-end audit adjustments
and to any other adjustments described therein).
SECTION 5.6. ABSENCE OF CERTAIN CHANGES; NO UNDISCLOSED LIABILITIES.
(a) Except as disclosed or reflected in the SEC Documents or
disclosed in the Disclosure Letter, since December 31, 1995, the
Company has not (i) incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, or
suffered any event or occurrence which, individually or in the
aggregate, would have a Company Material Adverse Effect or (ii)
made
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any changes in accounting methods, principles or practices or
(iii) declared, set aside or paid any dividend or other
distribution with respect to its capital stock, other than regular
quarterly cash dividends at a rate not exceeding $0.09 per Share
per quarter, payable on the Company's customary dividend payment
dates. Since December 31, 1995, each of the Company and its
subsidiaries has conducted its operations according to its
ordinary course of business consistent with past practice.
(b) Except as and to the extent disclosed by the Company in
the SEC Documents or disclosed in the Disclosure Letter, as of
December 31, 1995, neither the Company nor any of its subsidiaries
had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that was required by generally
accepted accounting principles to be reflected on a consolidated
balance sheet of the Company and its subsidiaries (including the
notes thereto) or which would have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 5.7. LITIGATION. Except as disclosed by the Company in the SEC
Documents, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries or any of their respective properties or assets before any
court or governmental entity which, individually or in the aggregate, would
have a Company Material Adverse Effect or prevent or delay the consummation of
the transactions contemplated by this Agreement, nor, to the knowledge of the
Company, are there any facts that are reasonably likely to give rise to any
such suit, claim, action, proceeding or investigation. Neither the Company nor
any of its subsidiaries is subject to any outstanding order, writ, injunction
or decree which, insofar as can be reasonably foreseen, individually or in the
aggregate, in the future would have a Company Material Adverse Effect or would
prevent or delay the consummation of the transactions contemplated hereby.
SECTION 5.8. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed by the
Company in the SEC Documents, the Company and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
governmental entities necessary for the lawful conduct of their respective
businesses (the "Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Except as disclosed by the Company in the SEC Documents, the Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not, individually or in the aggregate,
have a Company Material Adverse Effect. Except as disclosed by the Company in
the SEC Documents, the businesses of the Company and its subsidiaries have not
been and are not being conducted in violation of any law, ordinance or
regulation of any governmental entity except for violations or possible
violations which individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Company Material
Adverse Effect. Except as disclosed by the Company in the SEC Documents, no
investigation or review by any governmental entity with respect to the Company
or any of its subsidiaries is pending or,
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to the knowledge of the Company, threatened nor, to the knowledge of the
Company, has any governmental entity indicated an intention to conduct the
same, other than, in each case, those which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 5.9. TAXES. Each of the Company and its subsidiaries has filed,
or caused to be filed, all federal, state, local and foreign income and other
material tax returns required to be filed by it, has paid or withheld, or
caused to be paid or withheld, all taxes of any nature whatsoever, with any
related penalties, interest and liabilities (any of the foregoing being
referred to herein as a "Tax"), that are shown on such tax returns as due and
payable, or otherwise required to be paid, other than such Taxes as are being
contested in good faith and for which adequate reserves have been established,
except where the failure so to file or pay would not, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and each of its
subsidiaries have paid or will timely pay all Taxes due with respect to any
period ending on or prior to the date Shares are purchased pursuant to the
Offer, or where the payment of Taxes is not yet due, have established, or with
respect to Taxes incurred after the date hereof will timely establish in
accordance with past practices, an adequate accrual in accordance with
generally accepted accounting practices, except for failures to pay or accrue
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. There are no material claims, assessments or audits pending,
or to the Company's knowledge threatened, against the Company or its
subsidiaries for any alleged deficiency in any Tax, and the Company does not
know of any threatened Tax claims or assessments against the Company or any of
its subsidiaries which if upheld could, individually or on the aggregate, have
a Company Material Adverse Effect. None of the Company or any of its
subsidiaries has made an election to be treated as a "consenting corporation"
under Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code"). There is no material deferred inter-company gain within the meaning of
the Treasury Regulations promulgated under Section 1502 of the Code. There are
no waivers or extensions of any applicable statute of limitations to assess any
Taxes. All returns filed with respect to Taxes are true and correct in all
material respects. There are no outstanding requests for any extension of time
within which to file any return or within which to pay any Taxes shown to be
due on any return. There are no liens for any Taxes upon the assets of the
Company or any of its subsidiaries (other than statutory liens for Taxes not
yet due and payable and liens for real estate taxes being contested in good
faith) which individually or in the aggregate could have a Company Material
Adverse Effect. Neither the Company nor any of its subsidiaries is a party to,
is bound by or has any obligation under, a tax sharing or tax allocation
agreement or arrangement for the allocation, apportionment, sharing,
indemnification or payment of taxes.
SECTION 5.10. TERMINATION, SEVERANCE AND EMPLOYMENT AGREEMENTS. The
Company has provided to Parent and the Purchaser a complete and accurate list
of each (a) employment or severance agreement not terminable without material
liability or obligation (either individually or collectively) on 60 days' or
less notice; (b) agreement with any director, executive officer or other key
employee of the Company (i) the benefits of which are contingent, or the terms
of which are materially altered, on the occurrence of a transaction involving
the Company of the nature of any of the transactions contemplated by this
Agreement or relating to an actual or
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potential change in control of the Company or (ii) providing any term of
employment or other compensation guarantee or extending severance benefits or
other benefits after termination not comparable to benefits available to
employees of the Company generally; (c) agreement, plan or arrangement under
which any person may receive payments that may be subject to tax imposed by
Section 4999 of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code; and (d) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Except as previously
disclosed to Parent and the Purchaser in the Disclosure Letter, since December
31, 1995, neither the Company nor any of its subsidiaries has entered into or
amended any employment or severance agreement with any director, executive
officer or other key employee of the Company or granted any severance or
termination pay to any director, executive officer or key employee of the
Company.
SECTION 5.11. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as previously disclosed to Parent and the
Purchaser, (i) each "employee benefit plan" (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), and all other employee benefit, bonus,
incentive, stock option (or other equity-based), severance, change
in control, welfare (including post-retirement medical and life
insurance) and fringe benefit plans (whether or not subject to
ERISA) maintained or sponsored by the Company or its subsidiaries
or any trade or business, whether or not incorporated, that would
be deemed a "single employer" within the meaning of Section 4001
of ERISA (an "ERISA Affiliate"), for the benefit of any employee
or former employee of the Company or any of its ERISA Affiliates
(the "Plans") is, and has been operated in accordance with its
terms and in compliance (including the making of governmental
filings) with all applicable Laws, including ERISA and the
applicable provisions of the Code, except for failures that would
not, individually or in the aggregate, have a Company Material
Adverse Effect, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified,
(iii) no "reportable event," as such term is defined in Section
4043(c) of ERISA (for which the 30-day notice requirement to the
Pension Benefit Guaranty Corporation ("PBGC") has not been
waived), has occurred with respect to any Plan that is subject to
Title IV of ERISA which presents a risk of liability to any
governmental entity or other person which, individually or in the
aggregate, would have a Company Material Adverse Effect, and (iv)
there are no pending, or to the Company's knowledge threatened,
claims (other than routine claims for benefits) by, on behalf of
or against, any of the Plans or any trusts related thereto which
would, individually or in the aggregate, have a Company Material
Adverse Effect. No Plan is a "multiemployer plan" (within the
meaning
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of ERISA) nor has the Company or any ERISA Affiliate ever
contributed or been required to contribute to any multiemployer
plan.
(b) (i) No Plan has incurred an "accumulated fund deficiency"
(as defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived and (ii) neither the Company nor any ERISA
Affiliate has incurred any liability under Title IV of ERISA
except for required premium payments to the PBGC, which payments
have been made when due, and no events have occurred which are
reasonably likely to give rise to any liability of the Company or
an ERISA Affiliate under Title IV of ERISA or which could
reasonably be anticipated to result in any claims being made
against Purchaser by the PBGC, in any such case, which presents a
risk of liability which would, individually or in the aggregate,
have a Company Material Adverse Effect.
(c) With respect to each Plan that is subject to Title IV of
ERISA, (i) the Company has provided to Parent and the Purchaser
copies of the most recent actuarial valuation report prepared for
such Plan prior to the date hereof, (ii) the assets and
liabilities in respect of the accrued benefits as set forth in the
most recent actuarial valuation report prepared by the Plan's
actuary fairly presented the funded status of such Plan in all
material respects, and (iii) since the date of such valuation
report there has been no adverse change in the funded status of
any such Plan which would, individually or in the aggregate, have
a Company Material Adverse Effect.
(d) Neither the Company nor any ERISA Affiliate has failed to
make any contribution or payment to any Plan which has resulted or
could result in the imposition of a lien or the posting of a bond
or other security under ERISA or the Code which would have a
Company Material Adverse Effect.
(e) Except as provided for in this Agreement or as disclosed
in the Disclosure Letter, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or
former employee or officer of the Company or any ERISA Affiliate
to severance pay, unemployment compensation or any other payment,
or (ii) accelerate the time of payment or vesting or increase the
amount of compensation due any such employee or officer.
SECTION 5.12. ENVIRONMENTAL MATTERS. The Company and each of its
subsidiaries has obtained and is in compliance with the terms and conditions of
all required permits, licenses, registrations and other authorizations required
under Environmental Laws (as hereinafter defined), except for failures which
would not, individually or in the aggregate, have a Company Material Adverse
Effect. No asbestos in a friable condition, equipment containing
polychlorinated biphenyls, leaking underground or above-ground storage tanks,
or Hazardous Substance (as hereinafter defined), is contained in or located at
any facility currently, or was contained or located at any facility previously,
owned, leased or controlled by the Company or
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any of its subsidiaries, except for any of the foregoing that would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company and each of its subsidiaries is in compliance with all applicable
Environmental Laws, except for failures to comply which would not, individually
or in the aggregate, have a Company Material Adverse Effect. The Company has
fully disclosed all past and present noncompliance with, or liability under,
Environmental Laws, and all past discharges, emissions, leaks, releases or
disposals of any substance or waste regulated under or defined by Environmental
Laws that have formed or could reasonably be expected to form the basis of any
claim, action, suit, proceeding, hearing or investigation under any applicable
Environmental Laws which, in any such case, individually or in the aggregate,
would have a Company Material Adverse Effect. Neither the Company nor any of
its subsidiaries has received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that have
resulted in or threaten to result in any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation under, any applicable Environmental Laws, which would,
individually or in the aggregate, have a Company Material Adverse Effect. For
purposes of this Section 5.12, (a) "Environmental Laws" mean applicable
federal, state, local and foreign laws, regulations and codes relating in any
respect to pollution or protection or the environment and (b) "Hazardous
Substances" means any toxic, caustic, or otherwise dangerous substance (whether
or not regulated under federal, state or local environmental statutes, rules,
ordinances, or orders), including (i) "hazardous substance" as defined in 42
U.S.C. Section 9601, and (ii) petroleum products, derivatives, byproducts and
other hydrocarbons.
SECTION 5.13. ASSETS; REAL PROPERTY; INTELLECTUAL PROPERTY.
(a) The Company and its subsidiaries own or have rights to
use all assets necessary to permit the Company and its
subsidiaries to conduct their business as it is currently being
conducted except where the failure to own or have the right to use
such assets would not, individually or in the aggregate, have or
constitute a Company Material Adverse Effect.
(b) Except as previously disclosed to Parent and the
Purchaser, the Company has, either directly or through its
subsidiaries, (i) good, valid and marketable or indefeasible title
to all real property material to its business operations, free and
clear of any liens, encumbrances, mortgages and security interests
other than Permitted Liens (as hereinafter defined), or (ii)
rights by lease or other agreement to use all such real property.
The term "Permitted Liens" shall mean (i) liens or encumbrances
for water, sewage and similar charges and current taxes and
assessments not yet due and payable or being contested in good
faith, (ii) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar liens or
encumbrances arising or incurred in the ordinary course of
business, (iii) liens, encumbrances, mortgages and security
interests arising or resulting from any action taken by Parent or
the Purchaser, (iv) liens, encumbrances, mortgages and security
interests of record or securing indebtedness described in the SEC
Documents and (v) easements, rights of way,
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restrictions and other similar charges or encumbrances that do not
materially interfere with the ordinary conduct of the Company's
business. All material real property leases under which the
Company or any of its subsidiaries is a lessee or lessor are
valid, binding and enforceable in all material respects in
accordance with their terms, and there are no existing defaults
thereunder which would, individually or in the aggregate, have a
Company Material Adverse Effect.
(c) Neither the Company nor any of its subsidiaries now or in
the past has manufactured or sold products which conflict with or
infringe upon any proprietary rights of others except where such
conflict or infringement would not, individually or in the
aggregate, have or constitute a Company Material Adverse Effect.
To the Company's knowledge, none of the Intellectual Property of
the Company or any of its subsidiaries is infringed or challenged
or threatened in any way, except for infringements, challenges or
threats which would not individually or in the aggregate have or
constitute a Company Material Adverse Effect. "Intellectual
Property" means trademarks, trade names, service marks, service
names, mark registrations, logos, assumed names, copyright
registrations, patents and all applications therefor and all other
similar proprietary rights.
SECTION 5.14. LABOR MATTERS. Neither the Company nor any of its
subsidiaries has, since July 1, 1993, (i) been subject to, or threatened with,
any material strike, lockout or other labor dispute or engaged in any unfair
labor practice, the result of which had or constituted, or could reasonably be
expected to have or constitute, a Company Material Adverse Effect, or (ii)
received notice of any pending petition for certification before the National
Labor Relations Board with respect to any material group of employees of the
Company or any of its subsidiaries who are not currently organized. The
Company has provided to Parent copies of each collective bargaining agreement
to which the Company or any subsidiary is a party.
SECTION 5.15. RIGHTS AGREEMENT. The Board has taken all necessary action
(i) to provide that neither Parent nor the Purchaser will become an "Acquiring
Person," that no "Stock Acquisition Date" or "Distribution Date" (as such terms
are defined in the Rights Agreement) will occur and that Sections 11 and 13 of
the Rights Agreement will not be triggered, in each case as a result of the
announcement, commencement or consummation of the Offer, the execution or
delivery of this Agreement or any amendment hereto, the consummation of the
Merger, or the consummation of any other transactions contemplated hereby or
thereby, and (ii) at the request of Parent or the Purchaser, to redeem the
Rights effective immediately prior to the Purchaser's acceptance of Shares for
purchase pursuant to the Offer.
SECTION 5.16. INFORMATION. None of the Schedule 14D-9, the Proxy
Statement, if any, or any other document filed or to be filed by or on behalf
of the Company with the SEC or any other governmental entity in connection with
the transactions contemplated by this Agreement contained when filed or will,
at the respective times filed with the SEC or other governmental entity and, in
addition, in the case of the Proxy Statement, if any, at the date it or any
amendment or supplement is mailed to stockholders and at the time of any
Special Meeting,
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contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading; provided that the foregoing shall not apply to information supplied
by Parent or the Purchaser specifically for inclusion or incorporation by
reference in any such document. The Schedule 14D-9 and the Proxy Statement, if
any, will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. None of the information
supplied by the Company specifically for inclusion or incorporation by
reference in the Offer Documents or in any other document filed or to be filed
by or on behalf of Parent or the Purchaser with the SEC or any other
governmental entity in connection with the transactions contemplated by this
Agreement contains, or will contain, any untrue statement of a material fact
or omits, or will omit, to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
SECTION 5.17. DELAWARE SECTION 203. The Board has taken all appropriate
and necessary action such that the provisions of Section 203 of the DGCL will
not apply to any of the transactions contemplated by this Agreement, including
the Letter Agreements.
SECTION 5.18. BROKER'S FEES. Except for Goldman Sachs & Co., whose fees
are set forth in the engagement letter previously provided by the Company to
Parent, neither the Company nor any of its subsidiaries or any of its directors
or officers has incurred any liability for any broker's fees, commissions, or
financial advisory or finder's fees in connection with any of the transactions
contemplated by this Agreement, and neither the Company nor any of its
subsidiaries or any of its directors or officers has employed any other broker,
finder or financial advisor in connection with any of the transactions
contemplated by this Agreement.
SECTION 5.19. REPRESENTATIONS AND WARRANTIES. None of the information
contained in the representations and warranties of the Company set forth in
this Agreement or in any certificate or writing delivered to Parent or the
Purchaser as contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as follows:
SECTION 6.1. ORGANIZATION. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing (to the
extent applicable) under the laws of its state of incorporation and each of
Parent and the Purchaser has all requisite corporate power and
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authority to own, lease and operate its properties and to carry on its business
as now being conducted. Purchaser is a wholly-owned subsidiary of Parent.
SECTION 6.2. AUTHORITY. Each of Parent and the Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized and approved by the Board of Directors of
each of Parent and the Purchaser and by Parent as the sole stockholder of the
Purchaser and no other corporate proceedings are necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Parent
and the Purchaser and, assuming this Agreement constitutes a legal, valid and
binding agreement of the Company, it constitutes a legal, valid and binding
agreement of each of Parent and the Purchaser, enforceable against them in
accordance with its terms.
SECTION 6.3. NO VIOLATIONS; CONSENTS AND APPROVALS.
(a) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby nor
compliance by Parent or the Purchaser with, any of the provisions
hereof will (i) violate any provision of their respective articles
or certificates of incorporation or by-laws, (ii) result in a
violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default, or give rise to any right of
termination, cancellation or acceleration or any right which
becomes effective upon the occurrence of a merger, under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture or other instrument of indebtedness for money borrowed
to which Parent or the Purchaser is a party, or by which Parent or
the Purchaser or any of their respective properties is bound,
(iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default, or give
rise to any right of termination, cancellation or acceleration or
any right which becomes effective upon the occurrence of a merger,
under any of the terms, conditions or provisions of any license,
franchise, permit or agreement to which Parent or the Purchaser is
a party, or by which Parent or the Purchaser or any of their
respective properties is bound, or (iv) violate any statute, rule,
regulation, order or decree of any public body or authority by
which Parent or the Purchaser or any of its respective properties
is bound, excluding from the foregoing clauses (ii), (iii) and
(iv) violations, breaches, defaults or rights which, either
individually or in the aggregate, would not have a material
adverse effect on Parent's or the Purchaser's ability to perform
their respective obligations pursuant to this Agreement or
consummate the Offer and the Merger (a "Parent Material Adverse
Effect") or for which Parent or the Purchaser has received or,
prior to the consummation of the Offer, shall have received
appropriate consents or waivers.
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(b) No filing or registration with, notification to, or
authorization, consent or approval of, any governmental entity is
required by Parent or the Purchaser in connection with the
execution and delivery of this Agreement, or the consummation by
Parent or the Purchaser of the transactions contemplated hereby,
except (i) expiration of the waiting period under the HSR Act,
(ii) in connection, or in compliance, with the provisions of the
Exchange Act, (iii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iv) such filings and consents as
may be required under any environmental law pertaining to any
notification, disclosure or required approval triggered by the
Merger or the transactions contemplated by this Agreement and (v)
such other consents, orders, authorizations, registrations,
declarations and filings not obtained prior to the Effective Time
the failure of which to be obtained or made would not,
individually or in the aggregate, have a Parent Material Adverse
Effect.
SECTION 6.4. INFORMATION. Neither the Offer Documents nor any other
document filed or to be filed by or on behalf of Parent or the Purchaser with
the SEC or any other governmental entity in connection with the transactions
contemplated by this Agreement contained when filed or will, at the respective
times filed with the SEC or other governmental entity, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading; provided
that the foregoing shall not apply to information supplied by the Company
specifically for inclusion or incorporation by reference in any such document.
None of the information supplied by Parent or the Purchaser specifically for
inclusion or incorporation by reference in the Schedule 14D-9, the Proxy
Statement, if any, or any other document filed or to be filed by or on behalf
of the Company with the SEC or any other governmental entity in connection with
the transactions contemplated by this Agreement contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 6.5. FINANCING. The Purchaser has available to it committed
funds sufficient to allow it to timely consummate the transactions contemplated
by this Agreement.
ARTICLE VII
COVENANTS
SECTION 7.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated
by this Agreement or as expressly agreed to in writing by Parent, during the
period from the date hereof to the Effective Date, the Company will not, nor
will it permit any of its subsidiaries to, conduct its operations otherwise
than in the ordinary course of business consistent with past practice. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in
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this Agreement, prior to the Effective Date, the Board will not, without the
prior written consent of Parent or the Purchaser, permit the Company or any of
its subsidiaries to:
(a) amend or propose to amend its certificate or articles of
incorporation or by-laws (or similar constituent documents);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any stock of any class or any other
securities or equity equivalents (including, without limitation,
any stock options or stock appreciation rights), except for Shares
issued upon exercise of Options outstanding as of the date of this
Agreement (in accordance with their respective terms) or pursuant
to the existing terms of the Rights Agreement, or amend any of the
terms of any such securities or agreements outstanding as of the
date hereof, except as specifically contemplated by this
Agreement;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem or
otherwise acquire any of its securities or any securities of its
subsidiaries; provided, however, that the Company shall be allowed
to pay the normal quarterly cash dividend for the first quarter of
1996 in the amount of $0.09 per Share, payable on or about March
21, 1996 to stockholders of record on March 7, 1996;
(d) (i) incur, assume or prepay any long-term or short-term
debt or issue any debt securities except for borrowing under
existing lines of credit or prepayments in the ordinary course of
business; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for any material obligations of any other person except
for obligations of wholly-owned subsidiaries of the Company; (iii)
make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly-owned
subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or
advance); (iv) pledge or otherwise encumber shares of capital
stock of the Company or any of its subsidiaries; or (v) mortgage
or pledge any of its material assets, tangible or intangible, or
create or suffer to exist any lien thereupon, excluding Permitted
Liens.
(e) except as may be required by law or as contemplated by
this Agreement, enter into, adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance
unit, stock equivalent, stock purchase agreement,
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pension, retirement, deferred compensation, employment, severance
or other employee benefit agreement, trust (except for the trusts
to be established pursuant to the Company's directors' retirement
plan), plan, fund or other arrangement for the benefit or welfare
of any director, officer or employee in any manner, or (except for
normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the
Company, and as required under existing agreements) increase in
any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock options, stock
appreciation rights or performance units);
(f) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which in the aggregate
are material to the Company and its subsidiaries taken as a whole,
or enter into any commitments, contracts, agreements or
transactions outside the ordinary course of business consistent
with past practice or which would, individually or in the
aggregate, be material to the Company and its subsidiaries taken
as a whole, or modify, amend, terminate or waive any material
rights under any material contract or agreement;
(g) except as may be required as a result of a change in law
or in generally accepted accounting principles (after consultation
with Parent as to the effect of any such change), change any of
the accounting principles or practices used by it;
(h) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein;
(ii) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice which
would be material to the Company and its subsidiaries taken as a
whole; or (iii) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action
that would be prohibited hereunder;
(i) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory
or writing-off notes or accounts receivable other than in the
ordinary course of business;
(j) make any tax election or settle or compromise any
federal, state or local tax liability or assent to the extension
of time for collection or assessment of any federal, state or
local tax (provided the Company and its subsidiaries may extend
the time for filing 1995 tax returns in accordance with past
practice);
(k) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than
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the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the
notes thereto) of the Company and its subsidiaries or incurred in
the ordinary course of business consistent with past practice;
(l) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby
or material to the Company and its subsidiaries take as a whole,
except for the contemplated settlements with insurance carriers
concerning environmental liabilities as disclosed to Parent (and
the Company agrees to consult with Parent prior to finalizing such
settlements);
(m) authorize any new capital expenditure or expenditures
which individually is in excess of $100,000 or in the aggregate
are in excess of $1,000,000; or
(n) take, or agree in writing or otherwise to take, any of
the actions described in Sections 7.1(a) through 7.1(m) or take,
or omit to take, any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue or incorrect in any material respect as of the
date when made or would result in any of the conditions set forth
in Annex I not being satisfied.
SECTION 7.2. NO SOLICITATION.
(a) The Company shall, and shall direct its officers,
directors, employees, representatives and agents to, immediately
cease any existing discussions and negotiations with any parties
conducted heretofore with respect to any proposal relating to an
Acquisition Transaction. The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit
any of its subsidiaries or any of its or its subsidiaries'
directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public
information) any inquiries or the making of any proposal with
respect to any acquisition of all or substantially all of the
Company by means of a merger, consolidation or other business
combination involving the Company or its subsidiaries or
acquisition of all or substantially all of the assets or capital
stock of the Company and its subsidiaries taken as a whole (an
"Acquisition Transaction") or, subject to the proviso to this
Section 7.2, negotiate, explore or otherwise engage in substantive
communications in any way with any person (other than Parent, the
Purchaser or their respective directors, officers, employees,
agents and representatives) with respect to any Acquisition
Transaction, or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by
this Agreement; provided that, notwithstanding the foregoing, the
Company may, in response to an unsolicited
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written proposal with respect to an Acquisition Transaction from a
third party reasonably believed to have the financial capability
to consummate an Acquisition Transaction, furnish information to,
and negotiate, explore or otherwise engage in substantive
discussions with, such third party, in each case if the Board
determines in good faith by a majority vote, after consultation
with its financial advisors and after receipt of the written
advice of the outside legal counsel of the Company, that such
action is required by applicable law (including fiduciary
principles thereof).
(b) The Company shall immediately advise Parent in writing of
the receipt of any inquiries or proposals relating to an
Acquisition Transaction and any actions taken pursuant to Section
7.2(a).
SECTION 7.3. ACCESS TO INFORMATION. From the date of this Agreement
until the Effective Time, the Company will give Parent and its authorized
representatives (including counsel, environmental and other consultants,
financial advisors, accountants, banks, financial institutions and auditors)
full access during normal business hours to all facilities, personnel and
operations and to all books and records of the Company and its subsidiaries,
will permit Parent to make such inspections as it may reasonably require and
will cause its officers and those of its subsidiaries to furnish Parent with
such financial and operating data and other information with respect to its
business and properties as Parent may from time to time request. All such
information shall be held in confidence in accordance with the terms of the
Confidentiality Agreement (the "Confidentiality Agreement") between Parent and
the Company dated December 13, 1995, the terms of which are hereby incorporated
herein.
SECTION 7.4. REASONABLE BEST EFFORTS; OTHER ACTIONS. Subject to the
terms and conditions herein provided and applicable law, each of the Company,
Parent and the Purchaser shall use its reasonable best efforts promptly to
take, or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using such reasonable best
efforts to (i) obtain all necessary consents, approvals or waivers under its
material contracts, (ii) cooperate in making available information and
personnel to the lenders to Parent and the Purchaser with respect to financing
for the transactions contemplated by this Agreement and (iii) lift any legal
bar to the Merger; provided, however, that the foregoing shall not require
Parent, the Purchaser or any other affiliate of Parent to agree to any action
or restriction which, if imposed by a governmental entity, would constitute a
condition described in paragraph (a) of Annex I to this Agreement. If any
"fair price," "moratorium," "control share acquisition" or other form of
antitakeover statute, regulation, charter provision or contract is or becomes
applicable to the transactions contemplated by this Agreement, the Company will
use its reasonable efforts to grant such approvals and take such actions as are
necessary under such laws, provisions or contracts so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise act to eliminate or
minimize the
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effects of such statute, regulation, provision or contract on the transactions
contemplated by this Agreement.
SECTION 7.5. PUBLIC ANNOUNCEMENTS. Before issuing any press release or
otherwise making any public statements with respect to this Agreement, the
Offer or the Merger, Parent, the Purchaser and the Company will consult with
each other as to its form and substance and shall not issue any such press
release or make any such public statement prior to such consultation, except in
either case as may be required by law or any obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 7.6. NOTIFICATION OF CERTAIN MATTERS. Each of the Company and
Parent shall give prompt notice to the other party of (i) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which would
be likely to cause either (A) any representation or warranty of any party
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the acceptance for payment of Shares
pursuant to the Offer, (B) any condition set forth in Annex I to be unsatisfied
at any time from the date hereof to the date the Purchaser purchases Shares
pursuant to the Offer or (C) any condition set forth in Article VIII hereof to
be unsatisfied at any time from the date hereof to the Effective Time, and (ii)
any material failure of the Company or Parent, as the case may be, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 7.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.7. INDEMNIFICATION.
(a) From and after the purchase of Shares pursuant to the
Offer, Parent shall indemnify, defend and hold harmless, and shall
cause the Surviving Corporation (including, if necessary,
providing the Surviving Corporation with sufficient funds) to
indemnify, defend and hold harmless, the present and former
officers, directors (including the Company's Advisory Director),
employees and agents of the Company and its subsidiaries (the
"Indemnified Parties") against all losses, claims, damages,
expenses or liabilities arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the
Effective Time to the same extent and on the same terms and
conditions (including with respect to advancement of expenses)
provided for in the Company's Certificate of Incorporation and
By-Laws and agreements in effect at the date hereof (to the extent
consistent with applicable law).
(b) For a period of six years after the Effective Time,
Parent shall cause to be maintained in effect the current policies
of directors' and officers' liability insurance maintained by the
Company (provided that Parent may substitute therefor policies of
at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims
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arising from facts or events which occurred before the Effective
Time; provided, however, that Parent shall not be obligated to
make annual premium payments for such insurance to the extent such
premiums exceed 175% of the annual premiums paid as of the date
hereof by the Company for such insurance (the "Maximum Amount").
If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Parent
and the Surviving Corporation shall maintain the most advantageous
policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount.
(c) The provisions of this Section 7.7 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified
Party, and their respective heirs, legal representatives,
successors and assigns.
SECTION 7.8. EXPENSES. Except as set forth in Section 9.6 hereof,
Parent, the Purchaser and the Company shall each bear their respective expenses
incurred in connection with this Agreement, the Offer and the Merger,
including, without limitation, the preparation, execution and performance of
this Agreement and the transactions contemplated hereby, and all fees and
expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
SECTION 7.9. RIGHTS AGREEMENT. Except as contemplated by Section 5.15
hereof or the last sentence of this Section 7.9, the Company shall not redeem
the Rights or amend or terminate the Rights Agreement prior to the consummation
of the Merger unless required to do so by order of a court of competent
jurisdiction or fiduciary obligation as advised in writing by outside counsel.
The Company will take any necessary further actions to cause the Rights not to
be outstanding upon consummation of the Merger. If requested to do so by
Parent or the Purchaser, the Company shall redeem all outstanding Rights at a
redemption price of $0.05 per Right effective immediately prior to the
acceptance for payment of any Shares by the Purchaser pursuant to the Offer.
SECTION 7.10. STANDSTILL AGREEMENT. For a period of three years from
the date of this Agreement, Parent shall not, directly or indirectly, except
pursuant to this Agreement: (a) acquire or agree, offer, seek or propose to
acquire, or cause to be acquired, ownership of any of the Company's assets or
businesses or any voting securities issued by the Company, or any other rights
or options to acquire that ownership (including from a third party); (b) seek
or propose to influence or control the Company's management or policies; or (c)
enter into any discussions, negotiations, arrangements or understandings with
any third party with respect to any of the foregoing.
SECTION 7.11. LETTER AGREEMENT INDEMNIFICATION. In the Letter
Agreements, and as a condition to obtaining the same, Parent agreed to
indemnify and hold harmless the stockholder signatories thereto from and
against any and all claims by third parties or Parent (and its affiliates),
judgments, fines, penalties, liabilities, fees and expenses (including, without
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limitation, reasonable attorneys' fees) that may be asserted against or
incurred by such stockholder signatories in connection with their entering into
the Letter Agreements or their compliance with the terms thereof, provided that
such indemnity does not protect the stockholder signatories against (i) any
violations of law (other than violations alleged to have occurred as a result
of their compliance with the terms and conditions of the Letter Agreements) or
(ii) any breach by the stockholder signatories of their commitments in the
Letter Agreements. The Company hereby agrees to indemnify and hold Parent
harmless from and against any liability, cost, or expense (including reasonable
attorneys' fees) incurred by it in providing the indemnification required under
the Letter Agreements; provided, however, that the foregoing indemnity of the
Company shall terminate upon the purchase of Shares by Parent pursuant to the
Offer. In the event that any claim is made which gives rise or may give rise
to the Company's obligation to indemnify Parent hereunder, Parent shall
promptly notify the Company and the Company shall be entitled to assume the
defense, settlement or other disposition thereof.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF PARENT,
THE PURCHASER AND THE COMPANY
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or, if permissible, waiver at or prior to the
Effective Time of each of the following conditions:
SECTION 8.1. PURCHASE OF SHARES. The Purchaser shall have accepted for
payment and paid for Shares pursuant to the Offer in accordance with the terms
thereof; provided that this condition shall be deemed to have been satisfied
with respect to the obligation of Parent and the Purchaser to effect the Merger
if the Purchaser fails to accept for payment or pay for Shares pursuant to the
offer in violation of the terms of the Offer.
SECTION 8.2. STOCKHOLDER APPROVAL. The vote of the stockholders of the
Company necessary to consummate the transactions contemplated by this Agreement
shall have been obtained, if required by applicable law.
SECTION 8.3. NO LEGAL IMPEDIMENTS. No statute, rule or regulation shall
have been promulgated, enacted, entered or enforced, and no other legally
binding, final and nonappealable action shall have been taken, by any domestic,
foreign or supranational government or governmental, administrative or
regulatory authority or agency of competent jurisdiction or by any court or
tribunal of competent jurisdiction, domestic, foreign or supranational, that in
any of the foregoing cases has the effect of making illegal or directly or
indirectly restraining, prohibiting or restricting the consummation of the
Merger. Any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired.
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ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.1. TERMINATION. This Agreement may be terminated (and the
Merger contemplated hereby may be abandoned notwithstanding approval thereof by
the stockholders of the Company, in which case the Offer shall also be
abandoned unless the Purchaser has already purchased Shares pursuant thereto)
at any time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if, without any material
breach of such terminating party of its obligations under this
Agreement, the purchase of Shares pursuant to the Offer shall not
have occurred on or before May 31, 1996 (or, in the event Parent
or the Company receives a request for additional information under
the HSR Act, the earlier of (i) July 31, 1996, or (ii) the
earliest date following the expiration of the waiting period under
the HSR Act, as extended by such request, on which the Purchaser
may purchase shares pursuant to the terms of the Offer and the
applicable rules and regulations of the SEC), which dates may be
extended by mutual written consent of the parties hereto and which
shall automatically be extended in certain instances as provided
in subparagraphs (c) and (d) of the Condition to Offer attached as
Annex I;
(c) by Parent or the Company if the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares
being purchased thereunder; provided however, that Parent may not
terminate this Agreement pursuant to this Section 9.1(c) if
Parent's or the Purchaser's termination of, or failure to accept
for payment or pay for any Shares tendered pursuant to, the Offer
does not follow the occurrence, or failure to occur, as the case
may be, of any condition set forth in Annex I hereto or is
otherwise in violation of the terms of the Offer or this
Agreement; or
(d) by either Parent or the Company if any court of competent
jurisdiction in the United States or other governmental body in
the United States shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the
purchase of Shares pursuant to the Offer or the Merger, and such
order, decree, ruling or other action shall have become final and
nonappealable; provided that the party seeking to terminate this
Agreement shall have used its reasonable best efforts, subject to
Section 7.4, to remove or lift such order, decree or ruling.
SECTION 9.2. TERMINATION BY PARENT. This Agreement may be terminated and
the Offer and the Merger may be abandoned by Parent, at any time prior to the
purchase of Shares pursuant to the Offer, if (a) the representations or
warranties of the Company contained in this
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<PAGE>
Agreement are not true and correct at and as of any date prior to the
expiration date of the Offer as if made at and as of such time, except for (i)
failures to be true and correct as could not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect and (ii)
failures to comply as are capable of being and are cured (other than by mere
disclosure of the breach) within 10 days after written notice from the
Purchaser to the Company of such failure; (b) the Company has failed to comply
with its obligations under this Agreement, except for (i) failures to so comply
as could not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect and (ii) failures to comply as are
capable of being and are cured within 10 days after written notice from the
Purchaser to the Company of such failure; (c) the Board shall (i) withdraw its
recommendation or approval in respect of this Agreement or Offer or (ii) modify
or change its recommendation or approval in respect of this Agreement, the
Offer or the Merger in a manner adverse to Parent; or (d) the Board shall have
recommended any proposal other than by Parent or the Purchaser in respect of an
Acquisition Transaction.
SECTION 9.3. TERMINATION BY THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned by the Company, (a) at any time
prior to the purchase of Shares pursuant to the Offer upon receipt of an
Acquisition Transaction proposal that contains no financing condition which the
Board in good faith determines in the exercise of its fiduciary duties (based
as to legal matters on the written opinion of legal counsel and after
consultation with its financial advisor) it is required to accept by applicable
law including the fiduciary principles thereof; or (b) at any time prior to the
Effective Time if (i) the representations and warranties of Parent or the
Purchaser contained in this Agreement are not true and correct as if made at
and as of such time, except for (A) failures to be true and correct as could
not, individually or in the aggregate, reasonably be expected to result in a
Parent Material Adverse Effect and (B) failures to comply as are capable of
being and are cured (other than by mere disclosure of the breach) within 10
days after written notice from the Company to Parent of such failure; or (ii)
Parent or the Purchaser has failed to comply with their respective obligations
under this Agreement, except for (X) failures to so comply as could not,
individually or in the aggregate, reasonably be expected to result in a Parent
Material Adverse Effect and (Y) failures to comply as are capable of being and
are cured within 10 days after written notice from the Company to Parent of
such failure.
SECTION 9.4. PROCEDURE FOR TERMINATION. In the event of termination and
abandonment of the Merger and the Offer by Parent or the Merger by the Company
pursuant to this Article IX, written notice thereof shall be given to the
other.
SECTION 9.5. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to and in accordance with this Article IX, the Merger shall
be deemed abandoned and this Agreement shall forthwith become void, except as
provided in the last sentence of Section 7.3 and in Sections 7.8, 7.10 and 7.11
(which Sections shall survive any termination of this Agreement), without
liability on the part of any party hereto or its affiliates, directors,
officers or stockholders except as provided in Section 9.6 and except for any
willful or bad faith
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<PAGE>
default of any obligation or undertaking hereunder, and each of the parties
hereto hereby waives and releases any other claim which may otherwise exist
upon such termination.
SECTION 9.6. TERMINATION FEE. In the event that following receipt by the
Company of an Acquisition Termination proposal this Agreement is terminated by
Parent pursuant to Section 9.2(c) or (d) or by the Company pursuant to Section
9.3(a), the Company shall promptly pay to Parent (but in any event within three
business days after termination) the sum of $3,000,000, provided that no fee
shall be payable if Parent or the Purchaser shall be in material breach of any
of its material representations, warranties or obligations hereunder as of the
date of termination. If such fee is payable and within 365 days after such
termination an Acquisition Transaction is consummated, the Company shall
promptly pay to Parent (but in any event within three business days after the
consummation of the Acquisition Transaction) the additional sum of $5,000,000.
ARTICLE X
DEFINITIONS
SECTION 10.1. TERMS DEFINED IN AGREEMENT. The following terms used
herein shall have the meanings ascribed in the indicated sections.
<TABLE>
<S> <C>
Acquiring Person ................. 5.15
Acquisition Transaction .......... 7.2 (a)
Agreement ........................ Preamble
Board ............................ Recitals
Certificate of Merger ............ 2.2
Certificates ..................... 4.2 (a)
Code ............................. 5.9
Company .......................... Preamble
Company Material Adverse Effect .. 5.1
Company Permits .................. 5.8
Company Preferred Stock .......... 5.2
Confidentiality Agreement ........ 7.3
Constituent Corporations ......... Preamble
Control Date ..................... 1.3(a)
Delaware Secretary of State ...... 2.2
DGCL ............................. Recitals
Dissenting Shares ................ 4.1
Distribution Date ................ 5.15
Effective Time ................... 2.2
Environmental Laws ............... 5.12
ERISA ............................ 5.11(a)
ERISA Affiliate .................. 5.11(a)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Exchange Act ..................... 1.1(a)
Hazardous Substances ............. 5.12
HSR Act .......................... 5.4(b)
Including ........................ 11.8
Indemnified Parties .............. 7.7(a)
Intellectual Property ............ 5.13(c)
Letter Agreements ................ Recitals
Maximum Amount ................... 7.7(b)
Merger ........................... 2.1(a)
Merger Price ..................... 3.1(a)
Minimum Condition ................ Annex I
Offer ............................ 1.1(a)
Offer Documents .................. 1.1(c)
Option ........................... 3.2(a)
Parent ........................... Preamble
Parent Material Adverse Effect ... 6.3(a)
Paying Agent ..................... 4.2(a)
PBGC ............................. 5.11(a)
Permitted Liens .................. 5.13(b)
Person ........................... 11.8
Plans ............................ 5.11(a)
Proxy Statement .................. 3.3(a)(ii)
Purchaser ........................ Preamble
Rights ........................... 1.1(a)
Rights Agreement ................. 1.1(a)
Schedule 14D-9 ................... 1.2(b)
SEC .............................. 1.1(c)
SEC Documents .................... 5.5(a)
Shares ........................... 1.1(a)
Special Meeting .................. 3.3(a)(i)
Stock Acquisition Date ........... 5.15
Subsidiary ....................... 11.8
Surviving Corporation ............ 2.1(a)
Tax .............................. 5.9
</TABLE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. AMENDMENT AND MODIFICATION. At any time prior to the
Effective Time, subject to applicable law and the provisions of Section 1.3(c)
hereof, this Agreement may be amended, modified or supplemented only by written
agreement (referring specifically to this Agreement) of Parent, the Purchaser
and the Company with respect to any of the terms
-34-
<PAGE>
contained herein; provided, however, that after any approval and adoption of
this Agreement by the stockholders of the Company, no such amendment,
modification or supplementation shall be made which reduces the Merger Price or
the form of consideration therefor or which in any way materially adversely
affects the rights of such stockholders, without the further approval of such
stockholders.
SECTION 11.2. WAIVER. Subject to the provisions of Section 1.3(c), at
any time prior to the Effective Time, Parent and the Purchaser, on the one
hand, and the Company, on the other hand, may (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive
any inaccuracies in the representations and warranties of the other contained
herein or in any documents delivered pursuant hereto and (iii) waive compliance
by the other with any of the agreements or conditions contained herein which
may legally be waived. Any such extension or waiver shall be valid only if set
forth in an instrument in writing specifically referring to this Agreement and
signed on behalf of such party.
SECTION 11.3. SURVIVABILITY; INVESTIGATIONS. The respective
representations and warranties of Parent, the Purchaser and the Company
contained herein or in any certificates or other documents delivered prior to
or as of the Effective Time (i) shall not be deemed waived or otherwise
affected by any investigation made by any party hereto and (ii) shall not
survive beyond the Effective Time. The covenants and agreements of the parties
hereto (including the Surviving Corporation after the Merger) shall survive the
Effective Time without limitation (except for those which, by their terms,
contemplate a shorter survival period).
SECTION 11.4. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt,
if personally delivered or telecopied, or one day after delivery to a courier
for next day delivery.
(a) if to the Company, to
Guardsman Products, Inc.
3033 Orchard Vista Drive, Suite 200
P.O. Box 1521
Grand Rapids, Michigan 49501
Telecopy: (616) 957-1236
Attention: President and Chief Executive Officer
with a copy to:
Warner Norcross & Judd LLP
900 Old Kent Building
111 Lyon St., N.W.
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<PAGE>
Grand Rapids, Michigan 49503-2489
Telecopy: (616) 752-2510
Attention: Tracy T. Larsen, Esq.
(b) if to Parent or the Purchaser, to
Lilly Industries, Inc.
733 South West Street
Indianapolis, Indiana 46225
Telecopy: (317) 687-6702
Attention: Chairman, President and Chief Executive Officer
with a copy to:
Barnes & Thornburg
1313 Merchants Bank Building
Indianapolis, Indiana 46204
Telecopy: (317) 231-7433
Attention: Catherine L. Bridge, Esq.
SECTION 11.5. ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, provided that Parent may assign the rights and obligations of the
Purchaser under this Agreement to any direct or indirect wholly-owned
subsidiary of Parent, but no such assignment will relieve any party of its
obligations under this Agreement. This Agreement, except for the provisions of
Sections 3.2(a) and 7.7 (which are intended to be for the benefit of the
persons identified therein, and may be enforced by such persons), is not
intended to confer any rights or remedies hereunder upon any other person
except the parties hereto.
SECTION 11.6. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Delaware, except for Section 7.11 above which shall be
governed by the laws of the State of Michigan (regardless of the laws that
might otherwise govern under applicable Delaware (or as to Section 7.11
Michigan) principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
SECTION 11.7. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 11.8. INTERPRETATION. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties
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<PAGE>
and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, (i) the term "person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or agency
thereof; (ii) the term "subsidiary" of any specified corporation shall mean any
corporation of which a majority of the outstanding securities having ordinary
voting power to elect a majority of the board of directors are directly or
indirectly owned by such specified corporation or any other person of which a
majority of the equity interests therein are, directly or indirectly, owned by
such specified corporation; (iii) the term "including" and words of similar
import shall mean "including, without limitation," unless the context otherwise
requires or unless otherwise specified; and (iv) the term "to the knowledge of
the Company" (or words of similar import) shall mean to the knowledge of the
Chairman or any executive officer of the Company.
SECTION 11.9. POST-CONTROL DATE ACTIONS. Notwithstanding anything in
this Agreement to the contrary, from and after the Control Date the Company
shall not be deemed for purposes hereof to be in breach of this Agreement if
such breach was caused by Parent in its capacity as the controlling stockholder
of the Company or by action of the Board taken with the approval of a majority
of Parent's designees thereto.
SECTION 11.10. ENTIRE AGREEMENT. This Agreement, the Disclosure Letter
and the Confidentiality Agreement, embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein and supersedes all prior agreements and understandings
between the parties with respect to such subject matter. There are no
representations, promises, warranties, covenants or undertakings in respect of
such subject matter, other than those expressly set forth or referred to herein
and therein.
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
LILLY INDUSTRIES, INC.
By: /s/ Douglas W. Huemme
-------------------------------------
Name: Douglas W. Huemme
Title: President and CEO
"Parent"
LP ACQUISITION CORPORATION
By: /s/ Douglas W. Huemme
-------------------------------------
Name: Douglas W. Huemme
Title: President and CEO
"Purchaser"
-37-
<PAGE>
GUARDSMAN PRODUCTS, INC.
By: /s/ Paul K. Gaston
------------------------------------
Name: Paul K. Gaston
Title: Chairman
"Company"
-38-
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, the Purchaser shall not
accept Shares for payment if the condition that there shall be validly tendered
and not withdrawn prior to the expiration of the Offer a number of Shares which
represents at least a majority of the number of Shares outstanding on a fully
diluted basis (assuming the exercise of all outstanding Options) shall not have
been satisfied (the "Minimum Condition"), which condition may not be waived
without the Company's consent, and shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
l4e-1(c) promulgated under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and (subject to any such rules or
regulations) may delay the acceptance for payment of any tendered Shares and
(except as provided in this Agreement) amend or terminate the Offer as to any
Shares not then paid for if (i) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer
or (ii) at any time after the date of this Agreement and before the time of
payment for any such Shares (whether or not any Shares have theretofore been
accepted for payment), any of the following conditions exists:
(a) there shall be in effect as of the Expiration Date (as
defined in the Offer Documents) an injunction or other order,
decree, judgment or ruling by a court of competent jurisdiction or
by a governmental, regulatory or administrative agency or
commission of competent jurisdiction or a statute, rule,
regulation, executive order or other action shall have been
promulgated, enacted, taken or threatened by a governmental
authority or a governmental, regulatory or administrative agency
or commission of competent jurisdiction which in any such case (i)
restrains or prohibits the making or consummation of the Offer or
the consummation of the Merger, (ii) results in a significant
delay in or significantly restricts the ability of the Purchaser,
or renders the Purchaser unable, to accept for payment, pay for or
purchase Shares sufficient to satisfy the Minimum Condition in the
Offer or the remaining Shares outstanding in the Merger (other
than as a result of the exercise of dissenters' rights and other
than for delays or restrictions that are not material to Parent
and the Purchaser), (iii) prohibits or restricts the ownership or
operation by Parent or the Purchaser (or any of their respective
affiliates or subsidiaries) of any portion of its or the Company's
business or assets which is material to the business of the
Company and its subsidiaries or of Parent and its subsidiaries or
compels Parent or the Purchaser (or any of their respective
affiliates or subsidiaries) to dispose of or hold separate any
portion of its or the Company's business or assets which is
material to the business of the Company and its subsidiaries or of
Parent and its subsidiaries, (iv) imposes material limitations on
the ability of the Purchaser effectively to acquire or to hold or
to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by the
Purchaser on all matters properly presented to the stockholders of
the Company, (v) imposes any material
<PAGE>
limitations on the ability of Parent or the Purchaser or any of
their respective affiliates or subsidiaries effectively to control
in any material respect the business and operations of the Company
and its subsidiaries, or (vi) which otherwise would materially
adversely affect the Company and its subsidiaries taken as a
whole; provided, however, that Parent and the Purchaser shall have
complied with Section 7.4 of this Agreement; or
(b) this Agreement shall have been terminated by the Company,
Parent or the Purchaser in accordance with its terms; or
(c) the representations or warranties of the Company
contained in this Agreement shall not be true and correct when
made or on the Expiration Date as if made as of such date, except
for (i) failures to be true and correct as could not, individually
or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect and (ii) failures to comply as are capable
of being and are cured (other than by mere disclosure of the
breach) within 10 days after written notice from the Purchaser to
the Company of such failure (in which case the Expiration Date
shall be extended to the end of such cure period or, if earlier,
the date of cure); or
(d) the Company shall have failed to comply with its
obligations under this Agreement, except for (i) failures to so
comply as could not, individually or in the aggregate, reasonably
be expected to result in a Company Material Adverse Effect and
(ii) failures to comply as are capable of being and are cured
within 10 days after written notice from the Purchaser to the
Company of such failure (in which case the Expiration Date shall
be extended to the end of such cure period or, if earlier, the
date of cure); or
(e) there shall have occurred on or after the date of this
Agreement and be continuing any development or developments with
respect to the Company or its subsidiaries which individually or
in the aggregate have had or constitute a Company Material
Adverse Effect, other than developments affecting generally the
industries and businesses in which the Company and its
subsidiaries operate; or
(f) there shall have occurred and be continuing (i) any
general suspension of, or limitation on prices for, trading in
securities on any national securities exchange or the
over-the-counter market, (ii) a declaration of, a banking
moratorium or any suspension of payments in respect of banks in
the United States (whether or not mandatory), (iii) the
commencement of a war, armed hostilities or other international or
national calamity directly involving the United States, (iv) from
the date of this Merger Agreement through the date of termination
or expiration of the Offer, a decline of at least 25 percent in
the Standard & Poor's 500 Index, (v) any limitation by any U.S.
governmental
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<PAGE>
authority or agency that materially affects generally the extension of
credit by banks or other financial institutions or (vi) in the case of
any of the foregoing existing at the time of the execution of this
Agreement, a material acceleration or worsening thereof; or
(g) Parent, the Purchaser and the Company shall have agreed
that the Purchaser shall amend the Offer to terminate the Offer or
postpone the payment for Shares pursuant thereto.
