SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A(6)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 4, 1995
Lynch Corporation
(Exact name of registrant as specified in its charter)
INDIANA 1-106 38-1799862
(State or other jurisdiction (Commission (IRS Employer
of Corporation) file Number) Identification No.)
Eight Sound Shore Drive, Suite 290, Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203/629-3333
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
See Item 5 below.
Item 5. Other Events
Reference is made to Item 2 of the Form 8-K of Registrant and
in particular to the description of the Spinnaker Subordinated Note
issued to ALCO, the Conversion Documents including the Put
Agreements and Registrant's obligations with respect thereto.
On April 5, 1996, Spinnaker Industries, Inc. ("Spinnaker"), a
subsidiary of Registrant, completed the refinancing of the two
subordinated notes of Spinnaker totaling $25,000,000 held by Alco
Standard Corporation ("Alco"), which were issued in connection with
Spinnaker's acquisition of Central Products Company. The
refinancing involved the issuance of a new subordinated convertible
promissory note in the aggregate principal amount of $20,250,000 to
Alco Standard (the "Alco Note"). The first $6,000,000 of principal
(and the interest accrued on that principal) of the Alco Note will
be converted automatically into approximately 171,430 shares (the
"Initial Conversion Shares") of common stock, no par value per share
(the "Common Stock") of Spinnaker on or about May 5, 1996, unless
Alco reasonable objects. Spinnaker has agreed to engage, at
Spinnaker's expense, an investment banker to assist Alco with a
private sale of the Initial Conversion Shares. If a private sale
cannot be effected on or before June 30, 1996, Spinnaker is
obligated to register the Initial Conversion Shares to enable Alco
to sell the Initial Conversion Shares in the public market.
Spinnaker has agreed to pay Alco the difference between the net
proceeds received by it upon the sale of the Initial Conversion
Shares and $6,000,000. At Alco's option, the remaining principal
amount of the Alco note becomes convertible into Common Stock, at
the then prevailing market price, commencing with an installment of
$7,000,000 on April 1, 1997 and the remaining balance on April 1,
1998.
Interest on the Alco Note is payable semiannually at an annual
rate of 7%, or 9% if Spinnaker is unable to pay interest because of
restrictions imposed by its senior lender and capitalizes the
interest. The unconverted principal of the Alco note will be due
in two installments. The first installment of $7,000,000 will be
due six months after the maturity date of the "Term Loan" (as
defined below) (but not before April 5, 1997) and balance will be
due on the first anniversary of the payment date of the $7,000,000
installment. Alco has the right to demand immediate prepayment of
the Alco Note, if Spinnaker successfully consummates certain
subsequernt financing transactions.
Spinnaker's financing arrangements included an $8,500,000
bridge loan made by Bankers Trust Company, which matures in
December 1996. If not paid in full on or before its due date, the
bridge loan converts into a 5-year term loan (the "Term Loan"). If
the bridge loan converts into the Term Loan, the lender will be
entitled to receive a warrant to purchase at a nominal price 2.5%
of the common equity of Spinnaker (on a fully diluted basis) upon
conversion of the bridge loan and for each quarter that the Term
Loan is outstanding the lender will receive an additional warrant
to purchase 2.5% of the common equity (on a fully diluted basis),
up to 20% of the common equity on a fully diluted basis. In order
to facilitate Spinnaker's financing transaction, Boyle, Fleming,
George & Co. ("BFI"), Inc., an affiliate of Spinnaker's chairman and
president, purchased shares of Common Stock by a partial exercise
of a warrant held by BFI. An agreement with Bankers Trust Company
requires BFI to make further purchases of Common stock under the
warrant if necessary to enable Spinnaker to make the interest
payments due under the bridge loan or the Term Loan. BFI has
pledged its warrant, all of the shares of Common Stock owned by it,
and any shares of Common Stock subsequently acquired by it, to
secure the loans make by Bankers Trust Company to Spinnaker. In
addition, Registrant's subsidiary, Lynch Manufacturing Corporation,
the holder of approximately 78% of the Common Stock, has pledged
all of its shares of Common Stock to secure the loans made by
Bankers Trust Company.
Spinnaker is exploring various alternatives to refinance the
indebtedness of Spinnaker and its subsidiaries, including
refinancing the bridge loan before its matures. There can be no
assurance that Spinnaker can successfully complete any such
refinancing.
The Alco Note is subordinated to the financing provided by
Bankers Trust Company. Both the Bankers Trust Company financing
and the Alco Note prohibits Spinnaker from making any cash
dividends or other cash distributions on its Common Stock.
Item 7. Financial Statement and Exhibits
(a) Financial Statements of Businesses Acquired
Not applicable
(b) Pro Forma Financial Information
Not applicable
(c) Exhibits
7.1 Subordinated Convertible Promissory Note,
dated April 5, 1996, in the aggregate
principal amount of $20,250,000, of Spinnaker
Industries, Inc.
7.2 Senior Credit Agreement, dated as of April 5,
1996, among Spinnaker Industries, Inc. and
Bankers Trust Company.
7.3 Warrant Exercise Agreement, dated April 5,
1996, among Boyle, Fleming, George & Co.,
Inc., Richard J. Boyle, Ned N. Fleming, III,
Spinnaker Industries, Inc. And Bankers Trust
Company.
7.4 Pledge Agreement, dated April 5,1996, by each
of the named pledgors in favor of Banker's
Trust Company.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.
LYNCH CORPORATION
(Registrant)
Robert E. Dolan
Chief Financial Officer
Date: April 19, 1996<PAGE>
(c) Exhibits
7.1 Subordinated Convertible Promissory Note,
dated April 5, 1996, in the aggregate
principal amount of $20,250,000, of Spinnaker
Industries, Inc.
7.2 Senior Credit Agreement, dated as of April 5,
1996, among Spinnaker Industries, Inc. and
Bankers Trust Company.
7.3 Warrant Exercise Agreement, dated April 5,
1996, among Boyle, Fleming, George & Co.,
Inc., Richard J. Boyle, Ned N. Fleming, III,
Spinnaker Industries, Inc. And Bankers Trust
Company.
7.4 Pledge Agreement, dated April 5,1996, by each
of the named pledgors in favor of Banker's
Trust Company.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.
LYNCH CORPORATION
(Registrant)
s/ Robert E. Dolan
Robert E. Dolan
Chief Financial Officer
Date: April 19, 1996
The payment of principal, interest and all other amounts owing on
this Note is subject to certain subordination provisions set forth
in paragraph 3 herein. This Note was originally issued on April 5,
1996 and has not been registered under the Securities Act of 1933,
as amended, or any comparable state securities law. The transfer
of this Note is subject to certain restrictions set forth in
paragraph 7 herein.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
April 5, 1996 $20,250,000.00
Spinnaker Industries, Inc., a Delaware corporation (the
"Company"), hereby promises to pay to Alco Standard Corporation
("Alco") or its permitted assigns (Alco and each of its permitted
assigns is a "Holder") the principal amount of Twenty Million Two
Hundred Fifty Thousand and No/100 Dollars ($20,250,000.00),
together with interest thereon calculated form the date hereof in
accordance with the provisions of this Note. This Note is being
executed by the Company in exchange for the cancellation of that
certain Subordinated Promissory Note, dated September 29, 1995,
issued by the Company and payable to the order of Alco.
1. Interest Rate/Payment of Interest.
(a) $6 Million 1996 Portion. With respect to
$6,000,000.00 of the principal amount of this Note (the "$6
Million 1996 Portion"), interest shall accrue from April 5,1996, at
the rate of seven percent (7%) per annum, on the unpaid principal
amount of the $6 Million 1996 Portion outstanding from time to
time. Subject to the provisions of paragraphs 3 and 11 hereof, the
Company shall pay to the Holder, in arrears, all accrued interest
on or before September 30, 1996. Any accrued interest, which for
any reason has not theretofore been paid with respect to the $6
Million 1996 Portion shall, subject to paragraph 3 hereof, be paid
in full, in cash, within 30 days of the date on which the principal
amount of the $6 Million 1996 Portion is paid or converted pursuant
to paragraph 11 hereof.
(b) $7 Million 1997 Portion. With respect to
$7,000,000.00 of the principal amount of this Note (the "$7 Million
1997 Portion"), interest shall accrue from April 5, 1996, at the
rate of seven percent (7%) per annum or at the higher rate provided
below, on the unpaid principal amount of the $7 Million 1997
Portion outstanding from time to time. Subject to the provisions
of paragraphs 3 and 11 hereof, the Company shall pay to the Holder,
in arrears, all accrued interest on each September 30 and March 31
(each September 30 and March 31 being an "Interest Payment Date")
during the term of this Note, beginning on September 30, 1996. Any
accrued interest, which for any reason has not theretofore been
paid, or is not permitted to be paid by the terms of any Senior
Indebtedness (as defined in Annex A attached hereto) on any
Interest Payment Date with respect to the $7 Million 1997 Portion
(the "1997 Capitalized Interest") shall, subject to paragraph 3
hereof, be paid in full, either in cash or, at the Company's
election, by increasing the principal amount of the $7 Million 1997
Portion of the Note by an amount equal to the 1997 Capitalized
Interest within 20 days of the date on which the principal amount
of the $7 Million 1997 Portion is converted pursuant to paragraph
11 hereof. Interest that is paid by increasing the principal amount
of the $7 Million 1997 Portion of the Note shall accrue at the rate
of 9% per annum.
(c) $7 Million 1998 Portion. With respect to the
remaining $7,250,000.00 of the principal amount of this Note (the
"$7 Million 1998 Portion"), interest shall accrue from April 5,
1996, at the rate of seven percent (7%) per annum, on the unpaid
principal amount of the $7 Million 1998 Portion outstanding from
time to time. Subject to the provisions of paragraphs 3 and 11
hereof, the Company shall pay to the Holder, in arrears, all
accrued interest on each September 30 and March 31 during the term
of this Note, beginning on September 30, 1996. Any accrued
interest, which for any reason has not theretofore been paid, or is
not permitted to be paid by the terms of any Senior Indebtedness on
any Interest Payment Date with respect to the $7 Million 1998
Portion (the "1998 Capitalized Interest") shall, subject to
paragraph 3 hereof, be paid in full, either in cash or, at the
Company's election, by increasing the principal amount of the
$7 Million 1998 Portion by an amount equal to the 1998 Capitalized
Interest within 20 days of the date on which the principal amount
of the $7 Million 1998 Portion is paid or converted pursuant to
paragraph 11 hereof. Interest that is paid by increasing the
principal amount of the $7 Million 1998 Portion of the Note shall
accrue at the rate of 9% per annum.
2. Payment of Principal.
(a) Scheduled Payments. Subject to the provisions of
subparagraph 2 (c) and paragraph 3 below, the Company shall repay
or convert the entire principal amount of the Note, together with
all accrued and unpaid interest thereon, as follows:
(i) $6 Million 1996 Portion. The $6 Million 1996
Portion shall be automatically converted into shares of
the Company's common stock, no par value per share (the
"Common Stock") as provided in paragraph 11 hereof.
(ii) $7 Million 1997 Portion. All of the
outstanding principal of the $7 Million 1997 Portion is
due and payable in full on the earlier of (x) six months
after the Maturity Date of the Term Loans (as those terms
are defined in the Credit Agreement (as defined in Annex
A hereto)) and (y) six months after all obligations
under the Credit Agreement have been paid in full in cash
(but in no event earlier than April 5, 1997), unless
previously converted pursuant to paragraph 11 hereof.
(iii) $7 Million 1998 Portion. All of the
outstanding principal of the $7 Million 1998 Portion is
due and payable in full on the first anniversary of the
date on which the outstanding principal amount of the $7
Million 1997 Portion is paid in full, unless previously
converted pursuant to paragraph 11 hereof.
(b) Prepayment. Subject to the provisions of paragraph
3 hereof, the Company may, at any time and from time to time
without premium or penalty, prepay all or a portion of the
outstanding principal of this Note. Prepayments of principal shall
be applied as directed by the Company.
(c) Events of Acceleration. Subject to paragraph 3
hereof, Alco will have the right, but not the obligation, to demand
immediate payment of all outstanding principal, and all interest
accrued hereon to the date of demand upon consummation by the
Company of an offering of approximately $100,000,000 of the
Company's senior subordinated notes in respect to which BT
Securities Corporation is acting as managing underwriter or
placement agent.
3. Subordination: Restrictions on Payment.
Notwithstanding anything in this Note to the contrary, the
obligations of the Company in respect of the principal, interest,
fees, charges and other amounts on this Note, and all rights and
remedies of the Holder under this Note, shall be subordinate,
junior and subject in right of payment, to the prior payment in
full in cash of all Senior Indebtedness to the extent and in the
manner hereinafter set forth on Annex A hereto, which Annex A is
incorporated herein in its entirety and made a part hereof.
4. Events of Default.
(a) Definition. For purposes of this Note, an "Event of
Default" shall be deemed to have occurred (subject to paragraph 3
hereof) if:
(i) the Company shall default in the payment of
interest or principal of this Note on the date when due,
whether at maturity, by acceleration or otherwise; or
(ii) the Company shall fail to perform any covenant
required to be performed hereunder, which failure shall
continue for a period of 30 days after the Company
receives notice of such failure; or
(iii) the Company shall make a Restricted
Payment (defined in paragraph 5); or
(iv) a liquidation, dissolution, bankruptcy,
reorganization, insolvency, receivership or similar
proceeding occurs with respect to the Company.
(b) Consequences of Events of Default.
(i) If an Event of Default of the type described in
clause (i), (ii) or (iii) of subparagraph 4(a) above has
occurred and is continuing, the Holder may, subject to
paragraph 3 hereof, declare all or any portion of the
outstanding principal amount of this Note due and payable
and demand immediate payment of all or any portion of the
outstanding principal amount of this Note. If the Holder
demands immediate payment of all or any portion of this
Note, the Company shall, subject to paragraph 3 hereof,
immediately pay to such Holder the principal amount of
this Note requested to be paid together with all accrued
and unpaid interest thereon.
(ii) If an Event of Default of the type described in
clause (iv) of subparagraph 4(a) above has occurred, all
of the outstanding principal amount of this Note shall,
subject to paragraph 3 hereof, automatically be
immediately due and payable without any notice or other
action on the part of the Holder.
(iii) Upon the occurrence of an Event of
Default, the Holder, subject to paragraph 3 hereof,
shall also have any other rights which such person may
have been afforded by the Company under any contract or
agreement at any time and any other rights which such
person may have pursuant to applicable law.
5. Restricted Payments. So long as any portion of the
principal amount of this Note (together with all accrued interest
thereon) remains outstanding, without the prior written consent of
the Holder, the Company shall not (a) declare or pay any cash
dividends or make any cash distributions upon any of its Common
Stock or (b) redeem, retire, purchase or otherwise acquire any of
its equity securities for cash (other than redemptions,
retirements, purchases or acquisitions of equity securities from
employees in connection with the termination of their employment)
each such prohibited declaration, payment, distribution, purchase,
redemption, acquisition or retirement being referred to as a
"Restricted Payment").
6. Financial Statements. So long as any portion of the
principal amount of this Note remains outstanding, the Company will
deliver to Alco (a) as soon as available but in any event within 45
days after the end of the first three quarterly accounting periods
in each fiscal year, unaudited consolidated statements of income
for such quarterly period, and consolidated balance sheets as of
the end of such quarterly period, and all such statements will be
prepared in accordance with United States generally accepted
accounting principals, consistently applied ("GAAP"), and (b) within
90 days after the end of each fiscal year, audited consolidated
statements of income for such fiscal year and audited consolidated
balance sheets as of the end of such fiscal year, all prepared in
accordance with GAAP.
7. Transfer Restrictions. This Note has not been
registered under the Securities Act of 1933, as amended, or any
comparable state securities law. If the Holder desires to transfer
this Note, such person first must furnish the Company with (a) a
written opinion reasonably satisfactory to the Company in form and
substance from counsel reasonably satisfactory to the Company to
the effect that the Holder may transfer this Note as desired
without registration under the Securities Act of 1933 or any
applicable state securities law, and (b) a written undertaking
executed by the desired transferee reasonably satisfactory to the
Company in form and substance agreeing to be bound by all of the
provisions of this Note, including, without limitation, the
subordination provisions set forth in paragraph 3 hereof.
8. Cancellation. After all principal and accrued interest
at any time owed on this Note has been paid in full or this Note
has been converted into the Common Stock pursuant to paragraph 11,
this Note shall be surrendered to the Company for cancellation and
shall not be reissued.
9. Place of Payment; Notices. Payments of principal and
interest, delivery of shares of Common Stock and any notice
hereunder are to be delivered to the Holder at the following
address:
<PAGE>
Alco Standard Corporation
825 Duportail Road
Chesterbrook, Wayne, PA 19087
Attention: Treasurer
Notices to the other parties hereto are to be delivered at the
following addresses:
Spinnaker Industries, Inc. Timothy R. Vaughan
600 North Pearl, Suite 2160, LB100 Crouch & Hallett, L.L.P.
Dallas, TX 75201 717 N. Harwood, Suite 1400
Attention: Treasurer Dallas, Texas 75201
Other addresses may be specified in written notices delivered to
the other parties hereto. Notices shall be deemed received when
delivered personally, or one day after being sent by Federal
Express or other overnight carrier, or five days after being sent
by certified or registered mail.
10. Governing Law. The validity, construction, and
interpretation of this Note will be governed by the internal laws,
and not the laws of conflicts, of the State of New York.
11. Conversion.
(a) Conversion of $6 Million 1996 Portion. The $6
Million 1996 Portion, together with all interest accrued and unpaid
on the $6 Million 1996 Portion, shall automatically, on that date
that is 30 days after the execution of this Note (the "Initial
Conversion Date"), and without any action being required on the
part of the Holder of this Note, convert into shares of fully paid
and nonassessable shares of Common Stock (the "Initial Conversion
Shares") at an initial conversion price per share of $35.00 (plus
or minus 10%, at the discretion of the Company) (the "Initial
Conversion Price"), unless the Holder of this Note shall reasonably
object. Upon surrender of this Note, the Company shall deliver to
the Holder certificates evidencing shares of Common Stock into
which the $6 Million 1996 Portion, together with accrued and unpaid
interest thereon, was converted. Based on the Initial Conversion
Price, the number of Initial Conversion Shares shall be 171,430
shares. Following such surrender, the Company shall issue a
replacement note, in form and substance substantially similar to
this Note, but appropriately revised to reflect such conversion.
(b) Conversion of $7 Million 1997 and $7 Million 1998
Portion. The Holder of this Note shall have the right, commencing
on the dates set forth in subparagraph 11 (c) below, at any time
thereafter and from time to time to convert all, or any portion, of
the unpaid principal of the $7 Million 1997 Portion and the $7
Million 1998 Portion of this Note, together with all interest
accrued and unpaid on the principal amount so converted, into that
number of fully paid and nonassessable shares of Common Stock
obtained by dividing the principal amount of the Note or portion
thereof surrendered for conversion, together with accrued and
unpaid interest thereon, by the applicable "Conversion Price"
(defined in subparagraph 11 (d) below). If a portion of this Note
is converted, the principal amount (together with accrued and
unpaid interest thereon) so converted shall be applied for the
proper number of shares of Common Stock for the portion converted
and the balance of the unpaid principal amount hereof shall remain
outstanding and due and payable in accordance with the terms
hereof, or may be converted at a subsequent date pursuant to the
terms of this Note. The conversion shall be deemed to have been
effected immediately before the close of business on the date the
Company receives a notice of conversion from the Holder; and at
such time (i) the principal amount of the Note (together with
accrued and unpaid interest thereon) so converted shall be deemed
to be satisfied and paid in full and (ii) the person or persons in
whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon conversion shall be deemed to
have become the holder of record of such shares of Common Stock as
of that date, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such
shares of Common Stock shall not then have been actually delivered.
Following such surrender, in the case of a partial conversion, the
Company shall issue a replacement note, in form and substance
substantially similar to this Note, but appropriately revised to
reflect such conversion.
(c) Conversion Price. The price per share at which
shares of Common Stock shall be delivered upon conversion of the $7
Million 1997 Portion and $7 Million 1998 Portion (the "Conversion
Price") shall be the Fair Market Value of the Common Stock on the
trading date immediately preceding the date fixed for conversion.
(d) Conversion Dates.
(i) $7 Million 1997 Portion. All or any part of
the principal of the $7 Million 1997 Portion may be
converted commencing April 1, 1997.
(ii) $7 Million 1998 Portion. All or any part of
the principal of the $7 Million 1998 Portion may be
converted commencing April 1, 1998.
(e) Fair Market Value. As used herein the term "Fair
Market Value" of a share of the Common Stock shall be the average
of the mean of the closing ask and bid prices of such Common Stock
(or last sale price if the Common Stock is then reported on the
National Market System of NASDAQ or is then listed on a major
securities exchange) during the 20 trading days immediately
preceding the applicable date.
(f) The number of shares of Common Stock to be issued
upon conversion of this Note shall be subject to adjustment as
follows:
(i) If the Company at any time shall consolidate or
merge with, or sell or convey all or substantially all
its assets to, any other corporation, partnership or
limited liability company, this Note or any portion
hereof convertible into Common Stock as provided for
herein shall be convertible into such number and kind or
securities and property as would have been issuable or
distributable on account of such consolidation, merger,
sale or conveyance upon or with respect to the securities
into which this Note or any portion hereof was
convertible immediately before such consolidation,
merger, sale or conveyance. The Company shall take such
steps in connection with such consolidation or merger,
sale or conveyance as may be necessary to assure that the
provisions of this Note shall thereafter be applicable,
as nearly as reasonably may be, in relation to any
security or property thereafter deliverable upon
conversion of this Note. The foregoing provisions shall
similarly apply to successive transactions of a similar
nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the provisions
hereof shall apply to such securities of such successor
or purchaser after any such consolidation, merger or
conveyance.
(ii) If the shares of the Company's Common Stock are
subdivided or combined into a greater or smaller number
of shares of Common Stock, the (i) Initial Conversion
Price with respect to the $6 Million 1996 Portion and
(ii) the Conversion Price with respect to the $7 Million
1997 Portion and the $7 Million 1998 Portion shall be
proportionately reduced in case of a subdivision of
shares or proportionately increased in the case of a
combination of shares, in both cases by the ratio which
the total number of shares of Common Stock to be
outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding
immediately before such event.
(g) Fractional Shares. No fractional shares of Common
Stock are to be issued in connection with any conversion, but in
lieu of such fractional share, the Company shall, subject to
paragraph 3 hereof, make a cash payment therefor upon the basis of
the Fair Market Value of such share of Common Stock on the
conversion date.
12. Covenants of the Company.
(a) The Company covenants that it will not, by amendment
of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this
Note, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the
Holder against impairment. Without limiting the generality of the
foregoing, the Company (i) shall at all times reserve and keep
available, so long as this Note remains outstanding, free from
preemptive rights, the number of shares of Common Stock equal to
the number of shares of Common Stock to be issued upon the
conversion of this Note, and (ii) will take all such action as may
be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares
of Common Stock upon the conversion of this Note.
(b) The Company shall engage Allen & Company, or such
other investment banking firm reasonably acceptable to both the
Company and Alco, to effect a private resale by Alco of the Initial
Conversion Shares as soon as practicable after conversion of the $6
Million 1996 Portion into the Initial Conversion Shares. All costs
of such resale, including without limitation fees of Allen &
Company or such other investment banking firm, shall be paid by the
Company. In the event that a private resale of the Initial
Conversion Shares is not effected on or before June 30, 1996, the
Company shall use its best reasonable efforts to cause to become
effective a registration statement covering the public resale by
Alco of the Initial Conversion Shares so that Alco will be able to
sell the shares of Common Stock in the public market.
(c) Alco will have the right to designate a
representative to attend all meetings of the Company's board of
directors, so long as it owns, or has the right to acquire, at
least five percent of the outstanding Common Stock.
(d) As long as either any portion of this Note is
outstanding or any shares of Common Stock are held by Alco, it will
receive copies of (i) all financial information delivered to the
Company's lenders, (ii) all filings made with the United States
Securities and Exchange Commission, and (iii) all press releases.
(e) Subject to paragraph 3 hereof, on or before
September 30, 1996, the Company will pay Alco the difference
between the net proceeds received by Alco upon the sale of the
Initial Conversion Shares and $6,000,000.00 (the "Make Whole
Provision"). The Company will have the option of paying any amount
due under the Make Whole Provision either in cash or by delivering
the number of shares of Common Stock obtained by dividing the
amount of the Make Whole Provision by the Fair Market Value of the
Common Stock on September 30, 1996.
IN WITNESS WHEREOF, the Company has executed and
delivered this Note on the date first above written.
SPINNAKER INDUSTRIES, INC.
By:
Title:
A:\CONVERT7.NTE<PAGE>
SUBORDINATION PROVISIONS
ANNEX A
TO SUBORDINATED CONVERTIBLE PROMISSORY NOTE
Section 1.01. Subordination of Liabilities. Spinnaker
Industries, Inc. (the "Company"), for itself, its successors and
assigns, covenants and agrees, and each holder of the Note to which
this Annex A is attached (the "Note") by its acceptance thereof
likewise covenants and agrees, that the payment of the principal
of, interest on, and all other amounts owing in respect of, the
Note (the "Subordinated Indebtedness") is hereby expressly
subordinated, to the extent and in the manner hereinafter set
forth, to the prior payment in full in cash of all Senior
Indebtedness (as defined in Section 1.07 of this Annex A). The
provisions of this Annex A shall constitute a continuing offer to
all persons who, in reliance upon such provisions, become holders
of, or continue to hold, Senior Indebtedness, and such provisions
are made for the benefit of the holders of Senior Indebtedness, and
such holders are hereby made obligees hereunder the same as if
their names were written herein as such, and they and/or each of
them may proceed to enforce such provisions.
Section 1.02. Company not to Make Payments with Respect to
Subordinated Indebtedness.
(a) The Company may not, directly or indirectly, make any
payment (whether in respect of principal, interest or other
amounts) of any Subordinated Indebtedness and may not acquire
(whether in respect of principal, interest or other amounts) any
Subordinated Indebtedness for cash or property until the sixth
month anniversary following the date on which all Senior
Indebtedness has been paid in full in cash, although the Company
may issue shares of its common stock upon conversion of any
principal or interest on the Note in accordance with the terms
thereof, and provided further the Company may prepay the
Subordinated Indebtedness with the proceeds of the Take-Out Notes
(as defined in the Credit Agreement referred to in Section 1.07
hereof) so long as the proceeds of such Take-Out Notes have been
first used to prepay the Senior Indebtedness then outstanding in
full in cash.
(b) In the event that notwithstanding the provisions of the
preceding subsection (a) of this Section 1.02, the Company shall
make any payment on account of the Subordinated Indebtedness at a
time when payment is not permitted by said subsection (a), such
payment shall be held by the holder of the Note, in trust for the
benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness or their representative or the
trustee under the indenture or other agreement pursuant to which
any instruments evidencing any Senior Indebtedness may have been
issued, as their respective interests may appear, for application
pro rata to the payment of all Senior Indebtedness remaining unpaid
to the extent necessary to pay all Senior Indebtedness in full in
cash in accordance with the terms of such Senior Indebtedness,
after giving effect to any concurrent payment or distribution to or
for the holders of Senior Indebtedness.
(c) In the event that any payment of Subordinated
Indebtedness is required to be made pursuant to the terms thereof
before the sixth month anniversary following the date on which all
Senior Indebtedness is paid in full in cash, such payment shall be
extended until such sixth month anniversary and each holder of the
Note agrees that such extension shall not give rise to a default or
an event of default under the Note and each holder of the Note
agrees that it will not sue for, or otherwise take any action to
enforce the Company's obligation to pay, amounts owing in respect
of the Note until the sixth month anniversary following the date on
which all Senior Indebtedness has been paid in full in cash.
Section 1.03. Subordination to Prior Payment of all Senior
Indebtedness on Dissolution. Liquidation or Reorganization of
Company. Upon any distribution of assets of the Company upon
dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or
otherwise):
(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full in cash of all Senior
Indebtedness (including, without limitation, post-petition interest
at the rate provided in the documentation with respect to the
Senior Indebtedness, whether or not such post-petition interest is
an allowed claim against the debtor in any bankruptcy or similar
proceeding) before the holder of the Note is entitled to receive
any payment of any kind or character, whether in cash, property,
securities or otherwise on account of the Subordinated
Indebtedness:
(b) any payment or distributions of assets of the Company of
any kind or character, whether in cash, property or securities to
which the holder of the Note would be entitled except for the
provisions of this Annex A, shall be paid by the liquidating
trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or other trustee or agent, directly to the
holders of Senior Indebtedness or their representative or repre-
sentatives, or to the trustee or trustees under any indenture under
which any instruments evidencing any such Senior Indebtedness may
have been issued, to the extent necessary to make payment in full
in cash of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section 1.03, any payment or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by the holder of the Note
on account of Subordinated Indebtedness before all Senior
Indebtedness is paid in full in cash, such payment or distribution
shall be received and held in trust for and shall be paid over to
the holders of the Senior Indebtedness remaining unpaid or
unprovided for or their representative or representatives, or to
the trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Indebtedness may have
been issued, for application to the payment of such Senior
Indebtedness until all such Senior Indebtedness shall have been
paid in full in cash, after giving effect to any concurrent payment
or distribution to the holders of such Senior Indebtedness.
Without in any way modifying the provisions of this Annex A or
affecting the subordination effected hereby if the hereafter
referenced notice is not given, the Company shall give prompt
written notice to the holder of the Note of any dissolution,
winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings or upon
assignment for the benefit of creditors or otherwise).
Section 1.04. Subrogation. Subject to the prior payment in
full in cash of all Senior Indebtedness, the holder of the Note
shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the
Company applicable to the Senior Indebtedness until all amounts
owing on the Note shall be paid in full, and for the purpose of
such subrogation no payments or distributions to the holders of the
Senior Indebtedness by or on behalf of the Company or by or on
behalf of the holder of the Note by virtue of this Annex A which
otherwise would have been made to the holder of the Note shall, as
between the Company, its creditors other than the holders of Senior
indebtedness, and the holder of the Note, be deemed to be payment
by the Company to or on account of the Senior Indebtedness, it
being understood that the provisions of this Annex A are and are
intended solely for the purpose of defining the relative rights of
the holder of the Note, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
Section 1.05. Obligation of the Company Unconditional. Except
to the extent set forth in this Annex A, nothing herein is intended
to or shall impair, as between the Company and the holder of the
Note, the obligation of the Company, which is absolute and
unconditional, to pay to the holder of the Note the principal of
and interest on the Note as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall
affect the relative rights of the holder of the Note and creditors
of the Company other than the holders of the Senior Indebtedness.
Upon any distribution of assets of the Company referred to in this
Annex A, the holder of the Note shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in
which such dissolution, winding up, liquidation or reorganization
proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the
holder of the Note, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Annex A.
Section 1.06. Subordination Rights not Impaired by Acts or
Omissions of Company or Holders of Senior Indebtedness. No right of
any present or future holders of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act in good faith by any
such holder, or by any noncompliance by the Company with the terms
and provisions of the Note, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with. The
holders of the Senior Indebtedness may, without in any way
affecting the obligations of the holder of the Note with respect
hereto, at any time or from time to time and in their absolute
discretion, change the manner, place or terms of payment of, change
or extend the time of payment of, or renew or alter, any Senior
Indebtedness or amend, modify or supplement any agreement or
instrument governing or evidencing such Senior Indebtedness or any
other document referred to therein, or exercise or refrain from
exercising any other of their rights under the Senior Indebtedness
including, without limitation, the waiver of default thereunder and
the release of any collateral securing such Senior Indebtedness,
all without notice to or assent from the holder of the Note.
Section 1.07. Senior Indebtedness. The term "Senior
Indebtedness" shall mean all Obligations (as defined below) of the
Company under, or in respect of, the Senior Credit Agreement (as
amended, modified, supplemented, extended, restated, refinanced,
replaced or refunded from time to time, the "Credit Agreement"),
dated as of April 5, 1996, by and among the Company, the Lenders
named therein and Bankers Trust Company, as Administrative Agent,
or any other Loan Document (as defined in the Credit Agreement) to
which the Company is a party, and in each case any renewal,
extension, restatement, refinancing or refunding thereof. As used
herein, the term "Obligation" shall mean any principal, interest,
premium, penalties, fees, expenses, indemnities and other
liabilities and obligations payable under the documentation
governing any Senior Indebtedness (including interest accruing
after the commencement of any bankruptcy, insolvency, receivership
or similar proceeding at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed
claim against the debtor in any such proceeding).
Section 1.08. Miscellaneous. If, at any time, all or part of
any payment with respect to Senior Indebtedness theretofore made by
the Company or any other person is rescinded or must otherwise be
returned by the holders of Senior Indebtedness for any reason
whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Company or such other person),
the subordination provisions set forth herein shall continue to be
effective or be reinstated, as the case may be, all as though such
payment had not been made.