The foregoing conditions, other than Minimum Condition, are for the sole
benefit of Parent and the Purchaser and may be asserted by Parent or the
Purchaser regardless of the circumstances (including any action or inaction by
Parent or the Purchaser) giving rise to any such conditions and, except as
provided in this Agreement, may be waived by Parent or the Purchaser in whole
or in part at any time and from time to time in their sole discretion in each
case subject to the terms of this Agreement. The failure by Parent or the
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
-3-
CREDIT AGREEMENT
between
LILLY INDUSTRIES, INC.
an Indiana corporation
the Lenders Signatory Hereto
and
NBD BANK, N.A., as Agent
and
HARRIS TRUST AND SAVINGS BANK
COMERICA BANK
MERCANTILE BANK OF ST. LOUIS
BANK ONE, INDIANAPOLIS, N.A.
as Co-Agents
Dated as of April 8, 1996
<PAGE>
TABLE OF CONTENTS
Page
PREAMBLE................................................................1
RECITALS................................................................1
SECTION 1. Definitions.................................................1
1.1. Defined Terms...................................................1
1.2. Rules of Construction..........................................19
1.3. Accounting Terms...............................................19
SECTION 2. Credit.....................................................19
2.1. Commitments....................................................19
2.1.1. Facility A Commitment..................................19
2.1.2. Facility B Commitment..................................20
2.1.3. Facility C Commitment..................................20
2.2. Interest.......................................................20
2.2.1. Facility A Term Loans..................................20
2.2.2 Facility B Term Loans..................................22
2.2.3. Facility C Revolving Loans.............................21
2.2.4. General................................................21
2.3. Payments of Principal and Interest.............................21
2.3.1. Facility A Term Loans..................................21
2.3.2. Facility B Term Loans..................................22
2.3.3. Facility C Revolving Loans.............................22
2.3.4. Mandatory Prepayment of Facility A and B Term Loans....23
2.3.5. Optional Prepayment....................................24
2.3.6. Taxes..................................................24
2.3.7. Method of Payment......................................25
2.3.8. Business Day...........................................26
2.4. Method of Advance..............................................26
2.4.1. Facility C Revolving Loans.............................26
2.4.2. General................................................26
2.5. Procedures for Electing the Fixed Rate Option..................27
2.6. Fees...........................................................28
2.6.1. Facility C Commitment Fee..............................28
2.6.2. Agent Fees.............................................29
2.6.3. Letter of Credit Fees..................................29
2.6.4. General................................................29
2.7. Reductions of Facility C Commitment............................29
2.8. Non-Receipt of Funds by the Agent..............................29
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Page
2.8.1. From the Lenders.......................................29
2.8.2. From the Borrower......................................30
2.9. Issuance of Letters of Credit..................................30
2.10. Letters of Credit Participation................................31
2.11. Compensation for Letters of Credit.............................32
2.11.1. Letter of Credit Facility Fee........................32
2.11.2. Letter of Credit Fronting Fees.......................32
2.11.3. Manner of Payment....................................33
2.12. Reimbursement of Letters of Credit.............................33
2.13. Yield Protection...............................................34
2.14. Changes in Capital Adequacy Regulations........................35
2.15. Availability of Types of Advances..............................35
2.16. Funding Indemnification........................................35
2.17. Lender Statements; Survival of Indemnity.......................36
2.18. Lending Installations..........................................36
2.19. Use of Proceeds................................................36
SECTION 3. Security and Guaranty......................................36
3.1. Security.......................................................36
3.2. Guaranty ......................................................37
3.3. Additional Collateral..........................................37
SECTION 4. Representations and Warranties.............................37
4.1. Due Organization...............................................37
4.2. Due Qualification..............................................37
4.3. Corporate Power................................................37
4.4. Corporate Authority............................................38
4.5. Financial Statements...........................................38
4.6. No Material Adverse Change.....................................38
4.7. Subsidiaries...................................................38
4.8. Binding Obligations............................................39
4.9. Marketable Title...............................................39
4.10. Indebtedness...................................................39
4.11. Default........................................................40
4.12. Tax Returns....................................................40
4.13. Litigation.....................................................40
4.14. ERISA..........................................................40
4.15. Full Disclosure................................................40
4.16. Contingent Obligations.........................................41
4.17. Licenses.......................................................41
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Page
4.18. Compliance with Law............................................41
4.19. Force Majeure..................................................41
4.20. Margin Stock...................................................41
4.21. Approvals......................................................41
4.22. Insolvency; Financial Condition................................41
4.23. Regulation.....................................................42
4.24. Environmental Matters..........................................42
4.25. Company Acquisition............................................44
4.26. General........................................................44
SECTION 5. Covenants..................................................44
5.1. Affirmative Covenants..........................................44
5.1.1. Financial Reporting...................................44
5.1.2. Good Standing.........................................46
5.1.3. Taxes, Etc............................................47
5.1.4. Maintain Properties...................................47
5.1.5. Insurance.............................................47
5.1.6. Books and Records.....................................47
5.1.7. Reports...............................................48
5.1.8. Licenses..............................................48
5.1.9. Conduct of Business...................................48
5.1.10. Compliance with Laws..................................48
5.1.11. Trade Accounts........................................48
5.1.12. Use of Proceeds.......................................48
5.1.13. Loan Payments.........................................48
5.1.14. Environmental Covenant................................48
5.1.15. Change Name and Place of Business.....................49
5.1.16. Required Rate Hedging Agreements......................49
5.1.17 Fixture Filings.......................................49
5.1.18 Landlord Waiver.......................................49
5.2. Negative Covenants.............................................49
5.2.1. Dispose of Property...................................49
5.2.2. Liens and Encumbrances................................50
5.2.3. Indebtedness..........................................50
5.2.4. Investments and Acquisitions..........................51
5.2.5. Contingent Obligations................................51
5.2.6. Mergers and Consolidations............................51
5.2.7. New Subsidiaries......................................51
5.2.8. Accounting Policies...................................51
5.2.9. Change of Business....................................51
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Page
5.2.10. Benefit Plans.........................................52
5.2.11. Interest Coverage Ratio...............................52
5.2.12. Maximum Leverage Ratio................................52
5.2.13. Fixed Charge Coverage Ratio...........................53
5.2.14. Affiliates............................................53
5.2.15. Sale and Leaseback....................................53
5.2.16. Operating Leases; Rentals.............................53
5.2.17. Capital Expenditures..................................54
5.2.18. Dividends.............................................54
5.2.19. Restrictive Agreements................................54
SECTION 6. Conditions Precedent to Loans...............................54
6.1. Conditions to Initial Advance..................................54
6.1.1. Secretary's Certificates..............................55
6.1.2. Insurance.............................................55
6.1.3. Loan Documents........................................55
6.1.4. Guaranty Documents....................................55
6.1.5. Opinion of Counsel....................................55
6.1.6. UCC Searches..........................................55
6.1.7. Approval..............................................56
6.1.8. Litigation............................................56
6.1.9. Due Diligence.........................................56
6.1.10. Tender Offer..........................................56
6.1.11. Acquisition Documents.................................56
6.1.12. Pro Forma Financial Statements........................57
6.1.13. Fairness Opinion......................................57
6.1.14. Solvency Certificate..................................57
6.1.15. Environmental Matters.................................57
6.1.16. Existing Facilities...................................57
6.1.17. Legal.................................................57
6.1.18. Regulations...........................................57
6.1.19. No Default; No Material Adverse Change................57
6.1.20. Commitment Fees and Expenses..........................58
6.1.21 Money Transfer Instructions...........................58
6.1.22 Additional Documentation..............................58
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Page
6.2. Conditions to Subsequent Advances..............................58
6.2.1. No Default............................................58
6.2.2. Representations and Warranties........................58
6.2.3. Legal Matters.........................................58
6.2.4. Expenses..............................................58
6.3. General........................................................58
SECTION 7. Default.....................................................59
SECTION 8. Remedy......................................................61
8.1. Acceleration..................................................61
8.2. Deposit to Secure Reimbursement Obligations...................61
8.3. Subrogation...................................................62
8.4. Preservation of Rights........................................62
SECTION 9. The Agent...................................................62
9.1. Appointment...................................................62
9.2. Powers........................................................62
9.3. Exculpatory Provisions........................................63
9.4. Reliance by Agent.............................................63
9.5. Non-Reliance on Agent and Other Lenders.......................63
9.6. Defaults; Notices.............................................64
9.7. Rights as Lender..............................................64
9.8. Agent's Indemnification and Reimbursement.....................64
9.9. Successor Agent...............................................65
SECTION 10. Benefit of Agreement; Assignments; Participations.........65
10.1. Successors and Assigns........................................65
10.2. Participations................................................66
10.2.1. Permitted Participations; Effect....................66
10.2.2. Voting Rights.......................................66
10.2.3. Benefit of Set-off..................................66
10.3. Assignments...................................................67
10.3.1. Permitted Assignments...............................67
10.3.2. Effect; Effective Date..............................67
10.4. Registered Notes..............................................68
10.5 Dissemination of Information..................................68
10.5. Tax Treatment.................................................68
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SECTION 11. General Provisions........................................69
11.1. Waivers and Amendments........................................69
11.2. Set-off by Lenders............................................69
11.3. Survival......................................................70
11.4. Governmental Regulation.......................................70
11.5. Taxes.........................................................70
11.6. Choice of Law.................................................70
11.7. Headings......................................................70
11.8. Entire Agreement..............................................70
11.9. Expenses......................................................70
11.10. Indemnification...............................................71
11.11. Confidentiality...............................................71
11.12. Notice........................................................71
11.13. Counterparts..................................................71
11.14. Incorporation by Reference....................................72
11.15. No Joint Venture..............................................72
11.16. Severability..................................................72
11.17. Waiver of Set-off by the Borrower.............................72
11.18. Lenders Not Controlling the Borrower..........................72
11.19. Foreign Lender Withholding Tax................................72
SECTION 12. Rights of Lenders in Collateral............................73
12.1. Ratable Benefit...............................................73
12.2. Liquidation of Collateral.....................................73
12.3. Adjustments...................................................74
12.4. Application of Proceeds.......................................74
SECTION 13. Waiver of Jury Trial......................................75
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SCHEDULES
Schedule 1 - Lenders
Schedule 4.7 - Subsidiaries
Schedule 4.10
and 5.2.3 - Indebtedness
Schedule 4.13 - Litigation
Schedule 4.16
and 5.2.5 - Contingent Obligations
Schedule 5.2.2 - Permitted Liens
Schedule 5.2.4 - Existing Investments
Schedule 6.1.16 - Existing Loan Facilities
EXHIBITS
Exhibit A - Form of Facility A Term Notes
Exhibit A-1 - Form of Facility A Registered Term Notes
Exhibit B - Form of Facility B Term Notes
Exhibit B-1 - Form of Facility B Registered Term Notes
Exhibit C - Form of Facility C Revolving Notes
Exhibit D - Security Agreement
Exhibit E - Form of Guaranty
Exhibit F - Form of Guarantor Security Agreement
Exhibit G - Money Transfer Instructions
Exhibit H - Form of Assignment
Exhibit I - Notice of Assignment
Exhibit J - Compliance Certificate
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 8th day of April, 1996, is among
LILLY INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the Lenders
party hereto from time to time as listed on Schedule 1 hereto, NBD Bank, N.A., a
national banking association, as agent for the Lenders hereunder (in such
capacity, the "Agent"), and Harris Trust and Savings Bank, Comerica Bank,
Mercantile Bank of St. Louis and Bank One, Indianapolis, N.A., collectively as
co-agents (in such capacity, the "Co-Agents"). The parties agree as follows:
SECTION 1
Definitions
1.1. Defined Terms. As used herein:
"Accounts," "Chattel Paper," "Documents," "Equipment," "Fixtures," "General
Intangibles," "Goods," "Investment Property," "Instruments," "Inventory" and
"Proceeds" shall have the meaning ascribed in the Security Agreements.
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (a) acquires any going business or all or substantially all
of the assets of any Person, whether through purchase of assets, merger or
otherwise or (b) directly or indirectly acquires (in one transaction or as a
result of the most recent transaction in a series of transactions) at least a
majority (in number of votes) of the securities of a corporation which have
ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) or a
majority (by percentage or voting power) of the outstanding ownership interests
of a partnership or limited liability company.
"Acquisition Documents" means the Merger Agreement executed by and among
the Borrower, the LPAC and the Company dated as of March 4, 1996, and all other
documents ancillary thereto related to the Company Acquisition, including,
without limitation, the Disclosure Letter and the Letter Agreements referred to
therein, all without amendment, except as expressly approved in writing by the
Agent.
"Advance" means a borrowing hereunder (or renewal thereof) consisting of
the aggregate amount of the several Loans made on the same Borrowing Date (or
date of renewal) by the Lenders to the Borrower of the same Type and, in the
case of Fixed Rate Advances, for the same Eurodollar Interest Period.
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"Affiliate" means, as to any Person, any other Person (a) directly or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with, such Person, and (b) that directly or indirectly owns
more than Ten Percent (10%) of any class of the voting securities or capital
stock of or equity interests in such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means NBD Bank, N.A., in its capacity as agent for the Lenders
hereunder, and any successor Agent appointed pursuant to this Agreement.
"Agreement" means this Credit Agreement, as amended from time to time.
"Alternate Base Rate" means the greater of (a) the Prime Rate or (b) the
Federal Funds Effective Rate plus One-Half Percent (1/2%).
"Applicable Commitment Fee" means the fee to be paid by the Borrower on the
average daily unused portion of the aggregate Facility C Commitments, which fee
shall (except as otherwise set forth below) be based on the Leverage Ratio in
accordance with the table set forth below. The Leverage Ratio shall be
determined by the Agent (which determination if made in good faith shall be
conclusive absent manifest error) based on the audited and unaudited Financial
Statements delivered by the Borrower pursuant to Sections 5.1.1 (a) and (b). The
adjustment, if any, to the Applicable Commitment Fee shall be effective
beginning on the fifth Business Day after the delivery of such Financial
Statements. In the event that the Borrower shall at any time fail to furnish to
the Agent in timely fashion the Financial Statements required to be delivered
pursuant to Sections 5.1.1(a) or (b), together with the Compliance Certificate
to be delivered with respect thereto, the Applicable Commitment Fee for Level 1
shall apply until such time as such Financial Statements and Compliance
Certificate are so delivered. Notwithstanding the foregoing, for the period from
the date hereof through and including the six month anniversary thereof, the
Applicable Commitment Fee for Level 1 shall apply, regardless of the Borrower's
Leverage Ratio at such time.
Leverage Ratio Applicable Commitment Fee
Greater than But less than
or equal to
Level 1 3.5 --- 0.50%
Level 2 3.0 3.5 0.50%
Level 3 2.5 3.0 0.375%
Level 4 2.0 2.5 0.375%
Level 5 1.5 2.0 0.375%
Level 6 --- 1.5 0.250%
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"Applicable Margin" means the incremental margin to be paid by the
Borrower on Loans hereunder, which margin shall (except as otherwise set forth
below) be based on the Leverage Ratio in accordance with the table set forth
below. The Leverage Ratio shall be determined by the Agent (which determination
if made in good faith shall be conclusive absent manifest error) based on the
audited and unaudited Financial Statements delivered by the Borrower pursuant to
Sections 5.1.1 (a) and (b). The adjustment, if any, to the Applicable Margin
shall be effective beginning on the fifth Business Day after the delivery of
such Financial Statements. In the event that the Borrower shall at any time fail
to furnish to the Agent in timely fashion the Financial Statements required to
be delivered pursuant to Sections 5.1.1(a) or (b), together with the Compliance
Certificate to be delivered with respect thereto, the Applicable Margin for
Level 1 shall apply until such time as such Financial Statements and Compliance
Certificate are so delivered. Notwithstanding the foregoing, for the period from
the Closing Date through and including the six month anniversary thereof, the
Applicable Margin for Level 1 shall apply, regardless of the Borrower's Leverage
Ratio at such time.
Leverage Ratio Applicable Margin
But less than
Greater than or equal to ABR Eurodollar Rate
------------ ----------- --- ---------------
Level 1 3.5 --- 0.75% 1.75%
Level 2 3.0 3.5 0.50% 1.50%
Level 3 2.5 3.0 0.25% 1.25%
Level 4 2.0 2.5 0% 1.00%
Level 5 1.5 2.0 0% 0.75%
Level 6 --- 1.5 0% 0.50%
"Authorized Officer" means the President, Vice President and Chief
Financial Officer, and Director of Corporate Accounting or such other officer of
the Borrower imbued with authority, as evidenced by a certified resolutions of
the Borrower's Board of Directors, to perform as an Authorized Officer under
this Agreement.
"Benefitted Lender " shall have the meaning ascribed thereto in Section
12.3.
"Borrower" shall have the meaning ascribed in the preamble to this
Agreement.
"Borrowing Base" means, on the date of determination, the lesser of (a)
an amount equal to the sum of (i) Eighty Percent (80%) of the aggregate value of
the Borrower's Consolidated Eligible Domestic Accounts, plus (ii) Forty Percent
(40%) of the aggregate value of the Borrower's Consolidated Foreign Accounts,
plus (iii) Fifty-Five Percent (55%) of the Borrower's Consolidated Eligible
Domestic Inventory, plus (iv) Twenty-Seven and One-Half Percent (27-1/2%) of the
Borrower's Consolidated Eligible Foreign Inventory; or (b) Seventy-Five Million
Dollars ($75,000,000).
"Borrowing Date" means a date on which an Advance is made hereunder.
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"Business Day" means (a) with respect to any borrowing, payment or rate
selection of a Fixed Rate Loan, a day (other than a Saturday or Sunday) on which
banks generally are open in Indianapolis and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (b)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Indianapolis for the conduct of substantially all of their
commercial lending activities.
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a Consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with GAAP, exclusive of the currently
anticipated expenditure for a new plant in the approximate amount of $7,000,000
to be expended in fiscal year 1996.
"Capitalized Lease" means any lease of Property which would be
capitalized on a balance sheet of a Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" means the aggregate amount of the
obligations of a Person under Capitalized Leases which would be shown as
liabilities on a balance sheet of such Person prepared in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List under CERCLA.
"Change in Control" means (a) the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 33 1/3% or more of the outstanding shares of Class A
common stock of the Borrower, or (b) the occurrence during any period of twelve
(12) consecutive months, commencing before or after the date of this Agreement,
individuals who on the first day of such period were directors of the Borrower
(together with any replacement or additional directors who were nominated or
elected by a majority of directors then in office) cease to constitute a
majority of the Board of Directors of the Borrower.
"Changes " shall have the meaning ascribed in Section 2.14.
"Closing Date" means the date of the initial Advance hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
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"Commitments" means, collectively, the Facility C Commitment, the
Facility A Commitment and the Facility B Commitment of a Lender.
"Commitment Fee" means the fee required to be paid by the Borrower
pursuant to Section 2.6.1.
"Company" means Guardsman Products, Inc., a Delaware corporation.
"Company Acquisition" means (a) the acquisition of a majority of the
outstanding voting capital stock of the Company by LPAC by tender offer to the
shareholders of the Company, and (b) the subsequent merger of LPAC into the
Company pursuant to the Acquisition Documents.
"Company Material Adverse Effect" shall have the meaning ascribed in
the Acquisition Documents.
"Compliance Certificate" means a Compliance Certificate, in the form of
Exhibit J hereto, duly completed, executed and delivered by the chief executive
officer or chief financial officer of the Borrower from time to time pursuant to
Section 5.1.1 reflecting and certifying the calculations necessary to determine
compliance with this Agreement and further certifying that there exists no
Default or Unmatured Default under the Loan Documents, or if any Default or
Unmatured Default exists, stating the nature and status thereof.
"Consolidated" means a calculation or a determination for a Person and
its Subsidiaries made in accordance with GAAP, including principles of
consolidation.
"Consolidated Subsidiary" means any Subsidiary of the Borrower which
would be consolidated on the Borrower's Consolidated balance sheet in accordance
with GAAP.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract; provided, however, notwithstanding the above,
that the following shall not constitute a Contingent Obligation of the Borrower
or any of its Subsidiaries: (a) any guarantee or similar accommodation provided
by the Borrower or any of its Subsidiaries to or for the benefit of the Borrower
or any of its Consolidated Subsidiaries, (b) any indemnification obligations of
the Borrower or any of its Subsidiaries in respect of the officers, directors or
employees of the Borrower or such Subsidiaries, (c) any contractual
indemnification for breaches of obligations of the Borrower or any of its
Subsidiaries created pursuant to documents executed in connection with any
acquisition or merger transaction, and (d) any contractual indemnification for
breaches of obligations of the Borrower or
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any of its Subsidiaries pursuant to contracts or agreements entered into in the
ordinary course of business to which the Borrower or any of its Subsidiaries are
a party.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Default" means an event described in Section 7.
"EBIT" means, with respect to the Borrower and its Subsidiaries
determined on a Consolidated basis, the sum of (a) Net Income, plus (b) to the
extent deducted in determining Net Income, income taxes paid or accrued, minus
(c) extraordinary gains, plus (d) extraordinary losses, plus (e) interest
expense, minus (f) interest income, plus (g) to the extent not previously added,
restructuring charges related to the Company Acquisition; in each instance
determined for the trailing four (4) quarter period ending on the date of
determination, except that (aa) for the fiscal period ending August 31, 1996,
EBIT shall be determined for all purposes of this Agreement by multiplying the
sum of clauses (a) through (f) for the quarter-annual period then ending by a
factor of 4, (bb) for the fiscal period ending November 30, 1996, EBIT shall be
determined by multiplying the sum of clauses (a) through (f) for the semi-annual
period then ending by a factor of 2, and (cc) for the fiscal period ending
February 28, 1997, EBIT shall be determined by multiplying the sum of clauses
(a) through (f) for the three quarter-annual period then ending by a factor of
1.333.
"EBITDA" means the sum of (a) EBIT, plus (b) to the extent deducted in
determining Net Income, depreciation, amortization and other non-cash charges;
in each instance determined for the trailing four (4) quarter period ending on
the date of determination, except that (aa) for the fiscal period ending August
31, 1996, EBITDA shall be determined for all purposes of this Agreement by
multiplying the amount of clause (b) for the quarter-annual period then ending
by a factor of 4, (bb) for the fiscal period ending November 30, 1996, EBITDA
shall be determined by multiplying the amount of clause (b) for the semi-annual
period then ending by a factor of 2, and (cc) for the fiscal period ending
February 28, 1997, EBITDA shall be determined by multiplying the amount of
clause (b) for the three quarter-annual period then ending by a factor of 1.333.
"Eligible Assignee" means a commercial bank, financial institution or
other "accredited investor," as defined in Regulation D of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
"Eligible Domestic Accounts" means, on the date of determination, all
Accounts of the Borrower and its Consolidated Subsidiaries on which the Agent,
on behalf of the Lenders, has a valid first priority and perfected Lien and
which conform with the representations and warranties set forth in the Security
Agreements, except (a) Accounts outstanding more than ninety (90) days from the
date of invoice, (b) all Accounts of any account debtor if Twenty-Five Percent
(25%) or more of the amount owing by such account debtor is more than ninety
(90) days from the date of invoice, (c) all Accounts of any account debtor which
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Agent reasonably deems unacceptable because of the credit-worthiness of the
account debtor and Accounts of any account debtor which is the subject of
bankruptcy or similar insolvency proceedings or has made an assignment for the
benefit of creditors or whose assets have been conveyed to a receiver or a
trustee, (d) Accounts of account debtors who are also creditors of the Borrower
or its Subsidiaries to the extent of the amount owed to such account debtors,
(e) Accounts owed by account debtors who are Affiliates of the Borrower or any
of its Subsidiaries, (f) Accounts for uncompleted sales, conditional sales,
pre-billings, consignment sales, guaranteed sales, sales subject to any
repurchase obligation or return right, and sales made on a bill-and-hold,
sale-and-return or sale on approval basis, (g) progress billings other than a
portion of a sale pursuant to a purchase order which has been shipped and has
been recorded as an Account, (h) Accounts of account debtors who are
Governmental Authorities, unless proper assignments have been completed, (i)
Accounts to such extent such Accounts are subject to known payments,
adjustments, setoffs, counterclaims or credits, (j) Accounts, or any portion
thereof, which are considered uncollectible for any reason, including, without
limitation, Inventory returned, rejected, repossessed, lost or damaged, (k)
Accounts of account debtors who are non-residents of the United States, except
Accounts collateralized by an irrevocable letter of credit or guaranty issued by
a financial institution satisfactory to the Agent, and (l) Accounts with respect
to which the account debtor is located in Minnesota unless the Borrower, or one
of its Consolidated Subsidiaries, as the case may be, has received a certificate
of authority to do business and is in good standing in such State or has filed a
Notice of Business Activities Report or similar required report with the
appropriate Governmental Authority in such State, as appropriate. In the event
that a previously scheduled Eligible Account ceases to be an Eligible Account
under the above-criteria, the Agent shall notify the Borrower thereof.
"Eligible Domestic Inventory" means, on the date of determination, all
raw material and finished goods Inventory of the Borrower and its Consolidated
Subsidiaries, located in the United States, on which the Agent, on behalf of the
Lenders, has a valid first priority and perfected Lien, and which (a) conforms
with the representations and warranties set forth in the applicable Security
Agreement, (b) is not stored with any bailee, warehouseman or similar party or
located at a location not owned by the Borrower or its Subsidiaries, unless the
Agent has received an acceptable bailment agreement or landlord or
warehouseman's lien waiver, as applicable, in a form acceptable to the Agent,
and (c) which the Agent has not otherwise reasonably determined unacceptable.
Notwithstanding the foregoing, during the first 90 days after the date hereof,
Inventory located in facilities leased by the Borrower or its Subsidiaries or
located in a public warehouse, will constitute Eligible Domestic Inventory
notwithstanding the fact that the Agent has not received an acceptable bailment
agreement or landlord or warehouseman's lien waiver, as applicable.
"Eligible Foreign Accounts" means Accounts that are otherwise Eligible
Domestic Accounts, except that the account debtor thereof is not a resident of
the United States, but are not otherwise included in the calculation of Eligible
Domestic Accounts.
"Eligible Foreign Inventory" means, on the date of determination, all
raw material and finished goods Inventory of the Borrower and its Consolidated
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Subsidiaries, located outside the United States and located on premises owned or
leased by the Borrower or any of its Consolidated Subsidiaries, and which the
Agent has not otherwise reasonably determined unacceptable.
"Environmental Laws" means all laws, statutes, ordinances, rules,
regulations, permits, licenses, judgments, writs, injunctions, decrees, orders,
awards and standards promulgated by any Governmental Authority concerning the
protection of, or regulation of the discharge of substances into, the
environment or concerning the health or safety of persons with respect to
environmental hazards, and includes, without limitation, the Hazardous Materials
Transportation Act, 42 U.S.C. ss.1801 et seq. CERCLA, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss.9601 et
seq., Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and Solid and Hazardous Waste Amendments of 1984, 42 U.S.C.
ss.ss.6901 et seq., Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1977, 33 U.S.C. ss.ss.1251 et seq., Clean Air Act of 1966, as
amended, 42 U.S.C. ss.ss.7401 et seq., Toxic Substances Control Act of 1976, 15
U.S.C. ss.ss.2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. ss.7401 et seq., Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. ss.ss.651 et seq., Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. ss.ss.11001 et seq., National Environmental
Policy Act of 1975, 42 U.S.C. ss.ss.4321 et seq., Safe Drinking Water Act of
1974, as amended, 42 U.S.C. ss.ss.300(f) et seq., and any similar or
implementing state law, and all amendments, rules, and regulations promulgated
thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means a Person which, together with another Person,
would be treated as a single employer under ERISA.
"Eurodollar Advance" means an Advance which bears interest by reference
to the Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, the rate determined by the Agent to be
the arithmetic average of the rates reported to the Agent by each Reference Bank
as the rate at which each Reference Bank offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
11:00A.M. (London time) two Business Days prior to the first day of such
Eurodollar Interest Period, in the approximate amount of such Reference Bank's
relevant Eurodollar Loan and having a maturity approximately equal to such
Eurodollar Interest Period. If any Reference Bank fails to provide such
quotation to the Agent, then the Agent shall determine the Eurodollar Base Rate
on the basis of the quotations of the remaining Reference Bank(s).
"Eurodollar Interest Period" means, with respect to a Eurodollar
Advance, a period of one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on the day which corresponds numerically to such date one, two,
three or six months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third, or sixth succeeding
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month, such Eurodollar Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month. If a Eurodollar Interest
Period would otherwise end on a day which is not a Business Day, such Eurodollar
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new calendar
month, such Eurodollar Interest Period shall end on the immediately preceding
Business Day.
"Eurodollar Loan" means a Loan which bears interest by reference to the
Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the quotient of (a) the Eurodollar Base
Rate applicable to such Eurodollar Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Eurodollar
Interest Period.
"Excess Cash Flow" means, for any period of determination (except for
the Borrower's fiscal year ending November 30, 1996) for the Borrower and its
Subsidiaries on a Consolidated basis (a) the sum of (i) Net Income, plus (ii)
depreciation, amortization and other non-cash charges; minus (b) the sum of (i)
Capital Expenditures, (ii) principal payments made on all Indebtedness for
borrowed money (exclusive of repayment of Facility C Revolving Loans and
exclusive of mandatory prepayments of Excess Cash Flow during such period made
pursuant to Section 2.3.4), plus (or minus) (iii) any increase (or decrease) (as
the case may be), as of the last day of a fiscal year of the Borrower from the
last day of the previous fiscal year of the Borrower, in the excess of current
assets other than cash and marketable securities over current liabilities other
than current maturities of long-term Indebtedness, and plus (iv) any cash
dividends paid by the Borrower, provided that, for the Borrower's fiscal year
ending November 30, 1996, (aa) the components of Excess Cash Flow set forth in
clauses (a)(i) and (ii) and (b)(i), (ii) and (iv) shall be calculated for the
period from the Closing Date through and including November 30, 1996 and (bb)
the component of Excess Cash Flow set forth in clause (b)(iii) shall be
calculated with respect to any increase or decrease in such amounts from the
first Business Day after (and giving effect to) the consummation of the merger
of LPAC into the Company until November 30, 1996.
"Facilities" means the Facility A Commitments, the Facility B
Commitments, the Facility C Commitments, any Letters of Credit, and any other
credit facility provided by the Lenders from time to time pursuant to this
Agreement.
"Facility A Advance" means an Advance under the Facility A Commitment.
"Facility A Commitment" means, as to a Lender, the amount so designated
opposite such Lender's name on Schedule 1 hereto, as amended from time to time
pursuant to the terms hereof, and the "Facility A Commitments" means the sum of
the Facility A Commitments.
"Facility A Lenders" means the Lenders making the Facility A
Commitments.
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"Facility A Term Loan" means, with respect to a Facility A Lender, such
Lender's portion of the outstanding Facility A Advances.
"Facility A Term Notes" means, collectively, the Facility A Term Notes,
each substantially in the form of Exhibit A hereto or, in the case of a
Registered Note, Exhibit A-1 hereto, duly executed by the Borrower to the
respective Lenders to evidence the Facility A Term Loans, including any
renewals, extensions, replacements and modifications thereof.
"Facility B Advance" means an Advance under the Facility B Commitment.
"Facility B Commitment" means, as to a Lender, the amount so designated
opposite such Lender's name on Schedule 1 hereto, as amended from time to time
pursuant to the terms hereof, and "Facility B Commitments" means the sum of the
Facility B Commitments.
"Facility B Lenders" means the Lenders making the Facility B
Commitments.
"Facility B Term Loan" means, with respect to Facility B Lender, such
Lender's portion of the outstanding Facility B Advances.
"Facility B Term Notes" means, collectively, the Facility B Term Notes,
each substantially in the form of Exhibit B hereto or, in the case of a
Registered Note, Exhibit B-1 hereto, duly executed by the Borrower to the
respective Lenders to evidence the Facility B Term Loans, including any
renewals, extensions, replacements and modifications thereof.
"Facility C Advance" means an Advance under the Facility C Commitment.
"Facility C Commitment" means, as to a Lender, the amount so designated
opposite such Lender's name on Schedule 1 hereto, as the same may be amended
from time to time pursuant to the terms hereof, and "Facility C Commitments"
means the sum of the Facility C Commitments.
"Facility C Lender" means the Lenders making the Facility C Commitments.
"Facility C Revolving Loan" means, with respect to a Facility C Lender,
such Lender's portion of the outstanding Facility C Advances.
"Facility C Revolving Notes" means, collectively, the Facility C
Revolving Notes, each substantially in the form of Exhibit C hereto, duly
executed by the Borrower to the respective Lenders to evidence the Facility C
Revolving Loans, including any renewals, extensions, replacements and
modifications thereof.
"Facility C Termination Date" means May 31, 2002 or any earlier date on
which the Facility C Commitments are reduced to zero or otherwise terminated
pursuant to the terms hereof.
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"Federal Funds Effective Rate" shall mean the per annum interest rate
that is equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York; or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 A.M.
(Indianapolis time) on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by the Agent in its sole
discretion; such interest rate to be rounded up, if necessary, to the nearest
whole multiple of One One-Hundredth of One Percent (1/100th of 1%).
"Fee Letter" means that certain letter agreement issued by the Agent,
and First Chicago Capital Markets, Inc. dated February 8, 1996, accepted by the
Borrower on February 15, 1996.
"Financial Contract" of a Person means (a) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, (b) any agreements, devices or
arrangements providing for payments related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to, interest rate
exchange agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate options, or
(c) to the extent not otherwise included in the foregoing, any Rate Hedging
Agreement.
"Financial Statements" means, as the context may require, (a)(i) the
Consolidated balance sheet of the Borrower and its Subsidiaries as of November
30, 1995, and their Consolidated statements of income and cash flows for the
period then ended and (ii) the Consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1995 and their Consolidated statements of income
and cash flows for the periods then ended, and/or (b) the similar Consolidated
(and consolidating) Financial Statements for the Borrower and its Subsidiaries
furnished from time to time pursuant to Section 5.1.1; in all cases, together
with any accompanying notes to such Financial Statements, and any other
documents or data furnished in connection therewith.
"Fixed Charge Coverage Ratio" means, with respect to the Borrower and
its Subsidiaries determined on a Consolidated basis, the ratio of (a)(i) EBITDA
minus (ii) Capital Expenditures, to (b) the sum of (i) interest expense, plus
(ii) scheduled principal payments in respect of Indebtedness paid in such
period, plus (iii) taxes paid, plus (iv) Rentals, plus (v) dividends paid in
such period, all as determined on the last day of each fiscal quarter of the
Borrower by reference to the Financial Statements; in each instance determined
for the trailing four (4) quarter period ending on the date of determination,
except that (aa) for the fiscal period ending August 31, 1996, the foregoing
items (other than EBITDA) shall be determined by multiplying each of the same as
determined for the quarter-annual period then ending by a factor of 4, (bb) for
the fiscal period ending November 30, 1996, the foregoing items (other than
EBITDA) shall be determined by multiplying each of the same as determined for
the semi-annual period then ending by a factor of 2, and (cc) for the fiscal
period ending February 28, 1997, the foregoing items (other than EBITDA) shall
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be determined by multiplying each of the same as determined for the three
quarter-annual period then ending by a factor of 1.333.
"Fixed Rate Loan" means any Loan, the interest on which is determined
by reference to the Eurodollar Rate.
"Fixed Rate Option" means the option of the Borrower to have the
interest on any Advance determined by reference to the Eurodollar Rate.
"Fixed Rate Option Notice" shall have the meaning ascribed in Section
2.5(b).
"Floating Rate Loan" means any Loan, the interest on which is
determined by reference to the Alternate Base Rate.
"Foreign Subsidiaries" means all Subsidiaries of the Borrower which are
organized or incorporated outside the United States of America including any
United States territories or possessions.
"Funded Indebtedness" of a Person means all outstanding Indebtedness of
such Person for borrowed money.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time as promulgated by the Financial
Standards Accounting Board and recognized and interpreted by the American
Institute of Certified Public Accountants.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government, including, without limiting the generality of the foregoing, any
agency, body, commission, court or department thereof, whether federal, state,
local or foreign.
"Guarantors" means, collectively, all U.S. Subsidiaries of the Borrower
from time to time, jointly and severally.
"Guarantor Security Agreement" means each Pledge and Security
Agreement, in substantially the form of Exhibit F hereto, duly executed by a
Guarantor to the Agent to secure its Guaranty, including any amendment or
modification.
"Guaranty" means each Subsidiary Guaranty, in substantially the form of
Exhibit E hereto, duly executed by a Guarantor to the Agent in connection with
the Obligations, including any modification, reaffirmation or replacement
thereof.
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"Guaranty Documents" means, collectively, all Guaranties, all Guarantor
Security Agreements and all other documents and instruments executed by any
Guarantor to govern, evidence or secure its Guaranty.
"Hazardous Materials" 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 federal, state or local law, regulation,
ordinance or requirement (including consent decrees and administrative orders)
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, all as amended or
hereafter amended.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of a Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (d) obligations which are evidenced by notes, acceptances, or other
instruments, (e) Capitalized Lease Obligations, (f) Contingent Obligations, (g)
reimbursement or other obligations in connection with letters of credit, (h)
obligations in connection with Sale and Leaseback Transactions, (i) any Net
Mark-To-Market Exposure of Rate Hedging Agreements or other Financial Contracts,
and (j) any other transaction which is the functional equivalent of, or takes
the place of borrowing, but which would not constitute a liability on a balance
sheet of such Person prepared in accordance with GAAP.
"Interest Coverage Ratio" means, with respect to the Borrower and its
Subsidiaries determined on a Consolidated basis, the ratio of (a) EBIT, divided
by (b) interest expense; in each instance determined for the trailing four (4)
quarter period ending on the date of determination, except that (aa) for the
fiscal period ending August 31, 1996, interest expense shall be determined by
multiplying interest expense for the quarter-annual period then ending by a
factor of 4, (bb) for the fiscal period ending November 30, 1996, the Interest
Coverage Ratio shall be determined by multiplying interest expense for the
semi-annual period then ending by a factor of 2, and (cc) for the fiscal period
ending February 28, 1997, the Interest Coverage Ratio shall be determined by
multiplying interest expense for the three quarter-annual period then ending by
a factor of 1.333.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
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"Lender" means each financial institution listed on Schedule 1 hereto,
as well as any Person which hereafter becomes a "Lender" hereunder pursuant to
Section 10.3.
"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, Subsidiary or Affiliate of such Lender or the Agent.
"Letter of Credit Application" or "Application" means an Application
for Standby Letter of Credit, in the form prescribed by NBD, duly executed by
the Borrower in favor of NBD, from time to time, to govern a Letter of Credit
issued pursuant to this Agreement, as any such Application may be amended from
time to time.
"Letters of Credit" means standby letters of credit now or hereafter
issued by NBD from time to time at the request of, and for the account of, the
Borrower issued pursuant to this Agreement.
"Leverage Ratio" means, with respect to the Borrower and its
Subsidiaries determined on a Consolidated basis as of the last day of any fiscal
quarter, the ratio of (a) total Indebtedness (exclusive of any Net
Mark-to-Market Exposure of Rate Hedging Agreements or other Financial
Contracts), to (b) EBITDA.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment for the purpose of security, deposit arrangement for
the purpose of security , encumbrance or preference, priority or other security
agreement of any kind or nature whatsoever (including, without limitation, the
interest of a vendor or lessor under any conditional sale, Capitalized Lease or
other title retention agreement).
"Loan Documents" means, collectively, this Agreement, the Notes, the
Security Agreement, any Letter of Credit Applications, any UCC Financing
Statements, any Financial Contracts, and any other documents or instruments now
or hereafter executed and delivered by or on behalf of the Borrower to any
Lender or the Agent in order to evidence, govern or secure the Obligations.
"Loans" means, collectively, the Facility A Term Loans, the Facility B
Term Loans and the Facility C Revolving Loans.
"LPAC" means LP Acquisition Corporation, a Delaware corporation, a
Wholly-Owned Subsidiary of the Borrower.
"Material Adverse Effect" means any event, circumstance or condition
that could reasonably be expected to have a material adverse effect on (a) the
business, operations, financial condition, Properties or prospects of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower
to perform Obligations, (c) the validity or enforceability of any of the Loan
Documents or Acquisition Documents, or any material provision thereof or any
transaction contemplated thereby, or (d) the rights and remedies of the Lenders
and the Agent under any of the Loan Documents.
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"Multi-employer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NBD" means NBD Bank, N.A., a national banking association, having its
principal offices in Indianapolis, Indiana, in its individual capacity.
"Net Income" means, for any period, the net income of the Borrower and
its Consolidated Subsidiaries after deductions for income taxes, determined on a
Consolidated basis in accordance with GAAP and as shown on the Financial
Statements.
"Net Mark-to-Market Exposure" of a Person means, as of any date of
determination, the excess (if any) of all unrealized losses over all unrealized
profits of such Person arising from Rate Hedging Agreements, where "unrealized
losses" means the fair market value of the cost to such Person of replacing such
Rate Hedging Agreement as of the date of determination (assuming the Rate
Hedging Agreement were to be terminated as of that date), and "unrealized
profits" means the fair market value of the gain to such Person of replacing
such Rate Hedging Agreement as of the date of determination (assuming such Rate
Hedging Agreement were to be terminated as of that date).
"Non U.S. Lender" means any Lender (including each Purchaser) that is
not (i) a citizen or resident of the United States of America, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States of America or any state thereof, or (iii) any estate
or trust that is subject to United States Federal Income taxation regardless of
the source of its income.
"Notes" means, collectively, the Facility C Revolving Notes, the
Facility A Term Notes, and the Facility B Term Notes.
"Notice of Assignment" shall have the meaning ascribed in Section 10.3.2.
"Obligations" means all of the unpaid principal amount of, and accrued
interest on, the Notes, actual and contingent reimbursement obligations under
Letters of Credit, the Commitment Fees, Agent fees, Letter of Credit fees,
obligations of the Borrower to a Lender or an Affiliate of a Lender or the Agent
in respect of any Rate Hedging Obligations with respect to Rate Hedging
Agreements entered into with a Lender or the Agent at a time such Lender or such
Agent was a party to this Agreement, notwithstanding such Lender or Agent later
ceases to be a party to this Agreement, all other obligations, indemnities,
reimbursements and liabilities of the Borrower to the Lenders or to any Lender
or to the Agent or any indemnified party hereunder in connection with the
Facilities of every type and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, or
otherwise arising under the Loan Documents whether or not contemplated by the
Borrower or the Lenders as of the date hereof, including, without limitation,
all reasonable costs of collection and enforcement of any and all thereof,
including reasonable attorneys' fees.
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"Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Participants" shall have the meaning ascribed thereto in Section 10.2.1.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to ERISA, or any successor entity.
"Permissible Increment" means a minimum principal amount of Five
Million Dollars ($5,000,000) and minimum increments of One Million Dollars
($1,000,000) above Five Million Dollars ($5,000,000).
"Permitted Liens" shall have the meaning ascribed in Section 5.2.2.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization and a Governmental Authority.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Plan Assets" shall have the meaning ascribed in ERISA.
"Prime Rate" means the variable per annum rate of interest established
and quoted by NBD from time to time as its "prime rate," as adjusted on the
effective date of each change in such established and quoted rate; provided that
such prime rate shall not necessarily be representative of the rate of interest
actually charged by NBD on any loan or class of loans.
"Property" of a Person means any and all Property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Pro Rata Share" means, as to any Lender, when used with reference to
an aggregate or total amount, an amount equal to the product of (a) such
aggregate or total amount, multiplied by (b) a fraction, the numerator of which
shall be the sum of such Lender's outstanding Facility A and B Loans and the sum
of such Lender's Facility C Commitment (or, if the Facility C Commitments have
been terminated, such Lender's outstanding Facility C Loans) and the denominator
of which shall be the sum of the total outstanding Facility A and B Loans and
the total Facility C Commitments.
"Purchasers" shall have the meaning ascribed thereto in Section 10.3.1.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
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exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Reference Lenders" means NBD Bank, N.A., First Union National Bank of
North Carolina and Credit Lyonnais Chicago Branch.
"Register" shall have the meaning ascribed thereto in Section 10.4.
"Registered Note" shall mean promissory notes that have been issued in
registered form as provided by Section 10.4 hereof.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing or
carrying margin stock applicable to member banks of the Federal Reserve System.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property having an original term (including any
required renewals or any renewals at the option of the lessor or lessee) of one
year or more.
"Replaced Lender" and "Replacement Lender" shall have the respective
meanings ascribed thereto in Section 11.20.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
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"Required Lenders" means Lenders in the aggregate having at least
Sixty-Six and Two-Thirds Percent (66-2/3%) of the sum of (a) the outstanding
Loans under Facilities A and B and (b) the aggregate Facility C Commitments or,
if the Facility C Commitments have been terminated, the outstanding Loans and
participations in Letters of Credit under Facility C.
"Reserve Requirement" means, as to any Fixed Rate Loan for any
Eurodollar Interest Period, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves, including any marginal,
supplemental, or emergency reserves, are required to be maintained during such
Eurodollar Interest Period under Regulation D by member banks of the Federal
Reserve System against "Eurocurrency liabilities" (as such term is used in
Regulation D), but without the benefit or credit of any prorations, exemptions,
or offsets that might otherwise be available from time to time under Regulation
D. Without limiting the generality or effect of the foregoing, the Reserve
Requirement shall reflect any reserves required to be maintained by the Lenders
against (a) any category of liabilities that includes deposits by reference to
which the Eurodollar Rate is to be determined or (b) any extensions of credit or
other assets of any category that includes Fixed Rate Loans.
"Risk-Based Capital Guidelines" shall have the meaning ascribed in
Section 2.14.
"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Security Agreement" means the Pledge and Security Agreement, in
substantially the form of Exhibit D hereto, duly executed by the Borrower to the
Agent to secure the Obligations, including any amendment or modification
thereof.
"Security Agreements" means, collectively, the Security Agreement and
each Guarantor Security Agreement.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which as at the date of determination
(a) represents more than 10% of the Consolidated total assets of the Borrower
and its Subsidiaries determined in accordance with GAAP
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by reference to the then most recent Financial Statements furnished pursuant to
Section 5.1.1 , or (b) is responsible for more than 10% of the Consolidated net
sales or of the Consolidated Net Income of the Borrower and its Subsidiaries
determined in accordance with GAAP for the four fiscal quarter period ending on
the date of the Financial Statements referred to in clause (a) above.
"Total Commitments" means the sum of the Facility C Commitments, the
Facility A Commitments and the Facility B Commitments.
"Transferee" shall have the meaning ascribed in Section 10.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or Fixed Rate Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means any event which with notice, or lapse of time
or both, would constitute a Default.
"U.S. Subsidiaries" means all Subsidiaries of the Borrower which are
organized or incorporated within the United States of America or within any
United States territories or possessions.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary, all of
the outstanding voting securities (other than director's qualifying shares) of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or one or more Wholly-Owned Subsidiaries of such Person, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization, 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
1.2. Rules of Construction. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the defined terms and shall
be construed accordingly. Use of the terms "herein," "hereof" and "hereunder"
shall be deemed references to this Agreement in its entirety and not to the
Section clause in which such term appears. References to "Sections" and
"subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided.
1.3. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP consistent with those applied in the
preparation of the Financial Statements.
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SECTION 2
Credit
2.1. Commitments.
2.1.1. Facility A Commitment. Subject to the terms and
conditions of this Agreement, each Facility A Lender severally agrees
to make its Facility A Term Loan to the Borrower in the amount of its
Facility A Commitment. The Facility A Term Loans shall be made by the
Facility A Lenders ratably pursuant to their respective Facility A
Commitments and shall be evidenced by the Facility A Term Notes.
2.1.2 Facility B Commitment. Subject to the terms and
conditions of this Agreement, each Facility B Lender severally agrees
to make its Facility B Term Loan to the Borrower in the amount of its
Facility B Commitment. The Facility B Term Loans shall be made by the
Facility B Lenders ratably pursuant to their respective Facility B
Commitments and shall be evidenced by the Facility B Term Notes.
2.1.3. Facility C Commitment. Subject to the terms and
conditions of this Agreement, each Facility C Lender severally agrees
to make Facility C Revolving Loans to the Borrower from time to time
prior to the Facility C Termination Date in a principal amount not in
excess of the lesser of (a) the unborrowed portion of such Lender's
Facility C Commitment on the borrowing date, or (b) the unborrowed
portion of an amount which bears the same proportion to the Borrowing
Base as of the borrowing date which such Lender's Facility C Commitment
bears to the aggregate of the Facility C Commitments of the Facility C
Lenders; provided, however, the borrowing limitation imposed by the
foregoing clause (b) shall not be in effect at such times when the
Applicable Margin is at Level 6 pricing. Prior to the Facility C
Termination Date, the Borrower may use the Facility C Commitments by
borrowing, prepaying the Facility C Revolving Loans, in whole or in
part, and reborrowing, all in accordance with the terms and conditions
hereof. The Facility C Revolving Loans shall be evidenced by the
Facility C Revolving Notes.
2.2. Interest.
2.2.1. Facility A Term Loans. Prior to maturity or Default,
the principal amount of the Facility A Term Loans outstanding from time
to time shall bear interest at a per annum rate equal to the Alternate
Base Rate plus the Applicable Margin, except that at the option of the
Borrower, exercised as provided in Section 2.5, interest may accrue
prior to maturity on any Permissible Increment of the Facility A Term
Loans at a per annum rate equal to the Eurodollar Rate plus the
Applicable Margin. At the expiration of the Eurodollar Interest Period
on such Permissible Increment, unless, in each case, the Borrower
selects the Fixed Rate Option as provided in Section 2.5, interest
shall again accrue at the Alternate Base Rate plus the Applicable
Margin. Notwithstanding anything to the contrary contained herein and
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notwithstanding the then-current Leverage Ratio, Level 1 pricing shall
be in effect on Facility A Term Loans until the six month anniversary
of the Closing Date.
2.2.2. Facility B Term Loans. Prior to maturity or Default,
the principal amount of the Facility B Term Loans outstanding from time
to time shall bear interest at a per annum rate equal to the Alternate
Base Rate plus One and One-Quarter Percent (1-1/4%), except that at the
option of the Borrower, exercised as provided in Section 2.5, interest
may accrue prior to maturity on any Permissible Increment of the
Facility B Term Loans at a per annum rate equal to the Eurodollar Rate
plus Two and One-Quarter Percent (2-1/4%). At the expiration of the
Eurodollar Interest Period on such Permissible Increment, unless, in
each case, the Borrower selects the Fixed Rate Option as provided in
Section 2.5, interest shall again accrue at the Alternate Base Rate
plus One and One-Quarter Percent (1-1/4%).
2.2.3. Facility C Revolving Loans. Prior to maturity or
Default, the principal amount of the Facility C Revolving Loans
outstanding from time to time shall bear interest at a per annum rate
equal to the Alternate Base Rate plus the Applicable Margin, except
that at the option of the Borrower, exercised as provided in Section
2.5, interest may accrue prior to maturity on any Permissible Increment
of the Facility C Revolving Loans at a per annum rate equal to the
Eurodollar Rate plus the Applicable Margin. At the expiration of each
Eurodollar Interest Period on such Permissible Increment, unless, in
each case, the Borrower selects the Fixed Rate Option as provided in
Section 2.5, interest shall again accrue at the Alternate Base Rate
plus the Applicable Margin. Notwithstanding anything to the contrary
contained herein and notwithstanding the then-current Leverage Ratio,
Level 1 pricing shall be in effect on Facility C Term Loans until the
six month anniversary of the Closing Date.
2.2.4. General. Interest shall be due and payable for the
exact number of days principal is outstanding and shall be calculated
on the basis of a three hundred sixty (360) day year, except in the
case of Floating Rate Loans which shall be calculated on the basis of a
three hundred sixty-five/three hundred sixty-six (365/366) day year.
Any change in the interest rates occasioned by a change in the Prime
Rate shall be effective on the same day as the change in the Prime
Rate. After the maturity of any Facility, whether by acceleration or
otherwise, and while and so long as there shall exist any uncured
Default under any Facility, the Facilities shall bear interest at a per
annum rate equal to the Alternate Base Rate plus Two Percent (2%).
2.3. Payments of Principal and Interest.
2.3.1. Facility A Term Loans. Interest only on the outstanding
Advances of the Facility A Term Loans from time to time shall be due
and payable (a) on the last day of each fiscal quarter of the Borrower
with respect to each Floating Rate Loan, and (b) on the last day of an
applicable Eurodollar Interest Period with respect to each Fixed Rate
Loan and, in the case of an Eurodollar Interest Period greater than
three (3) months, at three (3) month intervals after the first day of
such Eurodollar Interest Period. Commencing on August 31,
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<PAGE>
1996, and continuing on the last day of each November, February, May
and August thereafter, the Borrower shall pay installments of principal
on the Facility A Term Loans in accordance with the following schedule:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Installment Payment Dates Quarterly Principal Installment Due
<S> <C>
- -----------------------------------------------------------------------------------------------
August 31, 1996 through May 31, 1997 $ 3,500,000
- -----------------------------------------------------------------------------------------------
August 31, 1997 through May 31, 1998 $ 5,500,000
- -----------------------------------------------------------------------------------------------
August 31, 1998 through May 31, 1999 $ 7,000,000
- -----------------------------------------------------------------------------------------------
August 31, 1999 through May 31, 2000 $ 8,500,000
- -----------------------------------------------------------------------------------------------
August 31, 2000 through May 31, 2001 $ 9,250,000
- -----------------------------------------------------------------------------------------------
August 31, 2001 through May 31, 2002 $ 10,000,000
- -----------------------------------------------------------------------------------------------
TOTAL $ 175,000,000
- -----------------------------------------------------------------------------------------------
</TABLE>
2.3.2. Facility B Term Loans. Interest only on the outstanding
Advances of the Facility B Term Loans from time to time shall be due
and payable (a) on the last day of each fiscal quarter of the Borrower
with respect to each Floating Rate Loan, and (b) on the last day of an
applicable Eurodollar Interest Period with respect to each Fixed Rate
Loan and, in the case of an Eurodollar Interest Period greater than
three (3) months, at three (3) month intervals after the first day of
such Eurodollar Interest Period. Commencing on August 31, 1996, and
continuing on the last day of each November, February, May and August
thereafter, the Borrower shall pay installments of principal on the
Facility B Term Loans in accordance with the following schedule:
- ------------------------------------------------------------------------------
Installment Payment Dates Quarterly Principal Installment Due
- ------------------------------------------------------------------------------
August 31, 1996 through May 31, 2002 $ 125,000
- ------------------------------------------------------------------------------
August 31, 2002 through August 31, 2003 $ 7,833,333
- ------------------------------------------------------------------------------
November 30, 2003 $ 7,833,335
- ------------------------------------------------------------------------------
TOTAL $ 50,000,000
- ------------------------------------------------------------------------------
-22-
<PAGE>
2.3.3. Facility C Revolving Loans. Interest only on the
outstanding Advances of the Facility C Revolving Loans from time to
time shall be due and payable throughout the term of the Facility C
Commitments (a) on the last day of each fiscal quarter of the Borrower
with respect to each Floating Rate Loan, and (b) on the last day of an
applicable Eurodollar Interest Period with respect to each Fixed Rate
Loan and, in the case of an Eurodollar Interest Period greater than
three (3) months, at three (3) month intervals after the first day of
such Eurodollar Interest Period. From time to time, during the term of
the Facility C Commitments, the Borrower shall make principal payments
in an amount sufficient that the outstanding principal balance of the
Facility C Revolving Loans shall not exceed the Borrowing Base unless
the Applicable Margin is at Level 6 pricing. The entire principal
balance of the Facility C Revolving Loans, together with all accrued
and unpaid interest thereon, and all fees and charges payable in
connection therewith, shall be due and payable on May 31, 2002.
2.3.4. Mandatory Prepayment of Facility A and B Term Loans. In
addition to the principal payments required pursuant to 2.3.1 and
2.3.2, except as otherwise provided below in this Section, the Borrower
shall make the following additional principal payments to be applied as
mandatory prepayments:
(a) On March 15 of each year, the Borrower shall make
a principal payment in respect of the Facility A Term Loans
and the Facility B Term Loans, in an amount equal to (i)
Eighty Percent (80%) of Excess Cash Flow for the immediately
preceding fiscal year in the event the Borrower's Leverage
Ratio as of the end of such preceding fiscal year is equal to
or greater than 3.0 to 1.0, or (ii) Fifty Percent (50%) of
Excess Cash Flow for the immediately preceding fiscal year in
the event the Borrower's Leverage Ratio as of the end of such
preceding fiscal year is less than 3.0 to 1.0; provided that,
if the Leverage Ratio as reflected on the Financial Statements
furnished by the Borrower pursuant to Section 5.1.1 (a) would
qualify the Borrower for Level 6 pricing for purposes of
calculating the Applicable Margin, no mandatory prepayment
shall be required for such year under this Section 2.3.4(a).
(b) The Borrower shall make a principal payment in
respect of the Facility A Term Loans and the Facility B Term
Loans in an amount and at such times as required by Section
5.2.1(b).
(c) Upon the Borrower's or any Subsidiary's receipt
of the proceeds from the issuance of any subordinated
Indebtedness, common stock, preferred stock, warrant, or other
equity (excluding any stock issued pursuant to stock option or
other employee benefit plans which generate proceeds not
exceeding $2,000,000 in the aggregate during any fiscal year
and excluding proceeds received (i) from the Borrower from the
issuance of Indebtedness, stock, warrants and other equity to
a Subsidiary or (ii) from any Subsidiary from the issuance of
Indebtedness, stock, warrants and other equity to the Borrower
-23-
<PAGE>
or its Subsidiaries), the Borrower shall make a mandatory prepayment
equal to (i) in the case of indebtedness, 100% and (ii) in the case of
stock, warrants and other equity, 75%, of the proceeds thereof.
All such mandatory prepayments described in clauses (a), (b) and (c) of
this Section shall be applied ratably among the Facility A Lenders and
the Facility B Lenders, provided, however, that each Lender holding
Facility A or B Term Loans may decline to accept any mandatory
prepayment of either or both of its Facility A or B Term Loans, subject
to the provisions of this Section 2.3.4 below. Any mandatory
prepayments which are not accepted by the Facility A Lenders shall be
paid to the Facility B Lenders (other than any such Lender that has
declined the applicable prepayment of its Facility B Term Loan) until
the Facility B Term Loans are paid in full. Any mandatory prepayments
which are not accepted by the Facility B Lenders shall be paid to the
Facility A Lenders (other than any such Lender that has declined the
applicable prepayment of its Facility A Term Loan) until the Facility A
Term Loans are paid in full. If all of the Lenders under the Facility A
Term Loans and the Facility B Term Loans decline a mandatory
prepayment, or if the outstanding principal balance of the Facility A
Term Loans and the Facility B Term Loans held by Lenders who are
willing to accept a prepayment is less than the aggregate amount of
such prepayment, then the amount of such prepayment, to the extent it
exceeds the aggregate amount to be applied to the Facility A Term Loans
and the Facility B Term Loans, shall be applied ratably to the Facility
A and Facility B Term Loans of all Facility A and B Lenders. Partial
prepayments of the Facility A Term Loans and/or Facility B Term Loans
pursuant to this Section 2.3.4 shall be applied against installments of
principal in the inverse order of their maturity and shall not
otherwise affect the next regularly scheduled principal payments due
thereunder.
2.3.5. Optional Prepayment. Each Loan may be prepaid, without
premium, upon one Business Day notice to the Agent, except as set forth
in Section 2.16, or penalty, in Permissible Increments. Partial
prepayments of the Term Facility A and B Loans pursuant to this Section
2.3.5 shall be applied against regular quarterly installments of
principal in the inverse order of their maturity and shall not
otherwise affect the next regularly scheduled principal payment due
thereunder.
2.3.6. Taxes.
(a) All payments by the Borrower under this Agreement or the
Notes shall be made free and clear of, and without deduction or
withholding for, any present or future income, stamp or other taxes,
levies, duties, imposts, charges or fees or any related penalties,
interest or other liabilities ("Taxes"). If any Taxes are required to
be deducted or withheld from any amount payable to the Agent or any
Lender under this Agreement or the Notes, the Borrower shall pay
additional amounts so that the amount received by the Agent or such
Lender after the deduction of such Taxes (including Taxes on such
additional amounts) equals the amount that the Agent or such Lender
would have received if no Taxes had been deducted. The Borrower shall
pay to the appropriate taxing authority all Taxes required to be
deducted or withheld. Within 30 days after paying any such Taxes, the
Borrower shall
-24-
<PAGE>
deliver to the Agent the original or a certified copy of the receipt
for such payment. The Borrower shall not be required to pay additional
amounts to the Agent or a Lender on account of any Taxes, including,
but not limited to, income taxes, imposed solely by reason of (i) a
present or past connection between such person and the jurisdiction
imposing such Taxes (except a connection arising solely from the
execution, delivery, performance, enforcement of or the receipt of
payments under this Agreement or the Notes) or (ii) a failure of such
Person to comply with the requirements of subsection (b).
(b) Any Agent and each Lender that is not incorporated under
the laws of the United States of America or a state thereof shall:
(i) deliver to the Borrower by the date when the
Agent or the Lender becomes a party to this Agreement (A)(1)
two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 certifying that such Agent or Lender
is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States
federal income taxes and (2) a duly completed United States
Internal Revenue Service Form W-8 or W-9 certifying that such
Agent or Lender is entitled to an exemption from United States
backup withholding tax or (B) in the case of an Agent or
Lender not treated as a bank for regulatory, tax or other
legal purposes in any jurisdiction, (1) a certificate under
penalties of perjury that such Agent or Lender is not (x) a
bank, a shareholder of the Borrower or a controlled foreign
corporation related to the Borrower for purposes of section
881(c)(3) of the Code or (y) a conduit entity within the
meaning of United States Treasury Regulations section 1.881-3
and (2) a duly completed Internal Revenue Service Form W-8;
(ii) deliver to the Borrower a renewed form or
certificate (or applicable successor) upon reasonable request
of the Borrower unless such Agent or Lender is not entitled to
deliver a renewed form or certificate due to change in
applicable law or in the interpretation or administration of
applicable law; and
(iii) deliver to the Borrower a further form or
certificate (or applicable successor) upon the occurrence of
any event requiring a change in a form or certificate
previously delivered and notify the Borrower upon the
occurrence of any event requiring the withdrawal of a form or
certification previously delivered.
(c) The Borrower shall indemnify the Agent and each Lender
against any Taxes imposed on (and any related expenses reasonably
incurred by) the Agent or such Lender on account of the execution,
delivery, performance or enforcement of or the receipt of payments
under this Agreement or the Notes other than Taxes imposed solely by
reason of either cause specified in the last sentence of subsection
(a). The Borrower also shall pay and indemnify the Agent and each
Lender against any stamp or other documentary, excise or property taxes
or similar levies, imposts, or charges (or any related liability)
arising from the execution, delivery, registration, performance or
enforcement of this Agreement or the Notes.
-25-
<PAGE>
2.3.7. Method of Payment. All payments of principal and
interest hereunder shall be made by the Borrower to the Agent at its
main office in Indianapolis, Indiana by 12:00 Noon (Indianapolis time)
on the date when due, and shall be applied pro rata among the Lenders in
accordance with their respective Pro Rata Shares. Each payment timely
delivered to the Agent for the account of any Lender shall be delivered
by the Agent for the account of any Lender no later than 2:00 P.M.
(Indianapolis time) on the same day.
2.3.8. Business Day. If any Payment Obligation becomes due and
payable on a date other than a Business Day, the maturity of such
Obligation shall be extended to the next succeeding Business Day, and
interest shall be payable during such extension of maturity.
2.4. Method of Advance.
2.4.1. Facility C Revolving Loans. As the Borrower desires to
obtain Facility C Revolving Loans, the Borrower shall give the Agent
notice of the Borrower's request to borrow pursuant to the Facility C
Commitments by not later than 11:00 A.M. (Indianapolis time), on the
proposed Business Day of borrowing, subject to Section 2.5 with respect
to Eurodollar Advances. Such request may be made orally by an Authorized
Officer, or upon a request transmitted to the Agent by telex, facsimile
machine or other form of written electronic communication signed by an
Authorized Officer, and, once received by the Agent, shall be
irrevocable. The Agent may rely, without further inquiry, on all such
requests which shall have been received by it in good faith by any
Person reasonably believed to be an Authorized Officer. The Agent may
require telephonic or other oral requests to be followed immediately by
a written request. Each request shall, in and of itself, constitute a
representation and warranty that the conditions precedent to such
Advance as set forth in Sections 6.2.1 and 6.2.2 have been satisfied as
of, and after giving effect to, such Advance and that the requested
Advance shall not cause the principal balance of the Facility C
Revolving Loans to exceed the aggregate Facility C Commitments or, if
applicable, the Borrowing Base. The Agent shall notify the Lenders of
the Borrower's intent to borrow by 12:00 P.M. (Indianapolis time) on the
proposed Business Day of borrowing, subject to Section 2.5 with respect
to Eurodollar Advances. Each Advance under the Facility C Commitments
shall consist of Facility C Loans made by the several Facility C Lenders
ratably in the proportions that their Facility C Commitments bear to the
aggregate of the Facility C Commitments. By 2:00 P.M. (Indianapolis
time) on each such borrowing date, each Facility C Lender shall advance
its portion of such Facility C Advance by making available to the Agent,
either by wire transfer to the Agent's main office in Indianapolis,
Indiana, or by deposit to any correspondent account which Agent may
maintain with that Lender, the amount to be advanced by such Lender. The
Borrower hereby authorizes the disbursement of such Facility C Revolving
Loans (other than Facility C Revolving Loans made by payment of Letters
of Credit) by deposit to the account of the Borrower with NBD, and NBD,
as Agent, shall, by 2:30 P.M. (Indianapolis time) on the date received,
credit the amount so received from each Lender to the account of the
Borrower with NBD. The aggregate principal amount of Facility C
Revolving Loans (other
-26-
<PAGE>
than Facility C Revolving Loans made by payment of Letters of Credit)
made on any borrowing date shall be in Permissible Increments.
2.4.2. General. All Advances by the Lenders and payments by
the Borrower shall be recorded by the Agent and may be recorded by the
Lenders on its or their books and records, and the principal amount
outstanding from time to time, plus interest payable thereon shall be
determined from such books and records. The books and records of the
Agent and/or the Lenders as to such matters shall be presumed correct
absent manifest error.
2.5. Procedures for Electing the Fixed Rate Option. The Fixed Rate
Option may be elected only in accordance with the following procedures and
subject to the other conditions contained in this Agreement:
(a) If the Agent so requires, the Borrower shall select Fixed
Rate Options such that, during the period from the Closing Date through
the four month anniversary thereof, there shall be at least three
periods not less than three consecutive Business Days in length (which
periods shall not be more than one month apart) during which no Fixed
Rate Options are outstanding. Unless the Required Lenders otherwise
agree, no Fixed Rate Option may be elected or renewed at any time a
Default or Unmatured Default exists.
(b) The Borrower shall give the Agent irrevocable notice (a
"Fixed Rate Option Notice") of its election or renewal of a Fixed Rate
Option prior to 11:00 A.M. (Indianapolis time) not less than three (3)
Business Days, prior to the commencement of the applicable Eurodollar
Interest Period therefor specifying (i) Borrowing Date which shall be a
Business Day , (ii) the amount of the Advance elected or renewed which
amount shall be in a Permissible Increment, and (iii) the duration of
the Eurodollar Interest Period selected to apply thereto. The Agent
shall promptly notify the Lenders whenever a new Fixed Rate Option is
selected by the Borrower.
(c) An election of a Fixed Rate Option may be communicated by
telephone or by telex, facsimile machine or other form of written
electronic communication, or by a writing delivered to the Agent. The
Borrower shall confirm in writing any election communicated by
telephone. The Agent shall be entitled to rely on any verbal
communication of the election of the Fixed Rate Option Notice which is
received by a designated employee of the Agent from anyone reasonably
believed in good faith by such employee to be authorized.
(d) Not more than eight (8) Eurodollar Interest Periods may be
selected at any one time to apply to outstanding Advances.
(e) Notwithstanding any other provision of this Agreement, in
the event that the Agent determines (which determination, if made in
good faith, shall be conclusive and binding upon the Borrower) that by
reason of circumstances affecting the London interbank market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate
-27-
<PAGE>
for any Eurodollar Interest Period at a time when Fixed Rate Loans are
outstanding, or quotations of interest rate for the relevant deposits
referred to in definition of the Eurodollar Rate are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest on a Fixed Rate Loan as
provided herein, or if the Required Lenders determine (which
determination, if made in good faith, shall be conclusive and binding
upon the Borrower) that the relevant rates of interest referred to in
the definition of the Eurodollar Rate upon the basis of which the rate
of interest for any such type of Loan is to be determined do not
accurately cover the cost to the Lenders of making or maintaining such
types of Loans, the Agent shall forthwith give notice of such
determination, confirmed in writing, to the Borrower. If such notice
is given, (i) the obligation of the Lenders to make Fixed Rate Loans
shall be suspended until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exists, and
(ii) the Borrower shall repay in full the then outstanding principal
amount of each Fixed Rate Loan together with accrued interest thereon,
on the last day of the then current Eurodollar Interest Period
applicable to such Loan.
(f) If at the time of any voluntary or mandatory prepayment of
any portion of the principal of any Loan, interest accrues at both the
Fixed Rate Option and with reference to the Alternate Base Rate on
portions of a Loan or Loans, then any prepayment of principal will be
applied first to the portion of a Loan or Loans on which interest
accrues with reference to the Alternate Base Rate and next to the
portion or portions at which interest accrues at a Fixed Rate Option.
(g) In addition to the compensation required by Section 2.13,
2.14 and 2.16 hereof, the Borrower shall indemnify each Lender (on a
net basis) against any loss or expense (including loss of margin) which
any Lender has sustained or incurred as a consequence of any attempt by
the Borrower to revoke (expressly, by later inconsistent notices or
otherwise) in whole or in part any notice stated herein to be
irrevocable (the Agent having, in its sole discretion, the option (i)
to give effect to such attempted revocation and obtain indemnity under
this Sections 2.5(g), or (ii) to treat such attempted revocation as
having no force or effect, as if never made). Calculation of all
amounts payable to a Lender under this Section 2.5(g) shall be made as
though such Lender had actually funded its relevant Eurodollar Loan
through the purchase of a deposit bearing interest at the Eurodollar
Rate in an amount equal to the amount of such Eurodollar Loan and
having a maturity comparable to the relevant Interest Period; provided,
however, that each Lender may fund each of its Eurodollar Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only
for the calculation of amounts payable under this Section 2.5(g). If
any Lender sustains or incurs any such loss or expense it shall notify
the Borrower of the amount determined in good faith by such Lender
(which determination shall be presumed to be correct) to be necessary
to indemnify such Lender for such loss or expense. Such amount shall be
due and payable by the Borrower to such Lender ten (10) Business Days
after such notice is given.
-28-
<PAGE>
2.6. Fees.
2.6.1. Facility C Commitment Fee. The Borrower shall pay to
the Agent, for the pro rata benefit of the Lenders, a Commitment Fee
equal to the Applicable Commitment Fee on the average daily unused
portion of the aggregate Facility C Commitments, which fee shall be
calculated on the basis of a three hundred sixty (360) day year and
shall be due and payable quarterly in arrears on the last day of each
August, November, February and May.
2.6.2. Agent Fees. The Borrower shall pay to the Agent an
annual administrative fee in accordance with the Fee Letter.
2.6.3 Letter of Credit Fees. The Borrower shall pay fees in
respect of the Letters of Credit as more fully provided in Section 2.11.
2.6.4. General. The compensation provided in this Section
shall be in consideration of the services of the Lenders in connection
with the Facilities and shall be in addition to any other fee, charge,
payment or expense required to be borne by the Borrower under the Loan
Documents or in any other separate agreement between the Borrower and
the Agent.
2.7. Reductions of Facility C Commitment. The Borrower shall have the
right to terminate or reduce the aggregate amount of the Facility C Commitment,
provided that (a) the Borrower shall give at least ten (10) Business Days' prior
written notice to the Agent and the Lenders of each such termination or
reduction, (b) each partial reduction shall be in Permissible Increments, (c)
each partial reduction shall apply to the Lenders ratably with respect to their
Facility C Commitment, (d) the Facility C Commitment shall not be reduced to an
amount less than the outstanding principal balance of the Facility C Revolving
Loans and Letter of Credit Obligations, and (e) the Facility C Commitment, once
terminated or reduced, may not be reinstated without the prior written approval
of all the Lenders.
2.8. Non-Receipt of Funds by the Agent.
2.8.1. From the Lenders. Unless the Agent shall have received
notice from a Lender by 2:00 P.M. (Indianapolis time) on a proposed
Business Day on which such Lender is to provide funds to the Agent for
a Loan to be made by such Lender that such Lender will not make
available to the Agent such funds, the Agent may assume that such
Lender has made such funds available to the Agent on the date of such
Loan in accordance with this Agreement, and the Agent, in its sole
discretion, may, but shall not be obligated to, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent such Lender has not made such funds
available to the Agent (and provided such Lender was given timely
notice in accordance with this Agreement), and the Agent has made such
corresponding amount available to the Borrower, such Lender agrees to
repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount
-29-
<PAGE>
is made available to the Borrower, at a rate per annum equal to the
Federal Funds Effective Rate, and if such Lender fails to repay the
Agent for more than three (3) Business Days, such amount shall bear
interest at a rate per annum equal to the Federal Funds Effective Rate
plus Two Percent (2%). If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such
Lender's Loan for purposes of this Agreement. If such Lender does not
pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower, and the
Borrower shall immediately pay such corresponding amount to the Agent
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Agent, at the rate of interest applicable at the time to the relevant
Loan. If the Borrower repays such corresponding amount, the Lender
shall no longer be obligated to make such payment.
2.8.2. From the Borrower. Unless the Agent shall have received
notice from the Borrower prior to the date on which any payment is due
to the Lenders hereunder that the Borrower will not make such payment
in full, the Agent may assume that the Borrower has made such payment
in full to the Agent on such date, and the Agent, in its sole
discretion, may, but shall not be obligated to, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent
the Borrower has not made such payment in full to the Agent, and
without limiting the Obligation of the Borrower to make such payment,
each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date
the Agent recovers such amount at a rate per annum equal to the Federal
Funds Effective Rate, and if such Lender fails to repay the Agent for
more than three (3) Business Days, such amount shall bear interest at a
rate per annum equal to the Federal Funds Effective Rate plus Two
Percent (2%).
2.9. Issuance of Letters of Credit. Subject to the terms and conditions
hereof, NBD agrees, upon proper Application, to issue on behalf of the Facility
C Lenders from time to time during the Facility C Commitment Period, Letters of
Credit for the account of the Borrower. The Letters of Credit shall have an
expiration date not later than the earlier of (a) one year from the date of
issuance or (b) five days before the expiration of the Facility C Commitment
Period. The aggregate of the Letters of Credit outstanding plus the aggregate
amount of unreimbursed drawings under the Letters of Credit shall not exceed
Five Million Dollars ($5,000,000). The amount of any Letter of Credit
outstanding at any time for all purposes hereof shall be the maximum amount
which could be drawn thereunder under any circumstances from and after the date
of determination. Each Letter of Credit issued pursuant to this Agreement and
each unreimbursed drawing thereunder shall count against and reduce the Facility
C Commitments by the amount of such Letter of Credit outstanding unless and
until such Letter of Credit expires by its terms or otherwise terminates or the
amount of a drawing thereunder is reimbursed, in which event the Facility C
Commitments shall be reinstated by the amount of such Letter of Credit or the
amount of such reimbursement, as the case may be. Each such Letter of Credit
shall be issued pursuant to a Letter of Credit Application and shall conform to
the general requirements of NBD for the issuance of such credits, as to form and
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<PAGE>
substance, shall be subject to the Uniform Customs and Practices for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500
and shall be a letter of credit which NBD may lawfully issue. Each payment of a
Letter of Credit by NBD shall be reimbursed by Advances under the Facility C
Commitments evidenced by the Facility C Revolving Notes. If and to the extent a
drawing is at any time made under any Letter of Credit, NBD shall notify the
Borrower, the Agent and the other Lenders of such draw and the Borrower agrees
to pay to NBD immediately and unconditionally upon demand for reimbursement, in
lawful money of the United States, an amount equal to each amount which shall be
so drawn, together with interest from the date of such drawing to and including
the date such payment is reimbursed to NBD or converted to Facility C Loans as
provided herein. Until demand for reimbursement, such interest shall be
calculated at a variable rate per annum equal to the Alternate Base Rate plus
the Applicable Margin for Floating Rate Loans, and interest shall be calculated
after such demand at a variable rate per annum equal to the Alternate Base Rate
plus the Applicable Margin for Floating Rate Loans plus Three Percent (3%). All
such interest shall be calculated on the basis that an entire year's interest is
earned in three hundred sixty (360) days. In the event that a drawing under any
Letter of Credit is not reimbursed by the Borrower by 11:00 A.M. (Indianapolis
time) on the first Business Day after such drawing, NBD shall promptly notify
the Agent and the other Facility C Lenders by 12:00 Noon (Indianapolis time)
that Advances under the Facility C Commitments are required to reimburse NBD.
The Borrower hereby irrevocably authorizes the Lenders to refinance, without
notice to the Borrower, the reimbursement Obligation of the Borrower arising out
of any such drawing into Facility C Revolving Loans, evidenced by the Facility C
Revolving Notes and for all purposes under, on and subject to the terms and
conditions of this Agreement, but without regard to the conditions precedent to
making an Advance under the Facility C Commitments or to any requirement of this
Agreement that each Facility C Loan Facility Loan be in a minimum amount or
multiple; provided, however, that an Advance under the Facility C Commitments in
spite of the Borrower's failure to satisfy any conditions precedent to making an
Advance shall not constitute a waiver of any Default by the Lenders. This
Agreement and the other Loan Documents shall supersede any terms of any Letter
of Credit Applications or other documents which are irreconcilably inconsistent
with the terms hereof or thereof. By 2:00 P.M. (Indianapolis time) on the date
the Lenders have received notice that Advances under the Facility C Commitments
are required to reimburse NBD for draws under the Letters of Credit, each
Facility C Lender severally agrees to make its portion of the Facility C Loan
then being made by making available to the Agent, either by wire transfer to the
Agent's main office in Indianapolis, Indiana, or by deposit to any correspondent
account which the Agent may maintain with that Lender, the amount to be advanced
by such Lender. By 2:30 P.M. (Indianapolis time) on such date, the Agent shall
reimburse NBD, but only from funds received by the Agent, the amount paid on
Letters of Credit that date, either by wire transfer or by deposit to NBD's
correspondent account with the Agent (or as otherwise agreed between NBD and the
Agent).
2.10. Letters of Credit Participation. For administrative convenience, NBD
shall issue the Letters of Credit for the account of the Borrower pursuant to
the arrangements set forth herein, and, the outstanding portion of each Letter
of Credit shall be deemed to utilize a Pro Rata Share of the Facility C
Commitment of each Lender. Each Facility C Lender severally agrees to
participate in each Letter of Credit according to its Pro Rata Share of the
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Facility C Commitments. Each Lender's participation shall be funded by funding
its Pro Rata Share of the Facility C Commitments upon any drawing under any
Letter of Credit not reimbursed the same day as a drawing thereunder by the
Borrower by 2:00 P.M. (Indianapolis time) by making such funds available to the
Agent in accordance with Sections 2.4.1 and 2.9; and thereupon, each such Lender
shall be entitled to, and NBD or the Agent, as applicable, shall remit to each
such Lender, their respective Pro Rata Share of any amounts (including any
interest thereon) received by NBD or the Agent, as applicable, in reimbursement
of such drawing. NBD shall furnish to such Lenders, each time any Letter of
Credit either is issued or drawn under (whether in whole or in part), (i) a
participation certificate showing the aggregate amount of NBD's Letters of
Credit issued and unexpired or unfunded and the amount of their respective Pro
Rata Share thereof, and (ii) such other information with respect to the Letters
of Credit as any Lender may reasonably request from time to time. The
obligations of the Facility C Lenders to fund their respective Pro Rata Share of
a Facility C Revolving Loan for reimbursement of a draw under a Letter of Credit
shall be irrevocable and not subject to counterclaim, set-off or other defense
or any other qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following circumstances
(other than in the case of gross negligence or wilful misconduct of NBD):
(a) Any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(b) The existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary
named in the Letter of Credit, any transferee of the Letter of Credit
(or any Person for whom any such transferee may be acting), the Agent,
NBD as the Letter of Credit issuer, any Lender, or other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(c) Any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) The surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(e) The occurrence of any Default or Unmatured Default.
2.11. Compensation for Letters of Credit.
2.11.1. Letter of Credit Facility Fee. The Borrower shall pay to NBD,
for the ratable benefit of the Facility C Lenders in accordance with their
Facility C Commitments, a Letter of Credit facility fee at a per annum rate
equal to the Applicable Margin for Fixed Rate Loans
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on the average daily undrawn amount of all Letters of Credit
outstanding hereunder, such fee to be calculated on the basis of a
three hundred sixty (360) day year and to be paid in arrears on the
last day of each August, November, February and May and on the day upon
which the Facility C Commitments are terminated or expire by their
terms.
2.11.2. Letter of Credit Fronting Fees. In addition to the
Letter of Credit facility fees, the Borrower shall pay to NBD, for
NBD's own account a Letter of Credit fronting fee in the amount set
forth in the Fee Letter, as well as NBD's reasonable and customary
costs of issuing and servicing the Letters of Credit.
2.11.3. Manner of Payment. The Borrower authorizes NBD to
collect all such fees by deducting the amount thereof from the deposit
account of the Borrower.
2.12. Reimbursement of Letters of Credit. The obligation of the
Borrower to reimburse any drawing under any Letter of Credit shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement under all circumstances, whatsoever,
including, without limitation, the following:
(a) Any lack of validity or enforceability of any Letter of
Credit, or any Loan Document;
(b) Any amendment or waiver of or consent to departure from
the terms of any Letter of Credit, or any Loan Document;
(c) The existence of any claim, set-off, defense or other
right which the Borrower may have at any time against the beneficiary
or any Letter of Credit, any transferee of any Letter of Credit, the
Lenders or any other Person, whether in connection with the Loan
Documents, such Letter of Credit, or any unrelated transaction;
(d) Any statement, draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) The surrender or impairment of any security for the
performance or observance of the terms of the Loan Documents or such
Letter of Credit; or
(f) Any circumstance, happening or admission whatsoever,
whether or not similar to any of the foregoing, including, without
limitation, those matters described below.
The parties benefitted by any Letter of Credit shall be deemed to be the agents
of the Borrower, and except as expressly set forth herein, the Borrower assumes
all risks for their acts, omissions, or misrepresentations. Neither NBD nor any
of its Affiliates or correspondents shall be responsible for the validity,
sufficiency, truthfulness or genuineness of any document required to draw under
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any Letter of Credit even if such document should in fact prove to be in any and
all respects invalid, insufficient, fraudulent or forged, provided only that the
document appears on its face to be in accordance with the terms of the Letter of
Credit. NBD, its Affiliates and correspondents shall not be responsible for any
failure of any draft to bear reference or adequate reference to the applicable
Letter of Credit or for the failure of any Person to note the amount of any
draft on any Letter of Credit or to surrender or take up any Letter of Credit,
each of which provisions may be waived by NBD, or for any errors, omissions,
interruptions, or delays in transmission or delivery of any messages or
documents. Without limiting the generality of the foregoing, the Borrower agrees
that any action taken by NBD or any of its Affiliates or correspondents under or
in connection with any Letter of Credit shall be binding upon the Borrower and
shall not put NBD or any such Affiliates or correspondents under any such
resulting liability to the Borrower. NBD shall not be liable for action or
failure to take action under or in connection with any Letter of Credit except
for any such action or failure to take action which constitutes gross negligence
or wilful misconduct. NBD shall not be liable for consequential damages in
connection with any Letter of Credit. NBD is expressly hereby authorized to
honor any request for payment which is made under or in compliance with the
terms of any Letter of Credit without regard to, and without any duty on its
part to inquire into, the existence of any disputes or controversies between the
Borrower and any beneficiary of any Letter of Credit or any other Person or into
respective rights, duties or liabilities of any of them or whether any facts or
occurrences represented in any of the documents presented under any Letter of
Credit are true and correct. No Person, other than the parties hereto, shall
have any rights of any nature under this Agreement or by reason hereof. In no
event shall NBD's reliance and payment against documents presented under a
Letter of Credit appearing on its face to substantially comply with the terms
thereof be deemed to constitute gross negligence or wilful misconduct.
2.13. Yield Protection. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation, or the compliance of any
Lender therewith,
(a) Subjects any Lender or any applicable Lending Installation
to any tax, duty, charge or withholding on or from payments due from
the Borrower (excluding federal taxation of the overall net or gross
income of any Lender or applicable Lending Installation), or changes
the basis of taxation of payments to any Lender in respect of its
Facilities, Loans or other amounts due it hereunder, or
(b) Imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Fixed Rate Advances), or
(c) Imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining Facilities or Loans or reduces any
amount receivable by any Lender or any applicable Lending Installation
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in connection with Facilities or Loans, or requires any Lender or any
applicable Lending Installation to make any payment calculated by
reference to the amount of Facilities or Loans held or interest
received by it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender reasonably determines is attributable to making,
funding and maintaining its Facilities and its Commitment.
2.14. Changes in Capital Adequacy Regulations. If a Lender reasonably
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within 15 days of demand
by such Lender the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender reasonably determines is attributable to
this Agreement, its Facilities, Loans or its obligation to make Loans hereunder
(after taking into account such Lender's policies as to capital adequacy).
"Change" means (a) any change after the date of this Agreement in the Risk-Based
Capital Guidelines or (b) any adoption of or change in any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (aa) the
risk-based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (bb) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
2.15. Availability of Types of Advances. If any Lender reasonably
determines that maintenance of its Fixed Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders reasonably
determine that (a) deposits of a Type and maturity appropriate to match fund
Fixed Rate Advances are not available or (b) the interest rate applicable to a
Type of Advance does not accurately reflect the cost of making or maintaining
such Advance, then the Agent shall suspend the availability of the affected Type
of Advance and require any Fixed Rate Advances of the affected Type to be
repaid.
2.16. Funding Indemnification. If any payment (whether mandatory or
optional) of a Fixed Rate Advance occurs on a date which is not the last day of
the applicable Eurodollar Interest Period, whether because of acceleration,
prepayment or otherwise, or a Fixed Rate Advance is not made on the date
specified by the Borrower for any reason other than default by the Lenders, the
Borrower will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Fixed
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Rate Advance. Calculation of all amounts payable to a Lender under this Section
2.16 shall be made as though such Lender had actually funded its relevant
Eurodollar Loan through the purchase of a deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan and
having a maturity comparable to the relevant Interest Period; provided, however,
that each Lender may fund each of its Eurodollar Loans in any manner it sees
fit, and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this Section 2.16.
2.17. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of the
Borrower to such Lender under Sections 2.13 and 2.14 or to avoid the
unavailability of a Type of Advance under Section 2.15, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender to the Borrower (with a copy to the Agent) as
to the amount due, if any, under Section 2.13 2.14 and/or 2.16. Such written
statement shall set forth in reasonable detail the calculations upon which such
Lender determined such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Fixed Rate Loan shall be calculated as
though each Lender funded its Fixed Rate Loan through the purchase of a deposit
of the type and maturity corresponding to the deposit used as a reference in
determining the Fixed Rate applicable to such Loan, whether in fact that is the
case or not. Unless otherwise provided herein, the amount specified in the
written statement of any Lender shall be payable on demand after receipt by the
Borrower of such written statement. The Obligations of the Borrower under
Sections 2.13 and 2.14 shall survive payment of all other Obligations and
termination of this Agreement.
2.18. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to the Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.19. Use of Proceeds. The proceeds of Advances under the Facility C
Commitments, the Facility A Commitments and the Facility B Commitments shall be
advanced by the Borrower to LPAC to fund the Company Acquisition, for general
working capital purposes of the Borrower and its Subsidiaries, and for other
proper corporate purposes of the Borrower not prohibited by this Agreement.
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SECTION 3
Security and Guaranty
3.1. Security. The Obligations shall be secured by: (a) The Security
Agreement constituting (i) a first priority security interest in all Accounts,
Inventory, Equipment, General Intangibles, Chattel Paper, Fixtures, Goods,
Instruments, Documents, Investment Property and other personal Property of the
Borrower and all Proceeds thereof and (ii) a first priority pledge by the
Borrower of all of the capital stock owned by the Borrower of its U.S.
Subsidiaries (other than the Company) and Sixty-Five Percent (65%) of the
capital stock of its Foreign Subsidiaries (exclusive of the Borrower's right,
title and interest in and to the capital stock of Dongguan Lilly Paint
Industries, Ltd., an entity organized under the laws of the Peoples Republic of
China) and all Proceeds thereof, and (b) such other security interests as may be
described in the Loan Documents, all subject to Permitted Liens, the exceptions
set forth in the second sentence of Section 4.9 and subject to Sections 5.1.17
and 5.1.18.
3.2. Guaranty. The Obligations of the Borrower shall be
unconditionally, jointly and severally guaranteed by the Guarantors pursuant to
the Guaranties. The obligations of each Guarantor to the Lenders shall be
secured by a first priority, perfected security interest in all Accounts,
Inventory, Equipment, General Intangibles, Chattel Paper, Fixtures, Goods,
Instruments, Documents, Investment Property and other personal Property of such
Guarantor and all Proceeds thereof, and (b) a first priority pledge by each
Guarantor of all the capital stock owned by such Guarantor of such Guarantor's
U.S. Subsidiaries (other than the Company) and Sixty-Five percent (65%) of the
capital stock of such Guarantor's Foreign Subsidiaries (exclusive of the
Borrower's right, title and interest in and to the capital stock of Dongguan
Lilly Paint Industries, Ltd., an entity organized under the laws of the Peoples
Republic of China), all subject to Permitted Liens, the exceptions set forth in
the second sentence of Section 4.9 and subject to Sections 5.1.17 and 5.1.18.
3.3. Additional Collateral. Any Subsidiary (other than a Foreign
Subsidiary) hereafter created or acquired by the Borrower or any Guarantor shall
execute and deliver to the Agent, upon the earlier of such Acquisition or ten
(10) days of such creation, Guaranty Documents satisfactory to the Agent.
SECTION 4
Representations and Warranties
In order to induce the Lenders to enter into this Agreement and to make
Loans pursuant to their Facility C Commitments, their Facility A Commitments and
their Facility B Commitments, and to induce NBD to issue Letters of Credit, the
Borrower represents and warrants to NBD, the Agent and the Lenders, which
representations and warranties will survive the delivery of the Notes, the
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establishment of the Facilities, the making of Loans and the issuance of Letters
of Credit that (with each reference to a Subsidiary deemed to include the
Company and its Subsidiaries):
4.1. Due Organization. The Borrower and each Subsidiary is a
corporation duly organized, validly existing and, if applicable, in good
standing under and by virtue of the laws of its state of incorporation.
4.2. Due Qualification. The Borrower and each Subsidiary is
qualified, in good standing and authorized to do business as a foreign
corporation in such other states wherein the failure to so qualify could have a
Material Adverse Effect.
4.3. Corporate Power. The Borrower and each Subsidiary, possesses the
requisite power to enter into the Loan Documents and the Acquisition Documents
to which it is a party, to borrow under the Loan Documents (in the case of the
Borrower), to execute and deliver the Loan Documents and the Acquisition
Documents and to perform its respective obligations thereunder.
4.4. Corporate Authority. The Borrower has taken the necessary
corporate action to authorize the execution and delivery of the Loan Documents
and the borrowings under the Loan Documents and the granting of the security
interests therein, and none of the provisions of the Loan Documents violates,
breaches, contravenes, conflicts with, or causes a default under any provision
of the articles of incorporation or the by-laws or regulations of the Borrower
or any provision of any existing note, bond, mortgage, debenture, indenture,
trust, license, lease, instrument, decree, order, judgment, or agreement to
which the Borrower is a party or by which it or its assets may be bound or
affected, the breach or default of which, singly or in the aggregate, could have
a Material Adverse Effect. Each Guarantor has taken the necessary corporate
action to authorize the execution and delivery of its Guaranty Documents and the
granting of the security interests therein, and none of the provisions of the
Guaranty Documents violates, breaches, contravenes, conflicts with, or causes a
default under any provision of the articles of incorporation or by-laws of any
Guarantor or any provision of any existing note, bond, mortgage, debenture,
indenture, trust, license, lease, instrument, decree, order, judgment, or
agreement to which such Guarantor is a party or by which it or its assets may be
bound or affected, the breach or default of which, singly or in the aggregate,
could have a Material Adverse Effect. The Borrower and LPAC each have taken the
necessary corporate action to authorize the execution and delivery of the
Acquisition Documents, and none of the provisions of the Acquisition Documents
violates, breaches, contravenes, conflicts with, or causes a default under any
provision of the articles of incorporation or by-laws of the Borrower or LPAC or
any provision of any existing note, bond, mortgage, debenture, indenture, trust,
license, lease, instrument, decree, order, judgment, or agreement to which the
Borrower or LPAC is a party or by which it or its assets may be bound or
affected, the breach or default of which, singly or in the aggregate, could have
a Material Adverse Effect.
4.5. Financial Statements. The Financial Statements were prepared in
accordance with GAAP consistent with prior years, unless specifically otherwise
noted thereon, and present fairly the Consolidated financial condition of the
Borrower and its Consolidated Subsidiaries and the Company
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and its Consolidated Subsidiaries, respectively, as of the dates thereof and the
results of their respective Consolidated operations for the periods then ended
(except, in the case of interim Financial Statements, for normal year-end
adjustments and for the absence of footnotes).
4.6. No Material Adverse Change. The Financial Statements disclose all
known or contingent material liabilities, whether direct or indirect, fixed or
contingent, liquidated or unliquidated, asserted or unasserted, matured or
unmatured, of the Borrower, the Company and their respective Subsidiaries as of
the dates thereof in accordance with GAAP (except, in the case of interim
Financial Statements, for normal year-end adjustments and for the absence of
footnotes), and since such dates, there has been no material adverse change in
the business, operations, financial condition, Properties or prospects of the
Borrower and its Subsidiaries, taken as a whole, or the Company and its
Subsidiaries, taken as a whole.
4.7. Subsidiaries. Except as set forth on Schedule 4.7 hereto, the
Borrower has no Subsidiaries or other ownership interest in any Person. There
are no restrictions on the Borrower or any of its Subsidiaries which prohibit or
otherwise restrict the transfer of cash or other assets from any Subsidiary of
the Borrower to the Borrower, other than prohibitions or restrictions existing
under or by reason of this Agreement and applicable law.
4.8. Binding Obligations. Each of the Loan Documents and the
Acquisition Documents, upon execution and delivery, will constitute a legal,
valid and binding obligation of the Borrower and its Subsidiaries, as
applicable, enforceable against the Borrower and each Subsidiary party thereto
in accordance with its terms, except as the same may be limited by
reorganization, bankruptcy, insolvency, moratorium or other laws affecting
generally the enforcement of creditors' rights. Each of the Guaranty Documents,
upon execution and delivery, will constitute a legal, valid and binding
obligation of the Guarantor signatory thereto, enforceable against such
Guarantor in accordance with its terms, except as the same may be limited by
reorganization, bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally.
4.9. Marketable Title. The Borrower and each Subsidiary has good and
marketable title to all of its real Property and good title to all of its other
Properties and assets shown on the Financial Statements, except such Properties
or assets as have been disposed of since the date of such statements in the
ordinary course of business. Except for Permitted Liens, none of the assets of
the Borrower or any of its Subsidiaries (including the assets acquired pursuant
to the Company Acquisition) is subject to any mortgage, pledge, security
interest, title retention Lien or other encumbrance, and, except for (a)
Permitted Liens, (b) Inventory placed on consignment in the ordinary course of
business with any consignee, (c) Inventory having a value not exceeding
$1,000,000 in the aggregate for the Borrower and its Subsidiaries held by
vendors or stored in public warehouses from time to time in the ordinary course
of the Borrower's and its Subsidiaries' business, (d) Equipment (other than
aircraft and aircraft engines) covered by a certificate of title (e) other
Equipment located at sites not disclosed to the Agent having a value not
exceeding $500,000 in the aggregate for the Borrower and its Subsidiaries, (f)
additional actions required to perfect a security interest in a deposit account
or deposit other than as provided in 5.2.4(d) and subject to Section 4.8
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of the Security Agreements, (g) aircraft owned by the Borrower or its
Subsidiaries for 90 days after the date hereof, (h) the non-perfection of the
Agent's security interest (i) in the capital stock of London Laboratories GmbH,
an entity organized under the laws of Germany for a period of 90 days from the
date hereof and (ii) in the capital stock of Lilly Industries (Thailand) Limited
until requested in writing by Agent, and (i) Instruments and Investment Property
not exceeding $500,000 in the aggregate for the Borrower and its Subsidiaries,
and subject to Sections 5.1.17 and 5.1.18, the security interests in favor of
the Agent under the Loan Documents will constitute first, senior and prior
perfected security interests in the collateral therein described. Except to
evidence Permitted Liens, no financing statement or similar instrument which
names the Borrower or any of its Subsidiaries as debtor or relates to any of
their Properties, has been filed in any state or other jurisdiction which
remains unreleased. Neither the Borrower nor any of its Subsidiaries has signed
any financing statement or similar instrument or security agreement authorizing
the secured party thereunder to file any such financing statement or similar
instrument.
4.10. Indebtedness. Except as shown on the Financial Statements, except
trade debt incurred in the ordinary course of business since the date of the
Financial Statements, and except as shown on Schedule 4.10 hereto, neither the
Borrower nor any of its Subsidiaries has any Indebtedness.
4.11. Default. Neither the Borrower nor any of its Subsidiaries has
committed or suffered to exist any default or any circumstance which with
notice, lapse of time, or both, would constitute a default under the terms and
conditions of any trust, debenture, indenture, note, bond, instrument, mortgage,
lease, agreement, order, decree, or judgment to which the Borrower or such
Subsidiary is a party or by which it or its assets may be bound or affected,
which default(s), singly or in the aggregate, could have a Material Adverse
Effect.
4.12. Tax Returns. All tax returns or reports of the Borrower and its
Subsidiaries required by law have been filed, and all taxes, assessments,
contributions, fees and other governmental charges (other than those presently
payable without penalty or interest and those currently being contested in good
faith and against which adequate reserves have been established) upon the
Borrower, its Subsidiaries or their assets, Properties or income, which are
payable, have been paid. The United States income tax returns of the Borrower
and its Subsidiaries have been audited by the Internal Revenue Service through
the fiscal year ended November 30, 1993, and the similar returns of the Company
and its Subsidiaries have been audited by the Internal Revenue Service through
the fiscal year ended December 31, 1993.
4.13. Litigation. Except as set forth on Schedule 4.13 hereto, no
litigation or proceeding of any Governmental Authority or other Person is
presently pending or, to the Borrower's knowledge, threatened, nor has any claim
been asserted, against the Borrower or any of its Subsidiaries or the Company or
any of its Subsidiaries which, in the reasonable judgment of the Borrower,
singly or in the aggregate, could have a Material Adverse Effect.
4.14. ERISA. The Borrower, each Subsidiary and each ERISA Affiliate of
either is in compliance in all material respects with all applicable provisions
of ERISA, and none of such Persons
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has incurred any material liability to the PBGC. No Reportable Event, has
occurred under, nor has there occurred any complete or partial withdrawal from,
nor has there occurred any other event which would constitute grounds for
termination of or the appointment of a trustee to administer any Plan (including
any Multi-employer Plan) maintained for employees of the Borrower, any
Subsidiary or any ERISA Affiliate of either.
4.15. Full Disclosure. No information, exhibit, memorandum, or report
(excluding estimated future operating results) furnished by the Borrower to the
Lenders in connection with the negotiation of the Facilities contains any
material misstatement of fact, or omits to state any fact necessary to make the
statements contained therein not materially misleading, and all estimated future
operating results, if furnished, were prepared on the basis of assumptions,
data, information, tests or other conditions believed to be valid or accurate or
to exist at the time such estimates were prepared and furnished. To the
knowledge of the Borrower and its Subsidiaries, there presently exists no fact
or circumstance relative to the Borrower or any Subsidiary, whether or not
disclosed, which, singly or in the aggregate, is presently anticipated to have a
Material Adverse Effect.
4.16. Contingent Obligations. Except for the endorsements of the Borrower
and its Subsidiaries of negotiable instruments for deposit or collection in the
ordinary course of business and except as set forth on Schedule 4.16 hereto,
neither the Borrower nor any of its Subsidiaries is a party to any Contingent
Obligations.
4.17. Licenses. The Borrower and each Subsidiary possesses such
franchises, licenses, permits, patents, copyrights, trademarks, and consents of
appropriate Governmental Authorities as are necessary to own its Properties and
to carry on its business, except where the failure to possess the same, singly
or in the aggregate, could not have a Material Adverse Effect.
4.18. Compliance with Law. The Borrower and each Subsidiary is in
compliance in all material respects with all applicable requirements of law and
of all Governmental Authorities, noncompliance with which, singly or in the
aggregate, could have a Material Adverse Effect.
4.19. Force Majeure. Neither the business nor the Properties of the
Borrower or any Subsidiary are presently affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty that,
singly or in the aggregate, could have a Material Adverse Effect.
4.20. Margin Stock. (a) Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System), and (b) except as
contemplated by the Acquisition Documents, no part of the proceeds of the
Facilities will be used for the purpose of purchasing or carrying margin stock,
as above defined.
4.21. Approvals. No authorization, consent, approval or any form of
exemption of any Governmental Authority not obtained is required in connection
with the issuance, execution or performance of any Loan Documents or any of the
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Acquisition Documents by the Borrower or any Subsidiary, as applicable, or in
connection with the issuance, execution or performance of any Guaranty Document
by any Guarantor. Without limiting the generality of the foregoing, the waiting
period under the HSR Act applicable to the Company Acquisition has expired or
has been terminated, and no Governmental Authority with jurisdiction over the
Company Acquisition has objected thereto.
4.22. Insolvency; Financial Condition. Neither the Borrower nor any of
its Subsidiaries is "insolvent" within the meaning of that term as defined in
the Federal Bankruptcy Code, and the Borrower and each Subsidiary is able to pay
its debts as they mature. Neither the Borrower nor any of its Subsidiaries is
entering into the arrangements contemplated hereby and by the Acquisition
Documents with actual intent to hinder, delay or defraud either present or
future creditors. As of the initial funding of the Facilities, on a pro forma
basis, after giving effect to the Company Acquisition and the obligations
incurred or to be created in connection herewith or in connection with the
Company Acquisition: (a) the present fair salable value of the respective assets
of each of the Borrower and its Subsidiaries will exceed its respective
liabilities, (b) neither the Borrower nor any of its Subsidiaries has incurred
or intends to, or believes that it will, incur liabilities beyond its ability to
pay such liabilities as they mature, and (c) each of the Borrower and its
Subsidiaries will have sufficient capital with which to conduct its present and
proposed business and the Property of the Borrower and its Subsidiaries does not
constitute unreasonably small capital with which to conduct its present or
proposed business.