SENIOR CREDIT AGREEMENT
dated as of
April 5, 1996
among
SPINNAKER INDUSTRIES, INC.,
as Borrower,
THE LENDERS named herein,
and
BANKERS TRUST COMPANY,
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
Section Heading Page
INTRODUCTION. . . . . . . . . . . . . . . . . . . . 1
RECITALS. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . 1
1.2 Accounting Terms. . . . . . . . . . . . . . 22
1.3 Other Definitional Provisions; Anniversaries 22
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND
LOANS; NOTES. . . . . . . . . 22
2.1 Bridge Loan and Bridge Note . . . . . . . . 22
2.2 Term Loan and Term Note . . . . . . . . . . 25
2.3 Interest on the Loans . . . . . . . . . . . 26
2.4 Fees. . . . . . . . . . . . . . . . . . . . 28
2.5 Prepayments and Payments. . . . . . . . . . 28
2.6 Use of Proceeds . . . . . . . . . . . . . . 32
SECTION 3. CONDITIONS . . . . . . . . . . . . . . . . . 33
3.1 Conditions to Bridge Loan . . . . . . . . . 33
3.2 Conditions to Term Loan . . . . . . . . . . 40
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . 41
4.1 Organization and Good Standing; Capitalization 42
4.2 Authorization and Power . . . . . . . . . . 42
4.3 No Conflicts or Consents. . . . . . . . . . 43
4.4 Enforceable Obligations . . . . . . . . . . 43
4.5 Properties; Liens . . . . . . . . . . . . . 44
4.6 Financial Condition . . . . . . . . . . . . 44
4.7 Full Disclosure . . . . . . . . . . . . . . 45
4.8 No Default. . . . . . . . . . . . . . . . . 46
4.9 Compliance with Contracts, Etc. . . . . . . 46
4.10 No Litigation . . . . . . . . . . . . . . . 46
4.11 Use of Proceeds; Margin Stock, Etc. . . . . 47
4.12 Taxes . . . . . . . . . . . . . . . . . . . 47
4.13 ERISA . . . . . . . . . . . . . . . . . . . 48
4.14 Compliance with Law . . . . . . . . . . . . 49
4.15 Government Regulation . . . . . . . . . . . 49
4.16 Pledge Agreement. . . . . . . . . . . . . . 49
4.17 Intellectual Property . . . . . . . . . . . 49
4.18 Environmental Matters . . . . . . . . . . . 50
4.19 Survival of Representations and Warranties. 51
4.20 Permits . . . . . . . . . . . . . . . . . . 51
4.21 Insurance . . . . . . . . . . . . . . . . . 52
4.22 Labor Matters . . . . . . . . . . . . . . . 52
4.23 Indebtedness; etc.. . . . . . . . . . . . . 53
4.24 Take-Out Notes. . . . . . . . . . . . . . . 53
4.25 Broker's or Finder's Fees . . . . . . . . . 54
SECTION 5. AFFIRMATIVE COVENANTS. . . . . . . . . . . . 54
5.1 Financial Statements and Other Reports. . . 54
5.2 Corporate Existence, Etc. . . . . . . . . . 59
5.3 Payment of Taxes and Claims; Tax Consolidation 59
5.4 Maintenance of Properties; Insurance. . . . 60
5.5 Inspection. . . . . . . . . . . . . . . . . 60
5.6 Compliance with Laws, Etc.. . . . . . . . . 60
5.7 Maintenance of Accurate Records, Etc. . . . 61
5.8 Take-Out Financing. . . . . . . . . . . . . 61
5.9 ERISA Compliance. . . . . . . . . . . . . . 62
5.10 Payments in U.S. Dollars. . . . . . . . . . 63
5.11 Register. . . . . . . . . . . . . . . . . . 63
5.12 Lenders Meeting . . . . . . . . . . . . . . 64
5.13 End of Fiscal Years; Fiscal Quarters. . . . 64
5.14 Performance of Obligations. . . . . . . . . 64
5.15 Incorporation by Reference. . . . . . . . . 64
5.16 Additional Security; Further Assurances; etc. 65
5.17 Butler Warehouse. . . . . . . . . . . . . . . 66
5.18 Dividends and Intercompany Loan Payments. . . 66
5.19 Audited Financials. . . . . . . . . . . . . . 66
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . 66
6.1 Indebtedness. . . . . . . . . . . . . . . . 67
6.2 Liens . . . . . . . . . . . . . . . . . . . 68
6.3 Restricted Payments . . . . . . . . . . . . 69
6.4 Investments; Joint Ventures . . . . . . . . 70
6.5 Contingent Obligations. . . . . . . . . . . 71
6.6 Purchase or Sale of Assets, etc.. . . . . . 71
6.7 Restriction on Fundamental Changes. . . . . 72
6.8 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries. . . 73
6.9 Capital Expenditures. . . . . . . . . . . . 73
6.10 Transactions with Affiliates. . . . . . . . 74
6.11 Limitation on Issuance of Capital Stock . . 74
6.12 Business. . . . . . . . . . . . . . . . . . 75
6.13 Amendments or Waivers of Certain Documents. 75
6.14 Amendments to Charter Documents . . . . . . 75
6.15 Refinancing of the Loans in Part. . . . . . 76
6.16 Leases. . . . . . . . . . . . . . . . . . . 76
6.17 Creation of Subsidiaries. . . . . . . . . . 76
SECTION 7. EVENTS OF DEFAULT. . . . . . . . . . . . . . 76
7.1 Failure To Make Payments When Due . . . . . 76
7.2 Default in Other Agreements . . . . . . . . 76
7.3 Breach of Certain Covenants . . . . . . . . 77
7.4 Breach of Warranty. . . . . . . . . . . . . 77
7.5 Other Defaults Under Agreement or Loan
Documents. . . . . . . . . . . . . . . . 77
7.6 Involuntary Bankruptcy; Appointment of
Custodian, Etc.. . . . . . . . . . . . . 78
7.7 Voluntary Bankruptcy; Appointment of Custodian,
Etc. . . . . . . . . . . . . . . . . . . 78
7.8 Judgments and Attachments . . . . . . . . . 79
7.9 Dissolution . . . . . . . . . . . . . . . . 79
7.10 Pledge Agreement. . . . . . . . . . . . . . 79
7.11 Boyle Fleming Warrant Exercise Agreement. . 79
7.12 ERISA . . . . . . . . . . . . . . . . . . . 79
SECTION 8. THE ADMINISTRATIVE AGENT . . . . . . . . . . 81
8.1 Appointment . . . . . . . . . . . . . . . . 81
8.2 Delegation of Duties. . . . . . . . . . . . 81
8.3 Exculpatory Provisions. . . . . . . . . . . 82
8.4 Reliance by Administrative Agent. . . . . . 83
8.5 Notice of Default . . . . . . . . . . . . . 83
8.6 Non-Reliance on Administrative Agent and Other
Lenders. . . . . . . . . . . . . . . . . 84
8.7 Indemnification . . . . . . . . . . . . . . 84
8.8 Administrative Agent in its Individual Capacity 85
8.9 Holders . . . . . . . . . . . . . . . . . . 85
8.10 Resignation of the Administrative Agent;
Successor Administrative Agent . . . . . 86
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . 86
9.1 Representation of the Lenders . . . . . . . 86
9.2 Participations in and Assignments of Loans and
Notes. . . . . . . . . . . . . . . . . . 86
9.3 Expenses. . . . . . . . . . . . . . . . . . 89
9.4 Indemnity . . . . . . . . . . . . . . . . . 90
9.5 Setoff. . . . . . . . . . . . . . . . . . . 91
9.6 Amendments and Waivers. . . . . . . . . . . 92
9.7 Independence of Covenants . . . . . . . . . 93
9.8 Notices . . . . . . . . . . . . . . . . . . 93
9.9 Survival of Warranties and Certain Agreements 93
9.10 Failure or Indulgence Not Waiver;
Remedies Cumulative. . . . . . . . . . . 94
9.11 Headings. . . . . . . . . . . . . . . . . . 94
9.12 Applicable Law. . . . . . . . . . . . . . . 94
9.13 Successors and Assigns; Subsequent Holders of
Notes. . . . . . . . . . . . . . . . . . 94
9.14 Counterparts; Effectiveness . . . . . . . . 95
9.15 Consent to Jurisdiction; Venue; Waiver of Jury
Trial. . . . . . . . . . . . . . . . . . 95
9.16 Payments Pro Rata . . . . . . . . . . . . . 96
9.17 Taxes and Other Taxes . . . . . . . . . . . 97
9.18 Waiver of Stay, Extension or Usury Laws . . 99
9.19 Compensation. . . . . . . . . . . . . . . . 99
9.20 Requirements of Law . . . . . . . . . . . .100
SCHEDULES
A SUBSIDIARIES; CAPITALIZATION
B EXISTING INDEBTEDNESS; EXISTING CONTINGENT OBLIGATIONS
C EXISTING LIENS
D EXISTING INVESTMENTS
E BROKERS FEES
F UNDISCLOSED LIABILITIES
EXHIBITS
I FORM OF BRIDGE NOTE
II FORM OF TERM NOTE
III FORM OF COMPLIANCE CERTIFICATE
IV-A FORM OF NOTICE OF BORROWING
IV-B FORM OF NOTICE OF CONVERSION
V FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
VI FORM OF SECTION 9.2F(ii) CERTIFICATE
VII FORM OF OPINION OF CROUCH & HALLET - COUNSEL
TO THE COMPANY
VIII FORM OF OPINION OF ROBERT A. HURWICH -
COUNSEL TO LYNCH MANUFACTURING CORPORATION
IX FORM OF OPINION OF HAYNES AND BOONE, L.L.P. -
COUNSEL TO THE COMPANY
X FORM OF SOLVENCY CERTIFICATE
XI FORM OF PLEDGE AGREEMENT
XII FORM OF BOYLE FLEMING WARRANT EXERCISE AGREEMENT
XIII FORM OF ESCROW AGREEMENT
XIV FORM OF SUBORDINATION PROVISIONS
<PAGE>
This Senior Credit Agreement is dated as of April 5,
1996, and entered into by and among Spinnaker Industries, Inc., a
Delaware corporation (the "Company"), the Lenders (as defined in
Section 1) from time to time party hereto, and Bankers Trust
Company, as administrative agent for the Lenders (in such
capacity, and together with any successor thereto, the
"Administrative Agent").
RECITALS
WHEREAS, the Company desires that the Lenders extend a
senior credit facility to the Company in connection with the
Refinancing (as defined in Section 1);
NOW, THEREFORE, in consideration of the premises and
the agreements, provisions and covenants herein contained, the
Company and the Lenders hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 Certain Defined Terms
The following terms used in this Agreement shall have
the following meanings:
"Additional Security Documents" has the meaning
ascribed to such term in Section 5.16.
"Administrative Agent" has the meaning ascribed to such
term in the introduction to this Agreement.
"Affiliate," as applied to any Person, means any other
Person directly or indirectly controlling, controlled by, or
under common control with, that Person. For the purposes of this
definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by" and "under common control
with"), as applied to any Person, means (i) the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or
otherwise or (ii) the ownership of more than 5% of the voting
securities of that Person; provided that neither the Lenders, the
Administrative Agent nor any Affiliate thereof shall be treated
as an Affiliate of the Company or of any Subsidiary of the
Company or shall be deemed to be a holder of 5% or more of any
class of equity securities of the Company as said term is used in
Section 6.10.
"Agreement" means this Senior Credit Agreement dated as
of April 5, 1996, as it may be amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof.
"Alco" means Alco Standard Corporation, an Ohio
corporation.
"Applicable Rate" means for each Monthly Period the
greater of (i) the LIBOR Reference Rate for such Monthly Period
and (ii) the Treasury Rate for such Monthly Period.
"Applicable Spread" means 5% for the period from and
including the Closing Date and to but excluding the 90th day
following the Closing Date and for each subsequent 90-day period
the Applicable Spread in effect for the immediately preceding 90-day period
plus .25%.
"Assignment and Assumption Agreement" means an
Assignment and Assumption Agreement substantially in the form of
Exhibit V annexed hereto and appropriately completed.
"Bankruptcy Law" means Title 11 of the United States
Code entitled "Bankruptcy", as now and hereafter in effect, or
any successor statute or any other United States federal, state
or local law or the law of any other jurisdiction relating to
bankruptcy, insolvency, winding up, liquidation, reorganization
or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a
proceeding pursuant to or within the meaning of any Bankruptcy
Law, containing an adjudication of bankruptcy or insolvency, or
providing for liquidation, winding up, dissolution or
reorganization, or appointing a custodian of a debtor or of all
or any substantial part of a debtor's property, or providing for
the staying, arrangement, adjustment or composition of
indebtedness or other relief of a debtor.
"Boyle Fleming" means Boyle, Fleming, George & Co.,
Inc., a Texas corporation.
"Boyle Fleming Warrant Exercise Agreement" means the
Warrant Exercise Agreement between Boyle Fleming and the
Administrative Agent substantially in the form of Exhibit XII
annexed hereto, as it may be amended, supplemented or otherwise
modified from time to time.
"Bridge Loan" means, collectively, the loans made by
the Lenders pursuant to Section 2.1A.
"Bridge Loan Commitment" means the commitment of the
Lenders to make the Bridge Loan as set forth in Section 2.1A.
"Bridge Note" means the Original Bridge Note of the
Company issued pursuant to Section 2.1D and substantially in the
form of Exhibit I annexed hereto, as the same may be modified,
endorsed or amended from time to time and shall also include any
Subsequent Bridge Note.
"Brown Bridge" means Brown-Bridge Industries, Inc., a
Delaware corporation.
"Brown Bridge Shareholder Roll-Up Agreement" shall have
the meaning provided in Section 3.1A.13.
"BTCo" means Bankers Trust Company.
"Business Day" means any day excluding Saturday, Sunday
and any day which is a legal holiday under the laws of New York,
New York or is a day on which banking institutions therein
located are authorized or required by law or other governmental
action to close.
"Butler Warehouse" means the warehouse located in
Denver, Colorado that is currently owned by Alco (or a Subsidiary
thereof) and which is being sold to the Company.
"Capital Expenditures" means, with respect to any
Person, all expenditures by such Person which should be
capitalized in accordance with GAAP, including all such
expenditures with respect to fixed or capital assets (including,
without limitation, expenditures for maintenance and repairs
which should be capitalized in accordance with GAAP) and the
amount of Capitalized Lease Obligations incurred by such Person.
"Capital Lease," as applied to any Person, means any
lease of any property (whether real, personal or mixed) by that
Person as lessee which, in conformity with GAAP, is required to
be accounted for as a capital lease on the balance sheet of that
Person.
"Capitalized Lease Obligation" means obligations under
a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligations shall be the
capitalized amount of such obligations determined in accordance
with GAAP.
"Capital Stock" means (i) with respect to any Person
that is a corporation, any and all shares, interests,
participations or other equivalents (however designated and
whether or not voting) of corporate stock, including, without
limitation, each class of Common Stock and Preferred Stock of
such Person and (ii) with respect to any Person that is not a
corporation, any and all partnerships or other equity interests
of such Person.
"Cash Equivalents" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United
States Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one
year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc.;
(iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having
the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; (iv) certificates
of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least
"adequately capitalized" (as defined in the regulations of its
primary Federal banking regulator) and (b) has Tier 1 capital (as
defined in such regulations) of not less than $100,000,000;
(v) shares of any money market mutual fund that (a) has at least
95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has
net assets of not less than $500,000,000, and (c) has the highest
rating obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; and (vi) repurchase agreements
with respect to, and which are fully secured by a perfected
security interest in, obligations of a type described in clause
(i) or clause (ii) above and are with any commercial bank
described in clause (iv) above.
"Central Products" means Central Products Company, a
Delaware corporation.
"Change of Control" means (i) Lynch shall cease to own
100% of the capital stock of LMC or (ii) LMC and Boyle Fleming
shall in the aggregate cease to own on a fully diluted basis at
least 51% of the voting and economic interest in the Company's
capital stock or (iii) the occurrence of any "change of control"
or similar event under the Existing Central Products Credit
Agreement, the Existing Brown Bridge Credit Agreement or the
Existing Entoleter Credit Agreement.
"Change of Control Date" has the meaning ascribed to
such term in Section 2.5A(iv).
"Change of Control Offer" has the meaning ascribed to
such term in Section 2.5A(iv).
"Closing Date" means the date on or before March 29,
1996 on which the initial Bridge Loan is made and the conditions
set forth in Section 3.1 are satisfied or waived in accordance
with Section 9.6.
"Collateral Agent" means BTCo acting as collateral
agent for the Lenders pursuant to the Pledge Agreement and the
Additional Security Documents, and any successor thereto.
"Commission" means the Securities and Exchange
Commission.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents
(however designated and whether voting or non-voting) of, such
Person's common stock, whether outstanding on the Closing Date or
issued after the Closing Date, and includes, without limitation,
all series and classes of such common stock.
"Company" has the meaning ascribed to such term in the
introduction to this Agreement.
"Company Plan" means any multiemployer or single-employer plan, as
defined in Section 4001 of ERISA, which is maintained or contributed to
by (or to which there is an obligation to contribute of) the Company or a
Subsidiary of the Company.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit III annexed hereto delivered
to the Administrative Agent by the Company pursuant to Section
5.1(iv)(b).
"Contingent Obligation," as applied to any Person,
means any direct or indirect liability, contingent or otherwise,
of that Person (i) with respect to any Indebtedness, lease,
dividend or other obligation of another if the primary purpose or
intent thereof by the Person incurring the Contingent Obligation
is to provide assurance to the obligee of such obligation of
another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof,
(ii) with respect to any letter of credit issued for the account
of that Person or as to which that Person is otherwise liable for
reimbursement of drawings, or (iii) under Interest Rate
Agreements and Currency Agreements. Contingent Obligations shall
include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other
party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or
any balance sheet item, level of income or financial condition of
another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if
less, the amount to which such Contingent Obligation is
specifically limited.
"Contractual Obligation," as applied to any Person,
means any provision of any Security issued by that Person or of
any indenture, mortgage, deed of trust, contract, undertaking,
agreement or other instrument to which that Person is a party or
by which it or any of its properties is bound or to which it or
any of its properties is subject.
"Conversion Date" means December 30, 1996.
"Covered Taxes" has the meaning ascribed to such term
in Section 9.17.
"Currency Agreement" means any foreign exchange
contract, currency swap agreement, futures contract, option
contract, synthetic cap or other similar agreement or arrangement
designed to protect any Guarantor, the Company or any of the
Company's Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, interim receiver,
receiver and manager, trustee, assignee, liquidator, sequestrator
or similar official charged with maintaining possession or
control over property for one or more creditors, whether under
any Bankruptcy Law or otherwise.
"Dollars" or the sign "$" means the lawful money of the
United States of America.
"18% Subordinated Promissory Notes" means (i) the First
Amended and Restated Subordinated Promissory Note, dated April 5,
1996, in the principal amount of $964,950, issued by the Company
to Lynch and (ii) the First Amended and Restated Subordinated
Promissory Note, dated April 5, 1996, in the principal amount of
$321,650, issued by the Company to James B. Fleming, Jr. (as
attorney-in-fact and individually).
"Entoleter" means Entoleter, Inc., a Delaware
corporation.
"Environmental Claim" means any accusation, allegation,
notice of violation, claim, demand, abatement order or other
order or direction (conditional or otherwise) by any governmental
authority or any Person for any damage, including, without
limitation, personal injury (including sickness, disease or
death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties or
restrictions, in each case relating to, resulting from or in
connection with Hazardous Materials and relating to any
Guarantor, the Company, any of the Company's Subsidiaries, or any
of their respective Affiliates or properties.
"Environmental Laws" means all statutes, ordinances,
orders, rules, regulations, plans, policies or decrees and the
like relating to (i) environmental matters, including, without
limitation, those relating to fines, injunctions, penalties,
damages, contribution, cost recovery compensation, losses or
injuries resulting from the Release or threatened Release of
Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or
(iii) occupational safety and health, industrial hygiene, land
use or the protection of human, plant or animal health or
welfare, in any manner applicable to any Guarantor, the Company
or any of the Company's Subsidiaries or any of their respective
properties, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42
U.S.C. 9601 et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. 6901 et seq.), the Federal Water Pollu-
tion Control Act ( 33 U.S.C. 1251 et seq.), the Clean Air Act
(42 U.S.C. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. 136 et seq.), the Occupational Safety
and Health Act (29 U.S.C. 651 et seq.) and the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. 11001 et
seq.), each as amended or supplemented, and any analogous future
or present local, state and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of
determination.