4.23. Regulation. Neither the Borrower nor any of its Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company" or an "affiliate of a holding company"
or a "subsidiary of a holding company" within the meanings of the Public Utility
Holding Company Act of 1935, as amended.
4.24. Environmental Matters. In the ordinary course of its business,
the Borrower conducts an ongoing review of the effect of Environmental Laws on
the business, operations and Properties of the Borrower and its Subsidiaries, in
the course of which it identifies and evaluates associated liabilities and costs
(including any capital or operating expenditures required for clean-up or
closure of Properties presently owned or operated, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by Environmental Laws or as a condition of any
license, permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations conducted thereat and any actual
or potential liabilities to third parties, including employees, and any related
costs and expenses). On the basis of this review, the Borrower has reasonably
concluded that, except as disclosed in writing by the Borrower to the Lenders
and the Agent as of the Closing Date, to the best of its knowledge after due
inquiry (provided that clause (e) below is not subject to any such knowledge
qualification except as specifically provided in clause (e)):
(a) All facilities and Property (including underlying
groundwater) owned, leased or operated by the Borrower or any
Subsidiary have been, and continue to be, owned, leased or operated by
the Borrower or any Subsidiary in compliance with all applicable
Environmental Laws, noncompliance with which could not, singly or in
the aggregate, have a Material Adverse Effect;
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(b) There have been no past unresolved, and there are no
pending or threatened,
(i) claims, complaints, notices or inquiries, to, or
requests for information received by, the Borrower or any
Subsidiary with respect to any alleged violation of any
Environmental Law, that, singly or in the aggregate, have or
may reasonably be expected to have a Material Adverse Effect,
or
(ii) claims, complaints, notices or inquiries to, or
requests for information received by, the Borrower or any
Subsidiary regarding potential liability under any
Environmental Law or under any common law theories relating to
operations or the condition of any facilities or Property by
the Borrower or any Subsidiary that, singly or in the
aggregate, have, or may reasonably be expected to have a
Material Adverse Effect.
(c) There have been no releases of Hazardous Materials, at, on
or under any Property now or previously owned or leased by the Borrower
or any Subsidiary that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect;
(d) The Borrower and each Subsidiary have been issued and are
in compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary
for their businesses, the noncompliance with which could not, singly or
in the aggregate, have a Material Adverse Effect;
(e) No Property now or previously owned, leased or operated by
the Borrower or any Subsidiary is listed or, to the best knowledge of
the Borrower, proposed for listing on the National Priorities List
pursuant to CERCLA (or any similar Environmental Law) or on the CERCLIS
or on any other federal or state list of sites requiring investigation
or clean-up, to the extent that any such listing, singly or in the
aggregate, may have, or may reasonably be expected to have, a Material
Adverse Effect;
(f) There are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any Property
now or previously owned, leased or operated by the Borrower or any
Subsidiary that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(g) None of the Borrower or any Subsidiary has directly
transported or directly arranged for the transportation of any
Hazardous Material to any location (i) which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA (or any
similar Environmental Law) or on the CERCLIS or on any federal or state
list, to the extent that any such listing, singly or in the aggregate,
may have, or may reasonably be expected to have, a Material Adverse
Effect, or (ii) which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims
against the Borrower or such Subsidiary for any remedial work, damage
to natural resources or personal injury, including
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claims under any Environmental Law, to the extent that such claims,
singly or in the aggregate, may have, or may reasonably be expected to
have, a Material Adverse Effect;
(h) There are no polychlorinated biphenyl, radioactive
materials or friable asbestos present at any Property now or previously
owned or leased by the Borrower or any Subsidiary that, singly or in
the aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect; and
(i) No condition exists at, on or under any Property now or
previously owned or leased by the Borrower or any Subsidiary which,
with the passage of time, or the giving of notice or both, would give
rise to material liability under any Environmental Law that, singly or
in the aggregate have, or may reasonably be expected to have, a
Material Adverse Effect.
4.25. Company Acquisition. To the best knowledge and information of the
Borrower: (a) the information provided to the Lenders with respect to the
Company Acquisition and of the Company remains true and correct in all material
respects as of the date of the initial Advance of the Loans, (b) the Company is
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (c) the Company, the Borrower and LPAC have fully
and timely complied with any and all applicable laws in connection with the
Company Acquisition, and neither the consummation of the transactions
contemplated by the Acquisition Documents nor the Borrower's, LPAC's nor the
Company's compliance with the provisions thereof will violate any law, rule,
regulation, order, writ, judgment, decree or award binding upon the Borrower,
LPAC or the Company or any provision of their respective organizational
documents or any provision of any indenture, instrument or agreement to which
the Borrower, its Subsidiaries or the Company is a party or by which it or its
assets may be bound or affected, where such violations, singly or in the
aggregate, could have a Material Adverse Effect, (d) the representations and
warranties of the Company contained in the Acquisition Documents were and are
true and correct in all material respects on the dates when made, (e) each of
the Acquisition Documents constitutes a legal, valid and binding obligation of
each of the parties thereto, enforceable against each such party in accordance
with its terms, except as the same may be limited by reorganization, bankruptcy,
insolvency, moratorium or other laws affecting generally the enforcement of
creditors' rights, (f) no authorization, consent, approval, registration,
license or any form of exemption of any Governmental Authority is required in
connection with the execution, delivery and performance by each of the parties
to the Acquisition Documents of the obligations thereunder except for such
consents as have been obtained and delivered to the Agent, and no litigation or
proceedings in any court or before any Governmental Authority or other Person is
currently pending or threatened against any party which seeks to enjoin the
transactions contemplated by the Acquisition Documents.
4.26. General. All statements contained in any certificate or Financial
Statement delivered by or on behalf of the Borrower or any Subsidiary to the
Lenders under or in connection with any Loan Document or Guaranty Document shall
constitute representations and warranties made by the Borrower hereunder.
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SECTION 5
Covenants
5.1. Affirmative Covenants. Until the Obligations are paid in full, and so
long as any Commitment is outstanding, unless the Required Lenders shall
otherwise consent in writing, the Borrower will:
5.1.1. Financial Reporting. Furnish the Lenders:
(a) As soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Borrower,
Consolidated and consolidating Financial Statements of the
Borrower and its Consolidated Subsidiaries, such Consolidated
Financial Statements to have been certified after audit by
certified public accountants acceptable to the Required
Lenders, including a balance sheet and statements of income,
retained earnings and cash flows, together with the
accompanying notes to such Financial Statements, all prepared
in accordance with GAAP on a Consolidated and consolidating
basis consistent with prior periods, unless specifically
otherwise noted thereon, and accompanied by (i) the
unqualified opinion of such accountants that such Consolidated
Financial Statements present fairly the Consolidated financial
position of the Borrower and its Consolidated Subsidiaries as
of the date thereof and the results of their Consolidated
operations for the fiscal year then ended, (ii) the management
letter of such accountants describing any deficiencies in the
internal controls or other matters of significance discovered
during the course of the audit, (iii) a certificate of such
accountants to the effect that, in the course of their
examination, they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such accountants,
any Default or Unmatured Default shall exist, stating the
nature and status thereof, (iv) a Compliance Certificate duly
completed and signed by the chief executive officer or chief
financial officer of the Borrower and (v) a certificate duly
completed and signed by the chief executive officer or the
chief financial officer of the Borrower reflecting and
certifying Borrower's calculation of Excess Cash Flow for the
immediately preceding fiscal year;
(b) As soon as practicable, but in any event within
forty-five (45) days after the end of each of the Borrower's
first three (3) fiscal quarters, similar unaudited
Consolidated Financial Statements of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and
the results of their operations for the portion of the fiscal
year then elapsed, all prepared in accordance with GAAP on a
Consolidated basis consistent with prior periods (except for
normal year-end adjustments and for the absence of footnotes),
unless specifically otherwise noted thereon, and accompanied
by a Compliance Certificate duly completed and signed by the
chief executive officer or chief financial officer of the
Borrower;
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(c) As soon as practicable, but in any event within five
(5) days after the Borrower becomes aware thereof, a written
statement signed by the chief executive or chief financial
officer of the Borrower as to the occurrence of any Default or
Unmatured Default stating the specific nature thereof, the
Borrower's intended action to cure the same and the time
period in which such cure is to occur;
(d) As soon as practicable, but in any event within ten
(10) days after the Borrower becomes aware thereof, a written
statement describing any litigation instituted by or against
the Borrower which, in the reasonable judgment of the
Borrower, singly or in the aggregate, could have a Material
Adverse Effect;
(e) As soon as practicable, but in any event within ten
(10) days after the Borrower becomes aware thereof, a written
statement signed by the chief executive officer or the chief
financial officer of the Borrower describing any Reportable
Event which has occurred with respect to any Plan and the
action which the Borrower proposes to take with respect
thereto; and within two hundred seventy (270) days after the
close of each fiscal year, a statement of the Unfunded
Liabilities of each Single Employer Plan, certified as correct
by an actuary enrolled under ERISA;
(f) As soon as practicable, but in any event within twenty
(20) days after the end of each calendar month, but only if
the Borrower's Leverage Ratio is greater than 1.5 to 1.0, a
Borrowing Base Certificate, in the form prescribed by the
Agent executed by the chief financial officer of the Borrower,
evidencing the Borrowing Base as of the close of such month,
showing the calculation thereof, the outstanding principal
amount of the Facilities and the outstanding face amount of
Letters of Credit and such other information as the Agent may
reasonably request; provided, however, Borrower shall not be
required to deliver a Borrowing Base Certificate when Level 6
pricing is in effect;
(g) As soon as practicable, but in any event within ten
(10) days after the filing with the Securities and Exchange
Commission, or any successor thereto, or any state securities
Governmental Authority, copies of all registration statements
and all periodic and special reports required or permitted to
be filed under federal or state securities laws and
regulations;
(h) As soon as practicable, but in any event within 10
days after receipt by the Borrower, a copy of any notice,
complaint, Lien, inquiry or claim (i) to the effect that the
Borrower or any of its Subsidiaries is or may be liable to any
Person as a result of the release by the Borrower, any of its
Subsidiaries, or any other Person of any Hazardous Material
into the environment, or (ii) alleging any violation of any
Environmental Law by the Borrower or any of its Subsidiaries,
which, in either case, singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect; and
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(i) Such other information as the Agent or any of the
Lenders may from time to time reasonably request, including,
without limitation, such information or certifications to
evidence compliance with Section 5.1.14.
5.1.2. Good Standing. Maintain, and cause each Subsidiary to
maintain, its corporate existence, good standing (if applicable), and
right to do business in its jurisdiction of incorporation and all
requisite authority to conduct its business in each jurisdiction in
which such business is conducted, except where the failure to do so,
singly or in the aggregate, could have a Material Adverse Effect and
except as permitted by Section 5.2.6.
5.1.3. Taxes, Etc. Pay and discharge, and cause each
Subsidiary to pay and discharge, all taxes, assessments, judgments,
orders, and governmental charges or levies imposed upon it or on its
income or profits or upon its Property prior to the date on which
penalties attach thereto and all lawful claims which, if unpaid, may
become a Lien or charge upon the Property of the Borrower or any
Subsidiary, provided that neither the Borrower nor any of its
Subsidiaries shall be required to pay any tax, assessment, charge,
judgment, order, levy or claim, if such payment is being contested
diligently, in good faith, and by appropriate proceedings which will
prevent foreclosure or levy upon its Property and adequate reserves
against such liability have been established. The Borrower further
covenants not to elect to have Section 338 of the Code apply in respect
of the Company Acquisition.
5.1.4. Maintain Properties. Maintain, and cause each
Subsidiary to maintain, all Properties and assets used by, or useful
to, the Borrower or such Subsidiary in the ordinary course of its
business in good working order and condition and suitable for the
purpose for which it is intended, and from time to time, make any
necessary repairs and replacements.
5.1.5. Insurance. Maintain, and cause each Subsidiary to
maintain, in full force and effect public liability insurance, business
interruption insurance, worker's compensation insurance and casualty
insurance policies with coverages and with such companies as are
acceptable to the Agent. Each policy providing liability coverage shall
be endorsed to reflect "NBD Bank, N.A., as Agent," on behalf of the
Lenders as an additional insured, and each such policy covering
Properties pledged as collateral to the Agent shall have a lender's
loss payable clause in favor of "NBD Bank, N.A., as Agent." If
requested by the Agent, a copy of each policy, accompanied by a
certificate of coverage issued by the insurance carrier, shall be
delivered to the Agent. Such policy shall stipulate that the insurance
cannot be canceled or materially modified without thirty (30) days'
prior written notice to the Agent and shall insure the Agent
notwithstanding the act or neglect of the Borrower.
5.1.6. Books and Records. Keep, and cause each Subsidiary to
keep, proper books of account in which full, true and correct entries
will be made of all dealings and transactions of, and in relation to,
the business and affairs of the Borrower and its Subsidiaries, and, at
all reasonable times, and as often as the Lenders may request, permit
authorized representatives of the Lenders to (a) have access to the
premises and Properties of the Borrower and its Subsidiaries and to the
records relating to the operations of the
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Borrower and its Subsidiaries, (b) make copies of or excerpts from such
records, (c) discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with and be advised as to the same by the chief
executive and financial officers of the Borrower and each Subsidiary,
and (d) audit and inspect such books, records, accounts, memoranda and
correspondence at all reasonable times, to make such abstracts and
copies thereof as the Lenders may deem necessary, and to furnish copies
of all such information to any proposed Purchaser or Participant,
provided, however, that the Borrower's Obligation to reimburse the
Agent and the Lenders for costs and expenses associated with
performance of periodic audits of the records of the Borrower and its
Subsidiaries by the Agent's auditors shall be limited to one audit
visit per year, unless unusual and adverse circumstances require, in
the reasonable opinion of the Agent, more frequent visits.
5.1.7. Reports. File, and cause each Subsidiary to file, as
appropriate, on a timely basis, annual reports, operating records and
any other reports or filings required to be made with any Governmental
Authority, except where the failure to make any such filing, singly or
in the aggregate, could not have a Material Adverse Effect.
5.1.8. Licenses. Maintain, and cause each Subsidiary to
maintain, in full force and effect all operating permits, licenses,
franchises, and rights used by it in the ordinary course of business,
except where the failure to maintain the same, singly or in the
aggregate, could not have a Material Adverse Effect.
5.1.9. Conduct of Business. Carry on and conduct, and cause each
Subsidiary to carry on and conduct, its business in substantially the
same manner and in substantially the same fields of enterprise as
currently conducted.
5.1.10. Compliance with Laws. Comply, and cause each
Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards
to which the Borrower or such Subsidiary may be subject, including,
without limitation, ERISA and all Environmental Laws, except where such
noncompliance, singly or in the aggregate, could not have a Material
Adverse Effect.
5.1.11. Trade Accounts. Pay all trade accounts in accordance
with past custom and industry practice.
5.1.12. Use of Proceeds. Use the proceeds of the Facilities
solely for the purposes herein described.
5.1.13. Loan Payments. Duly and punctually pay or cause to be
paid principal and interest on the Facilities in lawful money of the
United States at the time and places and in the manner specified
herein according to the stated terms hereof.
5.1.14. Environmental Covenant. (a) Use, operate and maintain all
of its Properties in compliance with all applicable Environmental
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Laws, keep or acquire all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in
effect and remain in compliance therewith, and handle all Hazardous
Materials in compliance with all applicable Environmental Laws, except
where the failure to do any of the foregoing, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect (b) use its reasonable best efforts to have dismissed with
prejudice, within ninety (90) days after filing thereof, any actions
or proceedings against the Borrower or any of its Subsidiaries
relating to compliance with Environmental Laws which, in the
reasonable opinion of the Agent, singly or in the aggregate, could
have a Material Adverse Effect, and (c) diligently pursue cure of any
material underlying environmental problem which forms the basis of any
claim, complaint, notice, Lien, inquiry, proceeding or action referred
to in Section 5.1.1(h). If the Borrower or any Subsidiary is notified
of any event described in Section 5.1.1(h), the Borrower shall, upon
the request of Required Lenders, establish appropriate reserves
against such potential liabilities and engage a firm or firms of
engineers or environmental consultants appropriately qualified to
determine as quickly as practical the extent of contamination and the
potential financial liability of the Borrower or any of its
Subsidiaries with respect thereto, and the Lenders shall be provided
with a copy of any report prepared by such firm or by any Governmental
Authority as to such matters as soon as any such report becomes
available to the Borrower or any Subsidiary. The selection of any
engineers or environmental consultants engaged pursuant to the
requirements of this Section shall be subject to the approval of the
Required Lenders, which approval shall not be unreasonably withheld or
delayed.
5.1.15. Change Name and Place of Business. Provide Agent not less
than sixty (60) days written notice prior to changing its corporate
name or principal place of business.
5.1.16. Required Rate Hedging Agreements. Within ninety (90)
days after the Closing Date, the Borrower will have entered into Rate
Hedging Agreements, in form and substance and for a term acceptable to
the Agent, with one or more financial institutions acceptable to the
Agent providing for a fixed rate of interest on a notional amount equal
to or greater than 50% of the then outstanding Facility A and Facility
B Loans.
5.1.17. Fixture Filings. Within ninety (90) days after the
Closing Date, the Borrower shall have duly completed, executed and
delivered to the Agent UCC financing statements legally sufficient, in
the reasonable opinion of the Agent, to perfect the security interests
of the Lenders in those Fixtures of the Borrower and the Guarantors
designated by the Agent.
5.1.18. Landlord Waiver. The Borrower shall use its reasonable
best efforts to procure, within ninety (90) days after the Closing
Date, landlord and warehousemen Lien waivers, in the form prescribed by
the Agent, pursuant to which the various landlords and warehousemen of
the Borrower and the Guarantors shall waive all Liens or other rights
of detainer against the assets constituting collateral for the
Facilities or any Guaranty.
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5.2. Negative Covenants. Until the Obligations are paid in full, and so
long as any Commitment is outstanding, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, and will not permit any
Subsidiary to:
5.2.1. Dispose of Property. Sell, transfer, lease or otherwise
dispose of its assets (including, without limitation, stock in any
Subsidiary), Properties, or business, or discount, with or without
recourse, any of its accounts or notes receivable, except (a) sales
from Inventory in the ordinary course of business, (b) dispositions of
fixed assets no longer used or useful in the operation of its business,
provided, (i) any such disposition is for cash and for fair value, (ii)
at the time of such disposition there exists no Default or Unmatured
Default and no Default or Unmatured Default would be occasioned
thereby, and (iii) the aggregate net after-tax sale proceeds from such
dispositions in excess of $750,000 during any fiscal year of the
Borrower are promptly paid to the Lenders to repay pro rata the
Facility A Term Loans and the Facility B Term Loans, (c) transfers to
or from Wholly-Owned Subsidiaries of the Borrower, (d) the issuance of
stock constituting directors' qualifying shares in Foreign
Subsidiaries, (e) such other dispositions of Property, which when
coupled with dispositions of fixed assets pursuant to clause (b) above,
do not exceed, in the aggregate, $5,000,000 during any fiscal year, and
(f) the sale, transfer or other disposition of the capital stock of the
Company.
5.2.2. Liens and Encumbrances. Create or suffer to exist any
Lien in, of or on any of its Property, except (a) Liens for taxes or
assessments which are not yet due, Liens for taxes or assessments or
Liens of judgments which are being contested, appealed or reviewed in
good faith by appropriate proceedings which prevent foreclosure of any
such Lien or levy of execution thereunder and against which Liens, if
any, adequate insurance or reserves have been provided, (b) pledges or
deposits to secure payment of workers' compensation obligations and
deposits or indemnities to secure public or statutory obligations or
for similar purposes, (c) any Liens and other security interests in
favor of the Lenders and/or the Agent under the Loan Documents, (d)
Liens imposed by law, such as carrier's, warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than sixty (60)
days past due, (e) utility easements, building restrictions, zoning
ordinances and such other encumbrances or charges against real Property
as are of a nature generally existing with respect to Properties of a
similar character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in the
business of a Person, (f) lessors' interests under Capitalized Leases,
(g) Liens first arising after the Closing Date which constitute
purchase money security interests encumbering only the Property
acquired by the Borrower or its Subsidiary and the Proceeds thereof to
secure only the purchase price thereof and which do not exceed
$4,000,000 in the aggregate at any one time outstanding, (h) any Lien
encumbering the capital stock of the Company, and (i) those further
encumbrances (if any) shown on Schedule 5.2.2 hereto (collectively,
"Permitted Liens").
5.2.3. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except (a) that in existence as of the date hereof and
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disclosed in the Financial Statements, (b) trade accounts and normal
business accruals payable in the ordinary course of business, (c)
Indebtedness to the Lenders pursuant to the Loan Documents, (d)
Indebtedness arising under Rate Hedging Agreements, (e) Indebtedness
to the Borrower or any Wholly-Owned Subsidiary of the Borrower, (f)
other Indebtedness of the Borrower and its Subsidiaries not exceeding
in the aggregate $6,000,000 outstanding at any time, and (g) as set
forth on Schedule 5.2.3. . 5.2.4. Investments and Acquisitions. Make
any Investment (including, without limitation, Investments in
Subsidiaries), or commitments therefor, or create any Subsidiary
except as permitted by Section 5.2.7 or remain a partner in any
partnership or joint venture, or make any Acquisition of any Person,
except, or investment in, any Person, except (a) short-term
obligations of, or fully guaranteed by, the United States of America,
(b) commercial paper rated in one of the two highest rating categories
of either Standard & Poor's Corporation or Moody's Investors Service,
Inc., (c) demand deposit accounts maintained in the ordinary course of
business, provided that, to the extent such demand deposit accounts
are located in the United States, the same shall be maintained with
one or more of the Lenders within 90 days of the date hereof, (d)
certificates of deposit issued by, and time deposits with, commercial
banks having capital and surplus in excess of One Hundred Million
Dollars ($100,000,000), provided that, to the extent any such
certificates of deposit or time deposits are located in the United
States, the same shall be maintained within 90 days of the date hereof
with one or more of the Lenders so qualifying, (e) existing
Investments in Subsidiaries and other Investments in existence on the
date hereof, all as described on Schedule 5.2.4, (f) as permitted by
Section 5.2.7, and (g) Investments made after the Closing Date at any
time not exceeding $5,000,000 in the aggregate.
5.2.5. Contingent Obligations. Assume, guarantee, suffer to
exist or otherwise become liable for any Contingent Obligations ,
except (a) for endorsements by the Borrower and its Subsidiaries of
negotiable instruments for deposit or collection in the ordinary course
of business, (b) for the Guaranties, and (c) as permitted by Section
5.2.3 and as set forth on Schedule 5.2.5.
5.2.6. Mergers and Consolidations. Merge or consolidate with
any other Person, except (a) pursuant to the Acquisition Documents, (b)
a Subsidiary may merge into the Borrower or a Guarantor and (c) any
merger with any other Person provided the Borrower or the Guarantor is
the surviving corporation and no Default or Unmatured Default has
occurred and is continuing or would result therefrom.
5.2.7. New Subsidiaries. Create any new Subsidiary, except the
Borrower may create (but not acquire except pursuant to Section 5.2.6)
(a) Subsidiaries having no material assets or operations and having an
existence not exceeding sixty (60) days, solely for the purpose of
facilitating a transaction permitted by Section 5.2.6, and (b)
Subsidiaries in substantially the same lines of business as currently
conducted by the Borrower or any of its Subsidiaries, if, within ten
(10) days, such new Subsidiary becomes a Guarantor and executes
Guaranty Documents satisfactory to the Agent.
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5.2.8. Accounting Policies. Change its fiscal year or any of its
significant accounting policies, except to the extent necessary to
comply with GAAP.
5.2.9. Change of Business. Make any material change in the nature
of its business as carried on at the date of this Agreement.
5.2.10. Benefit Plans. Permit any Reportable Event under, or
any partial or complete withdrawal from, or any other condition to
exist in connection with any Plan which might constitute grounds for
the PBGC to institute proceedings to have the Plan terminated or a
trustee appointed to administer the Plan; or engage in, or permit to
exist or occur any other condition, event or transaction with respect
to any Plan which could result in the Borrower incurring any liability,
fine or penalty in excess of $2,000,000 in the aggregate.
5.2.11. Interest Coverage Ratio. Permit its Interest Coverage
Ratio to be less than the ratio set forth below at the end of the
fiscal quarter ending on the corresponding dates set forth below:
Minimum Interest
Period Ending Coverage Ratio
August 31, 1996 2.40 to 1.00
November 30, 1996 2.40 to 1.00
February 28, 1997 2.40 to 1.00
May 31, 1997 2.60 to 1.00
August 31, 1997 3.00 to 1.00
November 30, 1997 3.25 to 1.00
February 28, 1998 3.25 to 1.00
May 31, 1998 3.25 to 1.00
August 31, 1998 3.50 to 1.00
Each quarter end thereafter 4.00 to 1.00
5.2.12. Maximum Leverage Ratio. Permit its Leverage Ratio to be
greater than the ratio set forth below at the end of the fiscal
quarter ending on the corresponding dates set forth below:
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Period Ending Maximum Leverage Ratio
August 31, 1996 3.90 to 1.00
November 30, 1996 3.75 to 1.00
February 28, 1997 3.75 to 1.00
May 31, 1997 3.50 to 1.00
August 31, 1997 3.25 to 1.00
November 30, 1997 2.75 to 1.00
February 28, 1998 2.75 to 1.00
May 31, 1998 2.75 to 1.00
August 31, 1998 2.50 to 1.00
November 30, 1998 2.50 to 1.00
February 28, 1999 2.00 to 1.00
May 31, 1999 2.00 to 1.00
August 31, 1999 1.75 to 1.00
November 30, 1999 1.75 to 1.00
Each quarter end thereafter 1.50 to 1.00
5.2.13. Fixed Charge Coverage Ratio. Permit its Fixed Charge
Coverage Ratio to be less than the ratio set forth below at the end of the
fiscal quarter ending on the corresponding dates set forth below:
Minimum Fixed
Period Ending Charge Coverage Ratio
August 31, 1996 1.10 to 1.00
November 30, 1996 1.10 to 1.00
February 28, 1997 1.05 to 1.00
May 31, 1997 1.10 to 1.00
August 31, 1997 1.10 to 1.00
November 30, 1997 1.10 to 1.00
February 28, 1998 1.10 to 1.00
May 31, 1998 1.10 to 1.00
August 31, 1998 1.15 to 1.00
November 30, 1998 1.15 to 1.00
February 28, 1999 1.15 to 1.00
May 31, 1999 1.15 to 1.00
August 31, 1999 1.15 to 1.00
November 30, 1999 1.15 to 1.00
February 29, 2000 1.15 to 1.00
May 31, 2000 1.15 to 1.00
Each quarter end thereafter 1.20 to 1.00
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5.2.14. Affiliates. Enter into any transaction (including,
without limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any Affiliate except in the
ordinary course of business and pursuant to the reasonable requirements
of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary
than the Borrower or such Subsidiary would obtain in a comparable
arms-length transaction.
5.2.15. Sale and Leaseback. Enter into any Sale and
Leaseback Transaction.
5.2.16. Operating Leases; Rentals. Enter into or remain liable
upon any Operating Lease, except for Operating Leases with annual
Rentals aggregating to not more than $4,000,000.
5.2.17. Capital Expenditures. Make, or commit to make, Capital
Expenditures in excess of the level set forth below during the period
indicated below on a non-cumulative basis in the aggregate for the
Borrower and its Subsidiaries:
Maximum
Period Capital Expenditures
During the remaining
portion of Borrower's fiscal year 1996 $ 7,000,000
During Borrower's fiscal year 1997 $10,000,000
During Borrower's fiscal year 1998 $10,000,000
During Borrower's fiscal year 1999 $10,000,000
During Borrower's fiscal year 2000 $11,000,000
During Borrower's fiscal year 2001 $11,000,000
During Borrower's fiscal year 2002 $12,000,000
During Borrower's fiscal year 2003 $13,000,000
provided, however, the currently anticipated Capital Expenditure for a
new plant in the approximate amount of $7,000,000 to be expended in
fiscal year 1996 shall not be counted against the foregoing limit for
fiscal year 1996.
5.2.18. Dividends, Etc. (a) Declare or pay any dividend in
cash or other Property (other than a dividend payable solely in the
form of common stock of the Borrower or a dividend payable by any
Subsidiary to the Borrower), if, at the time of such declaration or
payment, (i) there shall have occurred and then be continuing any
Default hereunder, or (ii) the payment of such dividend (assuming, in
the case of a declaration, that the payment of such dividend were made
immediately upon such declaration) would cause a Default hereunder; nor
(b) redeem, repurchase, or otherwise acquire or retire any of the
capital stock of the Borrower at any time outstanding.
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5.2.19. Restrictive Agreements. Enter into any agreement
(excluding any restrictions existing under the Loan Documents)
prohibiting (a) the (i) creation or assumption of any Lien upon its
Property, or (ii) ability of the Borrower 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
Borrower 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 ability of any such
Subsidiary to make any payment, directly or indirectly, to the
Borrower.
SECTION 6
Conditions Precedent to Loans
6.1. Conditions to Initial Advance. The obligation of the Lenders
to make the initial Advance under the Facilities is subject to each of the
following conditions precedent:
6.1.1. Secretary's Certificates. The Borrower shall have
furnished to the Agent (with sufficient copies for the Lenders), and
the Agent shall have determined satisfactory in all respects,
certificates, each dated as of the date of the initial Advance
hereunder, signed by the Secretary or an Assistant Secretary of the
Borrower and each Guarantor, respectively, certifying, in each case and
as the case may be, as true, accurate and complete, and attaching (a)
copies of the Borrower's or such Guarantor's articles or certificate of
incorporation (which shall bear the recent certification by the
appropriate Secretary of State), (b) copies of the Borrower's or such
Guarantor's code of by-laws or regulations, as amended, (c) original
certificates of existence and/or good standing issued as of a recent
date by the Secretaries of State of the respective states of
incorporation, of the Borrower and each Guarantor, (d) original
certificates issued by the appropriate Secretaries of State as of a
recent date evidencing the qualification by the Borrower and each
Guarantor to do business as a foreign corporation in each jurisdiction
in which the Borrower or any Guarantor conducts business, (e) copies of
resolutions adopted, respectively, by the Boards of Directors of the
Borrower and each Guarantor appropriately authorizing the transactions
contemplated hereby and specifying the names and capacities of those
Persons authorized to execute the Loan Documents or the Guaranty
Documents, as the case may be, and (f) the incumbency and genuine
signatures of each officer of the Borrower and the Guarantors, as the
case may be, authorized to sign the Loan Documents or the Guaranty
Documents. (The Lenders shall be entitled to rely upon such
certificates until informed in writing of any change by the Borrower.)
6.1.2. Insurance. The Borrower shall have furnished to the
Agent evidence of the insurance required by this Agreement in a form
reasonably satisfactory to the Agent.
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6.1.3. Loan Documents. Each of the Loan Documents (other
than the Guaranty Documents) shall have been executed and delivered by
the Borrower to the Agent (with sufficient copies for the Lenders).
6.1.4. Guaranty Documents. Each of the Guaranty Documents
shall have been executed appropriately and delivered by the Guarantors
to the Lenders (with sufficient copies for the Lenders).
6.1.5. Opinion of Counsel. The Agent shall have received a
favorable written opinion of counsel to the Borrower and the
Guarantors, dated of even date herewith, in form and substance
acceptable to the Lenders, which opinion shall cover, among other
things, the matters described in Section 6.1.11.
6.1.6. UCC Searches. The Agent shall have received
satisfactory return after search in accordance with the Uniform
Commercial Code or other applicable law in such governmental offices as
the Agent shall have deemed appropriate.
6.1.7. Approval. The Agent shall have received evidence
satisfactory to the Agent that the Borrower's directors and the
Company's directors and shareholders shall have approved the Company
Acquisition; and all regulatory and legal approvals for the Company
Acquisition shall have been obtained and shall remain in effect,
including, without limitation, any filings required under the HSR Act.
6.1.8. Litigation. No injunction or temporary restraining
order which, in the judgment of the Agent or the Required Lenders,
would prohibit the making of the Loans or the consummation of the
Company Acquisition shall have been issued; and no litigation has been
filed which, singly or in the aggregate, could reasonably be expected
to have a Material Adverse Effect on (a) the Borrower and its
Subsidiaries, taken as a whole, or (b) the Company and its
Subsidiaries, taken as a whole.
6.1.9. Due Diligence. The Agent shall have determined that no
information received after March 4, 1996 as to due diligence matters
investigated prior to such date indicates a change in the results of
such prior due diligence investigation which, singly or in the
aggregate, could have a Company Material Adverse Effect, and all
financial, accounting, and tax aspects of the Company Acquisition must
be acceptable to the Agent in all respects.
6.1.10. Tender Offer. The terms of the tender offer portion of
the Company Acquisition shall be substantially as set forth in the
draft tender offer documents delivered to the Agent on March 4, 1996,
such tender offer shall not have been amended (except with respect to
the expiration date thereof, which shall not be extended past a date
which would allow the initial funding for the purpose of purchasing
tendered shares to take place by April 15, 1996), without the consent
of the Required Lenders, and a majority of the outstanding shares of
stock of the Company (or any greater number of shares as may be
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required under applicable state law or the Company's certificate of
incorporation or by-laws to vote for and effect the merger) shall have
been tendered (and not withdrawn) to LPAC in accordance with such
tender offer terms and (a) the price per share paid pursuant to such
tender offer shall not exceed $23.00 in cash and (b) the shares to be
purchased on such date shall have been validly tendered to LPAC, free
and clear of all Liens and restrictions to purchase imposed by
applicable law or otherwise.
6.1.11. Acquisition Documents. The Acquisition Documents shall
be in the form delivered to the Agent on March 4, 1996 (which form
specifies cash consideration of $23.00 per share for the common stock
of the Company), the representations and warranties in the Acquisition
Documents shall be true and correct on the Closing Date (except for
failures of such representations and warranties to be true and correct
which could not, singly or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect), and the conditions
therein shall have been satisfied; and the Agent, on behalf of the
Lenders, shall have received an opinion of counsel satisfactory to
the Required Lenders as to the enforceability of the Acquisition
Documents and their compliance with all applicable law.
6.1.12. Pro Forma Financial Statements. The Required Lenders
shall have received such information as the Agent may reasonably
request to confirm the tax, legal, and business assumptions made in the
pro forma financial statements provided to the Agent and the Required
Lenders.
6.1.13. Fairness Opinion. The Agent shall have received a copy
of the opinion from the Borrower's investment banker addressed to the
Borrower's board of directors, relating to the terms of the Company
Acquisition, to the effect that the consideration to be paid the
stockholders of the Company pursuant to the Company Acquisition is fair
from a financial point of view.
6.1.14. Solvency Certificate. The Agent shall have received a
certificate from the chief financial officer of the Borrower in a form
reasonably satisfactory to the Agent supporting the conclusions that,
after giving effect to the Company Acquisition, the Borrower and its
Subsidiaries (including, without limitation, the Company), on a
Consolidated basis, are solvent and will be solvent subsequent to
incurring the Indebtedness in connection with the Company Acquisition,
will be able to pay their debts and liabilities as they become due, and
will not be left with unreasonably small capital with which to engage
in their businesses.
6.1.15. Environmental Matters. The Agent shall have determined
that no information received after March 4, 1996 as to environmental
hazards or liabilities of the Borrower and the Company investigated
prior to such date indicates a change in the results of such prior
environmental investigation which, singly or in the aggregate, could
have a Company Material Adverse Effect.
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6.1.16. Existing Facilities. The Borrower, the Company, and
their respective Subsidiaries shall have prepaid all obligations under
existing loan facilities, other than the Obligations as set forth on
Schedule 6.1.16.
6.1.17. Legal. All legal (including tax implications) and
regulatory matters relative to the Loans and the Company Acquisition
shall be satisfactory to the Required Lenders.
6.1.18. Regulations. The Borrower shall have complied with
all applicable requirements of Regulations G, T, U, and X of the Board
of Governors of the Federal Reserve System.
6.1.19. No Default; No Material Adverse Change. The Agent
shall have received a certificate signed by the chief executive officer
or chief financial officer of the Borrower stating that on the Closing
Date (a) no Default or Unmatured Default has occurred and is
continuing, and (b) no material adverse change in the business,
condition (financial or otherwise), operations, performance,
properties, or prospects of (i) the Borrower and its Subsidiaries,
taken as a whole, since November 30, 1995 or (ii) to the knowledge of
such officer, the Company and its Subsidiaries, taken as a whole,
since December 31, 1995, has occurred.
6.1.20. Commitment Fees and Expenses. The fees described in
Section 2.6 shall have been paid by the Borrower to the Agent for the
benefit of the Lenders, and the Borrower shall have reimbursed the
Agent for all reasonable legal fees, appraisal fees and other expenses
of the Agent in connection with the Facilities.
6.1.21. Money Transfer Instructions. The Borrower has
furnished to the Agent (with sufficient copies for the Lenders) written
money transfer instructions, in substantially the form of Exhibit G
hereto, addressed to the Agent and signed by an Authorized Officer,
together with such other related money transfer authorizations as the
Agent may have reasonably requested.
6.1.22. Additional Documentation. The Agent shall have
received such other documents, instruments, financing statements,
assignments, waivers, certificates, reaffirmations, consents and
opinions as the Agent may reasonably request.
6.2. Conditions to Subsequent Advances. The obligation of the Lenders to
make each subsequent Advance or for NBD to issue any Letter of Credit under the
Facilities is subject to each of the following conditions precedent:
6.2.1. No Default. No Default or Unmatured Default shall
have occurred and be continuing.
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6.2.2. Representations and Warranties. Each representation and
warranty contained in Section 4 shall be true and correct in all
material respects as of the date of such Advance, except to the extent
any such representation or warranty relates solely to an earlier date.
6.2.3. Legal Matters. All legal matters incident to the
making of such Advance shall be reasonably satisfactory to the Agent
and its counsel.
6.2.4. Expenses. The Borrower shall have reimbursed the Agent
for all legal fees and other reasonable expenses incurred by the
Agent in connection with the Facilities.
6.3. General. Each request for an Advance under the Facilities shall
constitute a representation and warranty by the Borrower that the
applicable conditions contained in this Section 6 have been satisfied.
SECTION 7
Default
The occurrence of any of the following events shall be deemed a Default
hereunder:
(a) Any representation or warranty made by or on behalf of the Borrower
or any Guarantor to the Lenders under or in connection with any Loan Document or
any Guaranty Document, shall be false in any material respect as of the date on
which made;
(b) The Borrower or any Guarantor fails to make any payment of
principal of, or interest on, any of the Notes when due, or any fee or other
payment Obligation within five (5) days after the same becomes due;
(c) The breach by the Borrower of any of the covenants contained in
Sections 5.1.1 through 5.1.18 (other than Sections 5.1.1(c) and 5.1.13) which
breach remains uncured for a period which is the earlier of twenty (20) days
after the occurrence thereof or ten (10) days after written notice to the
Borrower from the Agent or a Lender; or the breach by the Borrower of any other
covenant contained in Section 5;
(d) The breach by the Borrower or any Guarantor of any other terms or
provisions of the Loan Documents (other than a breach which constitutes a
Default under Section 7(a), (b) or (c) above) not cured within thirty (30) days
after written notice from the Agent or a Lender to the Borrower specifying such
breach;
(e) The failure of the Borrower or any Guarantor to pay any other
Indebtedness aggregating in excess of $2,500,000 when due or within any
applicable grace or cure period, or the default by the Borrower or any Guarantor
in the performance of any other term, provision or condition contained in any
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agreement under which any such Indebtedness was created or is governed, the
effect of which is to permit the holder or holders of such Indebtedness to cause
such Indebtedness to become due prior to its stated maturity, unless such
default is waived in writing by the holder or holders of such Indebtedness; or
any such Indebtedness shall be validly declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof;
(f) The Borrower or any Guarantor shall (i) have an order for relief
entered with respect to it under the Federal Bankruptcy Code, (ii) not pay, or
admit in writing its inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv) apply for, seek,
consent to, or acquiesce in the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (v) institute any proceeding seeking an order for relief under the
Federal Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, or (vi) suspend operations as currently conducted or
discontinue doing business as an ongoing concern;
(g) Without the application, approval or consent of the Borrower or any
Guarantor, a receiver, trustee, examiner, liquidator or similar official shall
be appointed for the Borrower or such Guarantor or any substantial part of its
Property, or a proceeding described in item (f) shall be instituted against the
Borrower or such Guarantor and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of sixty (60)
consecutive days;
(h) Any Guaranty or any material provision thereof shall cease to be in
full force or effect, or any Guarantor fails to promptly perform under its
Guaranty, or any Guarantor terminates or revokes or attempts to terminate or
revoke its Guaranty; or the breach by a Guarantor of any other term or provision
of the Guaranty Documents not cured within thirty (30) days after written notice
from the Agent or a Lender;
(i) Any Governmental Authority shall condemn, seize or otherwise
appropriate, or take custody or control of all or any Substantial Portion of the
Property of the Borrower;
(j) The Borrower or any Subsidiary shall fail within thirty (30) days
to pay, bond or otherwise discharge any judgment or order for the payment of
money which when aggregated with all other such outstanding judgments or orders
exceeds $2,000,000 and which is not stayed on appeal or otherwise appropriately
contested in good faith, or any attachment, levy or garnishment is issued
against any Property of the Borrower or such Subsidiary;
(k) The Unfunded Liabilities of all Single Employer Plans shall exceed
$2,000,000 in the aggregate or any Reportable Event shall occur in connection
with any Plan;
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(l) The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multi-employer Plan that it has incurred
withdrawal liability to such Multi- employer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multi-employer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $2,000,000;
(m) The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multi-employer Plan that such Multi-employer
Plan is in reorganization or is being terminated, within the meaning of Title IV
of ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of the Borrower and the other members of the Controlled
Group (taken as a whole) to all Multi-employer Plans which are then in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multi-employer Plans for the respective plan years
of each such Multi-employer Plan immediately preceding the plan year in which
the reorganization or termination occurs by an amount exceeding $2,000,000;
(n) Any Loan Document shall for any reason fail to create a valid and
perfected first priority security interest in any collateral purported to be
covered thereby (except as permitted by the terms of any Loan Document), or any
Loan Document shall fail to remain in full force or effect or any action shall
be taken to discontinue or to assert the invalidity or unenforceability of, or
the security interest created under, any Loan Document; or
(o) If there occurs a Change in Control.
SECTION 8
Remedy
8.1. Acceleration. If any Default described in Section 7 (f) or Section
7 (g), occurs, the Commitments and all obligations of the Lenders to make, renew
or convert Advances of the Facilities, to accept drafts or to issue Letters of
Credit hereunder shall automatically terminate and the Obligations (including,
without limitation, the Obligation to deposit with the Agent a sum equal to the
aggregate face amount of the outstanding Letters of Credit pursuant to Section
8.2) shall immediately become due and payable without any election or action on
the part of any Lender. If any other Default occurs, then upon the declaration
of the Required Lenders or the Agent at the direction of the Required Lenders,
the obligations of the Lenders to make, renew or convert Advances of the
Facilities, to accept drafts and to issue Letters of Credit under this Agreement
shall terminate, and the Obligations (including, without limitation, the
Obligation to deposit with the Agent a sum equal to the aggregate face amount of
the outstanding Letters of Credit pursuant to Section 8.2) shall immediately
become due and payable. In either event, the Obligations shall become
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives. The remedies of the
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Lenders specified in this Agreement and the other Loan Documents shall not be
exclusive, and the Lenders may avail themselves of any of the remedies provided
by law as well as any equitable remedies available to the Lenders, and each and
every remedy shall be cumulative and concurrent and shall be in addition to
every other remedy now or hereafter existing at law or in equity.
8.2. Deposit to Secure Reimbursement Obligations. When any Default has
occurred and is continuing, the Required Lenders or the Agent at the direction
of the Required Lenders may demand that the Borrower immediately pay to the
Agent an amount equal to the aggregate outstanding amount of the Letters of
Credit, and the Borrower shall immediately upon any such demand make such
payment. The Borrower hereby irrevocably grants to the Agent for the benefit of
the Lenders a security interest in all funds deposited to the credit of or in
transit to any deposit account or fund established pursuant to this Section 8.2,
including, without limitation, any investment of such fund. The Borrower hereby
acknowledges and agrees that the Agent and NBD would not have an adequate remedy
at law for failure by the Borrower to honor any demand made under this Section
8.2 and that the Agent and NBD shall have the right to require the Borrower
specifically to perform its undertakings in this Section 8.2 whether or not any
draws have been made under any Letter of Credit. In the event the Agent or NBD
makes a demand pursuant to this Section 8.2, and the Borrower makes the payment
demanded, the Agent agrees to invest the amount of such payment for the account
of the Borrower and at the Borrower's risk and direction in Qualified
Investments.
8.3. Subrogation. NBD shall, to the extent of any payments made by NBD
under any Letter of Credit, be subrogated to all rights of the beneficiary of
such Letter of Credit as to all obligations the Borrower and its Subsidiaries
with respect to which such payment shall have been made by NBD.
8.4. Preservation of Rights. No delay or omission of the Agent or any
Lender to exercise any power or right under the Loan Documents shall impair such
power or right or be construed to be a waiver of any Default or an acquiescence
therein, and any single or partial exercise of any power or right shall not
preclude other or further exercise thereof or the exercise of any other power or
right. No Advance hereunder shall constitute a waiver of any of the conditions
of any Lender's obligation to make further Advances, nor, in the event the
Borrower is unable to satisfy any such condition, shall a waiver of such
condition in any one instance have the effect of precluding any Lender from
thereafter declaring such inability to be a Default hereunder. No course of
dealings shall be binding upon the Agent or any Lender.
SECTION 9
The Agent
9.1. Appointment. Each of the Lenders hereby designates and appoints
NBD as the Agent of such Lender under the Loan Documents, and each such Lender
authorizes NBD, as Agent for such Lender. The duties of the Agent shall be
administrative in nature, and the Agent shall not have a fiduciary relationship
in respect of any Lender by reason of this Agreement, and the Agent shall not be
deemed to have assumed any obligation toward, or relationship or agency or trust
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with or for, the Borrower. The provisions of this Section 9 are solely for the
benefit of the Agent and the Lenders, and the Borrower shall not have any rights
as a third party beneficiary of any of the provisions hereof.
9.2. Powers. The Agent shall have and may exercise such powers
hereunder and under the other Loan Documents as are specifically delegated to
the Agent by the terms hereof and thereby, together with such powers as are
reasonably incidental thereto. The Agent shall have no implied duties to the
Lenders or any obligation to the Lenders to take any action hereunder or
thereunder, except any action specifically provided by this Agreement or the
other Loan Documents to be taken by the Agent. The Agent shall take such action
or refrain from taking such action as is directed by the Required Lenders, or,
if this Agreement or the Loan Documents requires that such direction shall be
given by all of the Lenders, then by all the Lenders.
9.3. Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
to be taken by it under or in connection with this Agreement or the other Loan
Documents except for its own gross negligence or willful misconduct, or be
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any Subsidiary or any
officer thereof contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent or any of the Lenders under or in connection with this Agreement or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any of the other Loan Documents or for any failure of the
Borrower to perform the Obligations. The Agent shall not be under any obligation
to any of the Lenders to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or the conditions of, this
Agreement. The Agent shall be fully justified in failing or refusing to take any
action hereunder or under the other Loan Documents unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability and expense which may be incurred by it or by reason of taking or
continuing to take any such action.
9.4. Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person. The Agent shall in all cases be fully protected in acting, or refraining
from acting, hereunder or under the other Loan Documents in accordance with
written instructions signed by the Required Lenders pursuant to Sections 8.1,
8.2, 9.6, 9.9 or 11.1 or signed by all of the Lenders as required by Section
11.1, and such instructions and any action taken or failure to act pursuant
thereto shall be binding on all the Lenders and on all holders of the Notes.
Further, the Agent shall be entitled to rely, with respect to legal matters,
upon the opinion of counsel selected by the Agent. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any requests, authority or consent of any Person, who at
the time of making such request or giving such authority or consent is the
holder of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.
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9.5. Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees or agents has made any representations or warranties to it and that no
act by the Agent hereinafter taken, including, without limitation, any review of
the affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent to any of the Lenders. Each Lender represents to the Agent
that it has, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
financial condition and credit-worthiness of the Borrower and made its own
decision to make its Commitments and Advances and enter into this Agreement.
Each Lender also represents that it will independently and without reliance upon
the Agent or the other Lenders, and based upon such documents and information as
it may deem appropriate at the time, continue to make its own credit analysis
and decisions in taking or not taking action under this Agreement. The Agent
makes no representation or warranty of any kind with respect to (a) the
enforceability or perfection or priority of the Lenders' interest in any
collateral under the Loan Documents, or (b) the value, sufficiency or existence
of any collateral, or (c) the validity, enforceability, legality or sufficiency
of the Loan Documents or any of the other documents referred to or contemplated
herein or therein.
9.6. Defaults; Notices. The Agent shall not be deemed to have knowledge of
the occurrence of any Default or Unmatured Default unless the Agent has received
written notice from a Lender or the Borrower specifying such Default or
Unmatured Default and stating that such notice is a "Notice of Default." In the
event that the Agent receives such a notice, the Agent shall promptly give
written notice thereof to the Lenders. Any time a Lender has actual knowledge of
the occurrence of any Default or Unmatured Default, such Lender shall promptly
give written notice thereof to the Agent. The Agent shall take such action with
respect to a Default or a Unmatured Default as shall be reasonably directed in
writing by the Required Lenders or all the Lenders, as applicable, provided,
however, that, unless and until the Agent shall have received such direction,
the Agent may take such action, or refrain from taking such action with respect
thereto, as it shall deem advisable in the best interests of the Lenders. The
Agent shall have no obligation to impose or collect the Default rate of interest
as provided in Section 2.2.4 unless and until instructed in writing by the
Required Lenders, which written instruction shall include the Required Lenders'
determination of the date of Default and the amount of interest due and payable
by the Borrower.
9.7. Rights as Lender. The Agent shall have the same rights and powers
hereunder as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
requires, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, and generally engage in any kind of banking or
trust business with the Borrower, as if it were not the Agent. The Borrower
hereby authorizes the Agent, as the Agent may elect in its sole discretion, to
discuss with, and furnish to, the Lenders or for a proper business purpose or to
any other Person having an interest in the Obligations (whether as a guarantor,
pledgor, Participant, Purchaser or otherwise) all Financial Statements, audit
reports and other information pertaining to the Borrower or any Subsidiary
whether such information was provided by the Borrower or such Subsidiary or
prepared or obtained by the Agent, provided that the Agent shall require the
recipient of any such information to comply with the confidentiality provisions
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of Section 11.11. Neither the Agent nor any of its employees, officers,
directors or agents makes any representation or warranty regarding any audit
reports or other analysis of the Borrower's or any Subsidiary's condition which
the Agent may elect to distribute, whether such information was provided by the
Borrower or any Subsidiary or prepared or obtained by the Agent, nor shall the
Agent or any of its employees, officers, directors or agents be liable to any
Person receiving a copy of such reports or analysis for any inaccuracy or
omission contained therein or relating thereto.