"Environmental Lien" means a Lien in favor of a
Tribunal or other Person (i) for any liability under an
Environmental Law or (ii) for damages arising from or costs
incurred by such Tribunal or other Person in response to a
release or threatened release of hazardous or toxic waste,
substance or constituent into the environment.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder. Section references to
ERISA are to ERISA, as in effect at the date of this Agreement
and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" means each person (as defined in
Section 3(9) of ERISA) which together with the Company or any
Subsidiary of the Company would be deemed to be a "single
employer" within the meaning of Section 414(b), (c), (m) or (o)
of the Internal Revenue Code or (ii) as a result of the Company
or a Subsidiary of the Company being or having been a general
partner of such person.
"Escrow Account" has the meaning ascribed to such term
in the Escrow Agreement.
"Escrow Agreement" means an Escrow Agreement between
the Company and the Administrative Agent in the form of Exhibit
XIII annexed hereto, as the same may at any time be amended,
modified and supplemented and in effect.
"Event of Default" means each of the events set forth
in Section 7.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor statute.
"Existing Alco Subordinated Notes" means (i) the
Subordinated Promissory Notes aggregating $25,000,000 in
principal amount that were issued by the Company to Alco prior to
the Closing Date and (ii) the Subordinated Promissory Note in the
principal amount of $5,000,000 that was issued by Central
Products to Alco prior to the Closing Date.
"Existing Brown Bridge Credit Agreement" means the Loan
and Security Agreement, dated as of September 16, 1994, among
Brown Bridge, as borrower, and TransAmerica Business Credit
Corporation, as lender, as such Loan and Security Agreement is in
effect on the Closing Date and without giving effect to any
amendments, modifications, supplements or terminations thereof or
thereto after the Closing Date unless, and to the extent, such
change is permitted by Section 6.13 or the Required Lenders
specifically agree that the respective change will be given
effect to for purposes of this Agreement. Notwithstanding
anything to the contrary contained above, for purposes of
determining whether the Existing Brown Bridge Credit Agreement
remains in effect or has terminated, amendments, modifications,
supplements or terminations thereof shall be given effect to.
"Existing Central Products Credit Agreement" means the
Credit Agreement, dated as of September 29, 1995, among the
Company, as pledgor, Central Products, as borrower, various
lenders, and Heller Financial, Inc., as Agent, as such Credit
Agreement is in effect on the Closing Date and without giving
effect to any amendments, modifications, supplements or
terminations thereof or thereto after the Closing Date unless,
and to the extent, such change is permitted by Section 6.13 or
the Required Lenders specifically agree that the respective
change will be given effect to for purposes of this Agreement.
Notwithstanding anything to the contrary contained above, for
purposes of determining whether the Existing Central Products
Credit Agreement remains in effect or has terminated, amendments,
modifications, supplements or terminations thereof shall be given
effect to.
"Existing Contingent Obligations" has the meaning
ascribed to such term in Section 4.23.
"Existing Entoleter Credit Agreement" means the Loan
and Security Agreement, dated as of February 21, 1995, between
Entoleter, as borrower, and TransAmerica Business Credit
Corporation, as lender, as such Loan and Security Agreement is in
effect on the Closing Date and without giving effect to any
amendments, modifications, supplements or terminations thereof or
thereto after the Closing Date unless, and to the extent, such
change is permitted by Section 6.13 or the Required Lenders
specifically agree that the respective change will be given
effect to for purposes of this Agreement. Notwithstanding
anything to the contrary contained above, for purposes of
determining whether the Existing Entoleter Credit Agreement
remains in effect or has terminated, amendments, modifications,
supplements or terminations thereof shall be given effect to.
"Existing Indebtedness" has the meaning ascribed to
such term in Section 4.23.
"Facilities" means any and all real property
(including, without limitation, all buildings, fixtures or other
improvements located thereon) now, hereafter or heretofore owned,
leased, operated or used by the Company or their Subsidiaries or
any of their respective predecessors.
"Federal Funds Rate" means, for any period, a
fluctuating interest rate equal for each day during such period
to the weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System arranged
by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next 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 for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of
recognized standing selected by the Administrative Agent.
"Fee Letters" means (i) the Letter, dated March 18,
1996, between the Company and BTCo and (ii) the Letter, dated
April 5, 1996, between the Company and BTCo, and acknowledged by
LMC in a separate Letter dated April 5, 1996.
"Fixed Rate" means a rate of interest per annum equal
to 18.00%.
"Fixed Rate Loans" means Loans described in Section
2.3A(ii).
"GAAP" means those generally accepted accounting
principles and practices which are recognized as such by The
Financial Accounting Standards Board and which are consistently
applied for all periods after the date hereof so as to properly
reflect the financial conditions, and the results of operations
and changes in financial position, of any Guarantor or of the
Company and its Subsidiaries, except that any accounting
principle or practice required to be changed in order to continue
as a generally accepted accounting principle or practice may be
so changed.
"Hazardous Materials" means (i) any chemical, material
or substance at any time defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous waste," "restricted hazardous
waste," "infectious waste," "toxic substances" or any other
formulations intended to define, list or classify substances by
reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TCLP toxicity" or "EP toxicity" or words of similar
import under any applicable Environmental Laws or publications
promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling
fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas
or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per
million; (ix) pesticides; and (x) any other chemical, material
or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could
pose a hazard to the health and safety of the owners, occupants
or any Persons in the vicinity of any of the Facilities.
"Incur" means, with respect to any Indebtedness or
other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume, guarantee or
otherwise become liable in respect of such Indebtedness or other
obligation, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of
such Person (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing);
provided, however, that any amendment, modification or waiver of
any document pursuant to which Indebtedness was previously
Incurred shall only be deemed to be an Incurrence of Indebtedness
if and to the extent such amendment, modification or waiver (i)
increases the principal thereof or interest rate or premium
payable thereon or (ii) changes to an earlier date the stated
maturity thereof or the date of any scheduled or required
principal payment thereon or the time or circumstances under
which such Indebtedness shall be redeemed.
"Indebtedness" means, with respect to any Person,
(i) all indebtedness, obligations and liabilities of such Person
for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and
drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money, (iv) any
indebtedness, obligation or liability owed for all or any part of
the deferred purchase price of property or services, and (v) all
indebtedness, obligations and liabilities secured by any Lien on
any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person
except that "Indebtedness" shall not include current trade
payables and accrued expenses incurred in the ordinary course of
business and obligations under Interest Rate Agreements and
Currency Agreements (which constitute Contingent Obligations, not
Indebtedness).
"indemnified liabilities" has the meaning ascribed to
such term in Section 9.4.
"Indemnitees" has the meaning ascribed to such term in
Section 9.4.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against
fluctuations in interest rates.
"Interest Rate Determination Date" means, with respect
to any Monthly Period, the second Business Day on which banks in
New York and London are open prior to the first Business Day of
such Monthly Period.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended from time to time and the regulations
promulgated and the rulings issued thereunder. Section
references to the Internal Revenue Code are to the Internal
Revenue Code, as in effect at the date of this Agreement, and to
any subsequent provision of the Internal Revenue Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Investment" means (i) any direct or indirect purchase
or other acquisition of, or of a beneficial interest in, any
Securities of any other Person or (ii) any direct or indirect
loan, advance, extension of credit or capital contribution to any
other Person, including all indebtedness and accounts receivable
from that other Person that are not current assets or did not
arise from sales to that other Person in the ordinary course of
business. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such
Investment.
"Joint Venture" means a joint venture, partnership or
other similar arrangement, whether in corporate, partnership or
other legal form; provided, however, that, as to any such
arrangement in corporate form, such corporation shall not, as to
any Person of which such corporation is a Subsidiary, be
considered to be a Joint Venture to which such Person is a party.
"Laws" means all applicable statutes, laws, ordinances,
regulations, rules, orders, judgments, writs, injunctions or
decrees of any state, commonwealth, nation, territory,
possession, province, county, parish, town, township, village,
municipality or Tribunal, and "Law" means each of the foregoing.
"Lenders" means the Lenders listed on the signatures
hereto, and any assignee of any Lender in respect of any Loan,
Note or Loan Commitment to the extent of such assignment.
"LIBOR Rate Loans" means Loans that bear interest at
the LIBOR Reference Rate.
"LIBOR Reference Rate" means for each Monthly Period
the rate determined on the basis of the offered rates for
deposits in U.S. Dollars for a period of three months which
appear on the Reuters Screen LIBO Page as of 11:00 a.m., London
time, on the Interest Rate Determination Date for such Monthly
Period. If at least two rates appear on the Reuters Screen LIBO
Page, the rate for such Monthly Period will be the arithmetic
mean of such rates rounded upwards, if necessary, to the nearest
1/16 of 1%. If fewer than two rates appear on the Reuters Screen
LIBO Page, then such rate shall equal the interest rate per annum
at which deposits in U.S. Dollars for a period of three months
are offered by BTCo at approximately 11:00 a.m., London time, on
such Interest Rate Determination Date to first class banks in the
London interbank market.
"Lien" means any lien, mortgage, pledge, assignment,
security interest, charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any
security interest) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing.
"Litigation" means any action, suit, proceeding, claim,
lawsuit and/or investigation conducted or threatened by or before
any Tribunal.
"LMC" means Lynch Manufacturing Corporation, a Delaware
corporation.
"Loan Commitment" means the Bridge Loan Commitment and
the Term Loan Commitment.
"Loan Documents" means this Agreement, the Bridge
Notes, the Term Notes, the Pledge Agreement, the Escrow Agreement
and the Additional Security Documents.
"Loans" means the Bridge Loan and the Term Loan as each
may be outstanding.
"Lynch" means Lynch Corporation, a Delaware
corporation.
"Margin Stock" has the meaning assigned to that term in
Regulation U and Regulation G of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse
effect upon the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of
the Company or the Company and its Subsidiaries taken as a whole
or (ii) the material impairment of the ability of the Company to
perform, or the impairment of the ability of the Administrative
Agent or Lenders to enforce, the Obligations.
"Maturity Date" has the meaning ascribed to such term
in Section 2.2D.
"Maximum Cash Interest Rate" means an interest rate of
16% per annum; provided, that in computing such interest rate,
fees paid to the Administrative Agent and the Lenders shall not
be deemed an interest payment.
"Monthly Period" means each period commencing on the
15th calendar day of each month, if such day is a Business Day,
or the first Business Day succeeding the 15th calendar day of
each month and ending on the day next preceding the 16th Business
Day of the following Monthly Period; provided, however, that the
first Monthly Period shall commence on the Closing Date and shall
end on and exclude April 15, 1996.
"New Alco Subordinated Notes" means (i) the
Subordinated Convertible Promissory Note, dated April 5, 1996, in
the principal amount of $20,250,000 that is issued by the Company
to Alco on the Closing Date as part of the Refinancing and as
partial consideration for the purchase of the Butler Warehouse,
and (ii) the Subordinated Promissory Note, dated September 29,
1995, in the principal amount of $5,000,000 that was initially
issued by Central Products to Alco, and which has been assumed by
the Company and amended as of April 5, 1996 as part of the
Refinancing.
"Notes" means, collectively, the Bridge Notes and Term
Notes.
"Notice of Borrowing" means a notice substantially in
the form of Exhibit IV-A annexed hereto with respect to a
proposed borrowing.
"Notice of Conversion" means a notice substantially in
the form of Exhibit IV-B annexed hereto with respect to a
proposed conversion.
"Obligations" means all obligations of every nature of
the Company from time to time owed to the Lenders and the
Administrative Agent under the Loan Documents and the Fee
Letters, whether for principal, reimbursements, interest, fees,
expenses, indemnities or otherwise, and whether primary,
secondary, direct, indirect, contingent, fixed or otherwise
(including obligations of performance).
"Offer Payment Date" has the meaning ascribed to such
term in Section 2.5A(iv).
"Officers' Certificate" means, as applied to any
corporation, a certificate executed on behalf of such corporation
by its chairman of the board (if an officer) or its president or
one of its vice presidents and by its chief financial officer or
its treasurer; provided, however, that every Officers'
Certificate with respect to the compliance with a condition
precedent to the making of the Loans hereunder shall include
(i) a statement that the officer or officers making or giving
such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such condition
has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied
with.
"Original Bridge Note" has the meaning ascribed to such
term in Section 2.1D.
"Original Term Note" has the meaning ascribed to such
term in Section 2.2E.
"Other Taxes" has the meaning ascribed to such term in
Section 9.17.
"Payment Office" means the office of the Administrative
Agent located at One Bankers Trust Plaza, New York, New York
10006 or such other office as the Administrative Agent may
designate to the Company and the Lenders from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor
thereto.
"Permits" has the meaning ascribed to such term in
Section 4.20.
"Permitted Encumbrances" means (i) Liens granted to
secure the Obligations; (ii) Liens existing on the Closing Date
set forth on Schedule C hereto to the extent and in the manner
such Liens are in effect on the Closing Date; (iii) inchoate
Liens for taxes, assessments or governmental charges or claims
not yet due and payable or Liens for taxes, assessments or
governmental charges or claims being contested in good faith by
appropriate proceedings for which reserves have been established
in accordance with GAAP; (iv) statutory Liens of landlords and
banks and rights of offset, and Liens of carriers, warehousemen,
workmen, repairmen, mechanics and materialmen and other Liens
imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; (v) Liens
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, trade contracts, utility payments,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money); (vi) any attachment or judgment Lien not constituting a
Potential Event of Default or an Event of Default; (vii) leases
or subleases granted to others not interfering in any material
respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries; (viii) easements, rights-of-way,
restrictions, minor defects, encroachments or irregularities in
title and other similar charges or encumbrances not interfering
in any material respect with the ordinary conduct of the business
of the Company or any of its Subsidiaries; (ix) any (a) interest
or title of a lessor or sublessor under any lease,
(b) restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to (including without
limitation ground leases or other prior leases of the demised
premises, mortgages, mechanics liens, tax liens, and easements),
or (c) subordination of the interest of the lessee or sublessee
under such lease to any restrictions or encumbrance referred to
in the preceding clause (b); (x) Liens arising from filing UCC
financing statements for precautionary purposes relating solely
to true leases of personal property permitted by this Agreement
under which the Company or any of its Subsidiaries is a lessee;
and (xi) any zoning or similar law or right reserved to or vested
in any governmental office or agency to control or regulate the
use of any real property.
"Person" or "person" means and includes natural
persons, corporations, limited liability companies, limited
partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to such
term in Section 2.3B.
"Plan" means any multiemployer or single-employer plan,
as defined in Section 4001 of ERISA, which is maintained or
contributed to by (or to which there is an obligation to
contribute of) the Company or a Subsidiary of the Company or an
ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Company or a
Subsidiary of the Company or an ERISA Affiliate maintained,
contributed to or had an obligation to contribute to such plan.
"Pledge Agreement" means a Pledge Agreement among LMC,
Boyle Fleming, the Company and the Collateral Agent in the form
of Exhibit XI annexed hereto, as the same may at any time be
amended, modified and supplemented and in effect.
"Pledged Securities" has the meaning ascribed to such
term in the Pledge Agreement.
"Potential Event of Default" means a condition or event
which, after notice or lapse of time or both, would constitute an
Event of Default if that condition or event were not cured or
removed within any applicable grace or cure period.
"Preferred Stock" of any Person means any Capital Stock
of such Person that has preferential rights (as compared to any
other Capital Stock of such Person) with respect to dividends or
redemptions or upon liquidation.
"Proceedings" has the meaning ascribed to such term in
Section 5.1(ix).
"Refinancing" means (i) the refinancing of the Existing
Alco Subordinated Notes issued by the Company with $7,500,000 of
proceeds of the Bridge Loan and the issuance by the Company of a
New Alco Subordinated Note in the principal amount of $20,250,000
and (ii) the assumption by the Company of, and the amendment to,
the Existing Alco Subordinated Note initially issued by Central
Products in the principal amount of $5,000,000.
"Register" has the meaning ascribed to such term in
Section 5.11.
"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous
Materials into the indoor or outdoor environment (including,
without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the
movement of any Hazardous Material through the air, soil, surface
water, groundwater or property.
"Reportable Event" means an event described in
Section 4043(c) of ERISA with respect to a Plan other than those
events as to which the 30-day notice period is waived under
subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation
Section 2615.
"Required Lenders" means Lenders holding in the
aggregate more than 50% of the outstanding principal amount of
Notes.
"Restricted Payment" has the meaning ascribed to such
term in Section 6.3.
"Returns" has the meaning ascribed to such term in
Section 4.12.
"Section 9.2F(ii) Certificate" has the meaning ascribed
to such term in Section 9.2F(ii).
"Securities" means any stock, shares, partnership
interests, voting trust certificates, certificates of interest or
participation in any profit sharing agreement or arrangement,
bonds, debentures, options, warrants, notes, or other evidences
of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or
participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Subsequent Bridge Note" has the meaning ascribed to
such term in Section 2.1D.
"Subsequent Term Note" has the meaning ascribed to such
term in Section 2.2E.
"Subsidiary" means any corporation, association or
other business entity of which more than 50% of the total voting
power of shares of stock or other equity interest entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereto is at the
time owned or controlled, directly or indirectly, by any Person
or one or more of the other Subsidiaries of that Person or a
combination thereof.
"Take-Out Banks" has the meaning ascribed to such term
in Section 3.1L.
"Take-Out Notes" means debt securities of the Company
the proceeds of which shall be used to repay the Bridge Notes in
full issued on the terms and conditions set forth in the
engagement and related letters with the Take-Out Banks.
"Take-Out Securities" means any Securities of the
Company and/or the Guarantors the proceeds of which are used to
repay the Notes in full and any Securities of the Company issued
in accordance with Section 6.15 the proceeds of which are used to
refinance the Notes in part; including, without limitation, the
Take-Out Notes.
"Taxes" means all taxes, assessments, fees, levies,
imposts, duties, penalties, deductions, liabilities, withholdings
or other charges of any nature whatsoever from time to time or at
any time imposed by any Law or any Tribunal.
"Tax Transferee" has the meaning ascribed to such term
in Section 9.17.
"Term Loan" has the meaning ascribed such term in
Section 2.2A.
"Term Loan Commitment" has the meaning ascribed such
term in Section 2.2A.
"Term Notes" has the meaning ascribed to such term in
Section 2.2E.
"Transaction Costs" means the fees, costs and expenses
payable by the Company pursuant hereto and other fees, costs and
expenses payable by the Company or a Subsidiary of the Company in
connection with the Refinancing, provided, however, in no event
shall Transaction Costs include any accrued guarantee fees that
may be due and payable by the Company to Lynch in connection with
Lynch's guaranty of the Company's obligations under the Existing
Alco Subordinated Notes issued by the Company.
"Treasury Rate" means the yield to maturity at the time
of computation of three-month United States Treasury securities
(as compiled and published in the most recent Federal Reserve
Statistical Release H.15(519) that has become publicly available
on the Interest Rate Determination Date for such Monthly Period
(or, if such Statistical Release is no longer published, any
publicly available source of similar market data)).
"Treasury Rate Loans" means Loans that bear interest at
the Treasury Rate.
"Tribunal" means any government, any arbitration panel,
any court or any governmental department, commission, board,
bureau, agency, authority or instrumentality of the United States
or any state, province, commonwealth, nation, territory,
possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or
existing.
"Unfunded Current Liability" of any Plan, means the
amount, if any, by which the actuarial present value of the
accumulated plan benefits under the Plan as of the close of its
most recent plan year exceeds the fair market value of the assets
allocable thereto, each determined in accordance with Statement
of Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan's actuary in the most
recent annual valuation of the Plan for which actuarial
assumptions were used.
1.2 Accounting Terms
For the purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings
assigned to them in conformity with GAAP.
1.3 Other Definitional Provisions; Anniversaries
References to "Section" and "Sections" shall be to a
Section and Sections, respectively, of this Agreement unless
otherwise specifically provided. Any of the terms defined in
Section 1.1 may, unless the context otherwise requires, be used
in the singular or the plural depending on the reference. For
purposes of this Agreement, a monthly anniversary of the Closing
Date shall occur on the same day of the applicable month as the
day of the month on which the Closing Date occurred; provided,
however, that if the applicable month has no such day (i.e., 29,
30 or 31), the monthly anniversary shall be deemed to occur on
the last day of the applicable month.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND
LOANS; NOTES.
2.1 Bridge Loan and Bridge Note
A. Bridge Loan Commitment. Subject to the terms and
conditions of this Agreement and in reliance upon the
representations and warranties of the Company herein set forth,
the Lenders hereby agree to lend to the Company on the Closing
Date $8,500,000 in the aggregate (the "Bridge Loan"), each such
Lender committing to lend on a several (but not joint) basis up
to the amount set forth next to such Lender's name on the
signature pages hereto. The Lenders' commitments to make the
Bridge Loan to the Company pursuant to this Section 2.1A are
herein called individually, the "Bridge Loan Commitment" and
collectively, the "Bridge Loan Commitments."
B. Notice of Borrowing. When the Company desires to
borrow under this Section 2.1, it shall deliver to the
Administrative Agent a Notice of Borrowing no later than 11:00
A.M. (New York time), at least one Business Day in advance of the
Closing Date. The Notice of Borrowing shall specify (i) the
applicable date of borrowing (which shall be a Business Day) and
(ii) the amount of the Bridge Loan to be borrowed on such date.
Upon receipt of such Notice of Borrowing, the Administrative
Agent shall promptly notify each Lender of its share of the
Bridge Loan and the other matters covered by the Notice of
Borrowing.
C. Disbursement of Funds. (a) No later than 12:00
Noon (New York time) on the Closing Date, each Lender will make
available its pro rata share of the Bridge Loan requested to be
made on such date in the manner provided below. All amounts
shall be made available to the Administrative Agent in Dollars
and immediately available funds at the Payment Office and the
Administrative Agent promptly will make available to the Company
by depositing to its account at the Payment Office the aggregate
of the amounts so made available in the type of funds received.
Unless the Administrative Agent shall have been notified by any
Lender prior to the Closing Date that such Lender does not intend
to make available to the Administrative Agent its portion of the
Bridge Loan to be made on such date, the Administrative Agent may
assume that such Lender has made such amount available to the
Administrative Agent on such date, and the Administrative Agent,
in reliance upon such assumption, may (in its sole discretion and
without any obligation to do so) make available to the Company a
corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent by such Lender
and the Administrative Agent has made available same to the
Company, the Administrative Agent shall be entitled to recover
such corresponding amount from such Lender. If such Lender does
not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent
shall promptly notify the Company, and the Company shall
immediately pay such corresponding amount to the Administrative
Agent. The Administrative Agent shall also be entitled to
recover from the Lender or the Company, as the case may be,
interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the
Administrative Agent to the Company to the date such
corresponding amount is recovered by the Administrative Agent, at
a rate per annum equal to (x) if paid by such Lender, the
overnight Federal Funds Rate or (y) if paid by the Company, the
then applicable rate of interest on the Loans.
(b) Nothing herein shall be deemed to relieve any
Lender from its obligation to fulfill its Bridge Loan Commitment
hereunder or to prejudice any rights which the Company may have
against any Lender as a result of any default by such Lender
hereunder.
D. Bridge Notes. The Company shall execute and
deliver to each Lender on the Closing Date a Bridge Note dated
the Closing Date substantially in the form of Exhibit I annexed
hereto to evidence the portion of the Bridge Loan made on such
date by such Lender and with appropriate insertions
(collectively, the "Original Bridge Notes"). On each interest
payment date prior to the Conversion Date on which the Company
elects to pay a PIK Interest Amount pursuant to Section 2.3B, the
Company shall execute and deliver to each Lender on such interest
payment date a Bridge Note dated such interest payment date
substantially in the form of Exhibit I annexed hereto in a
principal amount equal to such Lender's pro rata portion of such
PIK Interest Amount owing to such Lender and with other
appropriate insertions (each a "Subsequent Bridge Note" and,
together with the Original Bridge Notes, the "Bridge Notes"). A
Subsequent Bridge Note shall bear interest from the date of its
issuance at the same rate then borne by all Bridge Notes.
E. Scheduled Payment of Bridge Loan. Subject to
Section 2.2, the Company shall pay in full the outstanding amount
of the Bridge Loan and all other Obligations owing hereunder no
later than December 30, 1996.
F. Termination of Bridge Loan Commitment. The Bridge
Loan Commitment hereunder shall terminate on April 5, 1996 if the
initial Bridge Loan is not made on or before such date. The
Company shall have the right, without premium or penalty, to
reduce or terminate the Bridge Loan Commitment of the Lenders
hereunder at any time on or prior to the Closing Date.
G. Pro Rata Borrowings. The Bridge Loan made under
this Agreement shall be made by the Lenders pro rata on the basis
of their respective Bridge Loan Commitments. It is understood
that no Lender shall be responsible for any default by any other
Lender of its obligation to make its portion of the Bridge Loan
hereunder and that each Lender shall be obligated to make its
portion of the Bridge Loan hereunder, regardless of the failure
of any other Lender to fulfill its commitments hereunder.
2.2 Term Loan and Term Note
A. Term Loan Commitment. Subject to the terms and
conditions of this Agreement and in reliance upon the
representations and warranties of the Company herein set forth,
the Lenders hereby agree, on the Conversion Date, upon the
request of the Company, to convert the then outstanding principal
amount of the Bridge Notes into a term loan (the "Term Loan"),
such Term Loan to be in an aggregate principal amount not
exceeding the then outstanding principal amount of the Bridge
Notes. The Lenders' commitments under this Section 2.2A are
herein called collectively, the "Term Loan Commitment."
B. Notice of Conversion/Borrowing. If the Company
does not repay the Bridge Loan in full on the Conversion Date
then the Company shall, subject to the satisfaction of the
conditions set forth in Section 3.2, convert the then outstanding
principal amount of the Bridge Notes into a Term Loan under this
Section 2.2, provided, in the event that the Bridge Loan is not
so converted, the Company shall be required to repay the Bridge
Loan and all other outstanding Obligations pursuant to Section
2.1E. The Company shall deliver to the Lenders a Notice of
Conversion no later than 11:00 A.M. (New York time), at least two
Business Days in advance of the Conversion Date. The Notice of
Conversion shall specify the principal amount of the Bridge Notes
outstanding on the Conversion Date to be converted into a Term
Loan.
C. Making of Term Loan. Upon satisfaction or waiver
of the conditions precedent specified in Section 3.2, each Lender
shall extend to the Company the Term Loan to be made on the
Conversion Date by such Lender by cancelling on its records a
corresponding principal amount of the Bridge Notes held by such
Lender.
D. Maturity of Term Loan. The Term Loan shall mature
and the Company shall pay in full the outstanding principal
amount thereof and accrued interest thereon on the fifth
anniversary of the Conversion Date (the "Maturity Date").
E. Term Notes. The Company, as borrower, shall
execute and deliver to the Lenders on the Conversion Date Term
Notes dated the Conversion Date substantially in the form of
Exhibit II annexed hereto to evidence the Term Loan made on such
date, in the principal amount of the Bridge Notes held by such
Lender on such date and with other appropriate insertions
(collectively, the "Original Term Notes"). On or after the
Conversion Date, on each interest payment date on which the
Company elects to pay a PIK Interest Amount pursuant to
Section 2.3B, the Company shall execute and deliver to each
Lender on such interest payment date a Term Note dated such
interest payment date substantially in the form of Exhibit II
annexed hereto in a principal amount equal to such Lender's pro
rata portion of the PIK Interest Amount owing to such Lender and
with other appropriate insertions (each a "Subsequent Term Note"
and, together with the Original Term Notes, the "Term Notes"). A
Subsequent Term Note shall bear interest at the same rate then
borne by all Term Notes.
2.3 Interest on the Loans
A. Rate of Interest. (i) The Loans shall bear
interest on the unpaid principal amount thereof from the date
made through maturity (whether by prepayment, acceleration or
otherwise) either at the Applicable Rate for each Monthly Period
plus the Applicable Spread or, to the extent provided in clause
(ii) below, at the Fixed Rate.
(ii) At any time on or after the time at which the
Applicable Rate plus the Applicable Spread on the Term Loan
equals 18%, at the request of any Lender, all or a portion of the
Term Loan owing to such Lender shall from such date until repaid,
bear interest at a fixed rate per annum equal to the Fixed Rate;
provided that no such conversion shall be permitted in respect of
amounts to be voluntarily prepaid following receipt of a notice
of prepayment pursuant to Section 2.5A. In order to request the
conversion of a LIBOR Rate Loan or a Treasury Rate Loan to a
Fixed Rate Loan, the Lender shall notify the Administrative Agent
in writing of its intention to do so at least twenty Business
Days prior to an interest payment date indicating the amount of
the Term Loan for which it is requesting conversion to a Fixed
Rate Loan, which shall be not less than $2,000,000 and increments
of $10,000 in excess thereof, and the Administrative Agent shall
so notify the Company at least 10 Business Days prior to such
next succeeding interest payment date. Upon the conversion of a
portion of a LIBOR Rate Loan or a Treasury Rate Loan to a Fixed
Rate Loan an appropriate notation will be made on the Term Note
and, on and after the first interest payment date following the
receipt by the Company of a notice hereunder, such portion of
the Term Loan which is converted to a Fixed Rate Loan shall
thereafter bear interest at the Fixed Rate until repaid.
(iii)In no event will the combined sum of interest (cash or otherwise)
on the Loans exceed 18.00% per annum.
B. Interest Payments. Interest shall be
payable (i) with respect to the Bridge Loan, in arrears on July
15, 1996, October 15, 1996, January 15, 1997 and upon any
prepayment of the Bridge Loan (to the extent accrued on the
amount being prepaid) and at maturity of the Bridge Loan, (ii)
with respect to the Term Loan (other than with respect to any
portion thereof that has been converted into a Fixed Rate Loan)
in arrears on each April 15, July 15, October 15 and January 15
of each year, commencing on the first of such dates to follow the
Conversion Date, (iii) with respect to a Fixed Rate Loan in
arrears on each July 15 and January 15 of each year, commencing
on the first of such dates to follow the respective conversion of
any LIBOR Rate Loan or Treasury Rate Loan to a Fixed Rate Loan
and (iv) with respect to the Term Loan, upon any prepayment of
the Term Loan (to the extent accrued on the amount being prepaid)
and at maturity of the Term Loan; provided, however, that if, on
any interest payment date, the interest rate borne by the Bridge
Loan or the Term Loan, as the case may be, exceeds the Maximum
Cash Interest Rate, the Company may pay all or a portion of the
interest payable in excess of the amount of interest that would
be payable on such date at the Maximum Cash Interest Rate by
issuance of Subsequent Bridge Notes or Subsequent Term Notes, as
the case may be, in an aggregate principal amount equal to the
amount of such interest being so paid (the "PIK Interest
Amount").
C. Post-Maturity Interest. Any principal
payments on the Loans not paid when due and, to the extent
permitted by applicable law, any interest payment on the Loans
not paid when due, in each case whether at stated maturity, by
notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is
2.00% per annum in excess of the rate of interest otherwise
payable under this Agreement for the Loans.
D. Computation of Interest. Interest on the
Loans shall be computed on the basis of a 360 day year and, with
respect to any amount of the Loans which are LIBOR Rate Loans or
Treasury Rate Loans, the actual number of days elapsed in the
period during which it accrues or, with respect to any amount of
the Loans which are Fixed Rate Loans, twelve 30-day months. In
computing interest on the Loans, the date of the making of the
Loans shall be included and the date of payment shall be
excluded; provided, however, that if a Loan is repaid on the same
day on which it is made, one day's interest shall be paid on that
Loan.
2.4 Fees
A. The Company agrees to pay to the
Administrative Agent all fees and other obligations in accordance
with, and at the times specified by, the Fee Letters.
2.5 Prepayments and Payments
A. Prepayments
(i) Voluntary Prepayments. The Company may,
upon not less than three Business Days' prior
written or telephonic notice confirmed in writing to
the Administrative Agent at any time and from time
to time, prepay the Loans made to the Company in
whole or in part in an aggregate minimum amount of
$500,000 and integral multiples of $100,000 in
excess of that amount; provided that to the extent
that all or any portion of the Term Loan is prepaid
prior to the three month anniversary of the
Conversion Date, such prepayment in respect of
principal shall be in an amount equal to 101.5% of
the aggregate principal amount prepaid.
Notice of prepayment having been given as aforesaid,
the principal amount of the Loans to be prepaid
shall become due and payable on the prepayment date.
Amounts of the Loans so prepaid may not be
reborrowed.
(ii) Mandatory Prepayments
(a) Prepayments from Capital
Contributions and Equity Issuances. Concurrently
with the receipt by the Company of cash proceeds
from any capital contribution or any sale or
issuance of its equity (other than proceeds received
from (i) the exercise of any warrants issued to any
Lender or any of its Affiliates in connection with
the transaction contemplated by this Agreement, (ii)
the exercise of any warrants issued to Boyle Fleming
to the extent that the proceeds thereof are required
to be (and are) deposited into the Escrow Account in
accordance with the terms of the Escrow Agreement
and (iii) the consummation of the transactions
contemplated by the Brown Bridge Shareholder Roll-Up
Agreement), the Company shall prepay the Loans in a
principal amount equal to the lesser of the cash
proceeds thereof (net of underwriting or placement
discounts commission and other reasonable costs
associated therewith) or the aggregate principal
amount of the Notes then outstanding.
(b) Prepayments from Issuances of Take-Out Securities
and Certain Other Indebtedness.
Concurrently with the receipt by the Company of cash
proceeds from the issuance or incurrence of Take-Out
Securities or other Indebtedness for borrowed money
(other than Indebtedness permitted to be Incurred
under Section 6.1 as such Section is in effect on
the Closing Date), the Company shall prepay the
Loans in a principal amount equal to the lesser of
the cash proceeds thereof (net of underwriting or
placement discounts and commissions and other
reasonable costs associated therewith) or the
aggregate principal amount of the Notes then
outstanding, it being understood, however, that the
Loans shall be prepaid in full with the proceeds of
the Take-Out Notes.
(c) Notice. The Company shall notify the
Administrative Agent of any prepayment to be made
pursuant to this Section 2.5A(ii) at least two
Business Days prior to such prepayment date (unless
shorter notice is satisfactory to the Required
Lenders).
(iii) Company's Mandatory Prepayment
Obligation; Application of Prepayments. All
prepayments shall include payment of accrued
interest on the principal amount so prepaid and
shall be applied to payment of interest before
application to principal.
(iv) Mandatory Offer to Purchase Notes.
(a) Upon the occurrence of a Change of Control
(the date of such occurrence, the "Change of Control
Date"), the Lenders shall have the right to require
the repurchase of all of the Notes pursuant to an
offer to purchase (the "Change of Control Offer")
described below in this Section 2.5A(iv) at a
purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued interest
thereon to the date of repurchase.
(b) The notice to the Administrative Agent
shall contain all instructions and materials
necessary to enable the Lenders to tender Notes.
(c) Within 30 days following any Change of
Control the Company shall mail a notice to the
Administrative Agent stating:
(1) that the Change of Control Offer is
being made pursuant to this Section 2.5A(iv)
and that all Notes validly tendered will be
accepted for payment;
(2) the purchase price and the purchase
date, which shall be no earlier than 30 days
nor later than 40 days from the date such
notice is mailed (the "Offer Payment Date");
(3) that any Note not tendered will
continue to accrue interest;
(4) that any Note accepted for payment
pursuant to the Change of Control Offer shall
cease to accrue interest after the Offer
Payment Date unless the Company shall default
in the payment of the repurchase price of the
Notes;
(5) that if a Lender elects to have a
Note purchased pursuant to a Change of Control
Offer it will be required to surrender the
Note, with the form entitled "Option of Lender
to Elect Purchase" on the reverse of the Note
completed, to the Company prior to 5:00 p.m.