9.8. Agent's Indemnification and Reimbursement. The Lenders agree to
indemnify and to reimburse the Agent (to the extent not reimbursed by or on
behalf of the Borrower) according to their Pro Rata Shares, from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed upon, incurred by, or asserted against the Agent in any way relating to
or arising out of this Agreement or the other Loan Documents or any action taken
or omitted by the Agent under this Agreement or the other Loan Documents,
provided that no Lender shall be liable for any portion of the foregoing
resulting from the Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to indemnify and reimburse the Agent
(to the extent not reimbursed by or on behalf of the Borrower) promptly upon
demand for its Pro Rata Share of (a) any expenses for which the Agent is
entitled to reimbursement by the Borrower hereunder, and (b) any out-of-pocket
expenses (including, without limitation, fees and disbursements of counsel)
incurred by the Agent on behalf of the Lenders in connection with the
preparation, administration or enforcement of, or legal advice in respect of,
its rights or responsibilities under this Agreement.
9.9. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint, on behalf of the
Borrower and the Lenders, a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's notice of
resignation, then the retiring Agent may appoint, on behalf of the Borrower and
the Lenders, a successor Agent. Such successor Agent shall be a commercial bank
having capital and retained earnings of at least Two Hundred Million Dollars
($200,000,000). Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to, and become
vested with, all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 9 shall continue in effect for its benefit
with respect to any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder.
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SECTION 10
Benefit of Agreement; Assignments; Participations
10.1. Successors and Assigns. Each Lender will accept the Notes as
evidence of loans made in the ordinary course of its commercial banking or
investing business. The term and provisions of the Loan Documents shall be
binding upon and inure to the benefit of the Borrower and the Lenders and their
respective successors and assigns, except that (a) the Borrower shall not have
the right to assign its rights or obligations under the Loan Documents and (b)
any assignment by any Lender must be made in compliance with Section 10.3.
Notwithstanding clause (b) of this Section, any Lender may at any time, without
the consent of the Borrower or the Agent, assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank; provided,
however, that no such assignment to a Federal Reserve Bank shall release the
transferor Lender from its obligations hereunder. The Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 10.3 in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with the
Agent. Any assignee or transferor of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
10.2. Participations.
10.2.1. Permitted Participations; Effect. Any Lender may, in
the ordinary course of its business and in accordance with applicable
law, at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note for all purposes under
the Loan Documents, all amounts payable by the Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
10.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Facility
in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with
respect to any such Facility, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on,
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any such Facility, releases any guarantor of any such Loan or
releases any Substantial Portion of collateral for the Obligations.
10.2.3. Benefit of Set-off. The Borrower agrees that each
Participant shall be deemed to have the right of set-off provided in
Section 11.2 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
set-off provided in Section 11.2 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of set-off provided in Section 11.2, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
set-off, such amounts to be shared in accordance with Section 11.2 as
if each Participant were a Lender.
10.3. Assignments.
10.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more Eligible Assignees ("Purchasers") all or any
part of its Loans, rights and obligations under the Loan Documents, and
such assignments need not be pro rata among the Facilities. Such
assignment shall be made pursuant to an Assignment Agreement
substantially in the form of Exhibit H hereto or in such other form as
may be agreed to by the parties thereto. The consent of the Borrower
and the Agent (which consents shall not be unreasonably withheld or
delayed) shall be required prior to an assignment becoming effective
with respect to a Purchaser which is not a Lender or an Affiliate
thereof, and each such assignment to a Purchaser which is not a Lender
or an Affiliate thereof shall transfer an interest in the Facilities of
not less than the lesser of (a) $5,000,000 or (b) the then remaining
amount of such Lender's Loans and Commitments); provided, however, that
if a Default has occurred and is continuing, the consent of the
Borrower shall not be required.
10.3.2. Effect; Effective Date. Upon (a) delivery to the Agent
of a notice of assignment, substantially in the form attached as
Exhibit I hereto (a "Notice of Assignment"), together with any consents
required by Section 10.3.1, (b) acceptance and recording of the Notice
of Assignment by the Agent in accordance with Section 10.4, and (c)
payment of a Four Thousand Dollar ($4,000) fee to the Agent for
processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment.
Notwithstanding anything to the contrary contained herein, no
assignment of any Loan evidenced by a Registered Note shall be
effective unless and until the assignment is recorded in the Register.
The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment
agreement are Plan Assets and that the rights and interests of the
Purchaser in and under the Loan Documents will not be Plan Assets. On
and after the effective date of such assignment, such Purchaser shall
for all purposes be a Lender party to this Agreement and any other Loan
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Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent
as if it were an original party hereto, and no further consent or
action by the Borrower, the Lenders or the Agent shall be required to
release the transferor Lender with respect to the percentage of the
Commitment and Loans assigned to such Purchaser. Upon the consummation
of any assignment to a Purchaser pursuant to this Section, Schedule 1
shall be deemed modified to reflect the Commitments of the Purchaser
and of the existing Lenders, and the transferor Lender, the Agent and
the Borrower shall make appropriate arrangements so the replacement
Notes are issued to such transfer or Lender, and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each
case in principal amounts reflecting their Commitment, as adjusted
pursuant to such assignment.
10.4. Registered Notes.
(a) Any Non-U.S. Lender that could become completely exempt
from withholding of any taxes in respect of payment of any interest due
to such Non-U.S. Lender under this Agreement if the Notes held by such
Lender were in registered form for United States federal income tax
purposes may request the Borrower (through the Agent), and the Borrower
agrees (i) to exchange for any Notes held by such Lender, or (ii) to
issue to such Lender by the date it becomes a Lender, promissory
note(s) registered as provided in clause (b) of this Section 10.4
(each, a "Registered Note", to be in substantially the form of Exhibit
A-1 or Exhibit B-1 hereto, as applicable). Registered Notes may not be
exchanged for Notes that are not Registered Notes.
(b) The Borrower shall maintain, cause to be maintained, or
register (the "Register") which, at the request of the Borrower, shall
be kept at no extra charge to the Borrower by the Agent, acting for
this purpose solely as agent of the Borrower, at the address to which
notices to the Agent are to be sent hereunder, on which it enters the
name of the registered owner of each Loan evidenced by a Registered
Note.
(c) A Registered Note and the Loan evidenced thereby may be
assigned or otherwise transferred in whole or in part pursuant to
Section 10.3 only by registration of such assignment or transfer of
such Registered Note and the Loan evidenced thereby on the Register
(and each Registered Note shall expressly so provide). Any assignment
or transfer of all or part of a Loan and the Registered Note evidencing
the same shall be recorded on the Register only upon surrender for
registration of assignment or transfer of the Registered Note
evidencing such Loan; duly endorsed by (or accompanied by a written
instrument of assignment or transfer duly executed by) the holder of
such Registered Note and thereupon one or more new Registered Notes in
the same aggregate principal amount shall be issued to the Purchaser
and, if applicable, to the assignor Lender. The entries in the Register
shall be conclusive and the Borrower, the Agent, and the Lenders shall
treat the Person in whose name such Loan(s) and the Registered Notes(s)
evidencing the same are registered as the owner thereof for the purpose
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of receiving all payments thereon and for all other purposes,
notwithstanding any notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender at any
reasonable time upon reasonable prior notice.
10.5. Dissemination of Information. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the credit-worthiness of the Borrower and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section
11.11.
10.6. Tax Treatment. If any interest in any Loan Documents is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Sections 2.3.6(b) and 11.19.
SECTION 11
General Provisions
11.1. Waivers and Amendments. No delay or omission of the Lenders to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right. No waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Required Lenders (or
the Agent with the written consent of the Required Lenders), and, to the extent
any rights or duties of the Agent may be affected thereby, the Agent; provided,
however, that no waiver, amendment, modification, consent or other variation
shall, without the prior written consent of each Lender affected thereby, (a)
authorize or permit the extension of time for paying the principal of, or
interest on, any Obligations (including, without limitation, payments due under
Sections 2.3.1 and 2.3.2), or any fees payable hereunder or thereunder, or any
change in, or forgiveness or reduction of, the principal amount thereof or the
rate of interest or fees thereon (other than as a result of waiving the
applicability of any increase in the applicable interest rate upon Default or
maturity) or increase the amount of any Lender's Commitment hereunder, (b) amend
(i) the definition of Required Lenders or the percentage of Lenders required to
take or approve any action hereunder, or (ii) the provisions of this Section or
Sections 7, 8.1 or 2.3.4, (c) release a Substantial Portion of collateral
subject to any Loan Document or release any Guarantor from its Guaranty, or (d)
waive, amend, or modify any other provision of the Loan Documents which creates
an Obligation on the part of the Borrower to indemnify the Agent or any Lender
or to pay money to the Agent or any Lender. Any such waiver, amendment,
modification or consent shall be effective only in the specific instance and for
the specific purpose for which given.
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11.2. Set-off by Lenders. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of a Default, each Lender is hereby authorized
at any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by such Lender (including, without limitation, by branches and agencies of
such Lender wherever located) to, or for the credit or the account of, the
Borrower against and on account of the Obligations to such Lender, including,
without limitation, all interests in Obligations of the Borrower purchased by
such Lender pursuant to Section 10.2.3, and all other claims of any nature or
description arising out of or connected with this Agreement or any other Loan,
irrespective of whether or not such Lender shall have made any demand hereunder
and although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
11.3. Survival. All representations, warranties and indemnities made by the
Borrower in the Loan Documents shall survive delivery of the Notes, the
establishment of the Facilities, the making of Loans and the termination of the
Commitments.
11.4. Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, the Lenders shall not be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
11.5. Taxes. Any taxes (excluding taxation of the overall net income of the
Agent or any Lender) payable or ruled payable by any Governmental Authority in
respect of the Loan Documents shall be paid by the Borrower, together with
interest and penalties, if any.
11.6. Choice of Law. The Loan Documents (other than those containing a
contrary express choice of law provision) and the rights and obligations of the
parties thereunder and hereunder shall be governed by, and construed and
interpreted in accordance with the laws of the State of Indiana (but giving
effect to federal laws applicable to national banks), notwithstanding the fact
that Indiana conflict of law rules might otherwise require the substantive rules
of law of another jurisdiction to apply. The Borrower hereby consents to the
jurisdiction of any state or federal court located within Marion County,
Indiana. All service of process may be made by messenger, certified mail, return
receipt requested or by registered mail directed to the Borrower at the
addresses indicated aside its signature to this Agreement, and the Borrower
otherwise waives personal service of any and all process made upon the Borrower.
The Borrower waives any objection which the Borrower may have to any proceeding
commenced in a federal or state court located within Marion County, Indiana,
based upon improper venue or forum non conveniens. Nothing contained in this
Section shall affect the right of the Lenders to serve legal process in any
other manner permitted by law or to bring any action or proceeding against the
Borrower or its Property in the courts of any other jurisdiction.
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11.7. Headings. Section headings in the Loan Documents are for convenience
of reference only and shall not govern the interpretation of any of the
provisions of the Loan Documents.
11.8. Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings between the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
11.9. Expenses. The Borrower shall reimburse the Agent for any and all
reasonable costs, charges and out-of-pocket expenses (including attorneys' and
paralegals' fees and time charges of attorneys and paralegals for the Agent,
which attorneys may be employees of the Agent or its Affiliates), paid or
incurred by the Agent in connection with the preparation, review, execution,
delivery, amendment, modification and administration of the Facilities and/or
the Loan Documents. The Borrower shall reimburse the Agent and the Lenders for
any and all reasonable costs, charges and out-of-pocket expenses (including
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Agent and the Lenders, which attorneys may be employees of the Agent or its
Affiliates), paid or incurred by the Agent and/or the Lenders in connection with
the collection and enforcement of the Facilities and/or the Loan Documents. The
Lenders may pay or deduct from the Loan proceeds any of such expenses, and any
proceeds so applied shall be deemed to be advances under this Agreement
evidenced by the Notes, shall be secured by the Loan Documents, and shall bear
interest at the Alternate Base Rate plus the Applicable Margin for Floating Rate
Loans.
11.10. Indemnification. The Borrower agrees to indemnify the Lenders, and
their successors and assigns (including any purchaser of a participation in the
Facilities), and their respective directors, officers and employees, against all
losses, claims, costs, damages, liabilities and expenses, including, without
limitation, all expenses of litigation or preparation therefor (a "Loss"), which
any of them may pay or incur in connection with or arising out of, or related to
the Loan Documents, the transactions contemplated hereby, including, without
limitation, the Company, Acquisition or the direct or indirect application or
proposed application of the proceeds of the Facilities hereunder, except to the
extent they are determined by a court of competent jurisdiction in a final and
non-appealable order to have resulted from the gross negligence or willfull
misconduct of the party seeking indemnification.
11.11. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (a) to its Affiliates and to other Lenders and
their respective Affiliates, (b) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee, (c) to regulatory
officials, (d) to any Person as requested pursuant to, or as required by, law,
regulation, or legal process, (e) to any Person as deemed reasonably necessary
by such Lender or the Agent to prosecute or defend any legal proceeding to which
that Lender or the Agent is a party, and (f) permitted by Section 10.4.
11.12. Notice. Any notice required or permitted to be given under this
Agreement may be, and shall be deemed effective if made in writing and delivered
to the recipient's address, telex number or facsimile number addressed to the
Borrower at the address specified opposite its signature below, or if addressed
to the Agent or the Lenders at the addresses indicated on Schedule 1 hereto, by
any of the following means: (a) hand delivery, (b) United States first class
mail, postage prepaid, (c) registered or certified mail, postage prepaid, with
return receipt requested, (d) by a reputable rapid delivery service, or (e) by
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telegraph, telex, or facsimile when delivered to the appropriate office for
transmission, charges prepaid, with request for assurance of receipt in a manner
typical with respect to communication of that type. Notice made in accordance
with this Section shall be deemed given (aa) upon receipt if delivered by hand
or wire transmission, (bb) three (3) Business Days after mailing if mailed by
first class, registered or certified mail, or (cc) one (1) Business Day after
deposit with an overnight courier service if delivered by overnight courier. The
Borrower, the Agent and the Lenders may each change the address for service of
notice upon it by a notice in writing to the other parties hereto in accordance
with this Section 11.12.
11.13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders.
11.14. Incorporation by Reference. All Exhibits and Schedules hereto are
incorporated herein by this reference. Each of the other Loan Documents shall be
made subject to all of the terms, covenants, conditions, obligations,
stipulations and agreements contained in this Agreement to the same extent and
effect as if fully set forth therein, and this Agreement is made subject to all
of the terms, covenants, conditions, obligations, stipulations and agreements
contained in the other Loan Documents to the same extent and effect as if fully
set forth therein. The provisions of this Agreement, including, without
limitation, provisions relating to maintenance of insurance, are in addition to,
and not a limitation upon, the requirements of any other Loan Document ,
including any Guaranty Document.
11.15. No Joint Venture. Notwithstanding anything to the contrary herein
contained or implied, the Lenders, by this Agreement, or by any action pursuant
hereto, shall not be deemed to be a partner of, or a joint venturer with, the
Borrower or one another, and the Borrower hereby indemnifies and agrees to
defend and hold the Lenders harmless, including the payment of reasonable
attorneys' fees, from any Loss resulting from any judicial construction of the
parties' relationship as such.
11.16. Severability. In the event any provision of this Agreement or any of
the Loan Documents shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not affect the validity,
enforceability or legality of the remaining provisions hereof or thereof, all of
which shall continue unaffected and unimpaired thereby.
11.17. Waiver of Set-off by the Borrower. The Borrower agrees that it will
not exercise, and it will not permit any Subsidiary to exercise, any right of
set-off on any of the Obligations or under any Note or Guaranty or assert any
claim for, reduction or credit against any of the Notes except when actual
payment has been made.
11.18. Lenders Not Controlling the Borrower. None of the covenants or
other provisions contained in the Loan Documents shall be deemed to give the
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<PAGE>
Lenders the rights or power to exercise control over the affairs and/or
management of the Borrower or any Subsidiary, the power of the Lenders being
limited to the right to exercise the remedies provided in the Loan Documents;
provided, however, that if the Lenders become the owners of any stock or other
equity interest in any Person, whether through foreclosure or otherwise, the
Lenders shall be entitled (subject to requirements of law) to exercise such
legal rights as it may have by virtue of being the owner of such stock or other
equity interest in such Person.
11.19. Foreign Lender Withholding Tax. Each Lender that is not a U.S.
Person, (or in the case of a Purchaser on or prior to the date such Purchaser
becomes a Lender (A)(1) agrees that it will deliver to each of the Borrower and
the Agent at least five Business Days prior to the first date on which interest
or fees are payable hereunder for the account of any Lender two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes and (2) a duly completed United States Internal Revenue
Service Form W-8 or W-9 certifying that such Lender is entitled to an exemption
from United States backup withholding tax, or (B), in the case of a Lender not
treated as a bank for regulatory, tax or other legal purposes in any
jurisdiction, (1) a certificate signed under penalties of perjury that such
Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code or
a "conduit entity" within the meaning of United States Treasury Regulations
Section 1.881-3 and (2) a duly completed Internal Revenue Service Form W-8. Each
Lender which so delivers a Form 1001, 4224 or W-8 further undertakes to deliver
to each of the Borrower and the Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
in each case certifying, in the case of a Form 1001 or 4224, that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes and, in the
case of a Form W-8, if such Lender is entitled to receive payments of interest
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
11.20. Replacement of Lenders. Upon a Lender charging to the Borrower
increased costs in excess of those being generally charged by the other Lenders,
the Borrower shall have the right, in accordance with the requirements of
Section 10.3, if no Default will exist after giving effect to such replacement,
to replace such Lender (the "Replaced Lender") with an Eligible Assignee or
Eligible Assignees (collectively, the "Replacement Lender"), reasonably
acceptable to the Agent, provided that at the time of any replacement pursuant
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<PAGE>
to this Section, the Replacement Lender shall enter into one or more Assignment
Agreements pursuant to which the Replacement Lender shall acquire all the
Commitments and outstanding Loans of, and in each case participation in Letters
of Credit by, the Replaced Lender and, in connection therewith, shall pay to the
Replaced Lender in respect thereof an amount equal to the sum of (a) an amount
equal to the principal of, and all accrued interest on, all outstanding Loans of
the Replaced Lender and (b) an amount equal to all accrued, but theretofore
unpaid, fees owing to the Replaced Lender and (c) all Obligations of the
Borrower owing to the Replaced Lender (other than those specifically described
in clause (a) above in respect of which the assignment purchase price has been,
or is concurrently being, paid) shall be paid in full to such Replaced Lender
concurrently with such replacement.
SECTION 12
Rights of Lenders in Collateral
12.1. Ratable Benefit. All collateral from time to time securing the
Obligations of the Borrower shall exist for the ratable benefit of the Lenders.
The interest of each Lender in the collateral from time to time existing shall
be pro rata according to each Lender's Pro Rata Share of the outstanding
principal Obligations owing to the Lenders, but the interest of each Lender in
the collateral shall rank equally in priority with the interest of each other
Lender. Irrespective of the time, order or method of attachment or perfection of
the security interest or Lien, and irrespective of anything contained in any
filing or agreement to which any of the Lenders is a party, any Lien or security
interest in favor of any of the Lenders in any of the collateral described in
the Loan Documents which arises out of any prior or subsequent transaction shall
be subordinate to the security interest or Lien in such collateral in favor of
the Lenders under the Loan Documents.
12.2. Liquidation of Collateral. Subject to the provisions of Sections
8.1 and 9 and the further provisions of the Loan Documents, and subject to the
advice of its counsel, the Agent shall act with respect to the collateral
securing the Obligations under the Loan Documents as instructed by the Required
Lenders. No Lender will take any action to enforce its rights or Liens against
the Borrower or any Guarantor (other than by way of set-off), except through the
Agent.
12.3. Adjustments. If any Lender (a "Benefitted Lender") shall at any
time receive any payment (other than regularly scheduled payments of principal
and interest prior to any Default) of all or any part of its Facilities
hereunder, or interest thereon, or receive any collateral in respect thereof
(whether by set-off or otherwise) in a greater proportion than its Pro Rata
Share, such Benefitted Lender shall purchase for cash from the other Lenders
such portions of the other Lenders' Notes, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause the Benefitted Lender to share the excess payment or benefits
of such collateral or proceeds ratably with the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from the Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Notes may exercise all rights of
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<PAGE>
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion. If
during any period of Default or Unmatured Default, a Benefitted Lender receives
payment or other proceeds in connection with any other credit facility with the
Borrower, such payment or proceeds shall be applied exclusively for the pro rata
benefit of the Lenders in connection with their Facilities hereunder prior to
any application to such other credit facility.
12.4. Application of Proceeds. Notwithstanding any contrary provision of
any other Loan Document, after the occurrence of a Default and acceleration of
the Obligations, amounts paid or received in respect of the Obligations,
including, without limitation, any proceeds of collateral and recoveries under
the Guaranties, shall be applied by the Agent to payment of the Obligations in
the following order:
(a) First, to payment of all costs and expenses of the Agent
and the Lenders incurred in connection with the preservation, collection
and enforcement of the Obligations;
(b) Second, to the payment of that portion of the Obligations
constituting accrued and unpaid interest and fees to the Lenders in
accordance with their Pro Rata Shares;
(c) Third, to the payment of the principal amount of the
Obligations (including, without limitation, reimbursement Obligations
under Letters of Credit), to the Lenders in accordance with their Pro
Rata Shares;
(d) Fourth, to the payment of any other Obligations not
referred to above to the Agent or any of the Lenders as may be properly
payable; and
(e) Fifth, the balance, if any, after all the Obligations have
been satisfied, shall be returned to the Borrower.
SECTION 13
Waiver of Jury Trial
THE LENDERS, THE AGENT AND THE BORROWER, AFTER CONSULTING, OR HAVING HAD
THE OPPORTUNITY TO CONSULT, WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE
OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY OF
THEM. NEITHER A LENDER, THE AGENT NOR THE BORROWER SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
-75-
<PAGE>
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY EITHER THE LENDERS, THE AGENT OR THE BORROWER EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY THE LENDERS, THE AGENT AND THE BORROWER.
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused
this Agreement to be executed by their respective officers duly authorized as of
the day and year first above written.
[This space intentionally left blank]
-76-
<PAGE>
SIGNATURE PAGE OF
LILLY INDUSTRIES, INC.
TO
CREDIT AGREEMENT
LILLY INDUSTRIES, INC.
By: /s/ Douglas W. Huemme
Douglas W. Huemme, Chairman,
President and Chief Executive Officer
Address:
733 South West Street
Indianapolis, IN 46225
Attention: Director of Corporate Accounting
Facsimile: 317-687-6710
<PAGE>
SIGNATURE PAGE OF
NBD BANK, N.A.,
TO
CREDIT AGREEMENT
NBD BANK, N.A.,
individually and as Agent
By: /s/ Robert D. Lowrie
Robert D. Lowrie,
Senior Vice President
<PAGE>
SIGNATURE PAGE OF
CREDIT LYONNAIS CHICAGO BRANCH
TO
CREDIT AGREEMENT
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Attila Koc
Its: Vice President and Group Head
<PAGE>
SIGNATURE PAGE OF
CANADIAN IMPERIAL BANK OF COMMERCE
TO
CREDIT AGREEMENT
CANADIAN IMPERIAL BANK
OF COMMERCE
By: /s/ Kent S. Davis
--------------------------------
Its: Authorized Signature
<PAGE>
SIGNATURE PAGE OF
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
TO
CREDIT AGREEMENT
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Jane W. Workman
--------------------------------
Its: Senior Vice President
<PAGE>
SIGNATURE PAGE OF
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH
TO
CREDIT AGREEMENT
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH
By: /s/ Richard E. Stahl
--------------------------------
Its: Senior Vice President & Joint
General Manager
<PAGE>
SIGNATURE PAGE OF
DRESDNER BANK
TO
CREDIT AGREEMENT
DRESDNER BANK AG, Chicago and
Grand Cayman Branches
By: /s/ John H. Schaus
--------------------------------
Its: First Vice President
By: /s/ Graham D. Lewis
--------------------------------
Its: Assistant Vice President
<PAGE>
SIGNATURE PAGE OF
NATIONAL CITY BANK, INDIANA
TO
CREDIT AGREEMENT
NATIONAL CITY BANK, INDIANA
By: /s/ Frank B. Meltzer
--------------------------------
Its: Vice President
<PAGE>
SIGNATURE PAGE OF
DG BANK
TO
CREDIT AGREEMENT
DG BANK
By: /s/ Norah McCann
--------------------------------
Its: Senior Vice President
<PAGE>
SIGNATURE PAGE OF
SOCIETY NATIONAL BANK
TO
CREDIT AGREEMENT
SOCIETY NATIONAL BANK
By: /s/ Frank J. Jancar
--------------------------------
Its: Vice President
<PAGE>
SIGNATURE PAGE OF
CRESCENT/MACH I PARTNERS, L.P. AND
INTEGON LIFE INSURANCE CORPORATION
(TCW ASSET MANAGEMENT)
TO
CREDIT AGREEMENT
CRESCENT/MACH I PARTNERS, L.P.
By: TCW ASSET MANAGEMENT COMPANY,
its Investment Manager
By: /s/ Justin Driscoll
--------------------------------
Justin Driscoll, Vice President
INTEGON LIFE INSURANCE CORPORATION
By: TCW ASSET MANAGEMENT COMPANY,
its Attorney-in-Fact
By: /s/ Justin Driscoll
--------------------------------
Justin Driscoll, Vice President
<PAGE>
SIGNATURE PAGE OF
THE FIRST NATIONAL BANK OF CHICAGO
TO
CREDIT AGREEMENT
THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ Jacqueline Hopkins
--------------------------------
Its: Authorized Agent
<PAGE>
SIGNATURE PAGE OF
HARRIS TRUST AND SAVINGS BANK
TO
CREDIT AGREEMENT
HARRIS TRUST AND SAVINGS BANK
individually and as Co-Agent
By: /s/ Peter Krawchuk
--------------------------------
Its: Vice President
<PAGE>
SIGNATURE PAGE OF
COMERICA BANK
TO
CREDIT AGREEMENT
COMERICA BANK
individually and as Co-Agent
By: /s/ Phillip A. Coosaia
--------------------------------
Its: Vice President
<PAGE>
SIGNATURE PAGE OF
MERCANTILE BANK OF ST. LOUIS
TO
CREDIT AGREEMENT
MERCANTILE BANK OF ST. LOUIS
individually and as Co-Agent
By: /s/ Joseph L. Sooter, Jr.
--------------------------------
Its: Vice President
<PAGE>
SIGNATURE PAGE OF
BANK ONE, INDIANAPOLIS, N.A.
TO
CREDIT AGREEMENT
BANK ONE, INDIANAPOLIS, N.A.
individually and as Co-Agent
By: /s/ Brian D. Smith
--------------------------------
Its: Vice President &
Senior Portfolio Manager
<PAGE>
Schedule 1-Lenders
Lenders Facility A Facility B Facility C
And Addresses Commitment Commitment Commitment
NBD Bank, N.A. $21,000,000 $35,000,000 $9,000,000
One Indiana Square, Suite 302
Indianapolis, IN 46266
Attn: Robert D. Lowrie
Fax: 317-266-6042
Comerica Bank $16,100,000 - 0 - $6,900,000
One Detroit Center
500 Woodward Avenue, MC-3269
Detroit, MI 48226
Attn: Phillip A. Coosaia
Fax: (313) 222-9516
Harris Trust and Savings Bank $16,100,000 - 0 - $6,900,000
111 West Monroe, 2-West
Chicago, IL 60603
Attn: Peter Krawchuk
Fax: (312) 461-2591
Mercantile Bank of St.Louis $10,500,000 - 0 - $4,500,000
One Mercantile Center
St. Louis, MO 63101
Attn: Joseph L. Sooter, Jr.
Fax: (314) 425-8292
Bank One,Indianapolis,N.A. $16,100,000 - 0 - $6,900,000
111 Monument Circle
Indianapolis, IN 46277
Attn: Liz Waymann
Fax: (317) 321-8079
Credit Lyonnais Chicago Branch $14,000,000 - 0 - $6,000,000
227 West Monroe St., Ste. 3800
Chicago, IL 60606
Attn: Attila Koc
Fax: (312) 641-0527
<PAGE>
Lenders Facility A Facility B Facility C
And Addresses Commitment Commitment Commitment
Canadian Imperial Bank $14,000,000 - 0 - $6,000,000
of Commerce
200 W. Madison, Suite 2300
Chicago, IL 60606
Attn: Durc Savini
Fax: (312) 726-8884
First Union National Bank $14,000,000 - 0 - $6,000,000
of North Carolina
One First Union Center, TW-19
301 S. College Street
Charlotte, NC 28288
Attn: Stephen D. Johnson
Fax: (704) 374-2802
The Long-Term Credit Bank of $14,000,000 - 0 - $6,000,000
Japan Ltd., Chicago Branch
190 S. LaSalle St.,Suite 800
Chicago, IL 60603
Attn: Brady S. Sadek
Fax: (312) 704-8505
Dresdner Bank AG, Chicago
and Grand Cayman Branches $14,000,000 - 0 - $6,000,000
190 S.LaSalle St.,Ste.2700
Chicago, IL 60603
Attn: Graham Lewis
Fax: (312) 444-1305
National City Bank, Indiana $11,200,000 - 0 - $4,800,000
101 W.Washington St.,
Ste. 200E
Indianapolis, IN 46255
Attn: Rich Harcourt
Fax: (317) 267-8899
DG Bank $ 7,000,000 - 0 - $3,000,000
609 Fifth Avenue
New York, NY 10017
Attn: Norah McCam
Fax: (212) 745-1550
<PAGE>
Lenders Facility A Facility B Facility C
And Addresses Commitment Commitment Commitment
Society National Bank $ 7,000,000 - 0 - $3,000,000
127 Public Square
Mail Station OH-01-27-0606
Cleveland, OH 44114
Attn: Frank Jancar
Fax: (216) 689-4981
Crescent/Mach I Partners, L.P. - 0 - $ 7,500,000 - 0 -
c/o TCW Asset Management
200 Park Avenue, 22nd Floor
New York, NY 10166
Attn: Mark L. Gold/
Justin Driscoll
Fax: (212) 297-4159
cc: Crescent/
Mach I Partners, L.P.
c/o State Street Bank
& Trust Co.
Two International Place
Boston, MA 02110
Attn: Jackie Sweeney
Fax: (617) 664-5366
Integon Life Insurance
Corporation - 0 - $ 2,500,000 - 0 -
Investment Manager
Penn Corp. Financial, Inc.
10001 Wade Avenue
Raleigh, NC 27605
Attn: Chris Provost
Fax: (919) 831-8430
and Attn: Arthur Evans
Fax: (212) 758-5442
cc: c/o TCW Asset Management
200 Park Avenue, 22nd Floor
New York, NY 10166
Attn: Mark L. Gold/
Justin Driscoll
Fax: (212) 297-4159
The First National Bank
of Chicago - 0 - $ 5,000,000 - 0 -
One First National Plaza
Chicago, IL 60670
Attn: Jacqueline M. Hopkins
Fax: (312) 732-7655
$175,000,000 $50,000,000 $75,000,000
<PAGE>
SCHEDULES TO CREDIT AGREEMENT
Lilly Industries, Inc. agrees to furnish supplementally a copy of the
Schedules to the Credit Agreement to the Securities and Exchange Commission
upon request.
<PAGE>
EXHIBIT A
FACILITY A
TERM NOTE
$ Date: April , 1996
------------------------- ----
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay to the order of __________________________
("Lender"), or its assigns, at the main office of NBD BANK, N.A. (the "Agent"),
as Agent under the Agreement (hereinafter defined) in the City of Indianapolis,
Indiana, or at such other place as the holder hereof may designate in writing,
the principal sum of ____________ Dollars ($__________), in lawful money of the
United States of America and in immediately available funds, together with
interest on the principal amount from time to time outstanding at the per annum
rates and on the dates set forth in the Agreement. The Borrower shall pay the
principal and accrued and unpaid interest on the Facility A Term Loans in full
on May 31, 2002, and shall make such mandatory payments as are required to be
made under the terms of Section 2 of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of the initial Facility A Term Loan and the date and amount
of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender, and
NBD Bank, N.A., as the Agent for the Lenders (as the same may be amended from
time to time, the "Agreement"), to which Agreement reference is hereby made for
a statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. This Note is secured and guaranteed, all as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein and
not otherwise defined herein are used with the meanings attributed to them in
the Agreement.
Subject to any applicable grace or cure period set forth in the Agreement,
if Borrower fails to make the payment of any installment of principal or
interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
or in the Agreement, together with reasonable attorneys' fees and other costs
================================================================================
Page 1 of a Note containing Two Pages, dated April ____, 1996 from LILLY
INDUSTRIES, INC. to ______________________________________.
TN\MJK\98725.1
<PAGE>
incurred in collecting or enforcing payment or performance hereof and with
interest from the date of Default on the unpaid principal balance hereof at the
Default rate specified in the Agreement, shall, at the election of the Required
Lenders (except as otherwise provided for automatic acceleration on the
occurrence of certain Defaults specified in the Agreement), and without relief
from valuation and appraisement laws, become immediately due and payable.
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTIONS
OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY THE LENDER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER,
THE LENDER AND THE OTHER LENDERS.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
------------------------------------
Its:
------------------------------------
Page 2 of a Note containing Two Pages, dated April ____, 1996 from LILLY
INDUSTRIES, INC. to ___________________________________________.
TN\MJK\98725.1
<PAGE>
SCHEDULE OF FACILITY A TERM LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: APRIL ______, 1996
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
- ---- ------- ------- ------ ---------------- ------- --------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT A-1
FACILITY A
REGISTERED TERM NOTE
$_____________________ Date: April , 1996
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay to the order of ("Lender"), or its assigns,
at the main office of NBD BANK, N.A. (the "Agent"), as Agent under the Agreement
(hereinafter defined) in the City of Indianapolis, Indiana, or at such other
place as the holder hereof may designate in writing, the principal sum of
Dollars ($ ), in lawful money of the United States of America and in immediately
available funds, together with interest on the principal amount from time to
time outstanding at the per annum rates and on the dates set forth in the
Agreement. The Borrower shall pay the principal and accrued and unpaid interest
on the Facility A Term Loans in full on May 31, 2002, and shall make such
mandatory payments as are required to be made under the terms of Section 2
of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of the initial Facility A Term Loan and the date and amount
of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender, and
NBD Bank, N.A., as the Agent for the Lenders (as the same may be amended from
time to time, the "Agreement"), to which Agreement reference is hereby made for
a statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. This Note is secured and guaranteed, all as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein and
not otherwise defined herein are used with the meanings attributed to them in
the Agreement.
Subject to any applicable grace or cure period set forth in the Agreement,
if Borrower fails to make the payment of any installment of principal or
interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
or in the Agreement, together with reasonable attorneys' fees and other costs
incurred in collecting or enforcing payment or performance hereof and with
interest from the date of Default on the unpaid principal balance hereof at the
Default rate specified in the Agreement, shall, at the election of the Required
Lenders (except as otherwise provided for automatic acceleration on the
occurrence of certain Defaults specified in the Agreement), and without relief
from valuation and appraisement laws, become immediately due and payable.
- ----------
Page 1 of a Note containing Three Pages, dated April , 1996 from LILLY
INDUSTRIES, INC. to________________________________.
<PAGE>
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT
AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE
WITH THE REGISTRATION AND OTHER PROVISIONS OF SUBJECTION 10.4 OF THE CREDIT
AGREEMENT.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTIONS
OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY THE LENDER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER,
THE LENDER AND THE OTHER LENDERS.
- ----------
Page 2 of a Note containing Three Pages, dated April , 1996 from LILLY
INDUSTRIES, INC. to ___________________________________________.
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
--------------------------------------
Its:
--------------------------------------
- ----------
Page 3 of a Note containing Three Pages, dated April , 1996 from LILLY
INDUSTRIES, INC. to ___________________________________________.
<PAGE>
SCHEDULE OF FACILITY A TERM LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: APRIL , 1996
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
- ---- ------- ------- ------ ---------------- ------- --------
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<PAGE>
EXHIBIT B
FACILITY B
TERM NOTE
$______________ Date: April ___, 1996
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay to the order of __________________________
("Lender"), or its assigns, at the main office of NBD BANK, N.A. (the "Agent"),
as Agent under the Agreement (hereinafter defined) in the City of Indianapolis,
Indiana, or at such other place as the holder hereof may designate in writing,
the principal sum of __________________________________ Dollars
($_________________________), in lawful money of the United States of America
and in immediately available funds, together with interest on the principal
amount from time to time outstanding at the per annum rates and on the dates set
forth in the Agreement. The Borrower shall pay the principal and accrued and
unpaid interest on the Facility B Term Loans in full on November 30, 2003, and
shall make such mandatory principal payments as are required to be made under
the terms of Section 2 of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of the initial Facility B Term Loan and the date and amount
of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender, and
NBD Bank, N.A., as the Agent for the Lenders (as the same may be amended from
time to time, the "Agreement"), to which Agreement reference is hereby made for
a statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. This Note is secured and guaranteed, all as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein and
not otherwise defined herein are used with the meanings attributed to them in
the Agreement.
Subject to any applicable grace or cure period set forth in the Agreement,
if Borrower fails to make the payment of any installment of principal or
interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
================================================================================
Page 1 of a Note containing Two Pages, dated April ______, 1996 from LILLY
INDUSTRIES, INC. to _______________________________________.
TN\MJK\98727.1
<PAGE>
or in the Agreement, together with reasonable attorneys' fees and other costs
incurred in collecting or enforcing payment or performance hereof and with
interest from the date of Default on the unpaid principal balance hereof at the
Default rate specified in the Agreement, shall, at the election of the Required
Lenders (except as otherwise provided for automatic acceleration on the
occurrence of certain Defaults specified in the Agreement), and without relief
from valuation and appraisement laws, become immediately due and payable.
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTIONS
OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY THE LENDER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER,
THE LENDER AND THE OTHER LENDERS.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By: ____________________________________
Its: ____________________________________
================================================================================
Page 2 of a Note containing Two Pages, dated April ______, 1996 from LILLY
INDUSTRIES, INC. to _______________________________________.
TN\MJK\98727.1
<PAGE>
SCHEDULE OF FACILITY B TERM LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: APRIL , 1996
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
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<PAGE>
EXHIBIT B -1
FACILITY B
REGISTERED TERM NOTE
$________________________ Date: April , 1996
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay to the order of ("Lender"), or its assigns,
at the main office of NBD BANK, N.A. (the "Agent"), as Agent under the Agreement
(hereinafter defined) in the City of Indianapolis, Indiana, or at such other
place as the holder hereof may designate in writing, the principal sum of
Dollars ($ ), in lawful money of the United States of America and in immediately
available funds, together with interest on the principal amount from time to
time outstanding at the per annum rates and on the dates set forth in the
Agreement. The Borrower shall pay the principal and accrued and unpaid interest
on the Facility B Term Loans in full on November 30, 2003, and shall make such
mandatory principal payments as are required to be made under the terms of
Section 2 of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of the initial Facility B Term Loan and the date and amount
of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender, and
NBD Bank, N.A., as the Agent for the Lenders (as the same may be amended from
time to time, the "Agreement"), to which Agreement reference is hereby made for
a statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. This Note is secured and guaranteed, all as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein and
not otherwise defined herein are used with the meanings attributed to them in
the Agreement.
Subject to any applicable grace or cure period set forth in the Agreement,
if Borrower fails to make the payment of any installment of principal or
interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
or in the Agreement, together with reasonable attorneys' fees and other costs
incurred in collecting or enforcing payment or performance hereof and with
interest from the date of Default on the unpaid principal balance hereof at the
Default rate specified in the Agreement, shall, at the election of the Required
Lenders (except as otherwise provided for automatic acceleration on the
occurrence of certain Defaults specified in the Agreement), and without relief
from valuation and appraisement laws, become immediately due and payable.
================================================================================
Page 1 of a Note containing Three Pages, dated April , 1996 from LILLY
INDUSTRIES, INC. to .
TN\MJK\95567.1
<PAGE>
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT
AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE
WITH THE REGISTRATION AND OTHER PROVISIONS OF SUBJECTION 10.4 OF THE CREDIT
AGREEMENT.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTIONS
OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY THE LENDER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER,
THE LENDER AND THE OTHER LENDERS.
================================================================================
Page 2 of a Note containing Three Pages, dated April , 1996 from LILLY
INDUSTRIES, INC. to .
TN\MJK\95567.1
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
Its:
================================================================================
Page 3 of a Note containing Three Pages, dated April , 1996 from LILLY
INDUSTRIES, INC. to NBD BANK, N.A.
TN\MJK\95567.1
<PAGE>
SCHEDULE OF FACILITY B TERM LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: APRIL , 1996
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
- ---- ------- ------- ------ ---------------- ------- --------
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<PAGE>
EXHIBIT C
FACILITY C REVOLVING NOTE
$___________________________________ Date: April , 1996
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay to the order of _________________, a
national banking association (the "Lender"), or its assigns, at the main office
of NBD BANK, N.A. (the "Agent"), as Agent under the Agreement (hereinafter
defined) in the City of Indianapolis, Indiana, or at such other place as the
holder hereof may designate in writing, the principal sum of ________________
Dollars ($_____________), or the aggregate unpaid principal amount of all
Facility C Revolving Loans made by the Lender to the Borrower pursuant to
Section 2 of the Agreement, in lawful money of the United States of America and
in immediately available funds, together with interest on the unpaid principal
balance existing from time to time at the per annum rates and on the dates set
forth in the Agreement. The Borrower shall pay the principal and accrued and
unpaid interest on the Facility C Revolving Loans in full on the Facility C
Termination Date, and shall make such mandatory payments as are required to be
made under the terms of Section 2 of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Facility C Revolving Loan under this Note and the
date and amount of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender, and
NBD Bank, N.A., as the Agent for the Lenders (as the same may be amended from
time to time, the "Agreement"), to which Agreement reference is hereby made for
a statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. This Note is secured and guaranteed, all as more
specifically described in the Agreement, and reference is made thereto for a
statement of the terms and provisions thereof. Capitalized terms used herein and
not otherwise defined herein are used with the meanings attributed to them in
the Agreement.
Subject to any applicable grace or cure period set forth in the Agreement,
if Borrower fails to make the payment of any installment of principal or
interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
or in the Agreement, together with reasonable attorneys' fees and other costs
incurred in collecting or enforcing payment or performance hereof and with
interest from the date of Default on the unpaid principal balance hereof at the
Default rate specified in the Agreement, shall, at the election of the Required
Lenders (except as otherwise provided for automatic acceleration on the
occurrence of certain Defaults specified in the Agreement), and without relief
from valuation and appraisement laws, become immediately due and payable.
================================================================================
Page 1 of a Note containing Two Pages, dated April ______, 1996 from LILLY
INDUSTRIES, INC. to ___________________________________________.
CRN/MJK/95599.1
<PAGE>
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTIONS
OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY THE LENDERS EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER,
THE LENDER AND THE OTHER LENDERS.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
Its:
Page 2 of a Note containing Two Pages, dated April _____, 1996 from LILLY
INDUSTRIES, INC. to __________________________________________________________.
CRN/MJK/95599.1
<PAGE>
SCHEDULE OF FACILITY C REVOLVING LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: APRIL _________, 1996
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
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<PAGE>
EXHIBIT D
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is entered into as of April 8, 1996 by
and between LILLY INDUSTRIES, INC., an Indiana corporation (the "Borrower"), and
NBD BANK, N.A., a national banking association, in its capacity as agent (the
"Agent") on behalf of the Lenders party to the Credit Agreement referred to
below.
PRELIMINARY STATEMENT
The Borrower, the Agent and the Lenders are entering into a Credit
Agreement dated as of even date herewith (as the same may be amended from time
to time, the "Credit Agreement"). The Borrower is entering into this Pledge and
Security Agreement (as the same may be amended from time to time, the "Security
Agreement") in order to induce the Lenders to enter into and extend credit to
the Borrower under the Credit Agreement.
ACCORDINGLY, the Borrower and the Agent, on behalf of the Lenders, hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Terms Defined in Credit Agreement. All capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement.
1.2. Terms Defined in Indiana Uniform Commercial Code. Terms defined in the
Indiana Uniform Commercial Code which are not otherwise defined in this Security
Agreement are used herein as defined in the Indiana Uniform Commercial Code as
in effect on the date hereof.
1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings:
"Accounts" means all rights to payment for goods sold or leased or services
rendered by the Borrower, whether or not earned by performance, together with
all security interests or other security held by or granted to the Borrower to
secure such rights to payment.
"Article" means a numbered article of this Security Agreement, unless
another document is specifically referenced.
SA/MJK/97112.1
<PAGE>
"Chattel Paper" means any writing or group of writings which evidences both
a monetary obligation and a security interest in or a lease of specific goods.
"Collateral" means all Accounts, Chattel Paper, Documents, Equipment,
Fixtures, General Intangibles, Investment Property, Instruments, Inventory,
Pledged Deposits, Stock Rights and Other Collateral, wherever located, in which
the Borrower now has or hereafter acquires any right or interest, and the
proceeds, insurance proceeds and products thereof, together with all books and
records, customer lists, credit files, computer files, programs, printouts and
other computer materials and records related thereto.
"Control" shall have the meaning set forth in Article 8 or 8.1 of the
Indiana Uniform Commercial Code as in effect from time to time.
"Default" means an event described in Section 5.1.
"Documents" means all documents of title and goods evidenced thereby,
including, without limitation, all bills of lading, dock warrants, dock
receipts, warehouse receipts and orders for the delivery of goods, and also any
other document which in the regular course of business or financing is treated
as adequately evidencing that the Person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Equipment" means all equipment, machinery, furniture and goods used or
usable by the Borrower in its business and all other tangible personal property
(other than Inventory), and all accessions and additions thereto, including,
without limitation, all Fixtures.
"Exhibit" refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.
"Fixtures" means all goods which become so related to particular real
estate that an interest in such goods arises under any real estate law
applicable thereto, including, without limitation, all trade fixtures.
"General Intangibles" means all intangible personal property (other than
Accounts) including, without limitation, all contract rights, rights to receive
payments of money, choses in action, causes of action, judgments, tax refunds
and tax refund claims, patents, trademarks, trade names, copyrights, licenses,
franchises, computer programs, software, goodwill, customer and supplier
contracts, interests in general or limited partnerships, joint ventures or
limited liability companies, reversionary interests in pension and profit
sharing plans and reversionary, beneficial and residual interests in trusts,
leasehold interests in real or personal property, rights to receive rentals of
real or personal property and guarantee and indemnity claims.
SA/MJK/97112.1
2
<PAGE>
"Investment Property" means a security, whether certificated or
uncertificated; a security entitlement; a securities account; a commodity
contract; or a commodity account (all as defined in the Indiana Uniform
Commercial Code as in effect from time to time).
"Instruments" means all negotiable instruments (as defined in the Indiana
Uniform Commercial Code as in effect from time to time), certificated and
uncertificated securities and any replacements therefor and Stock Rights related
thereto, and other writings which evidence a right to the payment of money and
which are not themselves, security agreements or leases and are of a type which
in the ordinary course of business are transferred by delivery with any
necessary endorsement or assignment, including, without limitation, all checks,
drafts, notes, bonds, debentures, government securities, certificates of
deposit, letters of credit, preferred and common stocks, options and warrants.
"Inventory" means all goods held for sale or lease, or furnished or to be
furnished under contracts of service, or consumed in the Borrower's business,
including without limitation raw materials, intermediates, work in process,
packaging materials, finished goods, semi-finished inventory, scrap inventory,
manufacturing supplies and spare parts, all such goods that have been returned
to or repossessed by or on behalf of the Borrower, and all such goods released
to the Borrower or to third parties under trust receipts or similar documents.
"Lenders" means the Lenders party to the Credit Agreement and their
successors and assigns.
"Other Collateral" means any property of the Borrower, other than real
estate, not included within the defined terms Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory,
Investment Property, Pledged Deposits and Stock Rights, including, without
limitation, all cash on hand and all deposit accounts or other deposits (general
or special, time or demand, provisional or final) with any bank or other
financial institution, it being intended that the Collateral include all
property of the Borrower other than real estate.
"Pledged Deposits" means all time deposits of money, whether or not
evidenced by certificates, which the Borrower may from time to time designate as
pledged to the Agent or to any Lender as security for any Obligation, and all
rights to receive interest on said deposits.
"Receivables" means the Accounts, Chattel Paper, Documents, Investment
Property, Instruments or Pledged Deposits, and any other rights or claims to
receive money which are General Intangibles or which are otherwise included as
Collateral.
"Required Secured Parties" means (a) prior to an acceleration of the
Obligations under the Credit Agreement, the Required Lenders and (b) after an
acceleration of the Obligations under the Credit Agreement, Lenders holding in
the aggregate at least 66-2/3% of the total of (i) the unpaid principal amount
of outstanding Advances and (ii) the aggregate net early termination payments
then due and unpaid from the Borrower to the Lenders under Rate Hedging
Agreements, as determined by the Agent in its reasonable discretion.
SA/MJK/97112.1
3
<PAGE>
"Schedule of Accounts" has the meaning set forth in Section 4.2.5.
"Section" means a numbered section of this Security Agreement, unless
another document is specifically referenced.
"Security" has the meaning set forth in Article 8 or 8.1 of the Indiana
Uniform Commercial Code as in effect from time to time.
"Stock Rights" means any securities, dividends or other distributions and
any other right or property which the Borrower shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any securities or other ownership interests in a
corporation, partnership, joint venture, limited liability company or other
Person constituting Collateral and any securities, any right to receive
securities and any right to receive earnings, in which the Borrower now has or
hereafter acquires any right, issued by an issuer of such securities.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
GRANT OF SECURITY INTEREST
To secure the prompt and complete payment and performance of the
Obligations, the Borrower hereby pledges, assigns and grants to the Agent, on
behalf of and for the ratable benefit of the Lenders, a security interest in (i)
all of the Borrower's right, title and interest in and to the Collateral (other
than the Borrower's interest in Foreign Subsidiaries), and (ii) the Borrower's
right, title and interest in and to Sixty-Five (65%) of the issued and
outstanding capital stock of the Borrower's Foreign Subsidiaries, in each case
whether now or hereafter existing or acquired, exclusive of the Borrower's
right, title and interest in and to the capital stock of Donnguan Lilly Paint
Industries Ltd., an entity organized under the laws of the Peoples Republic of
China.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that:
3.1. Title, Authorization, Validity and Enforceability. The Borrower has
good and valid rights in and title to the Collateral with respect to which it
has purported to grant a security interest hereunder, free and clear of all
Liens except for Liens permitted under Section 4.1.6, and has full power and
SA/MJK/97112.1
4
<PAGE>
authority to grant to the Agent the security interest in such Collateral
pursuant hereto. The execution and delivery by the Borrower of this Security
Agreement has been duly authorized by proper corporate proceedings, and this
Security Agreement constitutes a legal, valid and binding obligation of the
Borrower and creates a security interest which is enforceable against the
Borrower in all now owned and hereafter acquired Collateral.
3.2. Conflicting Laws and Contracts. Neither the execution and delivery by
the Borrower of this Security Agreement, the creation and perfection of the
security interest in the Collateral granted hereunder, nor compliance with the
terms and provisions hereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or the Borrower's
articles or certificate of incorporation or by-laws, the provisions of any
indenture, instrument or agreement to which the Borrower is a party or is
subject, or by which it, or its property, is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
Lien pursuant to the terms of any such indenture, instrument or agreement (other
than any Lien of the Agent on behalf of the Lenders).