New York time on the Offer Payment Date;
(6) that a Lender will be entitled to
withdraw its election if the Company receives,
not later than 5:00 p.m. New York time on the
Business Day preceding the Offer Payment Date,
a telegram, telex, facsimile transmission or
letter setting forth the principal amount of
Notes such Lender delivered for purchase, and a
statement that such Lender is withdrawing its
election to have such Note purchased; and
(7) that if Notes are purchased only in
part a new Note of the same type will be issued
in principal amount equal to the unpurchased
portion of the Notes surrendered.
(d) On or before the Offer Payment Date,
the Company shall (i) accept for payment Notes or
portions thereof which are to be purchased in
accordance with the above, and (ii) deposit at the
Payment Office Dollars sufficient to pay the
purchase price of all Notes to be purchased. The
Administrative Agent shall promptly mail to the
Lenders whose Notes are so accepted payment in an
amount equal to the purchase price.
(e) The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations
thereunder to the extent such laws and regulations
are applicable in connection with the purchase of
Notes pursuant to an offer hereunder. To the extent
the provisions of any securities laws or regulations
conflict with the provisions under this Section
2.5A(iv), the Company shall comply with the
applicable securities laws and regulations and shall
not be deemed to have breached its obligations under
this Section by virtue thereof.
B. Manner and Time of Payment. All payments
of principal, interest, fees and other amounts hereunder and
under the Notes by the Company shall be made without defense,
set-off or counterclaim and in same-day funds and delivered to
the Administrative Agent, unless otherwise specified, not later
than 11:00 A.M. (New York time) on the date due at the Payment
Office for the account of the Lenders or the Administrative
Agent, as the case may be; funds received by the Administrative
Agent after that time shall be deemed to have been paid by the
Company on the next succeeding Business Day. The Company hereby
authorizes the Administrative Agent to charge its account with
the Administrative Agent in order to cause timely payment to be
made of all principal, interest, fees and other amounts due
hereunder (subject to sufficient funds being available in its
account for that purpose).
C. Payments on Non-Business Days. Whenever
any payment to be made hereunder or under the Notes shall be
stated to be due on a day which is not a Business Day, the
payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of
the payment of interest hereunder or under the Notes or of the
commitment and other fees hereunder, as the case may be.
D. Notation of Payment. Each Lender agrees
that before disposing of any Note held by it, or any part thereof
(other than by granting participations therein), such Lender will
make a notation thereon of all principal payments previously made
thereon and of the date to which interest thereon has been paid
and will notify the Company of the name and address of the
transferee of that Note; provided, however, that the failure to
make (or any error in the making of) such a notation or to notify
the Company of the name and address of such transferee shall not
limit or otherwise affect the obligation of the Company hereunder
or under such Notes with respect to the Loans and payments of
principal or interest on any such Note.
2.6 Use of Proceeds
A. Bridge Loan. (i) $5,500,000 of proceeds
of the Bridge Loan shall be used to repay a like principal amount
of the Existing Alco Subordinated Notes issued by the Company as
part of the Refinancing, (ii) $1,000,000 of proceeds of the
Bridge Loan shall be applied to repay accrued interest on the
Existing Alco Subordinated Notes issued by the Company,
(iii) $1,000,000 of proceeds of the Bridge Loan will be used by
the Company to finance, in part, the purchase of the Butler
Warehouse from Alco (or a Subsidiary thereof) and (iv) $1,000,000
of proceeds of the Bridge Loan shall be used to pay Transaction
Costs.
B. Term Loan. The proceeds of the Term Loan
shall be used to cancel any outstanding amount of Bridge Notes
converted to Term Notes on the Conversion Date.
C. Margin Regulations. No portion of the
proceeds of any borrowing under this Agreement shall be used by
the Company in any manner which might cause the borrowing or the
application of such proceeds to violate the applicable
requirements of Regulation G, Regulation U, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
SECTION 3. CONDITIONS.
3.1 Conditions to Bridge Loan
The obligation of the Lenders to make the
Bridge Loan is subject to prior or concurrent satisfaction of
each of the following conditions:
A. On or before the Closing Date, all
corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all
documents incidental thereto shall be satisfactory in form and
substance to the Administrative Agent, and the Administrative
Agent shall have received on behalf of the Lenders the following
items, each of which shall be in form and substance satisfactory
to the Administrative Agent and, unless otherwise noted, dated
the Closing Date:
1. a certified copy of the Company's, LMC's
and Boyle Fleming's charter, together with a
certificate of status, compliance, good standing or
like certificate with respect to each such Person
issued by the appropriate government officials of
the jurisdiction of its incorporation and of each
jurisdiction in which it owns any material assets or
carries on any material business, each to be dated a
recent date prior to the Closing Date;
2. a copy of the Company's, LMC's and Boyle
Fleming's bylaws, certified as of the Closing Date
by its Secretary or one of its Assistant
Secretaries;
3. resolutions of the Company's, LMC's and
Boyle Fleming's Board of Directors approving and
authorizing the execution, delivery and performance
of (to the extent any such Person is a party to)
this Agreement, each of the other Loan Documents,
the engagement and related letters of the Take-Out
Banks and any other documents, instruments and
certificates required to be executed in connection
herewith and therewith and, in the case of the
Company, approving and authorizing the execution,
delivery and payment of the Notes and the issuance
or incurrence of the Take-Out Notes and the
Refinancing, each certified as of the Closing Date
by its Secretary or one of its Assistant Secretaries
as being in full force and effect without
modification or amendment;
4. signature and incumbency certificates of
the Company's, LMC's and Boyle Fleming's officers
executing this Agreement, the Bridge Notes and the
other Loan Documents to which such Person is a
party;
5. originally executed copies of this
Agreement and the Bridge Notes substantially in the
form of Exhibit I annexed hereto executed in
accordance with Section 2.1D drawn to the order of
the Lenders and with appropriate insertions;
6. an originally executed Notice of Borrowing
substantially in the form of Exhibit III annexed
hereto, signed by the President or a Vice President
of the Company on behalf of the Company in writing
delivered to the Administrative Agent;
7. originally executed copies of one or more
favorable written opinions of (I) Crouch & Hallet,
counsel for the Company, substantially in the form
of Exhibit VII annexed hereto and addressed to the
Administrative Agent and the Lenders, (II) Robert A.
Hurwich, counsel to LMC, substantially in the form
of Exhibit VIII annexed hereto and addressed to the
Administrative Agent and the Lenders,
(III) Haynes and Boone, L.L.P., counsel to the
Company, substantially in the form of Exhibit IX
annexed hereto and addressed to the Administrative
Agent and the Lenders and (IV) such other opinions
of counsel as the Administrative Agent shall have
reasonably requested and satisfactory to the
Administrative Agent;
8. a solvency certificate from the Company
substantially in the form of Exhibit X annexed
hereto;
9. true and correct copies of each of the
documents entered into in connection with the
Refinancing, including executed copies of the New
Alco Subordinated Notes, each of which documents
shall be in full force and effect and shall be in
form and substance satisfactory to the
Administrative Agent;
10. (a)(i) an Officers' Certificate from the
Company certifying that each of the Existing Central
Products Credit Agreement, the Existing Brown Bridge
Credit Agreement and the Existing Entoleter Credit
Agreement is in full force and effect on the Closing
Date and, except as provided below in this Section
3.1A(10), no term or condition thereof has been
amended, modified or waived from the form most
recently provided to the Administrative Agent prior
to the Closing Date and (ii) an Officers'
Certificate from the Company certifying that each of
Central Products, Brown Bridge and Entoleter has
performed or complied with all agreements and
conditions contained in the Existing Central
Products Credit Agreement, the Existing Brown Bridge
Credit Agreement and the Existing Entoleter Credit
Agreement, respectively and any agreements or
documents referred to therein required to be
performed or complied with by such party, and that
no such party is in default in the performance or
compliance with any of the terms or provisions
thereof;
(b) a true and correct copy of an amendment to
the Existing Brown Bridge Credit Agreement, which
amendment shall be in full force and effect and
shall be in form and substance satisfactory to the
Administrative Agent, to (i) permit the Company to
grant to the Collateral Agent, for the benefit of
the Lenders, a second priority perfected security
interest in the capital stock of Brown Bridge owned
by the Company, and the existing pledgee of the
capital stock of Brown Bridge under the Existing
Brown Bridge Credit Agreement shall agree to hold
such capital stock for the benefit of the Collateral
Agent on a junior and subordinated basis, (ii)
permit Brown Bridge to make payments to the Company
with respect to Brown Bridge's allocable share of
taxes payable by the Company and (iii) permit the
payments of dividends to the Company on a basis
satisfactory to the Administrative Agent;
(c) a true and correct copy of an amendment to
the Existing Central Products Credit Agreement,
which amendment shall be in full force and effect
and shall be in form and substance satisfactory to
the Administrative Agent, to permit Central Products
to pay cash dividends to the Company, to Incur at
least $5,000,000 of intercompany indebtedness that
is owed to the Company, to permit the payment of
interest and principal thereon by Central Products
and to modify Section 6.2A of the Existing Central
Products Credit Agreement in respect of Central
Products' fiscal quarter ending March 31, 1996, in
each case on a basis satisfactory to the
Administrative Agent (it being understood, however,
that the payment of such dividends, interest and
principal may be subject to compliance with the
financial covenants set forth in the Existing
Central Products Credit Agreement as in effect on
the Closing Date); and
(d) a true and correct copy of an amendment to
the Existing Entoleter Credit Agreement, which
amendment shall be in form and substance
satisfactory to the Administrative Agent, to (i)
permit Entoleter to make payments to the Company
with respect to Entoleter's allocable share of taxes
payable by the Company and (ii) permit the Company
to grant to the Collateral Agent, for the benefit of
the Lenders, a second priority perfected security
interest in the capital stock of Entoleter owned by
the Company, and the existing pledgee of the capital
stock of Entoleter under the Existing Entoleter
Credit Agreement shall agree to hold such capital
stock for the benefit of the Collateral Agent on a
junior and subordinated basis;
11. an executed copy of the amended 18%
Subordinated Promissory Notes, each of which shall
be in full force and effect and shall be in form and
substance satisfactory to the Administrative Agent;
12. an executed copy of a letter from the
Board of Directors of the Company (or a special
committee thereof) concerning the continued
engagement by the Company of Boyle Fleming, or
Richard J. Boyle and Ned N. Fleming, III, which
letter shall be in form and substance satisfactory
to the Administrative Agent;
13. an executed copy of (i) an Agreement made
and entered into by and among the Company, Brown
Bridge and K.C. Caldabaugh and (ii) an Agreement
made and entered into by and between Lynch and LMC
(collectively, the "Brown Bridge Shareholder Roll-Up
Agreement"), which Brown Bridge Shareholder Roll-Up
Agreement shall be in full force and effect and
shall be in form and substance satisfactory to the
Administrative Agent;
14. an originally executed copy of the Pledge
Agreement substantially in the form of Exhibit XI
annexed hereto and the delivery to the Collateral
Agent of the Pledged Securities referred to therein
(to the extent required to be delivered on the
Closing Date pursuant to the terms thereof);
15. an originally executed copy of the Boyle
Fleming Warrant Exercise Agreement substantially in
the form of Exhibit XII annexed hereto;
16. an originally executed copy of the Escrow
Agreement substantially in the form of Exhibit XIII;
17. an originally executed copy of the Fee
Letter referred to in clause (ii) of the definition
thereof;
18. a true and correct copy of the Company's
audited financial statements for its fiscal year
ended December 31, 1995, which financial statements
shall have been audited by Ernst & Young and shall
be in form and substance satisfactory to the
Administrative Agent; and
19. an executed copy of a letter from Lynch
addressed to the Company, Boyle Fleming, Richard J.
Boyle, Ned N. Fleming, III, and Bankers Trust
Company, as Administrative Agent, pursuant to which
Lynch shall agree (i) to defer any accrued guarantee
fees that may be due and owing by the Company to
Lynch in respect of Lynch's guaranty of the
Company's obligations under the Existing Alco
Subordinated Notes issued by the Company until such
time as all Obligations have been paid in full and
(ii) that notwithstanding any agreements or
arrangements to the contrary, Boyle Flemings,
Richard J. Boyle and Ned N. Fleming, III may enter
into and perform their respective obligation under
the Boyle Fleming Warrant Exercise Agreement and the
Pledge Agreement, which letter shall be in form and
substance satisfactory to the Administrative Agent.
B. On or before the Closing Date, all
authorizations, consents and approvals necessary in connection
with the transactions contemplated by the Loan Documents and
otherwise referred to herein or therein shall have been obtained
and remain in full force and effect and all applicable waiting
periods under Law shall have expired without any action being
taken by any competent authority (including, without limitation,
any Tribunal) which restrains, prevents or imposes materially
adverse conditions upon the completion of the transactions
contemplated by the Loan Documents and otherwise referred to
herein or therein.
C. On or before the Closing Date, the Company
shall have paid to the Administrative Agent the fees (including
legal fees and expenses) payable on the Closing Date pursuant to
Section 2.4.
D. On or before the Closing Date, the Company
Lynch, LMC and Boyle Fleming shall have performed all agreements
which this Agreement provides shall be performed on or before the
Closing Date.
E. Simultaneously with the making of the
Bridge Loan by the Lenders, the Company shall have delivered to
the Administrative Agent an Officers' Certificate from the
Company in form and substance satisfactory to the Administrative
Agent certifying that (i) the representations and warranties in
Section 4 and the representations and warranties in the other
Loan Documents, in each case to the extent made by the Company
are true, correct and complete in all material respects on and as
of the Closing Date to the same extent as though made on and as
of that date, (ii) on or prior to the Closing Date, the Company
has performed and complied with all covenants and conditions to
be performed and observed by the Company on or prior to the
Closing Date, (iii) no event shall have occurred and be
continuing or would result from the consummation of the borrowing
contemplated by the Notice of Borrowing which would constitute an
Event of Default or a Potential Event of Default and (iv) the
Refinancing has been consummated in accordance with the documents
delivered to the Administrative Agent on or prior to the Closing
Date.
F. Simultaneously with the making of the
Bridge Loan by the Lenders, the Refinancing shall be consummated
without the waiver of any conditions precedent thereto.
G. Neither the Company nor any of its
Subsidiaries shall have sustained any loss or interference with
respect to its businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, which loss or interference, in the sole judgment of
the Administrative Agent, has had or could reasonably be expected
to have a Material Adverse Effect; there shall not have been, and
nothing shall have occurred, which in the sole judgment of the
Administrative Agent, has had or could reasonably be expected to
have a Material Adverse Effect.
H. No event shall have occurred and be
continuing or would result from the consummation of the borrowing
contemplated by the Notice of Borrowing which would constitute an
Event of Default or a Potential Event of Default. All
representations and warranties set forth herein, in the other
Loan Documents and in the Boyle Fleming Warrant Exercise
Agreement shall be true and correct in all material respects as
though made on and as of the Closing Date.
I. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or
restrain the Lenders from making the Bridge Loan.
J. No Litigation by any entity (private or
governmental) shall be pending or threatened with respect to this
Agreement or any other Loan Document or the transactions
contemplated hereby or thereby, or which the Administrative Agent
shall determine in its sole discretion could reasonably be
expected to have a Material Adverse Effect.
K. The making of the Bridge Loan in the
manner contemplated in this Agreement shall not violate the
applicable provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve Board or any other regulation of
such Board.
L. The Company shall have engaged one or more
investment banks (collectively, the "Take-Out Banks")
satisfactory to the Administrative Agent to publicly sell or
privately place the Take-Out Notes. Such engagement shall have
been definitively documented on terms and conditions satisfactory
to the Administrative Agent, such documentation shall be in full
force and effect and the parties thereto shall be in compliance
with all agreements thereunder.
M. There shall not have occurred (i) any
general suspension of, or limitation on times or prices for,
trading in securities on the New York Stock Exchange or American
Stock Exchange or in the over-the-counter market in the United
States; (ii) a declaration of a banking moratorium or any
suspension of payments in respect of the banks in the United
States or New York; (iii) either (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or
(B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or
international calamity or emergency, or (C) any material change
in the financial markets of the United States which, in the sole
judgement of the Administrative Agent, makes it impracticable or
inadvisable to proceed with the consummation of the Refinancing
or the Bridge Loan or any of the other transactions contemplated
hereby including, without limitation, the issuance of the
Take-Out Notes; or (iv) in the case of any of the foregoing
existing at the time hereof, a material acceleration or worsening
thereof.
N. The results of the Administrative Agent's
financial, business, legal and accounting due diligence
investigations shall be satisfactory in all respects to the
Administrative Agent and the Administrative Agent shall have
received any information reasonably necessary to conduct such due
diligence.
O. Boyle Fleming shall have exercised
warrants to purchase shares of common stock of the Company
pursuant to the Boyle Fleming Warrant Exercise Agreement
resulting in net cash proceeds to the Company in an amount equal
to the amount of the interest payment on the Bridge Loan that is
due on each of July 15, 1996 and October 15, 1996, and the
Company shall have deposited such cash proceeds in the Escrow
Account pursuant to the Escrow Agreement.
3.2 Conditions to Term Loan
The obligation of the Lenders to make the Term
Loan on the Conversion Date is subject to the prior or concurrent
satisfaction or waiver of the following conditions precedent:
A. The Administrative Agent shall have
received in accordance with the provisions of Section 2.2B an
originally executed Notice of Conversion.
B. Neither the Company nor any of its
Subsidiaries shall be subject to a Bankruptcy Order or a
bankruptcy or other insolvency proceeding.
C. No Event of Default or Potential Event of
Default (whether matured or not) shall have occurred.
D. On the Conversion Date, the Administrative
Agent shall have received an Officers' Certificate from the
Company dated the Conversion Date and satisfactory in form and
substance to the Administrative Agent, to the effect that the
conditions in this Section 3.2 are satisfied on and as of the
Conversion Date.
E. The Company shall have executed and
delivered to the Administrative Agent on the Conversion Date for
delivery to the Lenders Term Notes dated the Conversion Date
substantially in the form of Exhibit II annexed hereto to
evidence the Term Loan, in the principal amount of (which
principal amount shall not exceed in the aggregate the aggregate
principal amount of the Bridge Loan outstanding on the Conversion
Date) the Term Loan and with other appropriate insertions.