3.3. Principal Location. The Borrower's mailing address, and the location
of its chief executive office and of the books and records relating to the
Receivables, is disclosed in Exhibit A; the Borrower has no other places of
business except those set forth in Exhibit A.
3.4. Property Locations. The Inventory, Equipment and Fixtures are located
solely at the locations described in Exhibit A. All of said locations are owned
by the Borrower except for locations (i) which are leased by the Borrower as
lessee and designated in Part B of Exhibit A, (ii) at which Inventory is held in
a public warehouse or is otherwise held by a bailee or on consignment as
designated in Part C of Exhibit A, and with respect to Inventory included in the
calculation of Eligible Domestic Inventory, the Borrower has delivered bailment
agreements, warehouse receipts, financing statements or other documents
satisfactory to the Agent to protect the Agent's and the Lenders' security
interest in such Inventory, or (iii) otherwise designated on Exhibit A.
3.5. No Other Names. Within the last three (3) years, the Borrower has not
conducted business under any name except the name in which it has executed this
Security Agreement and Lilly Industrial Coatings, Inc.
3.6. No Default. No Default or Unmatured Default exists.
3.7. Accounts and Chattel Paper. The names of the obligors, amounts owing,
due dates and other information with respect to the Accounts and Chattel Paper
are and will be correctly stated in all material respects in all records of the
Borrower relating thereto and in all invoices and reports with respect thereto
furnished to the Agent by the Borrower from time to time. As of the time when
each Account or each item of Chattel Paper arises, the Borrower shall be deemed
to have represented and warranted that such Account or Chattel Paper, as the
case may be, and all records relating thereto, are genuine and in all material
respects what they purport to be. Each Account represents an undisputed, bona
fide right to payment from the account debtor named therein for Goods sold or
leased, or for services rendered, whether or not such right to payment has been
earned by performance.
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3.8. Filing Requirements. None of the Collateral is of a type for which
security interests or Liens may be perfected by filing under any federal statute
as described in Exhibit B. Within ninety (90) days after the date hereof, the
Borrower shall provide the Agent with the legal descriptions, street addresses
and name and address of the record owner of the properties on which Fixtures are
to be perfected by the Agent pursuant to, and subject to the provisions of, the
Credit Agreement.
3.9. No Financing Statements. No financing statement describing all or any
portion of the Collateral which has not lapsed or been terminated naming the
Borrower as debtor has been filed in any jurisdiction except (i) financing
statements naming the Agent on behalf of the Lenders as the secured party, and
(ii) as described in Exhibit C, and (iii) as permitted by Section 4.1.6.
3.10. Federal Employer Identification Number. The Borrower's Federal
employer identification number is 35-0471010.
3.11. Pledged Securities and Other Investment Property. Exhibit D sets
forth a complete and accurate list of the Instruments, Securities and other
Investment Property delivered to the Agent, except for such Instruments and
Investment Property having a value not exceeding $500,000 in the aggregate for
the Borrower and its Subsidiaries. The Borrower is the direct and beneficial
owner of each Instrument, Security and other type of Investment Property listed
on Exhibit D, as being owned by it, free and clear of any Liens, except for the
security interest granted to the Agent for the benefit of the Lenders hereunder.
The Borrower further represents and warrants that (i) all such Instruments,
Securities or other types of Investment Property which are shares of stock in a
corporation or ownership interests in a partnership or limited liability company
have been (to the extent such concepts are relevant with respect to such
Instrument, Security or other type of Investment Property) duly and validly
issued, are fully paid and non-assessable; (ii) that this pledge of such
Instruments, Securities and other Investment Property will not violate the
proscriptions or require the consent, license, filing, report, permit,
exemption, regulation or approval, of any Governmental Authority or other Person
or violate any provision of law; (iii) all such shares of pledged Securities
represent, in the case of U.S. Subsidiaries, One Hundred Percent (100%) of the
issued and outstanding capital stock of such U.S. Subsidiaries and, in the case
of Foreign Subsidiaries, Sixty-Five Percent (65%) of the issued and outstanding
capital stock of such Foreign Subsidiaries; (iv) such Instruments, Securities
and other Investment Property have not been materially altered and all
signatures thereon are genuine; (v) there exists no default by an issuer under
any of such Instruments, Securities and other Investment Property with respect
thereto; (vi) no insolvency proceedings have been instituted with respect to the
issuer of such Instruments, Securities or other Investment Property; (vii) the
Borrower has executed no instrument of any kind assigning any of such
Instruments, Securities and other Investment Property or the liability of any
issuer thereon, or with respect thereto, which remains in effect; (viii) none of
the issuers of such Instruments, Securities or other Investment Property have
any obligation, commitment, subscription, option, warrant or other rights
outstanding entitling the holder thereof to purchase or otherwise acquire any
capital stock of such issuer; and (ix) with respect to any certificates
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delivered to the Agent representing an ownership interest in a partnership or
limited liability company, either such certificates are Securities as defined in
Article 8 or 8.1 of the Uniform Commercial Code of the applicable jurisdiction
as a result of actions by the issuer or otherwise, or, if such certificates are
not Securities, the Borrower has so informed the Agent so that the Agent may
take steps to perfect its security interest therein as a General Intangible or
as otherwise required by applicable law.
ARTICLE IV
COVENANTS
From the date of this Security Agreement, and thereafter until this
Security Agreement is terminated:
4.1. General.
4.1.1. Inspection. The Borrower will permit the Agent or any
Lender, by its representatives and agents (i) to inspect the
Collateral, (ii) to examine and make copies of the records of the
Borrower relating to the Collateral and (iii) to discuss the
Collateral and the related records of the Borrower with, and to be
advised as to the same by, the Borrower's officers and employees (and,
in the case of any Receivable, with any Person which is or may be
obligated thereon), all at such reasonable times and intervals as the
Agent or such Lender may determine, and all at the Borrower's expense.
4.1.2. Taxes. The Borrower will pay when due all taxes,
assessments and governmental charges and levies upon the Collateral,
except those which are being contested in good faith by appropriate
proceedings and with respect to which no Lien exists.
4.1.3. Records and Reports; Notification of Default.
(i) The Borrower will maintain complete and accurate books
and records with respect to the Collateral, and furnish to the
Agent, with sufficient copies for each of the Lenders, such
reports relating to the Collateral as the Agent shall from time
to time reasonably request.
(ii) The Borrower will give prompt notice in writing to the
Agent and the Lenders of the occurrence of any Default or
Unmatured Default as required by the Credit Agreement and of any
other development, financial or otherwise, which might have a
material adverse effect on the aggregate value of the Collateral.
4.1.4. Financing Statements and Other Actions; Defense of Title.
The Borrower will execute and deliver to the Agent all financing
statements and other documents and take such other actions as may from
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time to time be requested by the Agent in order to maintain a first
priority perfected security interest in and, in the case of Investment
Property, Control of, the Collateral, subject to Permitted Liens and
except for (i) Inventory placed on consignment in the ordinary course
of business, (ii) Inventory having a value not exceeding $1,000,000 in
the aggregate for the Borrower and its Subsidiaries held by vendors or
in public warehouses from time to time in the ordinary course of the
Borrower's business, (iii) Equipment (other than aircraft and aircraft
engines) covered by a certificate of title, (iv) other Equipment
located at sites not described on Exhibit A having a value not
exceeding $500,000 in the aggregate for the Borrower and its
Subsidiaries, (v) as permitted by Sections 5.1.17 and 5.1.18 of the
Credit Agreement, (vi) actions required to perfect a security interest
in a deposit account or deposit other than as provided in Section
5.2.4(d) of the Credit Agreement or Section 4.8 of this Security
Agreement, (vii) aircraft listed on Exhibit B, except to the extent it
has not been disposed of in accordance with Section 5.2.1 of the
Credit Agreement within 90 days of the date hereof, (viii) Instruments
and Investment Property not exceeding $500,000 in the aggregate for
the Borrower and its Subsidiaries, and (ix) the initial perfection of
the Agent's security interest in the capital stock of London
Laboratories GmbH, an entity organized under the laws of Germany,
provided that the Borrower agrees to take such actions as reasonably
requested by the Agent for the Agent to obtain a first priority
perfected security interest in such capital stock within 90 days of
the date hereof. The Borrower will take any and all actions necessary
to defend title to the Collateral against all Persons and to defend
the security interest of the Agent in the Collateral and the priority
thereof against any Lien not expressly permitted hereunder.
4.1.5. Disposition of Collateral. The Borrower will not sell,
lease or otherwise dispose of the Collateral except (i) dispositions
specifically permitted pursuant to, and in accordance with, Section
5.2.1 of the Credit Agreement, (ii) until such time following the
occurrence and during the continuance of a Default as the Borrower
receives a notice from the Agent instructing the Borrower to cease
such transactions, sales or leases of Inventory in the ordinary course
of business, and (iii) until such time as the Borrower receives a
notice from the Agent pursuant to Article VII, proceeds of Inventory
and Accounts collected in the ordinary course of business.
4.1.6. Liens. The Borrower will not create, incur, or suffer to
exist any Lien on the Collateral except (i) the security interest
created by this Security Agreement, (ii) existing Liens described in
Exhibit C and (iii) other Liens permitted pursuant to Section 5.2.2 of
the Credit Agreement.
4.1.7. Change in Location or Name. The Borrower will not (i) have
any Inventory, Equipment or Fixtures or proceeds or products thereof
(other than Inventory and proceeds thereof disposed of as permitted by
Section 4.1.5 and other than proceeds located or held in demand
deposit accounts pursuant to Section 5.2.4(d) of the Credit Agreement)
at a location other than a location specified in Exhibit A, except (A)
the locations of consigned Inventory to be provided to the Agent
within 90 days after the date hereof and appropriately supplemented at
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least once in each calender quarter thereafter, and (B) the locations
of Inventory having a value not exceeding $1,000,000 in the aggregate
for the Borrower and its Subsidiaries held by vendors or in public
warehouses from time to time in the ordinary course of the Borrower's
business, (ii) maintain records relating to the Receivables at
locations other than at the locations specified on Exhibit A, (iii)
maintain a place of business at a location other than locations
specified on Exhibit A, (iv) change its name or taxpayer
identification number or (v) change the location of its chief
executive offices, unless the Borrower shall have given the Agent not
less than 30 days, prior written notice thereof, and the Agent shall
have reasonably determined that such change will not adversely affect
the validity, perfection or priority of the Agent's security interest
in the Collateral.
4.1.8. Other Financing Statements. The Borrower will not sign or
authorize the signing on its behalf of any financing statement naming
it as debtor covering all or any portion of the Collateral, except as
permitted by Section 4.1.6.
4.2. Receivables.
4.2.1. Certain Agreements on Receivables. The Borrower will not
make or agree to make any discount, credit, rebate or other reduction
in the original amount owing on a Receivable or accept in satisfaction
of a Receivable less than the original amount thereof, except that,
prior to the occurrence of a Default, the Borrower may reduce the
amount of Accounts arising from the sale of Inventory in accordance
with its present policies or practices and in the ordinary course of
business.
4.2.2. Collection of Receivables. Except as otherwise provided in
this Security Agreement, the Borrower will collect and enforce, at the
Borrower's sole expense, all amounts due or hereafter due to the
Borrower under the Receivables.
4.2.3. Disclosure of Counterclaims on Receivables. If (i) any
discount, credit or agreement to make a rebate or to otherwise reduce
the amount owing on a Receivable exists or (ii) if, to the knowledge
of the Borrower, any dispute, setoff, claim, counterclaim or defense
exists or has been asserted or threatened with respect to a
Receivable, the Borrower will disclose such fact to the Agent in
writing in connection with the inspection by the Agent of any record
of the Borrower relating to such Receivable and in connection with any
invoice or report furnished by the Borrower to the Agent relating to
such Receivable.
4.2.4. Schedule of Accounts. Upon request by the Agent, the
Borrower will, from time to time, deliver to the Agent a schedule
identifying each Account ("Schedule of Accounts"), together with such
schedules and certificates and reports relative to all or any of the
Receivables and the items or amounts received by the Borrower in full
or partial payment or otherwise, as Proceeds of any of the
Receivables. Each Schedule of Accounts or other schedule, certificate
or report shall be executed by its duly authorized officer and shall
be in the form specified by the Agent. Without limiting the provisions
of Section 5.1.6 of the Credit Agreement, any Schedule of Accounts
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requested after the occurrence or during the continuance of a Default
shall be accompanied, if the Agent requests, (a) by a true and correct
copy of the invoice evidencing such Account, (b) by evidence of
shipment, delivery or performance, and/or (c) by a duly executed
assignment of such Account from the Borrower to the Agent; provided,
however, that the Borrower's failure to execute and deliver any such
Schedule of Account and/or assignment shall not affect or limit the
Agent's security interest or other rights in and to Accounts.
Notwithstanding the foregoing, a proper assignment of any Account
wherein the United States Government is the Account Debtor may be
requested by the Agent at any time whether or not there shall have
occurred a Default if such Account is claimed by the Borrower to be an
Eligible Domestic Account.
4.2.5. Verification of Accounts. The Agent and its officers,
agents, attorneys, and accountants, may verify Accounts and returned
and repossessed Goods and, under reasonable procedures and at
reasonable intervals, directly with the Account Debtor or by other
methods, and the Borrower shall furnish to the Agent upon request
additional Schedules of Accounts, together with all notes or other
papers evidencing the same and any guaranty, securities or other
information relating thereto reasonably requested by the Agent.
4.3. Inventory and Equipment.
4.3.1. Maintenance of Goods. The Borrower will do all things
necessary to maintain, preserve, protect and keep the Inventory and
the Equipment used by, or useful to, the Borrower in the ordinary
course of its business in good working order and suitable for the
purpose for which it is intended, and from time to time, make any
necessary repairs and replacements.
4.3.2. Insurance. The Borrower will (i) maintain fire and
extended coverage insurance on the Inventory and Equipment containing
a lender's loss payable clause in favor of the Agent, on behalf of the
Lenders, and providing that said insurance will not be terminated
except after at least 30 days' written notice from the insurance
company to the Agent, (ii) maintain such other insurance on the
Collateral for the benefit of the Agent as the Agent shall from time
to time request, (iii) furnish to the Agent upon the request of the
Agent from time to time copies of all policies of insurance on the
Collateral and certificates with respect to such insurance and (iv)
maintain general liability insurance naming the Agent, on behalf of
the Lenders, as an additional insured.
4.4. Instruments, Securities, Chattel Paper, Documents and Pledged
Deposits. The Borrower will (i) deliver to the Agent immediately upon
execution of this Security Agreement the originals of all Chattel Paper,
Securities and Instruments (if any then exist), together with appropriate
stock powers, endorsements and other appropriate instruments of assignment
endorsed in blank, except the originals representing Instruments and
Investment Property not exceeding $500,000 in the aggregate for the
Borrower and its Subsidiaries, (ii) hold in trust for the Agent upon
receipt and immediately thereafter deliver to the Agent any Chattel Paper,
Securities and Instruments constituting Collateral except for such
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Instruments not exceeding $500,000 in the aggregate for the Borrower and
its Subsidiaries, (iii) upon the designation of any Pledged Deposits (as
set forth in the definition thereof), deliver to the Agent such Pledged
Deposits which are evidenced by certificates included in the Collateral
endorsed in blank, marked with such legends and assigned as the Agent shall
specify, and (iv) upon the Agent's request, after the occurrence and during
the continuance of a Default, deliver to the Agent (and thereafter hold in
trust for the Agent upon receipt and immediately deliver to the Agent) any
Document evidencing or constituting Collateral.
4.5. Uncertificated Securities and Certain Other Investment Property.
The Borrower will permit the Agent from time to time to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated securities or other types of
Investment Property not represented by certificates which are Collateral to
mark their books and records with the numbers and face amounts of all such
uncertificated securities or other types of Investment Property not
represented by certificates and all rollovers and replacements therefor to
reflect the Lien of the Agent granted pursuant to this Security Agreement.
The Borrower will take any actions necessary to cause (i) the issuers of
uncertificated securities which are Collateral and which are Securities and
(ii) any financial intermediary which is the holder of any Investment
Property, to cause the Agent to have and retain Control over such
securities or other Investment Property. Without limiting the foregoing,
the Borrower will, with respect to Investment Property held with a
financial intermediary, cause such financial intermediary to enter into a
control agreement with the Agent in form and substance satisfactory to the
Agent. Notwithstanding the foregoing, the Borrower shall only be required
to take such actions as the Agent reasonably deems necessary as permitted
or required by applicable law to perfect the Agent's security interest in
such Collateral, and the Borrower agrees to take such other actions as may
be required under applicable law to perfect the Agent's security interest
in such Collateral.
4.6. Stock and Other Ownership Interests.
4.6.1. Changes in Capital Structure of Issuers. The Borrower will
not without the written consent of the Required Secured Lenders (i)
permit or suffer any issuer of privately held corporate securities or
other ownership interests in a corporation, partnership, joint venture
or limited liability company constituting Collateral to dissolve,
liquidate, retire any of its capital stock or other Instruments or
Securities evidencing ownership, reduce its capital or merge or
consolidate with any other entity, except as provided in Section 5.2.6
of the Credit Agreement, or (ii) vote any of the Instruments,
Securities or other Investment Property in favor of any of the
foregoing, except as provided in Section 5.2.6 of the Credit
Agreement.
4.6.2. Issuance of Additional Securities. The Borrower will not
permit or suffer the issuer of privately held corporate securities or
other ownership interests in a corporation, partnership, joint venture
or limited liability company constituting Collateral, or, with respect
to such corporate securities or ownership interests in which the
Borrower's interests do not exceed 50%, the Borrower will not vote its
interests, to issue any such securities or other ownership interests,
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any right to receive the same or any right to receive earnings, except
in a manner which does not reduce the Borrower's percentage ownership
thereof,.
4.6.3. Registration of Pledged Securities and other Investment
Property. After the occurrence of and during the continuance of a
Default, the Borrower will permit any registerable Collateral to be
registered in the name of the Agent or its nominee at any time at the
option of the Required Secured Parties.
4.6.4. Exercise of Rights in Pledged Securities and other
Investment Property. Prior the occurrence of a Default, voting and
corporate rights (including the right to receive dividends) relating
to the Collateral shall remain with the Borrower. The Borrower will
permit the Agent or its nominee at any time after the occurrence and
during the continuance of a Default, without notice, to exercise all
voting and corporate rights relating to the Collateral, including,
without limitation, exchange, subscription or any other rights,
privileges, or options pertaining to any corporate securities or other
ownership interests or Investment Property in or of a corporation,
partnership, joint venture or limited liability company constituting
Collateral and the Stock Rights as if it were the absolute owner
thereof.
4.7. Pledged Deposits. The Borrower will not withdraw all or any
portion of any Pledged Deposit or fail to rollover said Pledged Deposit
without the prior written consent of the Agent.
4.8. Deposit Accounts. The Borrower will upon the Agent's request,
after the occurrence and during the continuance of a Default, notify each
bank or other financial institution in which it maintains a deposit account
or other deposit (general or special, time or demand, provisional or final)
of the security interest granted to the Agent hereunder and cause each such
bank or other financial institution to acknowledge such notification in
writing and deliver to each such bank or other financial institution a
letter, in form and substance acceptable to the Agent, transferring
dominion and control over each such account to the Agent. In the case of
deposits maintained with Lenders, the terms of such letter shall be subject
to the provisions of the Credit Agreement regarding setoffs.
ARTICLE V
DEFAULT
5.1. Events of Default. The occurrence of any one or more of the
following events shall constitute a Default:
5.1.1. Representations and Warranties. Any representation or
warranty made by or on behalf of the Borrower under or in connection
with this Security Agreement shall be false in any material respect as
of the date on which made.
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5.1.2. Article IV or VII Breaches. The breach by the Borrower of
any of the terms or provisions of Sections 4.1.1, 4.1.2, 4.1.3(i),
4.2.2, 4.2.3 or 4.3.1, which breach remains uncured for a period of 30
days after written notice from the Agent or a Lender to the Borrower
specifying such breach; or the breach by the Borrower of any of the
terms or provisions of any other covenant contained in Article IV or
in Article VII; or the breach by the Borrower of Section 4.3.2 which
remains uncured for a period which is the earlier of 20 days after the
occurrence thereof or 10 days after written notice to the Borrower.
5.1.3. Other Breaches of this Security Agreement. The breach by
the Borrower (other than a breach which constitutes a Default under
Section 5.1.1, 5.1.2, 5.1.4 or 5.1.5) of any of the terms or
provisions of this Security Agreement which is not remedied within 30
days after the giving of written notice to the Borrower by the Agent.
5.1.4. Disposition of Collateral. Any material portion of the
Collateral shall be transferred or otherwise disposed of, either
voluntarily or involuntarily, in any manner not permitted by Section
4.1.5 or 8.7; or any material portion of the Collateral not covered by
adequate insurance shall be lost, stolen, damaged or destroyed.
5.1.5. Credit Agreement Defaults. The occurrence and continuance
of any "Default" under, and as defined in, the Credit Agreement.
5.2. Acceleration and Remedies. Upon the acceleration of the
Obligations under the Credit Agreement pursuant to Section 8.1 thereof, the
Obligations shall immediately become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, and the Agent may, with the concurrence or at the direction of the
Required Secured Parties, exercise any or all of the following rights and
remedies:
5.2.1. Loan Document Rights and Remedies. Those rights and
remedies provided in this Security Agreement, the Credit Agreement, or
any other Loan Document, provided that this Section 5.2.1 shall not be
understood to limit any rights or remedies available to the Agent and
the Lenders prior to a Default.
5.2.2. UCC Rights and Remedies. Those rights and remedies
available to a secured party under the Indiana Uniform Commercial Code
(whether or not the Indiana Uniform Commercial Code applies to the
affected Collateral) or under any other applicable law (including,
without limitation, any law governing the exercise of a bank's right
of setoff or bankers' lien) when a debtor is in default under a
security agreement.
5.2.3. Disposition of Collateral. Without notice except as
specifically provided in Section 8.1 or elsewhere herein, and to the
extent permitted by applicable law, sell, lease, assign, grant an
option or options to purchase or otherwise dispose of the Collateral
or any part thereof in one or more parcels at public or private sale,
for cash, on credit or for future delivery, and upon such other terms
as the Agent may deem commercially reasonable.
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5.3. Debtor's Obligations upon Default. Upon the request of the Agent
after the occurrence and during the continuance of a Default, the Borrower
will:
5.3.1. Assembly of Collateral. Assemble and make available to the
Agent the Collateral and all records relating thereto at any place or
places specified by the Agent.
5.3.2. Secured Party Access. Permit the Agent, by the Agent's
representatives and agents, to enter any premises where all or any
part of the Collateral, or the books and records relating thereto, or
both, are located, to take possession of all or any part of the
Collateral and to remove all or any part of the Collateral.
5.4. License. The Agent is hereby granted a license or other right to use,
following the occurrence and during the continuance of a Default, without
charge, the Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, customer lists and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and, following the occurrence and during the continuance of a
Default, the Borrower's rights under all licenses and all franchise agreements
shall inure to the Agent's benefit. In addition, the Borrower hereby irrevocably
agrees that the Agent may, following the occurrence and during the continuance
of a Default, sell any of the Borrower's Inventory directly to any Person,
including without limitation Persons who have previously purchased the
Borrower's Inventory from the Borrower and in connection with any such sale or
other enforcement of the Agent's rights under this Agreement, may sell Inventory
which bears any trademark owned by or licensed to the Borrower and any Inventory
that is covered by any copyright owned by or licensed to the Borrower and the
Agent may finish any work in process and affix any trademark owned by or
licensed to the Borrower and sell such Inventory as provided herein.
ARTICLE VI
WAIVERS, AMENDMENTS AND REMEDIES
No delay or omission of the Agent or any Lender to exercise any right or
remedy granted under this Security Agreement shall impair such right or remedy
or be construed to be a waiver of any Default or an acquiescence therein, and
any single or partial exercise of any such right or remedy shall not preclude
any other or further exercise thereof or the exercise of any other right or
remedy. No waiver, amendment or other variation of the terms, conditions or
provisions of this Security Agreement whatsoever shall be valid unless in
writing signed by the Agent with the concurrence or at the direction of the
Lenders required under Section 11.1 of the Credit Agreement and then only to the
extent in such writing specifically set forth. All rights and remedies contained
in this Security Agreement or by law afforded shall be cumulative and all shall
be available to the Agent and the Lenders until the Obligations have been paid
in full.
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ARTICLE VII
PROCEEDS; COLLECTION OF RECEIVABLES
7.1. Lockboxes. Upon request of the Agent, after the occurrence and during
the continuance of a Default or Unmatured Default, the Borrower shall execute
and deliver to the Agent irrevocable lockbox agreements in the form provided by
or otherwise acceptable to the Agent, which agreements shall be accompanied by
an acknowledgment by the bank where the lockbox is located of the Lien of the
Agent granted hereunder and of irrevocable instructions to wire all amounts
collected therein to a special collateral account at the Agent.
7.2. Collection of Receivables. The Agent may at any time, after the
occurrence and during the continuance of a Default, by giving the Borrower
written notice, elect to require that the Receivables be paid directly to the
Agent for the benefit of the Lenders. In such event, the Borrower shall, and
shall permit the Agent to, promptly notify the account debtors or obligors under
the Receivables of the Lenders' interest therein and direct such account debtors
or obligors to make payment of all amounts then or thereafter due under the
Receivables directly to the Agent. Upon receipt of any such notice from the
Agent, the Borrower shall thereafter hold in trust for the Agent, on behalf of
the Lenders, all amounts and proceeds received by it with respect to the
Receivables and Other Collateral and immediately and at all times thereafter
deliver to the Agent all such amounts and proceeds in the same form as so
received, whether by cash, check, draft or otherwise, with any necessary
endorsements. The Agent shall hold and apply funds so received as provided by
the terms of Sections 7.3 and 7.4.
7.3. Special Collateral Account. The Agent may at any time, after the
occurrence and during the continuance of a Default, require all cash proceeds of
the Collateral to be deposited in a special non-interest bearing cash collateral
account with the Agent and held there as security for the Obligations. The
Borrower shall have no control whatsoever over said cash collateral account. If
any Default has occurred and is continuing, the Agent may (and shall, at the
direction of the Required Lenders), from time to time, apply the collected
balances in said cash collateral account to the payment of the Obligations
whether or not the Obligations shall then be due.
7.4. Application of Proceeds. The proceeds of the Collateral shall be
applied by the Agent to payment of the Obligations in the following order unless
a court of competent jurisdiction shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the Agent incurred
in connection with the collection and enforcement of the Obligations or of
the security interest granted to the Agent pursuant to this Security
Agreement;
(b) SECOND, to payment of that portion of the Obligations constituting
accrued and unpaid interest and fees, pro rata among the Lenders in
accordance with the amount of such accrued and unpaid interest and fees
owing to each of them;
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(c) THIRD, to payment of the principal of the Obligations and net
early termination payments then due and unpaid from the Borrower to any of
the Lenders under Rate Hedging Agreements, pro rata among the Lenders in
accordance with the amount of such principal and such net early termination
payments then due and unpaid owing to each of them;
(d) FOURTH, to payment of any Obligations (other than those listed
above) pro rata among those parties to whom such Obligations are due in
accordance with the amounts owing to each of them; and
(e) FIFTH, the balance, if any, after all of the Obligations have been
satisfied, shall be deposited by the Agent into the Borrower's general
operating account with the Agent.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Notice of Disposition of Collateral. To the extent permitted by
applicable law, the Borrower hereby waives notice of the time and place of any
public sale or the time after which any private sale or other disposition of all
or any part of the Collateral may be made. To the extent such notice may not be
waived under applicable law, any notice made shall be deemed reasonable if sent
to the Borrower, addressed as set forth in Article IX, at least ten days prior
to (i) the date of any such public sale or (ii) the time after which any such
private sale or other disposition may be made.
8.2. Compromises and Collection of Collateral. The Borrower and the Agent
recognize that setoffs, counterclaims, defenses and other claims may be asserted
by obligors with respect to certain of the Receivables, that certain of the
Receivables may be or become uncollectible in whole or in part and that the
expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect
to a Receivable. In view of the foregoing, the Borrower agrees that the Agent
may at any time and from time to time, if a Default has occurred and is
continuing, compromise with the obligor on any Receivable, accept in full
payment of any Receivable such amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Agent shall be
commercially reasonable so long as the Agent acts in good faith based on
information known to it at the time it takes any such action.
8.3. Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Agent may perform or pay any obligation which the
Borrower has agreed to perform or pay in this Security Agreement, and the
Borrower shall reimburse the Agent for any amounts paid by the Agent pursuant to
this Section 8.3. The Borrower's obligation to reimburse the Agent pursuant to
the preceding sentence shall be an Obligation payable on demand.
8.4. Authorization for Secured Party to Take Certain Action. The Borrower
irrevocably authorizes the Agent at any time and from time to time in the sole
discretion of the Agent and appoints the Agent as its attorney-in-fact (i) to
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execute on behalf of the Borrower as debtor and to file financing statements
necessary or desirable in the Agent's sole discretion to perfect and to maintain
the perfection and priority of the Agent's security interest in the Collateral,
(ii) after the occurrence and during the continuance of a Default, to endorse
and collect any cash proceeds of the Collateral, (iii) to file a carbon,
photographic or other reproduction of this Security Agreement or any financing
statement with respect to the Collateral as a financing statement in such
offices as the Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the Agent's security
interest in the Collateral, (iv) to contact and enter into one or more
agreements with the issuers of uncertificated securities which are Collateral
and which are Securities or with financial intermediaries holding other
Investment Property as may be necessary or advisable to give the Agent Control
over such Securities or other Investment Property, (v) subject to the terms of
Section 4.1.5 and 7.2, to enforce payment of the Receivables in the name of the
Agent or the Borrower, (vi) to apply the proceeds of any Collateral received by
the Agent to the Obligations as provided in Article VII and (vii) to discharge
past due taxes, assessments, charges, fees or Liens on the Collateral (except
for such Liens as are specifically permitted hereunder), and the Borrower agrees
to reimburse the Agent on demand for any payment made or any expense incurred by
the Agent in connection therewith, provided that this authorization shall not
relieve the Borrower of any of its obligations under this Security Agreement or
under the Credit Agreement.
8.5. Specific Performance of Certain Covenants. The Borrower acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1.5,
4.1.6, 4.4, 5.3, or 8.7 or in Article VII will cause irreparable injury to the
Agent and the Lenders, that the Agent and Lenders have no adequate remedy at law
in respect of such breaches and therefore agrees, without limiting the right of
the Agent or the Lenders to seek and obtain specific performance of other
obligations of the Borrower contained in this Security Agreement, that the
covenants of the Borrower contained in the Sections referred to in this Section
8.5 shall be specifically enforceable against the Borrower.
8.6. Use and Possession of Certain Premises. Upon the occurrence and during
the continuance of a Default, except as prohibited by applicable law, the Agent
shall be entitled to occupy and use any premises owned or leased by the Borrower
where any of the Collateral or any records relating to the Collateral are
located until the Obligations are paid or the Collateral is removed therefrom,
whichever first occurs, without any obligation to pay the Borrower for such use
and occupancy.
8.7. Dispositions Not Authorized. The Borrower is not authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1.5 and
notwithstanding any course of dealing between the Borrower and the Agent or
other conduct of the Agent, no authorization to sell or otherwise dispose of the
Collateral (except as set forth in Section 4.1.5) shall be binding upon the
Agent or the Lenders unless such authorization is in writing signed by the Agent
with the consent or at the direction of the Required Lenders.
8.8. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Agent and the Lenders and their respective successors and assigns, except that
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the Borrower shall not have the right to assign its rights or delegate its
obligations under this Security Agreement or any interest herein, without the
prior written consent of the Agent.
8.9. Survival of Representations. All representations and warranties of the
Borrower contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.
8.10. Taxes and Expenses. Any taxes (excluding taxation of the overall net
income of the Agent or any of the Lenders) payable or ruled payable by a
Governmental Authority in respect of this Security Agreement shall be paid by
the Borrower, together with interest and penalties, if any. Subject to any
specific limitations set forth in the Credit Agreement, the Borrower shall
reimburse the Agent for any and all reasonable out-of-pocket expenses and
reasonable internal charges (including reasonable attorneys', auditors' and
accountants' fees and reasonable time charges of attorneys, paralegals, auditors
and accountants who may be employees of the Agent) paid or incurred by the Agent
in connection with the preparation, execution, delivery, administration,
collection and enforcement of this Security Agreement and in the audit,
analysis, administration, collection, preservation or sale of the Collateral
(including the expenses and charges associated with any periodic or special
audit of the Collateral). Any and all costs and expenses incurred by the
Borrower in the performance of actions required pursuant to the terms hereof
shall be borne solely by the Borrower.
8.11. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.
8.12. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Obligations
outstanding) until (i) the Credit Agreement has terminated pursuant to its
express terms and (ii) all of the Obligations have been paid and performed in
full and no commitments of the Agent or the Lenders which would give rise to any
Obligations are outstanding.
8.13. Reinstatement. If, at any time after payment in full by the Borrower
of all Obligations and termination of the Agent's security interest, any
payments on the Obligations previously made by the Borrower or any other Person
must be disgorged by the Agent or any Lender for any reason whatsoever,
including, without limitation, the insolvency, bankruptcy or reorganization of
the Borrower or such Person, this Security Agreement and the Agent's security
interests herein shall be reinstated as to all disgorged payments as though such
payments had not been made, and the Borrower shall sign and deliver to the Agent
all documents, and shall do such other acts and things, as may be necessary to
re-perfect the Agent's security interest.
8.14. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Borrower and the Agent relating to the
Collateral and supersedes all prior agreements and understandings between the
Borrower and the Agent relating to the Collateral.
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8.15. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF INDIANA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
8.16. Indemnity. The Borrower hereby agrees to indemnify the Agent and the
Lenders, and their respective successors, assigns, and their respective
directors, officers, agents and employees, from and against any and all losses,
claims, costs, damages, liabilities and expenses, including, without limitation,
all expenses of litigation or preparation therefor (whether or not the Agent or
any Lender is a party thereto) which any of them may pay or incur in connection
with or arising out of, or related to this Security Agreement, or the
manufacture, purchase, acceptance, rejection, ownership, delivery, lease,
possession, use, operation, condition, sale, return or other disposition of any
Collateral (including, without limitation, latent and other defects, whether or
not discoverable by the Agent or the Lenders or the Borrower, and any claim for
patent, trademark or copyright infringement), except to the extent they are
determined by a court of competent jurisdiction in a final and non-appealable
order to have resulted from the gross negligence or willful misconduct of the
party seeking indemnification.
ARTICLE IX
NOTICES
9.1. Sending Notices. Any notice required or permitted to be given under
this Security Agreement shall be sent (and deemed received) in the manner and to
the addresses set forth in Section 11.12 of the Credit Agreement.
9.2. Change in Address for Notices. Each of the Borrower, the Agent and the
Lenders may change the address for service of notice upon it by a notice in
writing to the other parties.
ARTICLE X
THE AGENT
The NBD Bank, N.A. has been appointed Agent for the Lenders hereunder
pursuant to Section 9 of the Credit Agreement. It is expressly understood and
agreed by the parties to this Security Agreement that any authority conferred
upon the Agent hereunder is subject to the terms of the delegation of authority
made by the Lenders to the Agent pursuant to the Credit Agreement, and that the
Agent has agreed to act (and any successor Agent shall act) as such hereunder
only on the express conditions contained in such Section 9 of the Credit
Agreement. Any successor Agent appointed pursuant to Section 9 of the Credit
Agreement shall be entitled to all the rights, interests and benefits of the
Agent hereunder.
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IN WITNESS WHEREOF, the Borrower and the Agent have executed this Security
Agreement as of the date first above written.
LILLY INDUSTRIES, INC.,
an Indiana corporation
By:
--------------------------------------
Douglas W. Huemme, Chairman, President
and Chief Executive Officer
ACCEPTED:
NBD BANK, N.A., a national banking association,
as Agent
By:
--------------------------------------
Robert D. Lowrie, Senior Vice President
STATE OF ______________________)
) SS:
COUNTY OF _____________________)
Before me, a Notary Public in and for said County and State, personally
appeared Douglas W. Huemme, known to me to be the Chairman, President and Chief
Executive Officer of Lilly Industries, Inc., and acknowledged the execution of
the foregoing for and on behalf of said Corporation.
Witness my hand and Notarial Seal, this day of April, 1996.
-----------------------------------------
Notary Public - Signature
-----------------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
- ---------------------- -----------------------
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STATE OF ______________________)
) SS:
COUNTY OF _____________________)
Before me, a Notary Public in and for said County and State, personally
appeared Robert D. Lowrie, known to me to be a Senior Vice President of NBD
Bank, N.A., and acknowledged the execution of the foregoing for and on behalf of
said Bank.
Witness my hand and Notarial Seal, this day of April, 1996.
-----------------------------------------
Notary Public - Signature
-----------------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
- ---------------------- -----------------------
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EXHIBIT A
(See Sections 3.3, 3.4, 4.1.7 and 9.1 of Security Agreement) Principal Place of
Business and Mailing Address:
Location(s) of Receivables Records (if different from Principal Place of
Business above):
Locations of Inventory and Equipment and Fixtures:
A. Properties owned by the Borrower:
B. Properties Leased by the Borrower (Include Landlord's Name):
C. Public Warehouses or other Locations pursuant to Bailment or Consignment
Arrangements (subject to Section 4.1.7(i)(A)) (include name of Warehouse
Operator or other Bailee or Consignee):
D. Other Equipment located at sites not described above having a value not
exceeding $500,000 in the aggregate for the Borrower and its Subsidiaries.
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EXHIBIT B
(See Section 3.8 of Security Agreement)
A. Aircraft/engines, ships, railcars and other vehicles governed by federal
statute:
B. Patents, copyrights, trademarks protected under federal law*:
*For (i) trademarks, the registration date and the registration number; (ii)
trademark applications, the application filing date and the serial number of the
application; (iii) patents, show the patent number, issue date and the title of
the subject invention of the patent; and (iv) patent applications, show the
serial number of the application, the application filing date and the title of
the subject invention of the patent applied for. Any licensing agreements,
whether as grantor or grantee, for patents or trademarks should be described on
a separate schedule and furnished to the Agent within 90 days of the date
hereof.
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EXHIBIT C
(See Sections 3.9 and 4.1.6 of Security Agreement)
EXISTING LIENS ON THE COLLATERAL
Secured Party Collateral Principal Balance Maturity
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EXHIBIT D
List of Pledged Securities
(See Section 3.11 of Security Agreement)
A. STOCKS:
Issuer Certificate Number Number of Shares Percentage Ownership Interest
B. BONDS:
Issuer Number Face Amount Coupon Rate Maturity
C. GOVERNMENT SECURITIES:
Issuer Number Face Amount Coupon Rate Maturity
D. OTHER SECURITIES OR OTHER INVESTMENT PROPERTY (CERTIFICATED AND
UNCERTIFICATED):
Issuer Description of Collateral Percentage Ownership Interest
[Add description of custody accounts or arrangements with securities
intermediary, if applicable]
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EXHIBIT E
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of the 8th day of
April, 1996, by the undersigned (collectively, the "Subsidiary Guarantors") in
favor of the Agent, for the ratable benefit of the Lenders, under the Credit
Agreement referred to below;
WITNESSETH:
WHEREAS, Lilly Industries, Inc., an Indiana corporation (the "Principal"),
and NBD BANK, N.A., a national banking association, as Agent (the "Agent"), and
certain other Lenders from time to time party thereto have entered into a
certain Credit Agreement dated as of even date herewith (as same may be amended
or modified from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit to be made by the
Lenders to the Principal;
WHEREAS, it is a condition precedent to the Agent's and the Lenders'
executing the Credit Agreement that each of the Subsidiary Guarantors execute
and deliver this Guaranty whereby each of the Subsidiary Guarantors shall
guarantee the payment when due, subject to Section 9 hereof, of all principal,
interest and other amounts that shall be at any time payable by the Principal
under the Credit Agreement, the Notes and the other Loan Documents; and
WHEREAS, in consideration of the financial and other support that the
Principal has provided, and such financial and other support as the Principal
may in the future provide, to the Subsidiary Guarantors, and in order to induce
the Lenders and the Agent to enter into the Credit Agreement, each of the
Subsidiary Guarantors is willing to guarantee the obligations of the Principal
under the Credit Agreement, the Notes, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION l. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2.01 Representations and Warranties. Each of the Subsidiary
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been renewed upon each Advance under the Credit Agreement)
that:
(a) it (i) is a corporation duly organized, validly existing and, if
applicable, in good standing under the laws of its jurisdiction of
incorporation; (ii) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to
own its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in
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which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse
Effect.
(b) it has all necessary corporate power and authority to execute,
deliver and perform its obligations under this Guaranty; the execution,
delivery and performance of this Guaranty have been duly authorized by all
necessary corporate action; and this Guaranty has been duly and validly
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, or moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general equitable
principles.
(c) neither the execution and delivery by it of this Guaranty nor
compliance with the terms and provisions hereof will conflict with, or
result in a breach of, or require any consent under, (i) its articles or
certificate of incorporation or by-laws or any applicable law or
regulation; (ii) any order, writ, injunction or decree of Governmental
Authority, (iii) any other agreement or instrument to which it is a party
or by which it is bound or to which it is subject, the breach or default of
which, singly or in the aggregate, could have a Material Adverse Effect; or
(iv) result in the creation or imposition of any Lien upon any of its
revenues or assets pursuant to the terms of any such agreement or
instrument other than a Permitted Lien.
SECTION 2.02 Covenants. Each of the Subsidiary Guarantors covenants that,
so long as any Lender has any Commitment outstanding under the Credit Agreement
or any Obligation payable under the Credit Agreement or any Note shall remain
unpaid, that it will not take any action that would result in a violation by the
Principal of the covenants and agreements set forth in the Credit Agreement.
SECTION 3. The Guaranty. Subject to Section 9 hereof, each of the
Subsidiary Guarantors hereby unconditionally guarantees the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest on each Note issued by the Principal pursuant to the
Credit Agreement, and the full and punctual payment of all other amounts payable
by the Principal under the Credit Agreement and the other Loan Documents
including, without limitation, the Obligations (all of the foregoing, subject to
the provisions of Section 9 hereof, being referred to collectively as the
"Guaranteed Obligations"). Upon failure by the Principal to pay punctually any
such amount, each of the Subsidiary Guarantors agrees that it shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement, any Note or the relevant Loan Document, as the case may
be, it being agreed and acknowledged by each Subsidiary Guarantor that this
Guaranty constitutes a guaranty of payment (and not collection), and that it
shall not be necessary for the Agent or any Lender to exercise any remedies
against the Borrower or any other Person as a condition to a demand for payment
under this Guaranty.
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SECTION 4. Guaranty Unconditional. Subject to Section 9 hereof, the
obligations of each of the Subsidiary Guarantors hereunder shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Principal under the Credit Agreement, any
Note, or any other Loan Document, by operation of law or otherwise or any
obligation of any other guarantor of any of the Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, or any other Loan Document;
(iii) any release, nonperfection or invalidity of any direct or indirect
security for any obligation of the Principal under the Credit Agreement,
any Note, the Security Agreement, the Pledge and Security Agreement, any
Loan Document, or any obligations of any other guarantor-of any of the
Obligations;
(iv) any change in the corporate existence, structure or ownership of the
Principal or any other guarantor of any of the Obligations, or any
insolvency, bankruptcy, reorganization or other similar proceeding
affecting the Principal, or any other guarantor of the Obligations, or its
assets or any resulting release or discharge of any obligation of the
Principal, or any other guarantor of any of the Obligations;
(v) the existence of any claim, setoff or other rights which any of the
Subsidiary Guarantors may have at any time against the Principal, any other
guarantor of any of the Obligations, the Agent, any Lender or any other
Person, whether in connection herewith or any unrelated transactions;
(vi) any invalidity or unenforceability relating to or against the
Principal, or any other guarantor of any of the Obligations, for any reason
related to the Credit Agreement, any other Loan Document, or any provision
of applicable law or regulation purporting to prohibit the payment by the
Principal, or any other guarantor of the Obligations, of the principal of
or interest on any Note or any other amount payable by the Principal under
the Credit Agreement, the Notes, or any other Loan Document; or
(vii) any other act or omission to act or delay of any kind by the
Principal, any other guarantor of the Obligations, the Agent, any Lender or
any other Person or any other circumstance whatsoever which might, but for
the provisions of this paragraph, constitute a legal or equitable discharge
of any Subsidiary Guarantor's obligations hereunder.
SECTION 5. Discharge Only Upon Payment In Full; Reinstatement In Certain
Circumstances. Each of the Subsidiary Guarantor's obligations hereunder shall
remain in full force and effect until all Guaranteed Obligations shall have been
paid in full and the Commitments under the Credit Agreement shall have
terminated or expired. If at any time any payment of the principal of or
interest on any Note or any other amount payable by the Principal or any other
party under the Credit Agreement or any other Loan Document is rescinded or must
be otherwise restored or returned upon the insolvency, bankruptcy or
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reorganization of the Principal or otherwise, each of the Subsidiary Guarantor's
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.
SECTION 6. Waiver of Notice. Each of the Subsidiary Guarantors irrevocably
waives acceptance hereof, presentment, demand, protest and, to the fullest
extent permitted by law, any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person against the
Principal, any other guarantor of the Obligations, or any other Person.
SECTION 7. Subrogation. Each of the Subsidiary Guarantors hereby agrees
not to assert any right, claim or cause of action, including, without
limitation, a claim for subrogation, reimbursement, indemnification or
otherwise, against the Principal arising out of or by reason of this Guaranty or
the obligations hereunder, including, without limitation, the payment or
securing or purchasing of any of the Obligations by any of the Subsidiary
Guarantors unless and until the Guaranteed Obligations are paid in full and any
commitment to lend or issue Letters of Credit under the Credit Agreement and
other Loan Documents is terminated.
SECTION 8. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Principal under the Credit Agreement, any
Note or any other Loan Document is stayed upon the insolvency, bankruptcy or
reorganization of the Principal, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other Loan
Document shall nonetheless be payable by each of the Subsidiary Guarantors
hereunder forthwith on demand by the Agent made at the request of the Required
Lenders.
SECTION 9. Limitation on Obligations. (a) It is the intention of each of
the Subsidiary Guarantors and the Lenders that the obligations of each
Subsidiary Guarantor hereunder shall be in, but not in excess of, as of any
date, the maximum amount (such amount being the Subsidiary Guarantor's "Maximum
Liability") not subject to avoidance under Title 11 of the United States Code,
as same may be amended from time to time, or any applicable state law
(collectively, the "Bankruptcy Code"). To that end, but as to the Maximum
Liability of the Subsidiary Guarantors, only to the extent such obligations
would otherwise be subject to avoidance under the Bankruptcy Code if the
Subsidiary Guarantor is not deemed to have received valuable consideration, fair
value or reasonably equivalent value for its obligations hereunder, any
Subsidiary Guarantor's obligations hereunder shall be reduced to that amount
which, after giving effect thereto, would not render the Subsidiary Guarantor
insolvent, or leave the Subsidiary Guarantor with an unreasonably small capital
to conduct its business, or cause the Subsidiary Guarantor to have incurred
debts (or intended to have incurred debts) beyond its ability to pay such debts
as they mature, at the time such obligations are deemed to have been incurred
under the Bankruptcy Code. As used herein, the terms "insolvent" and
"unreasonably small capital" shall likewise be determined in accordance with the
Bankruptcy Code. This Section 9(a) with respect to the Maximum Liability of each
Subsidiary Guarantor is intended solely to preserve the rights of the Agent
hereunder to the maximum extent not subject to avoidance under the Bankruptcy
Code, and neither any Subsidiary Guarantor nor any other person or entity shall
have any right or claim under this Section 9(a) with respect to the Maximum
Liability, except to the extent necessary so that the obligations of such
Subsidiary Guarantor hereunder shall not be rendered voidable under the
Bankruptcy Code.
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(b) Each of the Subsidiary Guarantors agrees that the Guaranteed
Obligations may at any time and from time to time exceed the Maximum Liability
of each Subsidiary Guarantor, and may exceed the aggregate Maximum Liability of
all other Subsidiary Guarantors, without impairing this Guaranty or affecting
the rights and remedies of the Agent hereunder. Nothing in this Section 9(b)
shall be construed to increase any Subsidiary Guarantor's obligations hereunder
beyond its Maximum Liability.
(c) In the event any Subsidiary Guarantor (a "Paying Subsidiary Guarantor")
shall make any payment or payments under this Guaranty or shall suffer any loss
as a result of any realization upon any collateral granted by it to secure its
obligations under this Guaranty, each other Subsidiary Guarantor (each a
"Non-Paying Subsidiary Guarantor") shall contribute to such Paying Subsidiary
Guarantor an amount equal to such Non-Paying Subsidiary Guarantor's "Pro Rata
Share" of such payment or payments made, or losses suffered, by such Paying
Subsidiary Guarantor. For the purposes hereof, each Non-Paying Subsidiary
Guarantor's "Pro Rata Share" with respect to any such payment or loss by a
Paying Subsidiary Guarantor shall be determined as of the date on which such
payment or loss was made by reference to the ratio of (i) such Non-Paying
Subsidiary Guarantor's Maximum Liability as of such date (without giving effect
to any right to receive, or obligation to make, any contribution hereunder) to
(ii) the aggregate Maximum Liability of all Subsidiary Guarantors hereunder
(including such Paying Subsidiary Guarantor) as of such date (without giving
effect to any right to receive, or obligation to make, any contribution
hereunder). Nothing in this Section 9 (c) shall affect any Subsidiary
Guarantor's several liability for the entire amount of the Guaranteed
Obligations (up to such Subsidiary Guarantor's Maximum Liability). Each of the
Subsidiary Guarantors covenants and agrees that its right to receive any
contribution under this Guaranty from a Non-Paying Subsidiary Guarantor shall be
subordinate and junior in right of payment to all the Guaranteed Obligations.
The provisions of this Section 9(c) are for the benefit of both the Agent and
the Subsidiary Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.
SECTION 10. Notices. All notices, requests and other communications to any
party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Agent in accordance with the provisions of Section 11.12 of the
Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(provided, that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.
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SECTION 11. No Waivers. No failure or delay by the Agent or any Lenders in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Guaranty, the Credit Agreement, the
Notes, and the other Loan Documents shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 12. Successors and Assigns. This Guaranty is for the benefit of the
Agent and the Lenders and their respective successors and permitted assigns and
in the event of an assignment of any amounts payable under the Credit Agreement,
the Notes, or the other Loan Documents, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty shall be binding upon each of the Subsidiary
Guarantors and their respective successors and permitted assigns.
SECTION 13. Changes in Writing. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Subsidiary Guarantors and the Agent with the
consent of the Required Lenders.
SECTION 14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF INDIANA. EACH OF THE SUBSIDIARY GUARANTORS HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF INDIANA AND OF ANY INDIANA STATE COURT SITTING IN
INDIANAPOLIS, INDIANA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER
LOAN DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE SUBSIDIARY
GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE SUBSIDIARY GUARANTORS, AND THE AGENT AND THE LENDERS ACCEPTING THIS
GUARANTY, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 15. Taxes. etc. All payments required to be made by any of the
Subsidiary Guarantors hereunder shall be made without setoff or counterclaim and
free and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political or taxing authority thereof,
provided, however, that if any of the Subsidiary Guarantors is required by law
to make such deduction or withholding, such Subsidiary Guarantor shall forthwith
CG/DKD/97739.1
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pay to theAgent or any Lender, as applicable, such additional amount as results
in the net amount received by the Agent or any Lender, as applicable, equaling
the full amount which would have been received by the Agent or any Lender, as
applicable, had no such deduction or withholding been made.
IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Guaranty to be duly executed, under seal, by its authorized officer as of the
day and year first above written.
Address: ______________________________
________________________ By: _________________________
________________________
________________________ Title: _______________________
Address: ______________________________
________________________ By: _________________________
________________________
________________________ Title: _______________________
Address: ______________________________
________________________ By: _________________________
________________________
________________________ Title: _______________________
Address: ______________________________
________________________ By: _________________________
________________________
________________________ Title: _______________________
CG/DKD/97739.1
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Address: ______________________________
________________________ By: _________________________
________________________
________________________ Title: _______________________
CG/DKD/97739.1
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EXHIBIT F
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is entered into as of April 8th, 1996 by
and between ________________________________ (the "Guarantor") and NBD BANK,
N.A., a national banking association, in its capacity as agent (the "Agent") on
behalf of the Lenders party to the Credit Agreement referred to below.
PRELIMINARY STATEMENT
Lilly Industries, Inc. (the "Borrower"), the Agent and the Lenders are
entering into a Credit Agreement dated as of even date herewith (as the same may
be amended from time to time, the "Credit Agreement"). The Obligations of the
Borrower under the Credit Agreement are being guaranteed by the Guarantor
pursuant to its Subsidiary Guaranty of even date (the "Guaranty"). The Guarantor
is entering into this Pledge and Security Agreement (as the same may be amended
from time to time, the "Security Agreement") in order to induce the Lenders to
enter into and extend credit to the Borrower under the Credit Agreement.
ACCORDINGLY, the Guarantor and the Agent, on behalf of the Lenders, hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Terms Defined in Credit Agreement. All capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement.
1.2. Terms Defined in Indiana Uniform Commercial Code. Terms defined in the
Indiana Uniform Commercial Code which are not otherwise defined in this Security
Agreement are used herein as defined in the Indiana Uniform Commercial Code as
in effect on the date hereof.
1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings:
"Accounts" means all rights to payment for goods sold or leased or services
rendered by the Guarantor, whether or not earned by performance, together with
all security interests or other security held by or granted to any Guarantor to
secure such rights to payment.
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"Article" means a numbered article of this Security Agreement, unless
another document is specifically referenced.
"Chattel Paper" means any writing or group of writings which evidences both
a monetary obligation and a security interest in or a lease of specific goods.
"Collateral" means all Accounts, Chattel Paper, Documents, Equipment,
Fixtures, General Intangibles, Investment Property, Instruments, Inventory,
Pledged Deposits, Stock Rights and Other Collateral, wherever located, in which
the Guarantor now has or hereafter acquires any right or interest, and the
proceeds, insurance proceeds and products thereof, together with all books and
records, customer lists, credit files, computer files, programs, printouts and
other computer materials and records related thereto.
"Control" shall have the meaning set forth in Article 8 or 8.1 of the
Indiana Uniform Commercial Code as in effect from time to time.
"Default" means an event described in Section 5.1.
"Documents" means all documents of title and goods evidenced thereby,
including, without limitation, all bills of lading, dock warrants, dock
receipts, warehouse receipts and orders for the delivery of goods, and also any
other document which in the regular course of business or financing is treated
as adequately evidencing that the Person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Equipment" means all equipment, machinery, furniture and goods used or
usable by the Guarantor in its business and all other tangible personal property
(other than Inventory), and all accessions and additions thereto, including,
without limitation, all Fixtures.
"Exhibit" refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.
"Fixtures" means all goods which become so related to particular real
estate that an interest in such goods arises under any real estate law
applicable thereto, including, without limitation, all trade fixtures.
"General Intangibles" means all intangible personal property (other than
Accounts) including, without limitation, all contract rights, rights to receive
payments of money, choses in action, causes of action, judgments, tax refunds
and tax refund claims, patents, trademarks, trade names, copyrights, licenses,
franchises, computer programs, software, goodwill, customer and supplier
contracts, interests in general or limited partnerships, joint ventures or
limited liability companies, reversionary interests in pension and profit
sharing plans and reversionary, beneficial and residual interests in trusts,
leasehold interests in real or personal property, rights to receive rentals of
real or personal property and guarantee and indemnity claims.
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"Investment Property" means a security, whether certificated or
uncertificated; a security entitlement; a securities account; a commodity
contract; or a commodity account (all as defined in the Indiana Uniform
Commercial Code as in effect from time to time).
"Instruments" means all negotiable instruments (as defined in the Indiana
Uniform Commercial Code as in effect from time to time), certificated and
uncertificated securities and any replacements therefor and Stock Rights related
thereto, and other writings which evidence a right to the payment of money and
which are not themselves, security agreements or leases and are of a type which
in the ordinary course of business are transferred by delivery with any
necessary endorsement or assignment, including, without limitation, all checks,
drafts, notes, bonds, debentures, government securities, certificates of
deposit, letters of credit, preferred and common stocks, options and warrants.
"Inventory" means all goods held for sale or lease, or furnished or to be
furnished under contracts of service, or consumed in the Guarantor's business,
including without limitation raw materials, intermediates, work in process,
packaging materials, finished goods, semi-finished inventory, scrap inventory,
manufacturing supplies and spare parts, all such goods that have been returned
to or repossessed by or on behalf of the Guarantor, and all such goods released
to the Guarantor or to third parties under trust receipts or similar documents.
"Lenders" means the Lenders party to the Credit Agreement and their
successors and assigns.
"Obligations" means, collectively, all Obligations under the Credit
Agreement and all obligations of the Guarantor under its Subsidiary Guaranty and
under this Security Agreement.
"Other Collateral" means any property of the Guarantor, other than real
estate, not included within the defined terms Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory,
Investment Property, Pledged Deposits and Stock Rights, including, without
limitation, all cash on hand and all deposit accounts or other deposits (general
or special, time or demand, provisional or final) with any bank or other
financial institution, it being intended that the Collateral include all
property of the Guarantor other than real estate.
"Pledged Deposits" means all time deposits of money, whether or not
evidenced by certificates, which the Guarantor may from time to time designate
as pledged to the Agent or to any Lender as security for any Obligation, and all
rights to receive interest on said deposits.
"Receivables" means the Accounts, Chattel Paper, Documents, Investment
Property, Instruments or Pledged Deposits, and any other rights or claims to
receive money which are General Intangibles or which are otherwise included as
Collateral.
"Required Secured Parties" means (a) prior to an acceleration of the
Obligations under the Credit Agreement, the Required Lenders and (b) after an
acceleration of the Obligations under the Credit Agreement, Lenders holding in
the aggregate at least 66-2/3% of the total of (i) the unpaid principal amount
of outstanding Advances and (ii) the aggregate net early termination payments
then due and unpaid from the Guarantor to the Lenders under Rate Hedging
Agreements, as determined by the Agent in its reasonable discretion.
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"Schedule of Accounts" has the meaning set forth in Section 4.2.5.
"Section" means a numbered section of this Security Agreement, unless
another document is specifically referenced.
"Security" has the meaning set forth in Article 8 or 8.1 of the Indiana
Uniform Commercial Code as in effect from time to time.
"Stock Rights" means any securities, dividends or other distributions and
any other right or property which the Guarantor shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any securities or other ownership interests in a
corporation, partnership, joint venture, limited liability company or other
Person constituting Collateral and any securities, any right to receive
securities and any right to receive earnings, in which any Guarantor now has or
hereafter acquires any right, issued by an issuer of such securities.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
GRANT OF SECURITY INTEREST
To secure the prompt and complete payment and performance of the
Obligations, the Guarantor hereby pledges, assigns and grants to the Agent, on
behalf of and for the ratable benefit of the Lenders, a security interest in (i)
all of the Guarantor's right, title and interest in and to the Collateral (other
than the Guarantor's interest in Foreign Subsidiaries), and (ii) the Guarantor's
right, title and interest in and to Sixty-Five (65%) of the issued and
outstanding capital stock of the Guarantor's Foreign Subsidiaries, in each case
whether now or hereafter existing or acquired, exclusive of the Guarantor's
right, title and interest in and to the capital stock of Dongguan Lilly Paint
Industries Ltd., an entity organized under the laws of the Peoples Republic of
China.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor represents and warrants to the Agent and the Lenders that:
3.1. Title, Authorization, Validity and Enforceability. The Guarantor has
good and valid rights in and title to the Collateral with respect to which it
has purported to grant a security interest hereunder, free and clear of all
Liens except for Liens permitted under Section 4.1.6, and has full power and
authority to grant to the Agent the security interest in such Collateral
pursuant hereto. The execution and delivery by the Guarantor of this Security
Agreement has been duly authorized by proper corporate proceedings, and this
Security Agreement constitutes a legal, valid and binding obligation of the
Guarantor and creates a security interest which is enforceable against the
Guarantor in all now owned and hereafter acquired Collateral.
3.2. Conflicting Laws and Contracts. Neither the execution and delivery by
the Guarantor of this Security Agreement, the creation and perfection of the
security interest in the Collateral granted hereunder, nor compliance with the
terms and provisions hereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Guarantor or the
Guarantor's articles or certificate of incorporation or by-laws, the provisions
of any indenture, instrument or agreement to which the Guarantor is a party or
is subject, or by which it, or its property, is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
Lien pursuant to the terms of any such indenture, instrument or agreement (other
than any Lien of the Agent on behalf of the Lenders).
3.3. Principal Location. The Guarantor's mailing address, and the location
of its chief executive office and of the books and records relating to the
Receivables, is disclosed in Exhibit A; the Guarantor has no other places of
business except those set forth in Exhibit A.
3.4. Property Locations. The Inventory, Equipment and Fixtures are located
solely at the locations described in Exhibit A. All of said locations are owned
by the Guarantor except for locations (i) which are leased by the Guarantor as
lessee and designated in Part B of Exhibit A, (ii) at which Inventory is held in
a public warehouse or is otherwise held by a bailee or on consignment as
designated in Part C of Exhibit A, and with respect to Inventory included in the
calculation of Eligible Domestic Inventory, the Guarantor has delivered bailment
agreements, warehouse receipts, financing statements or other documents
satisfactory to the Agent to protect the Agent's and the Lenders' security
interest in such Inventory or (iii) otherwise designated on Exhibit A.
3.5. No Other Names. Within the last three (3) years, the Guarantor has not
conducted business under any name except the name in which it has executed this
Security Agreement and except as set forth on Exhibit C.
3.6. No Default. No Default or Unmatured Default exists.
3.7. Accounts and Chattel Paper. The names of the obligors, amounts owing,
due dates and other information with respect to the Accounts and Chattel Paper
are and will be correctly stated in all material respects in all records of the
Guarantor relating thereto and in all invoices and reports with respect thereto
furnished to the Agent by the Guarantor from time to time. As of the time when
each Account or each item of Chattel Paper arises, the Guarantor shall be deemed
to have represented and warranted that such Account or Chattel Paper, as the
case may be, and all records relating thereto, are genuine and in all material
respects what they purport to be. Each Account represents an undisputed, bona
fide right to payment from the account debtor named therein for Goods sold or
leased, or for services rendered, whether or not such right to payment has been
earned by performance.
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3.8. Filing Requirements. None of the Collateral is of a type for which
security interests or Liens may be perfected by filing under any federal statute
as described in Exhibit B. Within ninety (90) days after the date hereof, the
Guarantor shall provide the Agent with the legal descriptions, street addresses
and name and address of the record owner of the properties on which Fixtures are
to be perfected by the Agent pursuant to, and subject to the provisions of, the
Credit Agreement.
3.9. No Financing Statements. No financing statement describing all or any
portion of the Collateral which has not lapsed or been terminated naming the
Guarantor as debtor has been filed in any jurisdiction except (i) financing
statements naming the Agent on behalf of the Lenders as the secured party, and
(ii) as described in Exhibit C, and (iii) as permitted by Section 4.1.6.
3.10. Federal Employer Identification Number. The Guarantor's Federal
employer identification number is .
3.11. Pledged Securities and Other Investment Property. Exhibit D sets
forth a complete and accurate list of the Instruments, Securities and other
Investment Property delivered to the Agent, except for such Instruments and
Investment Property having a value not exceeding $500,000 in the aggregate for
the Borrower and its Subsidiaries. The Guarantor is the direct and beneficial
owner of each Instrument, Security and other type of Investment Property listed
on Exhibit D, as being owned by it, free and clear of any Liens, except for the
security interest granted to the Agent for the benefit of the Lenders hereunder.
The Guarantor further represents and warrants that (i) all such Instruments,
Securities or other types of Investment Property which are shares of stock in a
corporation or ownership interests in a partnership or limited liability company
have been (to the extent such concepts are relevant with respect to such
Instrument, Security or other type of Investment Property) duly and validly
issued, are fully paid and non-assessable; (ii) that this pledge of such
Instruments, Securities and other Investment Property will not violate the
proscriptions or require the consent, license, filing, report, permit,
exemption, regulation or approval, of any Governmental Authority or other Person
or violate any provision of law; (iii) all such shares of pledged Securities
represent, in the case of U.S. Subsidiaries, One Hundred Percent (100%) of the
issued and outstanding capital stock of such U.S. Subsidiaries and, in the case
of Foreign Subsidiaries, Sixty-Five Percent (65%) of the issued and outstanding
capital stock of such Foreign Subsidiaries; (iv) such Instruments, Securities
and other Investment Property have not been materially altered and all
signatures thereon are genuine; (v) there exists no default by an issuer under
any of such Instruments, Securities and other Investment Property with respect
thereto; (vi) no insolvency proceedings have been instituted with respect to the
issuer of such Instruments, Securities or other Investment Property; (vii) the
Guarantor has executed no instrument of any kind assigning any of such
Instruments, Securities and other Investment Property or the liability of any
issuer thereon, or with respect thereto, which remains in effect; (viii) none of
the issuers of such Instruments, Securities or other Investment Property have
any obligation, commitment, subscription, option, warrant or other rights
outstanding entitling the holder thereof to purchase or otherwise acquire any
capital stock of such issuer; and (ix) with respect to any certificates
delivered to the Agent representing an ownership interest in a partnership or
limited liability company, either such certificates are Securities as defined in
Article 8 or 8.1 of the Uniform Commercial Code of the applicable jurisdiction
as a result of actions by the issuer or otherwise, or, if such certificates are
not Securities, the Guarantor has so informed the Agent so that the Agent may
take steps to perfect its security interest therein as a General Intangible or
as otherwise required by applicable law.
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ARTICLE IV
COVENANTS
From the date of this Security Agreement, and thereafter until this
Security Agreement is terminated:
4.1. General.
4.1.1. Inspection. The Guarantor will permit the Agent or any Lender,
by its representatives and agents (i) to inspect the Collateral, (ii) to
examine and make copies of the records of the Guarantor relating to the
Collateral and (iii) to discuss the Collateral and the related records of
the Guarantor with, and to be advised as to the same by, the Guarantor's
officers and employees (and, in the case of any Receivable, with any Person
which is or may be obligated thereon), all at such reasonable times and
intervals as the Agent or such Lender may determine, and all at the
Guarantor's expense.
4.1.2. Taxes. The Guarantor will pay when due all taxes, assessments
and governmental charges and levies upon the Collateral, except those which
are being contested in good faith by appropriate proceedings and with
respect to which no Lien exists.
4.1.3. Records and Reports; Notification of Default.
(i) The Guarantor will maintain complete and accurate books and
records with respect to the Collateral, and furnish to the Agent, with
sufficient copies for each of the Lenders, such reports relating to
the Collateral as the Agent shall from time to time reasonably
request.
(ii) The Guarantor will give prompt (but in any event within five
days after the Guarantor becomes aware thereof) notice in writing to
the Agent and the Lenders of the occurrence of any Default under this
Security Agreement or the occurrence of any event which with notice,
or lapse of time or both, would constitute a Default and of any other
development, financial or otherwise, which might have a material
adverse effect on the aggregate value of the Collateral.
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4.1.4. Financing Statements and Other Actions; Defense of Title. The
Guarantor will execute and deliver to the Agent all financing statements
and other documents and take such other actions as may from time to time be
requested by the Agent in order to maintain a first priority perfected
security interest in and, in the case of Investment Property, Control of,
the Collateral, subject to Permitted Liens and except for (i) Inventory
placed on consignment in the ordinary course of business, (ii) Inventory
having a value not exceeding $1,000,000 in the aggregate for the Borrower
and its Subsidiaries held by vendors or in public warehouses from time to
time in the ordinary course of the Guarantor's business, (iii) Equipment
(other than aircraft and aircraft engines) covered by a certificate of
title, (iv) other Equipment located at sites not described on Exhibit A
having a value not exceeding $500,000 in the aggregate for the Borrower and
its Subsidiaries, (v) as permitted by Sections 5.1.17 and 5.1.18 of the
Credit Agreement, (vi) actions required to perfect a security interest in a
deposit account or deposit other than as provided in Section 5.2.4(d) of
the Credit Agreement or Section 4.8 of this Security Agreement, (vii)
aircraft listed on Exhibit B, except to the extent it has not been disposed
of in accordance with Section 5.2.1 of the Credit Agreement within 90 days
of the date hereof, (viii) Instruments and Investment Property not
exceeding $500,000 in the aggregate for the Borrower and its Subsidiaries,
and (ix) the initial perfection of the Agent's security interest in the
capital stock of London Laboratories GmbH, an entity organized under the
laws of Germany, provided that the Borrower agrees to take such actions as
reasonably requested by the Agent for the Agent to obtain a first priority
perfected security interest in such capital stock within 90 days of the
date hereof. The Guarantor will take any and all actions necessary to
defend title to the Collateral against all Persons and to defend the
security interest of the Agent in the Collateral and the priority thereof
against any Lien not expressly permitted hereunder.
4.1.5. Disposition of Collateral. The Guarantor will not sell, lease
or otherwise dispose of the Collateral except (i) dispositions specifically
permitted pursuant to Section 5.2.1 of the Credit Agreement, (ii) until
such time following the occurrence and during the continuance of a Default
as the Guarantor receives a notice from the Agent instructing the Guarantor
to cease such transactions, sales or leases of Inventory in the ordinary
course of business, and (iii) until such time as the Guarantor receives a
notice from the Agent pursuant to Article VII, proceeds of Inventory and
Accounts collected in the ordinary course of business.
4.1.6. Liens. The Guarantor will not create, incur, or suffer to exist
any Lien on the Collateral except (i) the security interest created by this
Security Agreement, (ii) existing Liens described in Exhibit C and (iii)
other Liens permitted pursuant to Section 5.2.2 of the Credit Agreement.
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4.1.7. Change in Location or Name. The Guarantor will not (i) have any
Inventory, Equipment or Fixtures or proceeds or products thereof (other
than Inventory and proceeds thereof disposed of as permitted by Section
4.1.5 and other than proceeds located or held in demand deposit accounts
pursuant to Section 5.2.4(d) of the Credit Agreement) at a location other
than a location specified in Exhibit A, except (A) the locations of
consigned Inventory to be provided to the Agent within 90 days after the
date hereof and appropriately supplemented at least once in each calender
quarter thereafter, and (B) the locations of Inventory having a value not
exceeding $1,000,000 in the aggregate for the Borrower and its Subsidiaries
held by vendors or in public warehouses from time to time in the ordinary
course of the Guarantor's business, (ii) maintain records relating to the
Receivables at locations other than at the locations specified on Exhibit
A, (iii) maintain a place of business at a location other than locations
specified on Exhibit A, (iv) change its name or taxpayer identification
number or (v) change the location of its chief executive offices, unless
the Guarantor shall have given the Agent not less than 30 days, prior
written notice thereof, and the Agent shall have reasonably determined that
such change will not adversely affect the validity, perfection or priority
of the Agent's security interest in the Collateral.
4.1.8. Other Financing Statements. The Guarantor will not sign or
authorize the signing on its behalf of any financing statement naming it as
debtor covering all or any portion of the Collateral, except as permitted
by Section 4.1.6.
4.2. Receivables.
4.2.1. Certain Agreements on Receivables. The Guarantor will not make
or agree to make any discount, credit, rebate or other reduction in the
original amount owing on a Receivable or accept in satisfaction of a
Receivable less than the original amount thereof, except that, prior to the
occurrence of a Default, the Guarantor may reduce the amount of Accounts
arising from the sale of Inventory in accordance with its present policies
or practices and in the ordinary course of business.
4.2.2. Collection of Receivables. Except as otherwise provided in this
Security Agreement, the Guarantor will collect and enforce, at the
Guarantor's sole expense, all amounts due or hereafter due to the Guarantor
under the Receivables.
4.2.3. Disclosure of Counterclaims on Receivables. If (i) any
discount, credit or agreement to make a rebate or to otherwise reduce the
amount owing on a Receivable exists or (ii) if, to the knowledge of the
Guarantor, any dispute, setoff, claim, counterclaim or defense exists or
has been asserted or threatened with respect to a Receivable, the Guarantor
will disclose such fact to the Agent in writing in connection with the
inspection by the Agent of any record of the Guarantor relating to such
Receivable and in connection with any invoice or report furnished by the
Guarantor to the Agent relating to such Receivable.
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4.2.4. Schedule of Accounts. Upon request by the Agent, the Guarantor
will, from time to time, deliver to the Agent a schedule identifying each
Account ("Schedule of Accounts"), together with such schedules and
certificates and reports relative to all or any of the Receivables and the
items or amounts received by the Guarantor in full or partial payment or
otherwise, as Proceeds of any of the Receivables. Each Schedule of Accounts
or other schedule, certificate or report shall be executed by its duly
authorized officer and shall be in the form specified by the Agent. Without
limiting the provisions of Section 5.1.6 of the Credit Agreement, any
Schedule of Accounts requested after the occurrence or during the
continuance of a Default shall be accompanied, if the Agent requests, (a)
by a true and correct copy of the invoice evidencing such Account, (b) by
evidence of shipment, delivery or performance, and/or (c) by a duly
executed assignment of such Account from the Guarantor to the Agent;
provided, however, that the Guarantor's failure to execute and deliver any
such Schedule of Account and/or assignment shall not affect or limit the
Agent's security interest or other rights in and to Accounts.
Notwithstanding the foregoing, a proper assignment of any Account wherein
the United States Government is the Account Debtor may be requested by the
Agent at any time whether or not there shall have occurred a Default if
such Account is claimed to be an Eligible Domestic Account.
4.2.5. Verification of Accounts. The Agent and its officers, agents,
attorneys, and accountants, may verify Accounts and returned and
repossessed Goods and, under reasonable procedures and at reasonable
intervals, directly with the Account Debtor or by other methods, and the
Guarantor shall furnish to the Agent upon request additional Schedules of
Accounts, together with all notes or other papers evidencing the same and
any guaranty, securities or other information relating thereto reasonably
requested by the Agent.
4.3. Inventory and Equipment.
4.3.1. Maintenance of Goods. The Guarantor will do all things
necessary to maintain, preserve, protect and keep the Inventory and the
Equipment used by, or useful to, the Guarantor in the ordinary course of
its business in good working order and suitable for the purpose for which
it is intended, and from time to time, make any necessary repairs and
replacements.
4.3.2. Insurance. The Guarantor will (i) maintain fire and extended
coverage insurance on the Inventory and Equipment containing a lender's
loss payable clause in favor of the Agent, on behalf of the Lenders, and
providing that said insurance will not be terminated except after at least
30 days' written notice from the insurance company to the Agent, (ii)
maintain such other insurance on the Collateral for the benefit of the
Agent as the Agent shall from time to time reasonably request, (iii)
furnish to the Agent upon the request of the Agent from time to time copies
of all policies of insurance on the Collateral and certificates with
respect to such insurance and (iv) maintain general liability insurance
naming the Agent, on behalf of the Lenders, as an additional insured.
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4.4. Instruments, Securities, Chattel Paper, Documents and Pledged
Deposits. The Guarantor will (i) deliver to the Agent immediately upon
execution of this Security Agreement the originals of all Chattel Paper,
Securities and Instruments (if any then exist), together with appropriate
stock powers, endorsements and other appropriate instruments of assignment
endorsed in blank, except the originals representing Instruments and
Investment Property not exceeding $500,000 in the aggregate for the
Borrower and its Subsidiaries, (ii) hold in trust for the Agent upon
receipt and immediately thereafter deliver to the Agent any Chattel Paper,
Securities and Instruments constituting Collateral except for such
Instruments not exceeding $500,000 in the aggregate for the Borrower and
its Subsidiaries, (iii) upon the designation of any Pledged Deposits (as
set forth in the definition thereof), deliver to the Agent such Pledged
Deposits which are evidenced by certificates included in the Collateral
endorsed in blank, marked with such legends and assigned as the Agent shall
specify, and (iv) upon the Agent's request, after the occurrence and during
the continuance of a Default, deliver to the Agent (and thereafter hold in
trust for the Agent upon receipt and immediately deliver to the Agent) any
Document evidencing or constituting Collateral.
4.5. Uncertificated Securities and Certain Other Investment Property.
The Guarantor will permit the Agent from time to time to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated securities or other types of
Investment Property not represented by certificates which are Collateral to
mark their books and records with the numbers and face amounts of all such
uncertificated securities or other types of Investment Property not
represented by certificates and all rollovers and replacements therefor to
reflect the Lien of the Agent granted pursuant to this Security Agreement.
The Guarantor will take any actions necessary to cause (i) the issuers of
uncertificated securities which are Collateral and which are Securities and
(ii) any financial intermediary which is the holder of any Investment
Property, to cause the Agent to have and retain Control over such
securities or other Investment Property. Without limiting the foregoing,
the Guarantor will, with respect to Investment Property held with a
financial intermediary, cause such financial intermediary to enter into a
control agreement with the Agent in form and substance satisfactory to the
Agent. Notwithstanding the foregoing, the Guarantor shall only be required
to take such actions as the Agent reasonably deems necessary as permitted
or required by applicable law to perfect the Agent's security interest in
such Collateral, and the Guarantor agrees to take such other actions as may
be required under applicable law to perfect the Agent's security interest
in such Collateral.
4.6. Stock and Other Ownership Interests.
4.6.1. Changes in Capital Structure of Issuers. The Guarantor
will not without the written consent of the Required Secured Lenders
(i) permit or suffer any issuer of privately held corporate securities
or other ownership interests in a corporation, partnership, joint
venture or limited liability company constituting Collateral to
dissolve, liquidate, retire any of its capital stock or other
Instruments or Securities evidencing ownership, reduce its capital or
merge or consolidate with any other entity, except as provided in
Section 5.2.6 of the Credit Agreement, or (ii) vote any of the
Instruments, Securities or other Investment Property in favor of any
of the foregoing, except as provided in Section 5.2.6 of the Credit
Agreement.
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4.6.2. Issuance of Additional Securities. The Guarantor will not
permit or suffer the issuer of privately held corporate securities or
other ownership interests in a corporation, partnership, joint venture
or limited liability company constituting Collateral, or, with respect
to such corporate securities or ownership interests in which the
Guarantor's interests do not exceed 50%, the Guarantor will not vote
its interests, to issue any such securities or other ownership
interests, any right to receive the same or any right to receive
earnings, except in a manner which does not reduce the Borrower's
percentage ownership thereof.
4.6.3. Registration of Pledged Securities and other Investment
Property. After the occurrence of and during the continuance of a
Default, the Guarantor will permit any registerable Collateral to be
registered in the name of the Agent or its nominee at any time at the
option of the Required Secured Parties.
4.6.4. Exercise of Rights in Pledged Securities and other
Investment Property. Prior the occurrence of a Default, voting and
corporate rights (including the right to receive dividends) relating
to the Collateral shall remain with the Guarantor. The Guarantor will
permit the Agent or its nominee at any time after the occurrence and
during the continuance of a Default, without notice, to exercise all
voting and corporate rights relating to the Collateral, including,
without limitation, exchange, subscription or any other rights,
privileges, or options pertaining to any corporate securities or other
ownership interests or Investment Property in or of a corporation,
partnership, joint venture or limited liability company constituting
Collateral and the Stock Rights as if it were the absolute owner
thereof.
4.7. Pledged Deposits. The Guarantor will not withdraw all or any
portion of any Pledged Deposit or fail to rollover said Pledged Deposit
without the prior written consent of the Agent.
4.8. Deposit Accounts. The Guarantor will upon the Agent's request,
after the occurrence and during the continuance of a Default, notify each
bank or other financial institution in which it maintains a deposit account
or other deposit (general or special, time or demand, provisional or final)
of the security interest granted to the Agent hereunder and cause each such
bank or other financial institution to acknowledge such notification in
writing and deliver to each such bank or other financial institution a
letter, in form and substance acceptable to the Agent, transferring
dominion and control over each such account to the Agent. In the case of
deposits maintained with Lenders, the terms of such letter shall be subject
to the provisions of the Credit Agreement regarding setoffs.
ARTICLE V
DEFAULT
5.1. Events of Default. The occurrence of any one or more of the
following events shall constitute a Default:
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5.1.1. Representations and Warranties. Any representation or
warranty made by or on behalf of the Guarantor under or in connection
with this Security Agreement shall be false in any material respect as
of the date on which made.
5.1.2. Article IV or VII Breaches. The breach by the Guarantor of
any of the terms or provisions of Sections 4.1.1, 4.1.2, 4.1.3(i),
4.2.2, 4.2.3 or 4.3.1, which breach remains uncured for a period of 30
days after written notice from the Agent or a Lender to the Guarantor
specifying such breach; or the breach by the Guarantor of any of the
terms or provisions of any other covenant contained in Article IV or
in Article VII; or the breach by the Borrower of Section 4.3.2 which
remains uncured for a period which is the earlier of 20 days after the
occurrence thereof or 10 days after written notice to the Guarantor.
5.1.3. Other Breaches of this Security Agreement. The breach by
the Guarantor (other than a breach which constitutes a Default under
Section 5.1.1, 5.1.2, 5.1.4, 5.1.5 or 5.1.6) of any of the terms or
provisions of this Security Agreement which is not remedied within 30
days after the giving of written notice to the Guarantor by the Agent.
5.1.4. Disposition of Collateral. Any material portion of the
Collateral shall be transferred or otherwise disposed of, either
voluntarily or involuntarily, in any manner not permitted by Section
4.1.5 or 8.7; or any material portion of the Collateral not covered by
adequate insurance shall be lost, stolen, damaged or destroyed.
5.1.5. Payment Defaults. Any payment obligation under the
Guarantor's Guaranty shall not be paid within five days after the same
is due, whether at stated maturity, upon acceleration, or otherwise.
5.1.6. Credit Agreement Defaults. The occurrence and continuance
of any "Default" under, and as defined in, the Credit Agreement.
5.2. Acceleration and Remedies. Upon the acceleration of the
Obligations under the Credit Agreement pursuant to Section 8.1 thereof, the
Obligations shall immediately become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, and the Agent may, with the concurrence or at the direction of the
Required Secured Parties, exercise any or all of the following rights and
remedies:
5.2.1. Loan Document Rights and Remedies. Those rights and
remedies provided in this Security Agreement, or any other Guaranty
Document, provided that this Section 5.2.1 shall not be understood to
limit any rights or remedies available to the Agent and the Lenders
prior to a Default.
5.2.2. UCC Rights and Remedies. Those rights and remedies
available to a secured party under the Indiana Uniform Commercial Code
(whether or not the Indiana Uniform Commercial Code applies to the
affected Collateral) or under any other applicable law (including,
without limitation, any law governing the exercise of a bank's right
of setoff or bankers' lien) when a debtor is in default under a
security agreement.
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5.2.3. Disposition of Collateral. Without notice except as
specifically provided in Section 8.1 or elsewhere herein, and to the
extent permitted by applicable law, sell, lease, assign, grant an
option or options to purchase or otherwise dispose of the Collateral
or any part thereof in one or more parcels at public or private sale,
for cash, on credit or for future delivery, and upon such other terms
as the Agent may deem commercially reasonable.
5.3. Debtor's Obligations upon Default. Upon the request of the Agent
after the occurrence and during the continuance of a Default, the Guarantor
will:
5.3.1. Assembly of Collateral. Assemble and make available to the
Agent the Collateral and all records relating thereto at any place or
places specified by the Agent.
5.3.2. Secured Party Access. Permit the Agent, by the
Agent's representatives and agents, to enter any premises where
all or any part of the Collateral, or the books and records
relating thereto, or both, are located, to take possession of all
or any part of the Collateral and to remove all or any part of
the Collateral.
5.4. License. The Agent is hereby granted a license or other right to
use, following the occurrence and during the continuance of a Default,
without charge, the Guarantor's labels, patents, copyrights, rights of use
of any name, trade secrets, trade names, trademarks, service marks,
customer lists and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in completing production of, advertising
for sale, and selling any Collateral, and, following the occurrence and
during the continuance of a Default, the Guarantor's rights under all
licenses and all franchise agreements shall inure to the Agent's benefit.
In addition, the Guarantor hereby irrevocably agrees that the Agent may,
following the occurrence and during the continuance of a Default, sell any
of the Guarantor's Inventory directly to any Person, including without
limitation Persons who have previously purchased the Guarantor's Inventory
from the Guarantor and in connection with any such sale or other
enforcement of the Agent's rights under this Agreement, may sell Inventory
which bears any trademark owned by or licensed to the Guarantor and any
Inventory that is covered by any copyright owned by or licensed to the
Guarantor and the Agent may finish any work in process and affix any
trademark owned by or licensed to the Guarantor and sell such Inventory as
provided herein.
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ARTICLE VI
WAIVERS, AMENDMENTS AND REMEDIES
No delay or omission of the Agent or any Lender to exercise any right or
remedy granted under this Security Agreement shall impair such right or remedy
or be construed to be a waiver of any Default or an acquiescence therein, and
any single or partial exercise of any such right or remedy shall not preclude
any other or further exercise thereof or the exercise of any other right or
remedy. No waiver, amendment or other variation of the terms, conditions or
provisions of this Security Agreement whatsoever shall be valid unless in
writing signed by the Agent with the concurrence or at the direction of the
Lenders required under Section 11.1 of the Credit Agreement and then only to the
extent in such writing specifically set forth. All rights and remedies contained
in this Security Agreement or by law afforded shall be cumulative and all shall
be available to the Agent and the Lenders until the Obligations have been paid
in full.
ARTICLE VII
PROCEEDS; COLLECTION OF RECEIVABLES
7.1. Lockboxes. Upon request of the Agent, after the occurrence and
during the continuance of a Default, the Guarantor shall execute and
deliver to the Agent irrevocable lockbox agreements in the form provided by
or otherwise acceptable to the Agent, which agreements shall be accompanied
by an acknowledgment by the bank where the lockbox is located of the Lien
of the Agent granted hereunder and of irrevocable instructions to wire all
amounts collected therein to a special collateral account at the Agent.
7.2. Collection of Receivables. The Agent may at any time, after the
occurrence and during the continuance of a Default, by giving the Guarantor
written notice, elect to require that the Receivables be paid directly to
the Agent for the benefit of the Lenders. In such event, the Guarantor
shall, and shall permit the Agent to, promptly notify the account debtors
or obligors under the Receivables of the Lenders' interest therein and
direct such account debtors or obligors to make payment of all amounts then
or thereafter due under the Receivables directly to the Agent. Upon receipt
of any such notice from the Agent, the Guarantor shall thereafter hold in
trust for the Agent, on behalf of the Lenders, all amounts and proceeds
received by it with respect to the Receivables and Other Collateral and
immediately and at all times thereafter deliver to the Agent all such
amounts and proceeds in the same form as so received, whether by cash,
check, draft or otherwise, with any necessary endorsements. The Agent shall
hold and apply funds so received as provided by the terms of Sections 7.3
and 7.4.
7.3. Special Collateral Account. The Agent may at any time, after the
occurrence and during the continuance of a Default, require all cash
proceeds of the Collateral to be deposited in a special non-interest
bearing cash collateral account with the Agent and held there as security
for the Obligations. The Guarantor shall have no control whatsoever over
said cash collateral account. If any Default has occurred and is
continuing, the Agent may (and shall, at the direction of the Required
Lenders), from time to time, apply the collected balances in said cash
collateral account to the payment of the Obligations whether or not the
Obligations shall then be due.
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7.4. Application of Proceeds. The proceeds of the Collateral shall be
applied by the Agent to payment of the Obligations in the following order unless
a court of competent jurisdiction shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the Agent incurred in
connection with the collection and enforcement of the Obligations or of the
security interest granted to the Agent pursuant to this Security Agreement;
(b) SECOND, to payment of that portion of the Obligations constituting
accrued and unpaid interest and fees, pro rata among the Lenders in accordance
with the amount of such accrued and unpaid interest and fees owing to each of
them;
(c) THIRD, to payment of the principal of the Obligations and net early
termination payments then due and unpaid from the Guarantor to any of the
Lenders under Rate Hedging Agreements, pro rata among the Lenders in accordance
with the amount of such principal and such net early termination payments then
due and unpaid owing to each of them;
(d) FOURTH, to payment of any Obligations (other than those listed above)
pro rata among those parties to whom such Obligations are due in accordance with
the amounts owing to each of them; and
(e) FIFTH, the balance, if any, after all of the Obligations have been
satisfied, shall be deposited by the Agent into the Guarantor's general
operating account with the Agent.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Notice of Disposition of Collateral. To the extent permitted by
applicable law, the Guarantor hereby waives notice of the time and place of any
public sale or the time after which any private sale or other disposition of all
or any part of the Collateral may be made. To the extent such notice may not be
waived under applicable law, any notice made shall be deemed reasonable if sent
to the Guarantor, addressed as set forth in Article IX, at least ten days prior
to (i) the date of any such public sale or (ii) the time after which any such
private sale or other disposition may be made.
8.2. Compromises and Collection of Collateral. The Guarantor and the Agent
recognize that setoffs, counterclaims, defenses and other claims may be asserted
by obligors with respect to certain of the Receivables, that certain of the
Receivables may be or become uncollectible in whole or in part and that the
expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect
to a Receivable. In view of the foregoing, the Guarantor agrees that the Agent
may at any time and from time to time, if a Default has occurred and is
continuing, compromise with the obligor on any Receivable, accept in full
payment of any Receivable such amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Agent shall be
commercially reasonable so long as the Agent acts in good faith based on
information known to it at the time it takes any such action.
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8.3. Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Agent may perform or pay any obligation which the
Guarantor has agreed to perform or pay in this Security Agreement, and the
Guarantor shall reimburse the Agent for any amounts paid by the Agent pursuant
to this Section 8.3. The Guarantor's obligation to reimburse the Agent pursuant
to the preceding sentence shall be an Obligation payable on demand.
8.4. Authorization for Secured Party to Take Certain Action. The Guarantor
irrevocably authorizes the Agent at any time and from time to time in the sole
discretion of the Agent and appoints the Agent as its attorney-in-fact (i) to
execute on behalf of the Guarantor as debtor and to file financing statements
necessary or desirable in the Agent's sole discretion to perfect and to maintain
the perfection and priority of the Agent's security interest in the Collateral,
(ii) after the occurrence and during the continuance of a Default, to endorse
and collect any cash proceeds of the Collateral, (iii) to file a carbon,
photographic or other reproduction of this Security Agreement or any financing
statement with respect to the Collateral as a financing statement in such
offices as the Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the Agent's security
interest in the Collateral, (iv) to contact and enter into one or more
agreements with the issuers of uncertificated securities which are Collateral
and which are Securities or with financial intermediaries holding other
Investment Property as may be necessary or advisable to give the Agent Control
over such Securities or other Investment Property, (v) subject to the terms of
Section 4.1.5 and 7.2, to enforce payment of the Receivables in the name of the
Agent or the Guarantor, (vi) to apply the proceeds of any Collateral received by
the Agent to the Obligations as provided in Article VII and (vii) to discharge
past due taxes, assessments, charges, fees or Liens on the Collateral (except
for such Liens as are specifically permitted hereunder), and the Guarantor
agrees to reimburse the Agent on demand for any payment made or any expense
incurred by the Agent in connection therewith, provided that this authorization
shall not relieve the Guarantor of any of its obligations under this Security
Agreement or under the Credit Agreement.
8.5. Specific Performance of Certain Covenants. The Guarantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1.5,
4.1.6, 4.4, 5.3, or 8.7 or in Article VII will cause irreparable injury to the
Agent and the Lenders, that the Agent and Lenders have no adequate remedy at law
in respect of such breaches and therefore agrees, without limiting the right of
the Agent or the Lenders to seek and obtain specific performance of other
obligations of the Guarantor contained in this Security Agreement, that the
covenants of the Guarantor contained in the Sections referred to in this Section
8.5 shall be specifically enforceable against the Guarantor.
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8.6. Use and Possession of Certain Premises. Upon the occurrence and during
the continuance of a Default, except as prohibited by applicable law, the Agent
shall be entitled to occupy and use any premises owned or leased by the
Guarantor where any of the Collateral or any records relating to the Collateral
are located until the Obligations are paid or the Collateral is removed
therefrom, whichever first occurs, without any obligation to pay the Guarantor
for such use and occupancy.
8.7. Dispositions Not Authorized. The Guarantor is not authorized to sell
or otherwise dispose of the Collateral except as set forth in Section 4.1.5 and
notwithstanding any course of dealing between the Guarantor and the Agent or
other conduct of the Agent, no authorization to sell or otherwise dispose of the
Collateral (except as set forth in Section 4.1.5) shall be binding upon the
Agent or the Lenders unless such authorization is in writing signed by the Agent
with the consent or at the direction of the Required Lenders.
8.8. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Guarantor, the
Agent and the Lenders and their respective successors and assigns, except that
the Guarantor shall not have the right to assign its rights or delegate its
obligations under this Security Agreement or any interest herein, without the
prior written consent of the Agent.
8.9. Survival of Representations. All representations and warranties of the
Guarantor contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.
8.10. Taxes and Expenses. Any taxes (excluding taxation of the overall net
income of the Agent or any of the Lenders) payable or ruled payable by a
Governmental Authority in respect of this Security Agreement shall be paid by
the Guarantor, together with interest and penalties, if any. Subject to any
specific limitations set forth in the Credit Agreement, the Guarantor shall
reimburse the Agent for any and all reasonable out-of-pocket expenses and
reasonable internal charges (including reasonable attorneys', auditors' and
accountants' fees and reasonable time charges of attorneys, paralegals, auditors
and accountants who may be employees of the Agent) paid or incurred by the Agent
in connection with the preparation, execution, delivery, administration,
collection and enforcement of this Security Agreement and in the audit,
analysis, administration, collection, preservation or sale of the Collateral
(including the expenses and charges associated with any periodic or special
audit of the Collateral). Any and all costs and expenses incurred by the
Guarantor in the performance of actions required pursuant to the terms hereof
shall be borne solely by the Guarantor.
8.11. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.
8.12. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Obligations
outstanding) until (i) the Credit Agreement has terminated pursuant to its
express terms and (ii) all of the Obligations have been paid and performed in
full and no commitments of the Agent or the Lenders which would give rise to any
Obligations are outstanding.
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8.13. Reinstatement. If, at any time after payment in full of the
Obligations and termination of the Agent's security interest, any payments on
the Obligations previously made by the Borrower, the Guarantor or any other
Person must be disgorged by the Agent or any Lender for any reason whatsoever,
including, without limitation, the insolvency, bankruptcy or reorganization of
the Borrower, the Guarantor or such other Person, this Security Agreement and
the Agent's security interests herein shall be reinstated as to all disgorged
payments as though such payments had not been made, and the Guarantor shall sign
and deliver to the Agent all documents, and shall do such other acts and things,
as may be necessary to re-perfect the Agent's security interest.
8.14. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Guarantor and the Agent relating to the
Collateral and supersedes all prior agreements and understandings between the
Guarantor and the Agent relating to the Collateral.
8.15. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF INDIANA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
8.16. Indemnity. The Guarantor hereby agrees to indemnify the Agent and the
Lenders, and their respective successors, assigns, and their respective
directors, officers, agents and employees, from and against any and all losses,
claims, costs, damages, liabilities and expenses, including, without limitation,
all expenses of litigation or preparation therefor whether or not the Agent or
any Lender is a party thereto) which any of them may pay or incur in connection
with or arising out of, or related to this Security Agreement, or the
manufacture, purchase, acceptance, rejection, ownership, delivery, lease,
possession, use, operation, condition, sale, return or other disposition of any
Collateral (including, without limitation, latent and other defects, whether or
not discoverable by the Agent or the Lenders or the Guarantor, and any claim for
patent, trademark or copyright infringement), except to the extent they are
determined by a court of competent jurisdiction in a final and non-appealable
order to have resulted from the gross negligence or willful misconduct of the
party seeking indemnification.
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ARTICLE IX
NOTICES
9.1. Sending Notices. Any notice required or permitted to be given under
this Security Agreement shall be given or made by telecopier or other writing
and telecopied, or mailed or delivered to the intended recipient at its address
or telecopier number set forth on the signature pages hereof or such other
address or telecopy number as such party may hereafter specify for such purpose
by notice to the Agent in accordance with the provisions of Section 11.12 of the
Credit Agreement. Except as otherwise provided in this Security Agreement, all
such notices shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(provided, that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.
9.2. Change in Address for Notices. Each of the Guarantor, the Agent and
the Lenders may change the address for service of notice upon it by a notice in
writing to the other parties.
ARTICLE X
THE AGENT
The NBD Bank, N.A. has been appointed Agent for the Lenders hereunder
pursuant to Section 9 of the Credit Agreement. It is expressly understood and
agreed by the parties to this Security Agreement that any authority conferred
upon the Agent hereunder is subject to the terms of the delegation of authority
made by the Lenders to the Agent pursuant to the Credit Agreement, and that the
Agent has agreed to act (and any successor Agent shall act) as such hereunder
only on the express conditions contained in such Section 9 of the Credit
Agreement. Any successor Agent appointed pursuant to Section 9 of the Credit
Agreement shall be entitled to all the rights, interests and benefits of the
Agent hereunder.
IN WITNESS WHEREOF, the Guarantor and the Agent have executed this Security
Agreement as of the date first above written.
By:
Its:
ACCEPTED:
NBD BANK, N.A., a national banking association,
as Agent
By:
Its:
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STATE OF ______________________)
) SS:
COUNTY OF _____________________)
Before me, a Notary Public in and for said County and State, personally
appeared, known to me to be the of ____________________________, and
acknowledged the execution of the foregoing for and on behalf of said
Corporation.
Witness my hand and Notarial Seal, this day of April, 1996.
Notary Public - Signature
Notary Public - Printed
My Commission Expires: My County of Residence:
STATE OF ______________________)
) SS:
COUNTY OF _____________________)
Before me, a Notary Public in and for said County and State, personally
appeared, known to me to be a of NBD Bank, N.A., and acknowledged the execution
of the foregoing for and on behalf of said Bank.
Witness my hand and Notarial Seal, this day of April, 1996.
Notary Public - Signature
Notary Public - Printed
My Commission Expires: My County of Residence:
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EXHIBIT A
(See Sections 3.3, 3.4, 4.1.7 and 9.1 of Security Agreement)
Principal Place of Business and Mailing Address:
Location(s) of Receivables Records (if different from Principal Place of
Business above):
Locations of Inventory and Equipment and Fixtures:
A. Properties owned by the Guarantor:
B. Properties Leased by the Guarantor (Include Landlord's Name):
C. Public Warehouses or other Locations pursuant to Bailment or Consignment
Arrangements (subject to Section 4.1.7(i)(A))(include name of Warehouse Operator
or other Bailee or Consignee):
D. Other Equipment located at sites not described above having a value not
exceeding $500,000 in the aggregate for the Borrower and its Subsidiaries.
SA/MJK/98040.1
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EXHIBIT B
(See Section 3.8 of Security Agreement)
A. Aircraft/engines, ships, railcars and other vehicles governed by federal
statute:
B. Patents, copyrights, trademarks protected under federal law*:
- ----------
*For (i) trademarks, the registration date and the registration number; (ii)
trademark applications, the application filing date and the serial number of the
application; (iii) patents, show the patent number, issue date and the title of
the subject invention of the patent; and (iv) patent applications, show the
serial number of the application, the application filing date and the title of
the subject invention of the patent applied for. Any licensing agreements,
whether as grantor or grantee, for patents or trademarks should be described on
a separate schedule and furnished to the Agent within 90 days of the date
hereof.
SA/MJK/98040.1
<PAGE>
EXHIBIT C
(See Sections 3.9 and 4.1.6 of Security Agreement)
EXISTING LIENS ON THE COLLATERAL
Secured Party Collateral Principal Balance Maturity
SA/MJK/98040.1
<PAGE>
EXHIBIT D
List of Pledged Securities
(See Section 3.11 of Security Agreement)
A. STOCKS:
Issuer Certificate Number Number of Shares Percentage Ownership Interest
B. BONDS:
Issuer Number Face Amount Coupon Rate Maturity
C. GOVERNMENT SECURITIES:
Issuer Number Type Face Amount Coupon Rate Maturity
D. OTHER SECURITIES OR OTHER INVESTMENT PROPERTY (CERTIFICATED AND
UNCERTIFICATED):
Issuer Description of Collateral Percentage Ownership Interest
[Add description of custody accounts or arrangements with securities
intermediary, if applicable]
SA/MJK/98040.1
<PAGE>
EXHIBIT G
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To NBD Bank, N.A.
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated April 8, 1996 (as the same may be amended or
modified, the "Credit Agreement"), among Lilly Industries, Inc. (the
"Borrower"), the Lenders named therein and the Agent. Capitalized terms
used herein and not otherwise defined herein shall have the meanings
assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 11.12 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.4.1 of the Credit Agreement.
Facility Identification Number(s):
Customer/Account Name
Transfer Funds To
For Account No.
Reference/Attention To
Authorized Officer (Customer Representative) Date__________________________
______________________________________ ______________________________
(Please Print) Signature
Bank Officer Name Date__________________________
______________________________________ ______________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
MISC\DKD\98052.1
<PAGE>
EXHIBIT H
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement")
between______________________________(the "Assignor") and
______________________________(the "Assignee") is dated as of
____________________, 19____. The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement,
provided that, for purposes of this Assignment Agreement, "Loan Documents" shall
be deemed to include the Guaranty Documents.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the Facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent , but, in
the case of a Loan evidenced by a Registered Note, not prior to the date the
assignment is recorded by the Agent in the Register) after a Notice of
Assignment substantially in the form of Exhibit I attached hereto has been
delivered to the Agent and, in the case of a Loan evidenced by a Registered
Note, recorded in the Register pursuant to Section 10.4 of the Credit Agreement.
Such Notice of Assignment must include any consents required to be delivered to
the Agent by Section 10.3.1 of the Credit Agreement. In no event will the
Effective Date occur if the payments required to be made by the Assignee to the
Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the
proposed Effective Date. The Assignor will notify the Assignee of the proposed
Effective Date no later than the Business Day prior to the proposed Effective
Date. As of the Effective Date, (a) the Assignee shall have the rights and
obligations of a Lender under the Loan Documents with respect to the rights and
obligations assigned to the Assignee hereunder and (b) the Assignor shall
relinquish its rights and be released from its corresponding obligations under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder.