F. The Company shall have paid any fees owing
pursuant to Section 2.4 in cash to the Administrative Agent, and
the Company shall have entered into the Warrant Agreement
referred to in the respective Fee Letter and shall have issued
the Warrants required to be issued thereunder on or prior to the
Conversion Date.
G. The making of the Term Loan shall not
violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve Board or any other regulation of such Board.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into
this Agreement and to make the Loans, the Company represents and
warrants to the Lenders that, at the time of execution hereof and
immediately after consummation of the Refinancing and the
incurrence of the Loans, the following statements are true,
correct and complete:
4.1 Organization and Good Standing;
Capitalization
(a) Each of the Company and each of its
Subsidiaries is a corporation duly organized and validly existing
and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and each of its Subsidiaries
has the corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which it
is doing business, except where failure to be so qualified or in
good standing, singly or in the aggregate, has not had and could
not reasonably be expected to have a Material Adverse Effect.
(b) All of the Subsidiaries of the Company as
of the Closing Date are identified in Schedule A annexed hereto.
The capital stock of each of the Subsidiaries of the Company
identified in Schedule A annexed hereto is duly authorized,
validly issued, fully paid and nonassessable.
(c) As of the Closing Date, the authorized
capital stock of the Company consists of 10,000,000 shares of
common stock, no par value, of which 2,715,694 shares are issued
and outstanding. All such outstanding shares have been duly and
validly issued, are fully paid and nonassessable. The Company
does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of,
or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock except as set forth in
Schedule A annexed hereto.
4.2 Authorization and Power
The Company has the corporate power and
requisite authority, and has taken all corporate action
necessary, to consummate the Refinancing and to execute, deliver
and perform the Loan Documents to which it is a party and each
other document and instrument to be delivered by it in connection
with the Refinancing or otherwise referred to in Section 3 and to
issue the Notes and the Take-Out Securities.
4.3 No Conflicts or Consents
(a) The execution and delivery of the Loan
Documents and each other document to be executed and delivered in
connection with the Refinancing or otherwise referred to in
Section 3, the consummation of each of the transactions herein or
therein contemplated, the compliance with each of the terms and
provisions hereof or thereof, and the issuance, delivery and
performance of the Notes and the Take-Out Securities, do not and
will not (i) violate any provision of any Law applicable to the
Company or any of its Subsidiaries, the Certificate or Articles
of Incorporation or Bylaws of any of them or any order, judgment
or decree of any court or other agency of government binding on
any of them, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under any material Contractual Obligation of the Company or any
its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of
any of the Company or any of its Subsidiaries (other than any
Liens created under the Loan Documents), (iv) require any
approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of the Company or any of its
Subsidiaries except for (x) such approvals or consents which will
be obtained on or before the Closing Date and (y) the approval of
the Company's stockholders to amend the Company's Certificate of
Incorporation to authorize a class a non-voting common stock in
connection with the issuance of warrants to purchase shares of
common stock of the Company as contemplated by the Fee Letters.
(b) No consent, approval, authorization or
order of any Tribunal or other Person is required in connection
with the execution and delivery by the Company of the Loan
Documents to which it is a party or any other document or
instrument to be delivered by the Company in connection with the
Refinancing or the consummation of the transactions contemplated
hereby or thereby, other than any such consent, approval,
authorization or order which has been obtained and remains in
full force and effect.
4.4 Enforceable Obligations
Each of the Loan Documents and each other
document or instrument to be delivered by the Company in
connection therewith and in connection with the Refinancing and
the other transactions contemplated herein have been duly
authorized; each of the Loan Documents and each such other
document or instrument to be executed and delivered by the
Company on or prior to the Closing Date have been duly executed
and delivered by the Company; and each of the Loan Documents and
each such other document or instrument to be executed and
delivered by the Company on or prior to the Closing Date are, and
each of the Loan Documents to be executed and delivered by the
Company after the Closing Date will be, upon such execution and
delivery, the legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms,
except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
4.5 Properties; Liens
The Company and each Subsidiary of the Company
have good, sufficient and legal title to all their respective
properties and assets, and all properties held under lease by any
of them are held under valid, subsisting and enforceable leases.
Except as permitted by this Agreement, all such properties and
assets owned or leased are so owned or leased free and clear of
Liens except as permitted under Section 6.2.
4.6 Financial Condition
(a) The consolidated statements of financial
condition of the Company and its Subsidiaries at December 31,
1995 and the related consolidated statements of income and cash
flow and changes in shareholders' equity of the Company and its
Subsidiaries for the fiscal year ended on such date, and furn-
ished to the Administrative Agent prior to the Closing Date
present fairly the financial condition of the Company and its
Subsidiaries at the date of such statements of financial
condition and the results of the operations of the Company and
its Subsidiaries for the respective fiscal year. All such
financial statements have been prepared in accordance with GAAP.
Since December 31, 1995, there has been no Material Adverse
Effect.
(b) On and as of the Closing Date, after
giving effect to the Refinancing and the Loans being incurred and
Liens created by the Company in connection therewith, (i) the sum
of the assets, at a fair valuation, of each of the Company on a
stand-alone basis and the Company and its Subsidiaries taken as a
whole will exceed its debts; (ii) the Company on a stand-alone
basis and the Company and its Subsidiaries taken as a whole has
not incurred and does not intend to incur, and does not believe
that they will incur, debts beyond its ability to pay such debts
as such debts mature; and (iii) the Company on a stand-alone
basis and the Company and its Subsidiaries taken as a whole will
have sufficient capital with which to conduct its business. For
purposes of this Section 4.6(b), "debt" means any liability on a
claim, and "claim" means (i) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
(c) Except as disclosed in the financial
statements delivered pursuant to Section 4.6(a) in accordance
with GAAP and as set forth on Schedule F annexed hereto, there
were as of the Closing Date no liabilities or obligations with
respect to the Company or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise
and whether or not due) which, either individually or in aggre-
gate, would be material to the Company on a stand-alone basis or
the Company and its Subsidiaries taken as a whole. As of the
Closing Date, the Company does not know of any basis for the
assertion against the Company or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not
disclosed in the financial statements delivered pursuant to
Section 4.6(a) in accordance with GAAP or as disclosed on
Schedule F annexed hereto which, either individually or in the
aggregate, could reasonably be expected to be material to the
Company or any of its Subsidiaries.
4.7 Full Disclosure
The financial projections (including, without
limitation, the pro forma financial statements included
therewith) furnished to the Administrative Agent by the Company
are complete, were prepared by or under the direction of an
officer of the Company and were prepared in good faith on the
basis of information and assumptions that the Company believed to
be fair, complete and reasonable as of the date of such
information, and which assumptions are believed to be fair,
complete and reasonable as of the date hereof. All other factual
information heretofore or contemporaneously furnished by or on
behalf of any Loan Party to the Administrative Agent or Lenders
for purposes of or in connection with this Agreement does not
contain any untrue statement of a material fact or omit to state
any material fact necessary to keep the statements contained
herein or therein from being misleading. No fact is known, no
condition exists nor has any event occurred which has not been
disclosed herein or in any other document, certificate or
statement furnished to the Administrative Agent or the Lenders
for use in the transactions contemplated hereby which could,
singly or in the aggregate, have a Material Adverse Effect.
4.8 No Default
No event has occurred and is continuing which
constitutes a Potential Event of Default or an Event of Default.
4.9 Compliance with Contracts, Etc.
Neither the Company nor any of its Subsidiaries
is in violation of (A) its Certificate or Articles of
Incorporation, By-Laws or other organizational documents or (B)
any applicable Law, except, with respect to this clause (B), for
such violations that could not reasonably be expected to, singly
or in the aggregate, have a Material Adverse Effect, or (C) any
order, decree or judgment of any Tribunal having jurisdiction
over any of them; and no event of default or event that but for
the giving of notice or the lapse of time, or both, would
constitute an event of default exists under any Contractual
Obligation to which the Company or any Subsidiary of the Company
is a party to or is otherwise subject to, except, with respect to
this clause (C), for such violations that could not reasonably be
expected to, singly or in the aggregate, have a Material Adverse
Effect.
4.10 No Litigation
There is no Litigation pending or, to the best
knowledge of the Company after due investigation, threatened, by,
against, or which may relate to or affect (a) any benefit plan or
any fiduciary or administrator thereof, (b) the transactions
contemplated by this Agreement, or (c) the Company or any of its
Subsidiaries which, singly or in the aggregate, could reasonably
be expected to have a Material Adverse Effect. There are no
outstanding injunctions or restraining orders prohibiting
consummation of any of the transactions contemplated by the Loan
Documents.
4.11 Use of Proceeds; Margin Stock, Etc.
The proceeds of the Bridge Loan will be used
solely for the purposes specified herein. None of such proceeds
will be used for the purpose of purchasing or carrying any Margin
Stock within the meaning of the applicable provisions of
Regulation G, T, U or X, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to
purchase or carry Margin Stock or for any other purpose which
might constitute this
transaction a "purpose credit" within the meaning of the
applicable provisions of Regulation G, T, U or X. Neither the
Company nor any of its Subsidiaries has taken or will take any
action which might cause any of the Loan Documents to violate the
applicable provisions of Regulation G, T, U or X, or any other
regulation of the Board of Governors of the Federal Reserve
System or to violate Section 8 of the Exchange Act or any rule or
regulation thereunder, in each case as now in effect or as the
same may hereafter be in effect.
4.12 Taxes
The Company and each of its Subsidiaries have
timely filed or caused to be timely filed with the appropriate
taxing authority, all Federal, state and other material returns,
statements, forms and reports for Taxes (the "Returns") required
to be filed by or with respect to the income, properties or
operations of the Company and/or any of its Subsidiaries. The
Returns accurately reflect all liability for Taxes of the Company
and its Subsidiaries for the periods covered thereby. The
Company and each of its Subsidiaries have paid all Taxes payable
by them other than Taxes which are not established, and other
than those contested in good faith and for which reserves have
been established in accordance with GAAP. There is no material
action, suit, proceeding, investigation, audit, or claim now
pending or, to the best knowledge of the Company, threatened by
any authority regarding any Taxes relating to the Company or any
of its Subsidiaries. Neither the Company nor any of its Sub-
sidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of
Taxes of the Company or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other
taxable periods of the Company or any of its Subsidiaries not to
be subject to the normally applicable statute of limitations.
Neither the Company nor any of its Subsidiaries has provided,
with respect to themselves or property held by them, any consent
under Section 341 of the Code.
4.13 ERISA
Each Company Plan is in substantial compliance
with ERISA and the Internal Revenue Code; no Reportable Event has
occurred with respect to a Company Plan; no Company Plan is
insolvent or in reorganization; the aggregate amount of Unfunded
Current Liabilities under all Company Plans does not exceed
$500,000; no Company Plan has an accumulated or waived funding
deficiency or has applied for an extension of any amortization
period within the meaning of Section 412 of the Internal Revenue
Code; all contributions required to be made with respect to a
Company Plan have been timely made; neither the Company nor any
Subsidiary of the Company has incurred any material liability to
or on account of a Company Plan pursuant to Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA
or Section 401(a)(29), 4971, 4975 or 4980 of the Internal Revenue
Code or expects to incur any material liability (including any
indirect, contingent or secondary liability) under any of the
foregoing Sections with respect to any Company Plan; no
proceedings have been instituted to terminate or appoint a
trustee to administer any Plan; no condition exists which
presents a likely risk to the Company or any Subsidiary of the
Company of incurring a material liability to or on account of a
Company Plan pursuant to the foregoing provisions of ERISA and
the Internal Revenue Code; using actuarial assumptions and
computation methods consistent with Part 1 of subtitle E of Title
IV of ERISA, the Company and each of its Subsidiaries do not have
any multiemployer plans (as defined in Section 4001(a)(3) of
ERISA); no lien imposed under the Internal Revenue Code or ERISA
on the assets of the Company or any Subsidiary of the Company
exists or is likely to arise on account of any Company Plan; and
the Company and each of its Subsidiaries may cease contributions
to or terminate any employee benefit plan maintained by any of
them without incurring any liability in excess of $1,500,000 in
the aggregate.
4.14 Compliance with Law
The Company and each of its Subsidiaries are in
compliance with all Laws, except where the failure to comply,
singly or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
4.15 Government Regulation
Neither the Company nor any of its Subsidiaries
is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Investment Company Act of
1940 (as any of the preceding acts have been amended) or other
Law which regulates the Incurring by the Company or any of its
Subsidiaries of Indebtedness, including, but not limited to, Laws
relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
4.16 Pledge Agreement
The security interests created in favor of the
Collateral Agent, as Pledgee, for the benefit of the Lenders
under the Pledge Agreement constitute first priority perfected
security interests in the Pledged Securities (or, in the case of
the capital stock of Brown Bridge and Entoleter, second priority
perfected security interests so long as the Existing Brown Bridge
Credit Agreement or the Existing Entoleter Credit Agreements, as
the case may be, is in effect), subject to no security interests
of any other Person (other than in favor of the lenders under the
Existing Brown Bridge Credit Agreement or the Existing Entoleter
Credit Agreement, as the case may be). No filings or recordings
are required in order to perfect (or maintain the perfection or
priority of) the security interests created in the Pledged
Securities and the proceeds thereof under the Pledge Agreement.
4.17 Intellectual Property
Each of the Company and each of its
Subsidiaries owns all the patents, trademarks, permits, service
marks, trade names, copyrights, licenses, franchises and
formulas, or rights with respect to the foregoing, and has
obtained assignments of all leases and other rights of whatever
nature, necessary for the present conduct of its business,
without any known conflict with the rights of others which, or
the failure to obtain which, as the case may be, could reasonably
be expected to result in a Material Adverse Effect.
4.18 Environmental Matters
(i) The operations of the Company and each of
its Subsidiaries (including, without limitation, all
operations and conditions at or in the Facilities)
comply with all Environmental Laws;
(ii) each of the Company and each of its
Subsidiaries has obtained all Permits under
Environmental Laws necessary to their respective
operations, and all such Permits are in good
standing, and each of the Company and each of its
Subsidiaries is in compliance with all terms and
conditions of such Permits;
(iii) neither the Company nor any of its
Subsidiaries has received (a) any notice or claim to
the effect that it is or may be liable to any Person
as a result of or in connection with any Hazardous
Materials or (b) any letter or request for
information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability
Act (42 U.S.C. 9604) or comparable state laws and,
to the best of the Company's knowledge, none of the
operations of the Company or any of its Subsidiaries
is the subject of any federal or state investigation
relating to or in connection with any Hazardous
Materials at any Facility or at any other location;
(iv) none of the operations of the Company or
any of its Subsidiaries is subject to any judicial
or administrative proceeding alleging the violation
of or liability under any Environmental Laws;
(v) neither the Company nor any of its
Subsidiaries or any of their respective Facilities
or operations are subject to any outstanding written
order or agreement with any governmental authority
or private party relating to (a) any Environmental
Laws or (b) any Environmental Claims;
(vi) neither the Company nor any of its
Subsidiaries has any contingent liability in
connection with any Release of any Hazardous
Materials by the Company or any of its Subsidiaries;
(vii) neither the Company nor any of its
Subsidiaries has filed any notice under any
Environmental Law indicating past or present
treatment or Release of Hazardous Materials at any
Facility, and neither the Company nor any of its
Subsidiaries' operations involves the generation,
transaction, treatment, storage or disposal of
hazardous waste, as defined under 40 C.F.R. Parts
260-270 or any state equivalent other than in
compliance with all Environmental Laws;
(viii) no Hazardous Materials exist on, under
or about any Facility in a manner that has a
reasonable possibility of giving rise to an
Environmental Claim, and neither the Company nor any
of its Subsidiaries has filed any notice or report
of a Release of any Hazardous Materials that has a
reasonable possibility of giving rise to an
Environmental Claim;
(ix) neither the Company nor any of its
Subsidiaries has disposed of any Hazardous Materials
in a manner that has a reasonable possibility of
giving rise to an Environmental Claim; and
(x) no unpermitted underground storage tanks
or surface impoundments are on or at any Facility.
Notwithstanding anything to the contrary in this Section 4.18,
the representations made in this Section 4.18 shall only be
untrue if the effect of any such failures and noncompliances of
the types described above, either individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
4.19 Survival of Representations and Warranties
Subject to Section 9.9, all representations and
warranties in the Loan Documents shall survive delivery of the
Bridge Notes and the Term Notes and the making of the Bridge Loan
and the Term Loan and the repayment of all Obligations.
4.20 Permits
Each of the Company and each of its
Subsidiaries have such certificates, permits, licenses,
franchises, consents, approvals, authorizations and clearances
that are material to the condition (financial or otherwise),
business, properties, operations or prospects of the Company or
the Company and its Subsidiaries taken as a whole ("Permits"),
and are in compliance in all material respects with all
applicable Laws of all Tribunals as are necessary to own, lease
or operate their respective properties and to conduct their
businesses in the manner as presently conducted, and all such
Permits are valid and in full force and effect. Each of the
Company and each of its Subsidiaries are in compliance in all
material respects with their respective obligations under such
Permits and no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination of such
Permits, except for any such revocation or termination as could
not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.21 Insurance
Each of the Company and each of its
Subsidiaries carry or are entitled to the benefits of insurance
(including self-insurance) in such amounts and covering such
risks as is generally maintained by companies of established
repute engaged in the same or similar businesses, and all such
insurance is in full force and effect.
4.22 Labor Matters
Neither the Company nor any of its Subsidiaries
is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no
unfair labor practice complaint pending against the Company or
any of its Subsidiaries or, to the best knowledge of the Company,
threatened against any of them, before the National Labor
Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so
pending against the Company or any of its Subsidiaries or, to the
best knowledge of the Company, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending
against the Company or any of its Subsidiaries or, to the best
knowledge of the Company, threatened against the Company or any
of its Subsidiaries and (iii) to the best knowledge of the
Company, no union representation question existing with respect
to the employees of the Company or any of its Subsidiaries,
except (with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate) such as
could not reasonably be expected to have a Material Adverse
Effect.