ASS\MJK\95790
<PAGE>
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee shall
be entitled to receive from the Agent all payments of principal, interest and
fees with respect to the interest assigned hereby. The Assignee shall advance
funds directly to the Agent with respect to all Loans and reimbursement payments
made on or after the Effective Date with respect to the interest assigned
hereby. [In consideration for the sale and assignment of Loans hereunder, (a)
the Assignee shall pay the Assignor, on the Effective Date, an amount equal to
the principal amount of the portion of all Floating Rate Loans assigned to the
Assignee hereunder and (b) with respect to each Fixed Rate Loan made by the
Assignor and assigned to the Assignee hereunder which is outstanding on the
Effective Date, (i) on the last day of the Interest Period therefor or (ii) on
such earlier date agreed to by the Assignor and the Assignee or (iii) on the
date on which any such Fixed Rate Loan either becomes due (by acceleration or
otherwise) or is prepaid (the date as described in the foregoing clauses (i),
(ii) or (iii) being hereinafter referred to as the "Payment Date"), the Assignee
shall pay the Assignor an amount equal to the principal amount of the portion of
such Fixed Rate Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date for
such Fixed Rate Loan shall be the Effective Date, they shall agree to the
interest rate applicable to the portion of such Loan assigned hereunder for the
period from the Effective Date to the end of the existing Interest Period
applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and any interest
received by the Assignee in excess of the Agreed Interest Rate shall be remitted
to the Assignor. In the event interest for the period from the Effective Date
to, but not including, the Payment Date is not paid by the Borrower with respect
to any Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the
Assignee shall pay to the Assignor interest for such period on the portion of
such Fixed Rate Loan sold by the Assignor to the Assignee hereunder at the
applicable rate provided by the Credit Agreement. In the event a prepayment of
any Fixed Rate Loan which is existing on the Payment Date and assigned by the
Assignor to the Assignee hereunder occurs after the Payment Date but before the
end of the Interest Period applicable to such Fixed Rate Loan, the Assignee
shall remit to the Assignor the excess of the prepayment penalty paid with
respect to the portion of such Fixed Rate Loan assigned to the Assignee
hereunder over the amount which would have been paid if such prepayment penalty
was calculated based on the Agreed Interest Rate. The Assignee will also
promptly remit to the Assignor (y) any principal payments received from the
Agent with respect to Fixed Rate Loans prior to the Payment Date and (z) any
amounts of interest on Loans and fees received from the Agent which relate to
the portion of the Loans assigned to the Assignee hereunder for periods prior to
the Effective Date, in the case of Floating Rate Loans or fees, or the Payment
Date, in the case of Fixed Rate Loans, and not previously paid by the Assignee
to the Assignor]*. In the event that either party hereto receives any payment to
which the other party hereto is entitled under this Assignment Agreement, then
the party receiving such amount shall promptly remit it to the other party
hereto.
- ----------
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
ASS\MJK\95790
2
<PAGE>
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor a
fee on each day on which a payment of interest or [Commitment] Fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of Fixed Rate Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (a)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (b) the interest or fee, as applicable, which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was of 1% less than the interest rate paid by the Borrower or
if the commitment fee was of 1% less than the commitment fee paid by the
Borrower, as applicable. In addition, the Assignee agrees to pay % of the
recordation fee required to be paid to the Agent in connection with this
Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agent or attorneys shall be
responsible for (a) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any Loan Documents, including,
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any Guarantor, (b) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (c) the financial condition or creditworthiness of the Borrower
or any Guarantor, (d) the performance of or compliance with any of the terms or
provisions of any of the Loan Documents, (e) inspecting any of the Property,
books or records of the Borrower, (f) the validity, enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or
purporting to secure the Loans or (g) any mistake, error of judgment, or action
taken or omitted to be taken in connection with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (a) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (b) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, (c) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto, (d) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Documents
are required to be performed by it as a Lender, (e) agrees that its payment
instructions and notice instructions are as set forth in the attachment to
Schedule 1, (f) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be "plan assets" under ERISA, [(g)
confirms that it is an Eligible Assignee,]* [and (h) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying that
the Assignee is entitled to receive payments under the Loan Documents without
deduction or withholding of any United States federal income taxes].**
- ----------
* to be inserted if required by the Credit Agreement
** to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof
ASS\MJK\95790
3
<PAGE>
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 10.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (a) any such subsequently assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (b) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Section 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the aggregate
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of
Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Indiana.
13. NOTICES. Notices shall be given under this Assignment Agreement in the
manner set forth in the Credit Agreement. For the purpose hereof, the addresses
of the parties hereto (until notice of a change is delivered) shall be the
address set forth in the attachment to Schedule 1.
ASS\MJK\95790
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by
their duly authorized officers as of the date first above written.
"ASSIGNOR"
By:_________________________________
Title:______________________________
"ASSIGNEE"
By:_________________________________
Title:______________________________
ASS\MJK\95790
5
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: ___________________, 19____
3. Amounts (as of date of Item 2 above):
Facility A Facility B Facility C
Term Loans Term Loans Revolving Loans
---------- ---------- ---------------
a. Total of Commitments
(Loans)** under
Credit Agreement $ $ $
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement*** % % %
c. Amount of Assigned Share
in each Facility purchased
under the Assignment
Agreement $ $ $
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $
5. Proposed Effective Date:
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
-------------------------- -------------------------------
Title: Title:
----------------------- -----------------------------
* Insert specific facility names per Credit Agreement
** If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
*** Percentage taken to 10 decimal places
ASS\MJK\95790
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which
must include notice address for the Assignor and the
Assignee
ASS\MJK\95790
<PAGE>
EXHIBIT I
to Assignment Agreement
NOTICE
OF ASSIGNMENT
_______________, 19__
To: [NAME OF BORROWER]*
-----------------------------------
-----------------------------------
[NAME OF AGENT]
-----------------------------------
-----------------------------------
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described in
Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
****[the Borrower and]**** the Agent pursuant to Section 10.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment Agreement,
dated as of______________, 19____ (the "Assignment"), pursuant to which, among
other things, the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule 1 of all outstandings,
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be
the later of the date specified in Item 5 of Schedule 1 or two Business Days (or
such shorter period as agreed to by the Agent and permitted by the Assignment)
after this Notice of Assignment and any consents and fees required by Sections
10.3.1 and 10.3.2 of the Credit Agreement have been delivered to the Agent,
provided that the Effective Date shall not occur if any condition precedent
agreed to by the Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the Agent
notice of the assignment and delegation referred to herein. The Assignor will
confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
ASS\MJK\95790
<PAGE>
* To be included only if consent must be obtained from the Borrower pursuant
to Section 10.3.1 of the Credit Agreement.
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $4,000 required by Section 10.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacements notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions are
set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Borrower or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
-------------------------- ------------------------------------
Title: Title:
----------------------- ---------------------------------
ACKNOWLEDGED [AND CONSENTED ACKNOWLEDGED [AND CONSENTED
TO] BY [NAME OF AGENT] TO] BY [NAME OF BORROWER]
By: By:
-------------------------- ------------------------------------
Title: Title:
----------------------- ---------------------------------
[Attach photocopy of Schedule 1 to Assignment]
ASS\MJK\95790
<PAGE>
EXHIBIT I
to Credit Agreement
NOTICE
OF ASSIGNMENT
___________, 19__
To: [NAME OF BORROWER]*
-----------------------------------
-----------------------------------
[NAME OF AGENT]
-----------------------------------
-----------------------------------
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described in
Item I of Schedule I attached hereto ("Schedule I"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
****[the Borrower and] * * the Agent pursuant to Section 10.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment Agreement.
dated as of ___________, 19___ (the "Assignment"), pursuant to which, among
other things. the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule I of all outstandings,
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule I. The Effective Date of the Assignment shall be
the later of the date specified in Item 5 of Schedule I or two Business Days (or
such shorter period as agreed to by the Agent and permitted by the Assignment)
after this Notice of Assignment and any consents and fees required by Sections
10.3.1 and 10.3.2 of the Credit Agreement have been delivered to the Agent,
provided that the Effective Date shall not occur if any condition precedent
agreed to by the Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee bereby give to the Borrower and the Agent
notice of the assignment and delegation referred to herein. The Assignor will
confer with the Agent before the date specified in Item 5 of Schedule I to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
<PAGE>
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
* To be included on1y if consent must be obtained from the Borrower pursuant
to Section 10.3.1 of the Credit Agreement.
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $4,000 required by Section 10.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date. The Assignor and the
Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacements notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions are
set forth in the attachment to Schedule I.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Borrower or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.*
* May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
-------------------------- ------------------------------------
Title: Title:
----------------------- ---------------------------------
ACKNOWLEDGED [AND CONSENTED ACKNOWLEDGED [AND CONSENTED
TO] BY [NAME OF AGENT] TO] BY [NAME OF BORROWER]
By: By:
-------------------------- ------------------------------------
Title: Title:
----------------------- ---------------------------------
[Attach photocopy of Schedule I to Assignment]
<PAGE>
EXHIBIT J
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Credit
Agreement dated as of April , 1996 (as amended, modified, renewed or extended
from time to time, the "Agreement") among the ___________________________ (the
"Borrower"), the lenders party thereto and NBD Bank, N.A., as Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ___________________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
5. Schedule II attached hereto sets forth the determination of the
Applicable Commitment Fee and the Applicable Margin to be effective on the fifth
Business Day following the delivery hereof.
6. Schedule III attached hereto sets forth the various reports and
deliveries which are required under the Credit Agreement, the Security Agreement
and the other Loan Documents and the status of compliance.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
COMPLI\DKD\98045.1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The foregoing certifications, together with the computations set forth in
Schedule I and Schedule II hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this ___________ day
of________________, 19___.
COMPLI\DKD\98045.1
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, 199_ with
Provisions of and of
the Agreement
COMPLI\DKD\98045.1
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Rate Determination
COMPLI\DKD\98045.1
<PAGE>
SCHEDULE III TO COMPLIANCE CERTIFICATE
Reports and Deliveries
COMPLI\DKD\98045.1
<PAGE>
EXHIBIT 99(a)
<TABLE>
<CAPTION>
Selected Financial Information
Year Ended December 31 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
Summary of Operations (In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Net sales $250,574 $201,888 $177,806 $152,197 $140,927
Income, net of income taxes 1,432* 5,903 4,671 1,978 956
Income per common share .15* .70 .60 .27 .13
Cash dividends per common share .33 .32 .32 .41 .50
Summary of Financial Position
(In Thousands)
Total assets $148,049 $137,052 $96,954 $83,494 $79,777
Long-term debt,
net of current maturities 27,757 27,805 19,013 14,464 9,568
Stockholders' equity 63,817 64,426 45,362 42,200 44,002
Working capital 45,498 42,373 33,796 28,818 25,112
Other Supplemental Information
Number of employees 1,060 1,109 860 791 757
Average shares outstanding 9,515,199 8,464,639 7,849,101 7,433,416 7,370,900
INDUSTRY SEGMENT OPERATIONS
(Audited and In Thousands)
Net Sales
Coatings Group $194,095 $155,967 $133,216 $116,768 $107,131
Consumer Products Group 56,506 46,042 44,618 35,480 33,906
----------- ----------- ----------- ----------- -----------
250,601 202,009 177,834 152,248 141,037
Inter-segment sales (27) (121) (28) (51) (110)
----------- ----------- ----------- ----------- -----------
Consolidated net sales $250,574 $201,888 $177,806 $152,197 $140,927
=========== =========== =========== =========== ===========
Operating Profit
Coatings Group $1,414** $8,738 $7,053 $3,973 $1,895
Consumer Products Group 6,681 5,533 5,524 4,323 4,502
----------- ----------- ----------- ----------- -----------
8,095 14,271 12,577 8,296 6,397
Corporate expenses-net (3,871) (3,618) (4,417) (4,611) (3,931)
Interest expense (2,131) (1,188) (991) (703) (1,026)
Costs of pooling of interests (529)
Investment income 587 374 376 372 425
----------- ----------- ----------- ----------- -----------
Income before income taxes $2,680 $9,839 $7,016 $3,354 $1,865
=========== =========== =========== =========== ===========
Identifiable Assets
Coatings Group $107,834 $102,593 $66,642 $56,141 $53,980
Consumer Products Group 28,563 25,475 20,092 16,165 16,079
Corporate 11,652 8,984 10,220 11,188 9,718
----------- ----------- ----------- ----------- -----------
Total $148,049 $137,052 $96,954 $83,494 $79,777
=========== =========== =========== =========== ===========
</TABLE>
*Includes restructuring charges which decreased net income by $6,635 or $.70 per
share.
**Includes pretax restructuring charges of $10,458.
-1-
<PAGE>
Consolidated Balance Sheets
December 31 (In Thousands, Except Share Amounts) 1995 1994
-------- --------
Assets
Current assets
Cash and cash equivalents $6,776 $5,630
Accounts receivable, less allowances of $569
in 1995 and $808 in 1994 34,083 29,517
Inventories
Finished products 16,949 16,680
Raw materials and work in process 15,243 14,644
-------- --------
32,192 31,324
-------- --------
Deferred income taxes 4,083 1,866
Other current assets 6,822 5,224
-------- --------
Total current assets 83,956 73,561
-------- --------
Property, plant and equipment
Land 2,543 2,559
Buildings 16,640 15,920
Machinery and equipment 26,869 27,469
Construction in progress 594 718
-------- --------
46,646 46,666
Accumulated depreciation 18,591 18,689
-------- --------
28,055 27,977
-------- --------
Goodwill, less accumulated amortization
of $3,894 in 1995 and $3,251 in 1994 19,405 20,336
Other intangibles, less accumulated amortization
of $6,141 in 1995 and $5,374 in 1994 11,893 12,587
Other assets 4,740 2,591
-------- --------
$148,049 $137,052
======== ========
-2-
<PAGE>
Consolidated Balance Sheets
December 31 (In Thousands, Except Share Amounts) 1995 1994
--------- ---------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $22,740 $19,286
Accrued compensation 4,130 4,142
Other accrued expenses 6,613 7,157
Restructuring reserves 4,257
Income taxes 665 510
Current maturities of long-term debt 53 93
--------- ---------
Total current liabilities 38,458 31,188
--------- ---------
Long-term debt 27,757 27,805
Deferred compensation and pension costs 8,672 7,041
Other liabilities 9,345 6,592
Stockholders' equity
Preferred stock, $1 par value, terms to be
determined when issued - authorized and
unissued - 1,000,000 shares
Common stock, $1 par value
authorized - 30,000,000 shares
outstanding - 9,558,993
shares in 1995, 9,482,199 shares
in 1994 9,559 9,482
Additional paid-in capital 47,324 46,560
Retained earnings 8,240 9,949
Cumulative translation adjustments (1,306) (1,565)
--------- ---------
Total stockholders' equity 63,817 64,426
--------- ---------
$148,049 $137,052
======== ========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Consolidated Statements of Income
Year ended December 31 (In Thousands,
Except Per Share Amounts) 1995 1994 1993
-------- -------- --------
Net sales $250,574 $201,888 $177,806
Cost of sales 165,618 132,984 116,943
-------- -------- --------
84,956 68,904 60,863
Selling, general and administrative
expenses 70,274 58,251 52,703
Restructuring charges 10,458
Interest expense 2,131 1,188 991
Costs of pooling of interests transaction 529
Investment income (587) (374) (376)
-------- -------- --------
Income before income taxes and cumulative
effect of change in accounting principle 2,680 9,839 7,016
Income taxes 1,248 3,936 2,495
-------- -------- --------
Income before cumulative effect of change
in accounting principle 1,432 5,903 4,521
Cumulative effect of change
in accounting principle 150
--------
Net income $1,432 $5,903 $4,671
======== ======== ========
Income per common share:
Before cumulative effect of change in
accounting principle $.15 $.70 $.58
Cumulative effect of change
in accounting principle .02
-------- -------- --------
Net income $.15 $.70 $.60
======== ======== ========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Cumulative
Common paid-in Retained translation
(In Thousands, Except Per Share Amounts) stock capital earnings adjustments
----- ------- -------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $7,453 $31,039 $4,437 $(729)
Net income for 1993 4,671
Cash dividends - $.32 per share (2,400)
Stock issued under employee
and stockholder plans 101 1,057 (223)
Stock issued for business acquired
under pooling of interests 359 (359) 409
Foreign currency translation (453)
------ ------- ------ -------
Balance at December 31, 1993 7,913 31,737 6,894 (1,182)
Net income for 1994 5,903
Cash dividends - $.32 per share (2,787)
Stock issued under employee
and stockholder plans 69 663 (61)
Stock issued for business acquired 1,500 14,160
Foreign currency translation (383)
------ ------- ------ -------
Balance at December 31, 1994 9,482 46,560 9,949 (1,565)
Net income for 1995 1,432
Cash dividends - $.33 per share (3,141)
Stock issued under employee
and stockholder plans 77 764
Foreign currency translation 259
------ ------- ------ -------
Balance at December 31, 1995 $9,559 $47,324 $8,240 $(1,306)
====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31 (In Thousands) 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Operations
Net income $1,432 $5,903 $4,671
Adjustments to reconcile net income
to cash provided by operations
Depreciation and amortization 6,944 5,489 4,674
Restructuring charges 10,458
Deferred income taxes (4,026) (634) (864)
Deferred compensation and pension costs 915 804 575
Other - net 1,555 518 720
Changes in certain working capital items
Accounts receivable (3,585) (2,101) (3,630)
Inventories (2,696) (4,373) (3,282)
Other current assets (1,594) (231) 693
Accounts payable 2,363 1,171 2,880
Accrued expenses (656) 44 250
------ ------ ------
Cash provided by operations 11,110 6,590 6,687
------ ------ ------
Investing Activities
Purchase of businesses (1,376) (5,712) (3,359)
Additions to property, plant and equipment (5,317) (3,410) (3,230)
Other - net (616) 141 (803)
------ ------ ------
Cash used by investing activities (7,309) (8,981) (7,392)
------ ------ ------
Financing Activities
Cash dividends paid (3,141) (2,787) (2,400)
Proceeds from revolving lines of credit and
other long-term debt 63,649 38,586 34,437
Payments on revolving lines of credit and
other long-term debt (64,088) (32,891) (30,429)
Stock issued under employee and
stockholder plans 841 671 935
------ ------ ------
Cash (used) provided by financing activities (2,739) 3,579 2,543
------ ------ ------
Effect of foreign currency rate changes on cash 84 (30) (208)
------ ------ ------
Increase in cash and cash equivalents 1,146 1,158 1,630
Cash and cash equivalents at beginning of year 5,630 4,472 2,842
------ ------ ------
Cash and cash equivalents at end of year $6,776 $5,630 $4,472
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
GUARDSMAN PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of Significant Accounting Policies
Principles of Consolidation and Foreign Exchange
The consolidated financial statements include the accounts of Guardsman
Products, Inc. and its wholly-owned subsidiaries (Guardsman or the Company). All
significant intercompany transactions and accounts are eliminated.
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at exchange rates in effect at the end of the year. The unrealized gains or
losses that result from this process are shown in the cumulative translation
adjustments section of stockholders' equity. Revenues and expenses are
translated using average exchange rates that prevailed during the year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash equivalents are
recorded at cost, which approximates current market value.
Inventories
Inventories are stated at the lower of cost or market, using the first-in,
first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided on the straight-line method based upon the estimated
useful lives of the assets as follows: buildings, 10 to 40 years; and machinery
and equipment, 3 to 20 years. Depreciation expense totaled $3,484,000 in 1995,
$2,840,000 in 1994 and $2,602,000 in 1993.
Goodwill and Other Intangible Assets
Goodwill represents the amount by which the cost of businesses purchased exceeds
the fair value of the net assets acquired. Goodwill and other intangible assets
are amortized over periods ranging from 5 to 40 years using the straight-line
method. The Company continually evaluates whether events and circumstances have
-7-
<PAGE>
occurred that indicate the remaining estimated useful life of goodwill and other
intangible assets may warrant revision or that the remaining balance may not be
recoverable. When factors indicate that the asset should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's undiscounted net cash flows over the remaining life of the asset in
measuring whether the asset is recoverable. Such adjustments were not
significant in 1995, 1994 and 1993. Other intangible assets in the accompanying
balance sheet include, among other things, formulas totaling $8,386,000 and
$9,928,000 at December 31, 1995 and 1994, respectively.
Long-Term Assets
In March 1995, the Financial Accounting Standards Board issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (SFAS No. 121). The Company is required to adopt the provisions
of SFAS No. 121 beginning in 1996. Based on information currently available, the
Company does not expect the impact of adopting this statement to have a material
effect on its financial condition or results of operations.
Research and Development
Research and development expenditures, primarily in the Coatings Group, are
charged to income as incurred. Research and development expenditures amounted to
$8,389,000 in 1995, $6,860,000 in 1994 and $5,932,000 in 1993.
Income Taxes
Income taxes are based on income reported for financial statement purposes.
Deferred income tax balances represent the tax effect of temporary differences
between the financial reporting basis and the tax basis of certain assets and
liabilities.
Income per Common Share
Income per common share is based on the weighted average number of shares of
common stock outstanding. Shares available for purchase under stock incentive
plans are not reflected in the computation of income per common share since the
effect would not be material.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
-8-
<PAGE>
The Company is partially self-insured for general and product liabilities and
workers compensation. Self-insurance liabilities are estimated using methods
management believes are reasonable and appropriate. These methods are based on
historical information along with certain assumptions about future events.
Changes in assumptions for such matters as legal actions, medical costs as well
as changes in actual experience could cause these estimates to change in the
near term.
NOTE 2
Acquisitions of Businesses
Effective January 30, 1995, the Company purchased the business and certain
assets of Soil Shield International, Inc. (Soil Shield), a producer and
distributor of retail-applied fabric protection products. The Company's
aggregate acquisition cost for this business totaled $1,327,000. Financing for
the acquisition was provided by cash flows from operations and long-term
borrowings under the Company's revolving lines of credit. The Company is
servicing the former Soil Shield customers from its existing facilities. The
acquisition of Soil Shield did not have a material effect on the Company's
financial statements.
On August 31, 1994, the Company purchased 100% of the stock of Moline Paint
Manufacturing Co. (Moline). The consideration for the stock of Moline included
1.5 million shares of Guardsman Common Stock valued at $10.44 per share,
approximately $6,000,000 in cash and the assumption of approximately $3,100,000
in outstanding debt of Moline. Moline is an industrial coatings manufacturer
focusing on the agricultural/construction equipment and general industrial
markets. Management intends to continue Moline's operations along substantially
the same lines of business.
The purchase agreement provides for certain contingent payments including a
contingent adjustment for stock price. In the event that the price of Guardsman
Common Stock does not equal or exceed $18 per share during the four year period
subsequent to the acquisition date, based on the highest trading price on any
twenty days during this period, then Guardsman shall pay the sellers the
difference between the highest trading price, as defined, and $18 per share
multiplied by the 1.5 million shares issued pursuant to the acquisition.
In addition, the sellers entered into non-competition agreements valued at
$5,014,000, which represents the present value discounted at 7.75% of payments
totaling $7,679,000 to be paid over a period of twelve years. The Company will
recognize the cost ratably over the term of the agreements.
The acquisition of Moline was accounted for as a purchase. Accordingly, the
purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $13
million, which has been accounted for as goodwill and is being amortized over 40
years using the straight-line method.
-9-
<PAGE>
The accompanying consolidated statements of income reflect the operating results
of Moline since the effective date of the acquisition. Pro forma unaudited
consolidated operating results of the Company and Moline for the years ended
December 31, 1994 and 1993, assuming the acquisition had been made as of January
1, 1994 and 1993, are summarized below (in thousands, except per share amount):
1994 1993
-------- --------
Net sales $227,346 $210,150
Net income 4,656 4,680
Earnings per share .49 .50
These pro forma results have been prepared for comparative purposes only and
include certain adjustments such as additional depreciation expense as a result
of a step-up in the basis of fixed assets, additional amortization expense as a
result of goodwill and other intangible assets and increased interest expense on
acquisition debt. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been in effect
on January 1, 1994 and 1993, or of future results of operations of the
consolidated entities.
In December 1993, the Company exchanged approximately 359,000 shares of its
common stock valued at $15 per share for all the outstanding shares of Atlanta
Sundries, Inc., the maker of Goof-Off latex paint remover and other related
consumer products. The acquisition was accounted for as a pooling of interests.
Since the acquisition did not have a material effect on periods prior to 1993,
they have not been restated.
NOTE 3
Restructuring Charges
Included in the accompanying Consolidated Statements of Income is $10,458,000 in
pretax restructuring charges, which reduced net income by $6,635,000 or $.70 per
share for the year ended December 31, 1995. This charge primarily includes
expenses associated with the closure of the Company's Grand Rapids, Michigan
coatings manufacturing plant.
Restructuring charges consisted of facilities, equipment and inventory
write-offs, termination benefits, and other costs associated with the
restructuring. Approximately 100 employees were terminated as a result of the
facility closing and job elimination process, which will be partially offset by
employee additions at other facilities as production is relocated. The closure
of the manufacturing facility and job elimination process was largely complete
in mid-January 1996.
The components of the restructuring charges and the amounts paid or charged
against these reserves during 1995 were as follows (in thousands):
-10-
<PAGE>
Costs paid Ending
Provision or charged balance
------- ------ ------
Facilities, equipment and inventories $5,736 $827 $4,909
Termination benefits 3,380 158 3,222
Other costs 1,342 451 891
------- ------ ------
$10,458 $1,436 $9,022
======= ====== ======
NOTE 4
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." This change resulted in a
one-time additional net tax benefit of $150,000 or $.02 per share at January 1,
1993 which is recorded under the caption "Cumulative Effect of Change in
Accounting Principle" in the accompanying Consolidated Statements of Income.
The provision for income taxes attributable to continuing operations is
summarized as follows (in thousands):
1995 1994 1993
---- ---- ----
Currently payable:
Federal $ 2,436 $ 3,048 $ 1,986
State 689 481 418
Foreign 2,149 1,127 670
----- ----- ---
5,274 4,656 3,074
----- ----- -----
Deferred expense (credit):
Federal (3,350) (624) (615)
State (305) (88) (70)
Foreign (371) (8) 106
---- -- ---
(4,026) (720) (579)
------ ---- ----
Total $ 1,248 $ 3,936 $ 2,495
= ===== = ===== = =====
The components of income (loss) before income taxes are (in thousands):
1995 1994 1993
---- ---- ----
Domestic $ (1,892) $ 7,259 $ 4,732
Foreign 4,572 2,580 2,284
----- ----- -----
$ 2,680 $ 9,839 $ 7,016
===== ===== =====
-11-
<PAGE>
A reconciliation of income taxes attributable to continuing operations
calculated at the applicable federal statutory rate of 34% to the provision for
income taxes follows (in thousands):
1995 1994 1993
------ ------ ------
Tax at federal statutory rate $911 $3,345 $2,385
Adjustments to taxes at statutory rate:
State income taxes, net of
federal income tax reduction 253 259 249
Nondeductible losses of subsidiaries
and other investments 109
Benefit of tax deduction from U.S. subsidiary (325) (417)
Nondeductible amortization of intangible assets 507 215 200
Other (98) 117 (31)
------ ------ ------
Income taxes $1,248 $3,936 $2,495
------ ------ ------
Effective income tax rate 46.6% 40.0% 35.6%
====== ====== ======
The following represents the components of deferred tax assets and liabilities
at December 31, 1995 and 1994 (in thousands):
1995 1994
---- ----
Deferred tax assets:
Deferred compensation and pension costs $ 2,850 $ 2,626
Environmental obligations 1,803 1,775
Reserves for self-insured losses 814 656
Inventory valuation reserves 743 646
Intangible assets 730 468
Warranty reserves 815 427
Reserves for restructuring charges 3,076
Other items 744 816
--- ---
Total deferred tax assets 11,575 7,414
------ -----
Deferred tax liabilities:
Basis difference in acquired assets 2,836 2,975
Property, plant and equipment 2,700 2,499
Other items 147 74
--- --
Total deferred tax liabilities 5,683 5,548
----- -----
Net deferred tax assets $ 5,892 $ 1,866
===== =====
-12-
<PAGE>
Income and remittance taxes have not been recorded on $4.6 million of
undistributed earnings of foreign subsidiaries, either because any taxes on
dividends would be offset substantially by foreign tax credits or because the
Company considers these earnings indefinitely reinvested in the foreign
operations. For those earnings which are indefinitely reinvested, it is not
practical to determine the amount of additional tax liabilities that would be
incurred if such earnings were repatriated.
Income tax payments, net of refunds, amounted to $5,127,000, $5,535,000 and
$3,050,000 in 1995, 1994 and 1993, respectively.
NOTE 5
Credit Arrangements and Long-Term Debt
The Company has two short-term revolving credit agreements. The Company may
borrow up to $5 million under a domestic agreement at substantially the same
rates available under the long-term revolving lines of credit discussed below.
The Company's Canadian subsidiary has an operating credit facility which permits
borrowings up to $1,500,000 Canadian at the same rates available under the
Canadian long-term facility described below. There were no amounts outstanding
under these agreements during 1995, 1994 and 1993.
The Company has three revolving credit agreements which are classified as
long-term. During 1994, the Company increased its available long-term borrowings
under two domestic revolving lines of credit, which expire in June and July
1997, from $25 million to $40 million. The interest rate options generally
utilized by the Company under the agreements include 5/8% over the Federal Funds
Rate and transaction rates, which are determined at the date of borrowing on
balances which mature in one to twenty-nine days. A revolving term credit
arrangement through the Canadian subsidiary, which expires January 1, 1997,
provides for borrowings up to $1,500,000 Canadian at the prime interest rate,
Base Rate Canada or 3/4% above London Interbank Offered Rate (LIBOR).
Long-term debt consisted of the following at December 31 (in thousands):
1995 1994
---- ----
Revolving lines of credit $ 27,700 $ 27,700
Other long-term debt 110 198
------ ------
27,810 27,898
Less current maturities 53 93
------ ------
Long-term debt $ 27,757 $ 27,805
====== ======
-13-
<PAGE>
Maturities of long-term debt are set forth below (in thousands):
1996 $ 53
1997 27,736
1998 21
The debt agreements include certain restrictive covenants with which the Company
was in compliance throughout the year. At December 31, 1995, the Company's
retained earnings totaled $8,240,000, all of which was available for the payment
of cash dividends and redemption of capital stock as provided by the debt
agreements.
To manage exposure to interest rate risk, the Company utilizes an interest rate
swap agreement, which has a notional amount of $6,000,000 and an expiration date
of January 1999. The Company pays a fixed rate of 5.74% and receives a floating
rate based on LIBOR. The counterparty to this agreement is a high credit quality
financial institution.
Payments of interest due under the Company's borrowings amounted to $2,001,000
in 1995, $1,174,000 in 1994 and $978,000 in 1993.
NOTE 6
Fair Value of Financial Instruments and Financial Instruments with Off-Balance
Sheet Risk
The carrying amount of the Company's financial instruments included in current
assets and current liabilities approximates the fair value due to their
short-term nature. The Company's long-term debt reprices frequently at the
then-prevailing market interest rates. As of December 31, 1995 and 1994,
carrying value approximated the fair value of the Company's long-term debt.
The carrying amount of the Company's interest rate swap agreement represents
interest due or accrued as reflected in the Consolidated Balance Sheets. The
estimated fair value of the interest rate swap agreement was based upon dealer
quotations for the amount which might be realized from a transfer, sale or
termination of such agreement. The fair values were $(66,000) and $467,000 at
December 31, 1995 and 1994, respectively, while the carrying values were
immaterial as of those dates.
NOTE 7
Leases
The Company has noncancelable operating leases covering certain machinery and
equipment, automobiles and buildings which expire at various dates through the
year 2000. Certain leases contain purchase and renewal options.
-14-
<PAGE>
Rental expense under all operating leases was $1,740,000, $1,529,000 and
$1,349,000 in 1995, 1994 and 1993, respectively. At December 31, 1995, future
minimum rental payments under noncancelable operating leases are due as follows
(in thousands):
1996 $ 1,413
1997 1,235
1998 997
1999 844
2000 429
Thereafter 8
-----
Total $ 4,926
=====
NOTE 8
Contingencies
Like other companies in its industry, Guardsman is subject to existing and
evolving standards related to the protection of the environment. As a result, it
is the Company's policy to establish reserves for site restoration costs and
related claims where it is probable a liability exists and the amount can be
reasonably estimated. These reserves are adjusted as information becomes
available upon which a more accurate estimate of eventual costs can be made.
Such estimates are subject to numerous variables, the effects of which are
difficult to measure, including the stage of the investigations, the nature of
potential remedies, the joint and several liability with other potentially
responsible parties, availability of insurance and government funds and other
issues. Accordingly, the ultimate cost of these matters cannot be determined at
this time and may not be resolved for a number of years. As such, it is
reasonably possible that current estimates could change in the near term. The
reserves of $4,810,000, of which $700,000 and $4,110,000 are included in other
accrued expenses and other liabilities, respectively, at December 31, 1995,
represent the Company's best estimate of probable exposures at this time. Based
upon information currently available, it is not anticipated that the outcome of
these environmental matters will materially affect the Company's consolidated
financial position. The ultimate effect of these matters on the Company's
results of operations cannot be predicted because any such effect depends on the
amount and timing of charges to operations resulting from new information as it
becomes available.
At December 31, 1995, approximately $600,000 included in other current assets
represents probable reimbursements from certain of the Company's insurance
carriers and from a state government agency for costs expended and to be
expended for certain site restoration activities.
-15-
<PAGE>
The Company is also involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
Company's consolidated financial statements.
NOTE 9
Pension Plans
The Company has four noncontributory primary defined benefit pension plans
covering substantially all of its employees. A plan covering non-union employees
provides pension benefits based upon a retiree's earnings of the five
consecutive calendar years during employment in which the retiree received the
highest level of compensation. Plans covering union employees provide pension
benefits at stated amounts for each year of service. The Company's policy is to
fund the minimum actuarially computed annual contribution required under ERISA.
-16-
<PAGE>
The following table sets forth the funded status and amounts recognized in the
Consolidated Balance Sheets for the Company's primary defined benefit pension
plans at December 31, (in thousands):
<TABLE>
<CAPTION>
1995 1994
------------------------------- ------------------------------
Plans whose Plan whose Plans whose Plan whose
assets exceed accumulated assets exceed accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Pension assets at fair value $23,377 $3,702 $20,076 $3,287
Actuarial present value of
accumulated plan benefits:
Vested 16,902 4,040 14,931 3,740
Non-vested 488 715 97
------ ----- ------ -----
17,390 4,040 15,646 3,837
Effect of estimated future
increases in compensation 5,607 5,506
------ ----- ------ -----
Projected benefit obligation of
service rendered to date 22,997 4,040 21,152 3,837
------ ----- ------ -----
Plan assets in excess of (less
than) projected benefit
obligation 380 (338) (1,076) (550)
Accrued pension costs
recognized
in the balance sheet 5,550 912 5,199 208
Adjustment to recognize
minimum liability 342
------ ----- ------ -----
Unrecognized net pension assets $5,930 $574 $4,123 $0
====== ===== ====== =====
Components of unrecognized
net pension assets:
Net experience gains $6,463 $659 $4,644 $438
Transition assets (liabilities) 311 (21) 333 (187)
Prior service costs (844) (64) (854) (593)
Adjustment to recognize
minimum liability 342
------ ----- ------ -----
$5,930 $574 $4,123 $0
====== ===== ====== =====
</TABLE>
During 1995, the Company changed its method of recognizing the market-related
value of plan assets from the fair value to a calculated value that recognizes
changes in fair value in a systematic and rational manner over not more than
five years. This change did not have a material affect on the Company's
financial statements.
-17-
<PAGE>
At December 31, 1995, plan assets of the four primary defined benefit plans were
invested in listed common stocks (46%), fixed income securities (36%), Guardsman
common stock (9%) with a market value of $2,430,000, life insurance contracts
(3%) and short-term investments (6%).
In addition to the four primary defined benefit pension plans, the Company also
has a supplemental executive retirement plan (the SERP), a pension restoration
plan and a directors' retirement plan, all of which are unfunded defined benefit
plans. The actuarial present value of accumulated plan benefits related to the
Company's SERP, pension restoration plan and directors' retirement plan totaled
$1,595,000 and $1,493,000 at December 31, 1995 and 1994, respectively. Accrued
pension costs of $1,924,000 and $1,878,000 related to these three plans were
recorded at December 31, 1995 and 1994, respectively.
The assumptions used in accounting for defined benefit plans for the three years
presented are set forth below:
1995 1994 1993
---- ---- ----
Weighted-average assumed discount rates 7.75% 8.25% 7.75%
Rates of compensation increase 4.50% 5.00% 5.00%
Weighted-average expected long-term rate
of return on plan assets 8.50% 8.50% 8.50%
Guardsman also maintains defined contribution plans covering the employees of
its Canadian and United Kingdom subsidiaries and a 401(k) plan for all of its
non-bargaining domestic employees.
The following is a summary of pension expense recognized by the Company (in
thousands):
1995 1994 1993
------ ------ -----
Defined benefit plans:
Service cost - benefits earned
during the period $1,287 $1,090 $945
Interest cost on projected benefit
obligations 2,252 1,950 1,805
Actual loss (return) on plan assets (4,733) 1,013 (2,698)
Net amortization (deferral) 2,376 (3,244) 598
Curtailment cost 615
Net pension cost of defined benefit
plans 1,797 809 650
Defined contribution plans 225 198 146
------ ------ ----
Total pension expense $2,022 $1,007 $796
====== ====== ====
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<PAGE>
In connection with the closing of the Grand Rapids, Michigan facility, as
further discussed in Note 3 to the Consolidated Financial Statements, the
Company recognized curtailment expenses in 1995 associated with the union
pension plan and the postretirement medical plan. These curtailments were
classified as restructuring charges in the accompanying Consolidated Statements
of Income.
NOTE 10
Postretirement Benefits Other Than Pensions
Substantially all domestic employees of the Company, other than employees of
Moline, are eligible upon retirement for certain healthcare and life insurance
benefits. The postretirement healthcare plans are unfunded contributory plans
and contain other cost-sharing features such as deductibles, life-time benefit
limits and coinsurance.
The following table sets forth amounts recognized in the Consolidated Balance
Sheets at December 31 (in thousands):
1995 1994
---- ----
Actuarial present value of
accumulated postretirement benefit obligation:
Retirees $ 1,113 $ 1,277
Fully eligible active participants 459 572
Other active participants 116 154
------ ------
Unfunded status 1,688 2,003
Unrecognized net transition obligation (1,081) (1,286)
Unrecognized net loss (436)
------ ------
Accrued postretirement benefit cost $ 607 $ 281
====== ======
The following is a summary of postretirement benefit cost recognized by the
Company (in thousands):
1995 1994 1993
---- ---- ----
Service cost $ 16 $ 19 $ 16
Interest cost 139 130 119
Net amortization 71 77 71
Curtailment cost 91
------ ------ --------
Net periodic postretirement benefit cost $ 317 $ 226 $ 206
====== ====== ========
The transitional liability upon implementation of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" in 1993 of $1,430,000 is being accrued ratably over a 20
year period. The discount rate assumed in determining the actuarial value of the
-19-
<PAGE>
postretirement benefit obligation plans' was 7.75% and 8.25% at December 31,
1995 and 1994, respectively. The annual assumed rate of increase in the per
capita cost of covered benefits, or healthcare cost trend rate, will be 10.675%
in 1996, uniformly decreasing to 5.25% in 2003 and thereafter. A 1% increase in
the assumed healthcare cost trend rate would not have a material effect on the
postretirement benefit obligation or the periodic cost of the plans.
NOTE 11
Employee Incentive Plans
The Company's 1992 Employee Stock Purchase Plan provides eligible employees the
option to purchase the Company's common stock at a price equal to 85% of the
market price at the date of purchase.
The Company has set aside 519,923 shares of common stock under its 1984
Incentive Stock Option Plan for the grant of options to directors and key
management employees. In addition, the Company has reserved 330,000 and 360,000
shares of common stock for granting of stock options to directors and key
management employees under its 1988 and 1991 Stock Option Plans, respectively.
In addition, 470,000 shares of common stock were reserved for the granting of
stock options and other incentives to directors and key management employees
under the 1995 Long-Term Incentive Plan. Certain of these options qualify as
nontaxable under the Internal Revenue Code.
Stock option activity under the various plans is presented below (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
1995 1994 1993
---- ----- ----
Shares under Employee Stock Purchase Plan:
<S> <C> <C> <C>
Outstanding at beginning of year 7 5 23
Granted 18 19 20
Exercised (18) (17) (17)
------ ------ ------
Canceled (21)
Outstanding and exercisable at end of year 7 7 5
====== ====== ======
Available for grant at end of year 49 66 85
====== ====== ======
Purchase price per share of options
exercised (A) $10.36 to $7.86 to $10.31 to
$11.42 $10.68 $13.81
Market price per share of options
exercised (A) $12.19 to $9.25 to $12.13 to
$13.44 $12.56 $16.25
</TABLE>
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<PAGE>
1995 1994 1993
---- ---- ----
Shares under Performance Award,
Stock Option and Long-Term Incentive Plans:
Outstanding at beginning of year 461 428 478
Granted 234 205 125
Exercised (44) (44) (100)
Terminated (72) (128) (75)
--- ---- ---
Outstanding at end of year 579 461 428
=== === ===
Exercisable at end of year 482 386 401
=== === ===
Available for grant at end of year 551 243 385
=== === ===
Purchase price per share of options:
Outstanding (B) $9.13 to $9.13 to $7.82 to
$14.75 $14.75 $14.75
Exercised (A) $9.13 to $7.82 to $8.28 to
$12.50 $14.75 $14.75
Market price per share of options
exercised (A) $11.00 to $11.50 to $10.75 to
$15.00 $16.50 $16.38
(A) At date of exercise. (B) Market value at date of grant.
In addition, 50,000 shares of common stock have been reserved for issuance under
a one-time grant in November 1994 of stock options to the Chairman of the Board
of the Company. These shares, which were granted at the fair market value of the
stock at the date of grant, are fully exercisable as of December 31, 1995.
The Company has a performance award plan under which performance award units may
be granted to key management employees. Performance award units include a
performance allotment expressed in dollars and options to purchase common stock.
Performance allotments aggregating $495,000, $353,000 and $222,000 were granted
under the plan in 1995, 1994 and 1993, respectively. Such allotments are payable
in 1998, 1997 and 1996, respectively, if specified performance levels, measured
in terms of income before income taxes, are achieved by the Company during the
three year period subsequent to the grant.
Distributions, payable in cash, to key employees under various bonus plans are
based primarily upon sales and income before income taxes. Expense incurred
under the plans was $3,744,000, $2,523,000 and $1,928,000 for 1995, 1994 and
1993, respectively.
-21-
<PAGE>
NOTE 12
Stock Rights Plan
On December 31, 1995, the Company had outstanding 9,558,993 Series A Preferred
Stock Purchase Rights (Rights). The Rights were originally issued in August 1986
as a dividend to holders of the Company's common stock at the rate of one Right
for each share of common stock outstanding. Each Right entitles the holder
thereof, until August 27, 1996, to buy one one-hundredth (1/100) of a share of
Series A Preferred Stock at an exercise price of $60.00. The exercise price and
the number of shares of Series A Preferred Stock issuable upon the exercise of
the Rights are subject to adjustment in certain cases to prevent dilution. The
Rights are evidenced by common stock certificates and are not exercisable or
transferable apart from the common stock until ten days after a person
(exclusive of persons holding 20% or more of the Company's common stock on
August 8, 1986) acquires 20% or more or makes a tender or exchange offer for 30%
or more of the common stock. If, after a person acquires 20% or more of the
common stock, the Company is acquired in a merger or other business combination
transaction (including one in which the Company is the surviving corporation),
or if certain other conditions are met, each Right will entitle its holder to
purchase, at the then current exercise price of the Right, that number of shares
of common stock of either the acquiring company or Guardsman, as the case may
be, which at the time of such transaction would have a market value of two times
the exercise price of the Right. The Rights do not have any voting rights and
are redeemable, at the option of the Company, at a price of $0.05 per Right
prior to any person acquiring beneficial ownership of at least 20% of the common
stock. The Rights expire on August 27, 1996. So long as the Rights are not
separately transferable, the Company will issue one Right with each new share of
common stock issued.
NOTE 13
Business Segments and Foreign Operations
The Company operates in two industries, Coatings and Consumer Products. Coatings
involves the production and distribution of industrial paints, varnishes,
enamels and lacquers primarily for sale to manufacturers of wood and metal
products. Additionally, the Group manufactures resins for internal use and
external sale. Consumer Products includes the distribution of furniture
polishes, wood treatments, dust cloths, cleaning fluids, paint sundries and
other household products to retailers. Consumer Products also manufactures and
distributes a variety of proprietary after-market automotive maintenance
products and industrial lubricants.
As summarized in the segment information below, identifiable assets are those
assets that are used by each of the Company's industry segments and foreign
operations presented. Capital expenditures exclude the cost of capital assets
acquired in business combinations. Corporate assets are principally cash,
marketable securities, prepaid expenses, deferred income tax assets and
-22-
<PAGE>
corporate fixed assets. Operating profit does not include general corporate
expenses, interest expense, investment income, costs of pooling of interests
transactions, and income taxes.
Sales between segments are at cost plus a small percentage markup.
Business segment financial information follows (in thousands):
1995 1994 1993
-------- -------- -------
Net Sales
Coatings Group $194,095 $155,967 $133,216
Consumer Products Group 56,506 46,042 44,618
-------- -------- -------
250,601 202,009 177,834
Inter-segment sales (27) (121) (28)
-------- -------- -------
Consolidated $250,574 $201,888 $177,806
======== ======== =======
Operating Profit
Coatings Group $1,414* $8,738 $7,053
Consumer Products Group 6,681 5,533 5,524
-------- -------- -------
8,095 14,271 12,577
Corporate expenses-net (3,871) (3,618) (4,417)
Interest expense (2,131) (1,188) (991)
Costs of pooling of interests (529)
Investment income 587 374 376
-------- -------- -------
Income before income taxes $2,680 $9,839 $7,016
======== ======== =======
Identifiable Assets
Coatings Group $107,834 $102,593 $66,642
Consumer Products Group 28,563 25,475 20,092
Corporate 11,652 8,984 10,220
-------- -------- -------
Total $148,049 $137,052 $96,954
======== ======== =======
Capital Expenditures
Coatings $4,375 $2,686 $2,582
Consumer Products 851 627 622
Corporate 91 97 26
-------- -------- -------
Total $5,317 $3,410 $3,230
======== ======== =======
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<PAGE>
Financial information by geographic area is set forth below (in thousands):
1995 1994 1993
-------- -------- -------
Depreciation and Amortization
Coatings $5,741 $4,350 $3,428
Consumer Products 1,093 982 1,068
Corporate 110 157 178
-------- -------- -------
Total $6,944 $5,489 $4,674
======== ======== =======
Financial information by geographic area is set forth below (in thousands):
1995 1994 1993
-------- -------- -------
Net sales
United States $216,410 $175,665 $156,662
Canada 26,827 19,424 15,687
Europe 7,337 6,799 5,457
-------- -------- -------
Consolidated $250,574 $201,888 $177,806
======== ======== =======
Operating profit
United States $3,183* $11,050 $9,894
Canada 2,751 1,395 1,177
Europe 2,161 1,826 1,506
-------- -------- -------
8,095 14,271 12,577
Corporate expenses - net (3,871) (3,618) (4,417)
Interest expense (2,131) (1,188) (991)
Costs of pooling of interests (529)
Investment income 587 374 376
-------- -------- -------
Income before income taxes $2,680 $9,839 $7,016
======== ======== =======
Identifiable assets
United States $114,472 $107,298 $68,098
Canada 17,976 14,102 12,866
Europe 3,949 4,964 3,351
Corporate 11,652 10,688 12,639
-------- -------- -------
Total $148,049 $137,052 $96,954
======== ======== =======
*Includes pretax restructuring charges of $10,458.
-24-
<PAGE>
NOTE 14
Summarized Quarterly Operating Results (Unaudited)
Selected quarterly financial data is summarized as follows (in thousands, except
share and per share data):
<TABLE>
<CAPTION>
1995 Quarters
--------------------------------------------------------------------------
First Second Third Fourth Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 64,340 $ 63,317 $ 61,481 $ 61,436 $ 250,574
Gross profit 21,280 21,593 19,999 22,084 84,956
Net income 1,672 2,377 1,354 (3,971) 1,432
Net income per common
share $ .18 $ .25 $ .14 $ (.42) $ .15
========= ========= ========= ========= =========
Weighted average shares
outstanding 9,484,154 9,495,754 9,529,767 9,550,234 9,515,199
========= ========= ========= ========= =========
1994 Quarters
--------------------------------------------------------------------------
First Second Third Fourth Total
--------- --------- --------- --------- ---------
Net sales $ 44,950 $ 48,946 $ 51,102 $ 56,890 $201,888
Gross profit 15,719 17,220 17,441 18,524 68,904
Net income 1,165 1,831 1,682 1,225 5,903
Net income per common
share $ .15 $ .23 $ .20 $ .13 $ .70
========= ========= ========= ========= =========
Weighted average shares
outstanding 7,940,876 7,956,326 8,470,159 9,474,283 8,464,639
========= ========= ========= ========= =========
</TABLE>
Included in the third and fourth quarters of 1995 were pretax restructuring
charges totaling approximately $470,000, or $.03 per share after taxes, and
$9,988,000, or $.67 per share after taxes, respectively. See Note 3 to the
Consolidated Financial Statements.
-25-
<PAGE>
NOTE 15 - SUBSEQUENT EVENT
On March 4, 1996, the Company entered into a definitive agreement pursuant to
which Lilly Industries, Inc. (Lilly) will acquire all of the outstanding common
stock of Guardsman. Under the terms of the agreement, Lilly, through a
wholly-owned subsidiary, will make a cash tender offer for all Guardsman shares,
including the associated rights, at a price of $23.00 per share in cash, and
upon successful completion of the tender offer, the stock not tendered will be
cashed out at $23.00 per share in a statutory merger. Guardsman's three largest
stockholders, collectively representing approximately 50% of Guardsman's
outstanding shares, have entered into separate agreements with Lilly supporting
the transaction. The transaction remains subject to regulatory approval and
certain other conditions.
-26-
<PAGE>
RESPONSIBILITIES FOR FINANCIAL STATEMENTS
Management is responsible for the integrity of the financial data reported by
Guardsman and its subsidiaries. This responsibility requires preparing financial
statements in accordance with generally accepted accounting principles and
reporting data which, using management's best judgment, fairly reflects
Guardsman's financial position and results of operations. To gather and control
financial data, the Company establishes and maintains accounting systems
adequately supported by internal controls. Management believes that a high level
of internal control is maintained by the selection and training of qualified
personnel, by the establishment and communication of accounting and business
policies and by internal audits.
Arthur Andersen LLP, independent public accountants, are engaged to audit and to
render an opinion as to whether management's financial statements, considered in
their entirety, present fairly Guardsman's consolidated financial position and
operating results. Their audit was conducted in accordance with generally
accepted auditing standards, and their report is included herein.
The Audit Committee of the Board of Directors, composed of five outside
directors, meets regularly with management, the internal auditor and the
independent public accountants to review the activities of each.
/s/ Charles E. Bennett /s/ Henry H. Graham, Jr.
- ---------------------- ------------------------
Charles E. Bennett Henry H. Graham, Jr.
President and Vice President of Finance and
Chief Executive Officer Chief Financial Officer
January 25, 1996
-27-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Guardsman Products, Inc.
We have audited the accompanying consolidated balance sheets of Guardsman
Products, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guardsman Products, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
As explained in note 4 to the consolidated financial statements, in 1993, the
Company changed its method of accounting for income taxes to adopt the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
/s/ Arthur Andersen LLP
Grand Rapids, Michigan
January 25, 1996 (except with respect to the matter discussed in Note 15, as to
which the date is March 4, 1996)
-28-