4.23 Indebtedness; etc.
(a) Schedule B sets forth a true and complete
list of all Indebtedness and Contingent Obligations of the
Company and its Subsidiaries as of the Closing Date and which is
to remain outstanding after giving effect thereto (excluding the
Obligations, such Indebtedness, the "Existing Indebtedness," and
such Contingent Obligations, the "Existing Contingent
Obligations"), in each case showing the aggregate principal
amount thereof and the name of the respective borrower and any
other entity which directly or indirectly guaranteed such debt.
(b) The subordination provisions contained in
the 18% Subordinated Promissory Notes and in the New Alco
Subordinated Notes are enforceable against the Company and the
respective holders of such notes, and all Obligations are within
the definition of "Senior Indebtedness" included in such
subordination provisions.
4.24 Take-Out Notes
The Company shall, on the date it executes and
delivers Take-Out Notes and the indenture governing the Take-Out
Notes, have the full corporate power, authority and capacity to
do so and to perform all of its obligations to be performed
thereunder; all corporate and other acts, conditions and things
required to be done and performed or to have occurred prior to
such execution and delivery to constitute them as valid and
legally binding obligations of the Company enforceable against
the Company in accordance with their respective terms shall have
been done and performed and shall have occurred in due
compliance with all applicable Laws; on the date of such
execution and delivery by the Company, the Take-Out Notes and the
indenture governing the Take-Out Notes shall constitute legal,
valid, binding and unconditional obligations of the Company,
enforceable against the Company in accordance with their
respective terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a
proceeding in equity or at law).
4.25 Broker's or Finder's Fees
Except as disclosed on Schedule E annexed
hereto, no broker's or finder's fees or commissions will be
payable by the Company with respect to any transaction contem-
plated hereby, and no similar fees or commissions will be payable
by the Company for any other services rendered to the Company or
any of its Subsidiaries in connection with the transactions
contemplated hereby and thereby. The Company represents,
warrants, covenants and agrees that the Company will indemnify
the Lenders and the Administrative Agent against, and hold each
of them completely harmless from and against, any and all claims,
demands or liabilities for broker's or finder's fees or similar
fees or commissions asserted to have been incurred in connection
with any of the transactions contemplated hereby.
SECTION 5. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that, until
the Loans and the Notes and all other obligations have been paid
in full, the Company will perform all covenants in this Section 5
required to be performed by it:
5.1 Financial Statements and Other Reports
The Company will maintain, and cause each of
its Subsidiaries to maintain, a system of accounting established
and administered in accordance with sound business practices to
permit preparation of consolidated financial statements in
conformity with GAAP. The Company will deliver, as applicable,
to each Lender and the Administrative Agent:
(i) within 30 days after the end of each
fiscal month of the Company, the consolidated
balance sheet of the Company and its Subsidiaries as
at the end of such fiscal month and the related
consolidated statements of income and retained
earnings for such fiscal month and for the elapsed
portion of the fiscal year ended with the last day
of such month, in each case setting forth
comparative figures for the corresponding month in
the prior fiscal year and the budgeted figures for
such month as set forth in the respective budget
delivered pursuant to Section 5.1(v);
(ii) within 45 days after the close of the
first three quarterly accounting periods in each
fiscal year of the Company, the consolidated and
consolidating balance sheets of the Company and its
Subsidiaries as at the end of such quarterly
accounting period and the related consolidated and
consolidating statements of income and retained
earnings and consolidated statements of cash flows
for such quarterly accounting period and for the
elapsed portion of the fiscal year ended with the
last day of such quarterly accounting period, all of
which shall be certified by the Chief Financial
Officer or Treasurer of the Company, subject to
normal year-end audit adjustments;
(iii) within 90 days after the close of each
fiscal year of the Company, the consolidated and
consolidating balance sheets of the Company and its
Subsidiaries as at the end of such fiscal year and
the related consolidated and consolidating
statements of income and retained earnings and of
cash flows for such fiscal year setting forth
comparative figures for the preceding fiscal year
and certified (x) in the case of the consolidated
financial statements, by Ernst & Young or such other
independent certified public accountants of
recognized national standing reasonably acceptable
to the Administrative Agent, together with a report
of such accounting firm stating that in the course
of its regular audit of the financial statements of
the Company and its Subsidiaries, which audit was
conducted in accordance with generally accepted
auditing standards, such accounting firm obtained no
knowledge of any Event of Default which has occurred
and is continuing or, if in the opinion of such
accounting firm such an Event of Default has
occurred and is continuing, a statement as to the
nature thereof and (y) in the case of the
consolidating financial statements, by the Chief
Financial Officer or Treasurer of the Company;
(iv) together with each delivery of financial
statements pursuant to clauses (ii) and (iii) above,
(a) an Officers' Certificate of the Company, stating
that the signers have reviewed the terms of this
Agreement and the Notes and have made, or caused to
be made under their supervision, a review in
reasonable detail of the transactions and condition
the Company and its Subsidiaries during the
accounting period covered by such financial
statements and that such review has not disclosed
the existence during or at the end of such
accounting period, and that the signers do not have
knowledge of the existence as at the date of the
Officers' Certificate, of any condition or event
which constitutes an Event of Default or a Potential
Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period
of existence thereof and what action the Company has
taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance (as
determined in accordance with GAAP) during and at
the end of such accounting periods with the
restrictions contained in Sections 5.15, 6.1, 6.2,
6.3, 6.4, 6.5, 6.6, 6.9, 6.10 and 6.16;
(v) no later than the commencement of the
first day of each fiscal year of the Company
(commencing with the fiscal year beginning January
1, 1997), a budget in form satisfactory to the
Administrative Agent (including budgeted statements
of income and sources and uses of cash and balance
sheets) prepared by the Company for (x) each of the
twelve months of such fiscal year prepared in detail
and (y) each of the two years immediately following
such fiscal year prepared in summary form, in each
case, of the Company and its Subsidiaries on a
consolidated basis and of the Company and each of
its Subsidiaries on a consolidating basis,
accompanied by the statement of the Chief Financial
Officer of the Company to the effect that, to the
best of such officer's knowledge, the budget is a
reasonable estimate for the period covered thereby;
(vi) promptly upon receipt thereof (unless
restricted by applicable professional standards),
copies of all reports submitted to the Company or
any of its Subsidiaries by independent certified
public accountants in connection with each annual,
interim or special audit of the financial statements
of the Company and its Subsidiaries made by such
accountants, including, without limitation, any
comment letter submitted by such accountants to
management in connection with their annual audit;
(vii) promptly upon the sending or filing
thereof, copies of (a) all financial statements,
reports, notices and proxy statements sent or made
available generally by the Company to its security
holders or by any Subsidiary of the Company to its
security holders other than the Company, (b) all
regular and periodic reports and all registration
statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by the Company
or any of its Subsidiaries with any securities
exchange or with the Commission or any governmental
or private regulatory authority, and (c) all press
releases and other statements made available
generally by the Company or any of its Subsidiaries
to the public concerning material developments in
the business of the Company or any of its
Subsidiaries;
(viii) promptly upon any officer of the
Company obtaining knowledge (a) of any condition or
event which constitutes an Event of Default or a
Potential Event of Default, or becoming aware that
any Lender or the Administrative Agent has given any
notice or taken any other action with respect to a
claimed Event of Default or a Potential Event of
Default, (b) that any Person has given any notice to
the Company or any Subsidiary of the Company or
taken any other action with respect to a claimed
default or event or condition which might result in
an Event of Default referred to in Section 7.2,
(c) of any condition or event which would be
required to be disclosed in a current report filed
with the Commission on Form 8-K whether or not the
Company is required to file such reports under the
Exchange Act, or (d) of the occurrence of any event
or change that has caused or evidences, either in
any case or in the aggregate, a Material Adverse
Effect, an Officers' Certificate of the Company
specifying the nature and period of existence of any
such condition or event, or specifying the notice
given or action taken by such holder or Person and
the nature of such claimed default, Event of
Default, Potential Event of Default, event or
condition, and what action the Company has taken, is
taking and proposes to take with respect thereto;
(ix) promptly upon any officer of the Company
obtaining knowledge of (X) the institution of, or
threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental
investigation or arbitration against or affecting
the Company or any of its Subsidiaries or any
property of the Company or any of its Subsidiaries
(collectively, "Proceedings") or (Y) any material
development in any Proceeding that, in any case:
(1) if adversely determined, could
reasonably be expected to give rise to a
Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent
the consummation of, or to recover any damages
or obtain relief as a result of, the
transactions contemplated by this Agreement and
the other Loan Documents;
written notice thereof together with such other
information as may be reasonably available to the
Company to enable Lenders and their counsel to
evaluate such matters;
(x) as soon as practicable after the last day
of each fiscal year of the Company, a report in form
and substance satisfactory to the Administrative
Agent outlining all material insurance coverage
maintained as of the date of such report by the
Company and its Subsidiaries all material insurance
coverage planned to be maintained by such Persons in
the subsequent fiscal year;
(xi) promptly upon its becoming available, one
copy of each report sent by the Company or any of
its Subsidiaries to any Tribunal pursuant to any
Environmental Law, and notice to each Lender, in
writing, promptly upon the Company's learning that
the Company or any of its Subsidiaries has received
notice or otherwise learned of any claim, demand,
action, event, condition, report or investigation
indicating any potential or actual liability arising
in connection with (x) the non-compliance with or
violation of the requirements of any Environmental
Law which could reasonably be excepted to have,
individually or in the aggregate, a Material Adverse
Effect, (y) the release or threatened release of any
toxic or hazardous waste, substance or constituent
into the environment which might have, individually
or in the aggregate, a Material Adverse Effect or
which release the Company or any of its Subsidiaries
would have a duty to report to a Tribunal under an
Environmental Law, or (z) the existence of any
Environmental Lien on any properties or assets of
any Guarantor, the Company or any of the its
Subsidiaries;
(xii) promptly after the availability thereof,
copies of all amendments to the Certificate or
Articles of Incorporation or By-laws of the Company
or any of its Subsidiaries;
(xiii) while any of the Notes remain
outstanding, upon request of any holder of Notes,
the information specified in Rule 144A(d)(4) under
the Securities Act of 1933, as amended, unless the
Company is then subject to Section 13 or 15(d) of
the Exchange Act; and
(xiv) with reasonable promptness, such other
information and data with respect to the Company or
any of its Subsidiaries or any of their respective
property, business or assets as from time to time
may be reasonably requested by the Administrative
Agent or any Lender.
5.2 Corporate Existence, Etc.
The Company will, and will cause each of its
Subsidiaries to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its
material rights, franchises, licenses and patents; provided,
however, that nothing in this Section 5.2 shall prevent (i) sales
of assets in accordance with Section 6.6 or (ii) the withdrawal
by the Company or any of the its Subsidiaries of its
qualification as a foreign corporation in any jurisdiction where
such withdrawal could not reasonably be expected to have a
Material Adverse Effect.
5.3 Payment of Taxes and Claims; Tax
Consolidation
The Company will, and will cause each of its
Subsidiaries to, pay all Taxes, assessments and other
governmental charges imposed upon it or any of its properties or
assets or in respect of any of its franchises, business, income
or property, in each case on a timely basis, and all claims
(including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and
payable and which by law have or may become a Lien upon any of
its properties or assets prior to the time when any penalty or
fine shall be incurred with respect thereto, provided, however,
that no such charge or claim need be paid if being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
5.4 Maintenance of Properties; Insurance
The Company will maintain or cause to be
maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used or useful in
the business of the Company and its Subsidiaries and from time to
time promptly will make or cause to be made all necessary
repairs, renewals and replacements thereof. The Company will
maintain or cause to be maintained, with financially sound and
reputable insurers or with self insurance programs, in each case
to the extent consistent with prudent business practices and
customary in their respective industries, insurance with respect
to its properties and business and the properties and businesses
of its Subsidiaries against loss or damage of the kinds
(including, in any event, business interruption insurance) and in
the amounts customarily carried or maintained under similar
circumstances by corporations of established reputation engaged
in similar businesses and owning similar properties in the same
general areas in which the Company or any of its Subsidiaries, as
the case may be, operates.
5.5 Inspection
The Company will permit any authorized
representatives designated by the Administrative Agent or the
Lenders to visit and inspect any of the properties of the Company
or its Subsidiaries, including, without limitation, its and their
financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent
public accountants, all upon reasonable notice and at such
reasonable times during normal business hours and as often as may
be reasonably requested.
5.6 Compliance with Laws, Etc.
The Company will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable
Laws of any Tribunal, noncompliance with which, singly or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
5.7 Maintenance of Accurate Records, Etc.
The Company will keep, and will cause each of
its Subsidiaries to keep, true books and records and accounts in
which full and correct entries will be made of all its respective
business transactions, and will reflect, and cause each of its
Subsidiaries to reflect, in its respective financial statements
adequate accruals and appropriations to reserves.
5.8 Take-Out Financing
A. The Company will take any and every action
necessary or desirable, to the extent within the power of the
Company, so that the Take-Out Banks can, as soon as practicable
after the Closing Date, publicly sell or privately place Take-Out
Notes.
B. The Company agrees that upon demand of the
Take-Out Banks or the Required Lenders, at any time and from time
to time following the Closing Date and prior to the Conversion
Date, the Company will cause the issuance and sale of Take-Out
Notes; provided that (i) the interest rate thereon shall be
determined by the Take-Out Banks, in light of the then prevailing
market conditions and market rates, but in no event shall the
annual interest rate on the Take-Out Notes exceed 16%; (ii) in
the event that the transactions contemplated by the Brown Bridge
Shareholder Roll-Up Agreement are not consummated by the time
that the Take-Out Notes are sold or issued, the Take-Out Banks
shall have the right to request that the Company issue to the
prospective holders of such Take-Out Notes, and upon such request
the Company agrees to issue to such prospective holders, common
equity of the Company (or warrants to purchase common equity of
the Company) on a basis reasonably satisfactory to the Take-Out
Banks but only to the extent that the Take-Out Banks have
reasonably determined that the issuance of such equity is
necessary to effect the sale or issuance of the Take-Out Notes;
(iii) the Take-Out Banks shall determine whether the Take-Out
Notes shall be issued through a public offering or a private
placement and, if issued in a private placement, the Take-Out
Notes will be accompanied by customary registration rights; (iv)
in no event will the Take-Out Notes have terms and conditions
that are more restrictive in any material respect than those
terms and conditions set forth in this Agreement; and (v) in no
event will the Company be required to sell more than $110,000,000
aggregate principal amount of Take-Out Notes pursuant to this
Section 5.8B.
5.9 ERISA Compliance
As soon as possible and, in any event, within
10 days after the Company or any Subsidiary of the Company knows
or has reason to know of the occurrence of any of the following,
the Company will deliver to each of the Lenders a certificate of
the chief financial officer of the Company setting forth details
as to such occurrence and the action, if any, that the Company or
such Subsidiary is required or proposes to take, together with
any notices required or proposed to be given to or filed with or
by the Company, such Subsidiary, the PBGC, a Company Plan
participant or the Company Plan administrator with respect
thereto: that a Reportable Event has occurred with respect to a
Company Plan; that an accumulated funding deficiency has been in-
curred or an application could reasonably be expected to be or
has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any
required installment payments) or an extension of any
amortization period under Section 412 of the Internal Revenue
Code with respect to a Company Plan; that a contribution required
to be made to a Company Plan has not been timely made; that a
Company Plan has been or could reasonably be expected to be
terminated, reorganized, partitioned or declared insolvent under
Title IV of ERISA; that a Company Plan has an Unfunded Current
Liability giving rise to a lien under ERISA or the Internal
Revenue Code; that proceedings could reasonably be expected to or
have been instituted to terminate or appoint a trustee to
administer a Company Plan; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent con-
tribution to a Company Plan; that the Company or any Subsidiary
of the Company will or could reasonably be expected to incur any
accrued post-retirement benefit material liability (including any
material contingent or secondary liability) to or on account of
the termination of or withdrawal from a Company Plan under
Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
with respect to a Company Plan under Section 401(a)(29), 4971,
4975 or 4980 of the Internal Revenue Code or Section 409 or
502(i) or 502(l) of ERISA; or that the Company or any Subsidiary
of the Company may incur any accrued post-retirement benefit
liability in excess of $100,000 in the aggregate pursuant to any
employee welfare benefit plan (as defined in Section 3(1) of
ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA)
or any employee pension benefit plan (as defined in Section 3(2)
of ERISA)). The Company will deliver to each of the Lenders a
complete copy of the annual report (Form 5500) of each Company
Plan (including, to the extent required, the related financial
and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required
to be filed with the Internal Revenue Service. In addition to
any certificates or notices delivered to the Lenders pursuant to
the first sentence hereof, copies of annual reports and any
material notices received by the Company or any Subsidiary of the
Company with respect to any Company Plan shall be delivered to
the Lenders no later than 10 days after the date such report has
been filed with the Internal Revenue Service or such notice has
been received by the Company or any Subsidiary of the Company, as
applicable.
5.10 Payments in U.S. Dollars
All payments of any Obligations to be made
hereunder or under the Notes by the Company, or any other obligor
with respect thereto, shall be made solely in Dollars or, to the
extent permitted herein, PIK Interest Amounts, or such other
currency as is then legal tender for public and private debts in
the United States of America.
5.11 Register
The Company hereby designates the
Administrative Agent to serve as the Company's agent, solely for
purposes of this Section 5.11, to maintain a register (the
"Register") on which it will record the Loans made by each of the
Lenders and each repayment in respect of the principal amount of
the Loans of each Lender. Failure to make any such recordation,
or any error in such recordation, shall not affect the Company's
obligations in respect of such Loans. With respect to any
Lenders, the transfer of the Loan Commitments of such Lender and
the rights to the principal of, and interest on, any Loan made
pursuant to such Loan Commitments shall not be effective until
such transfer is recorded on the Register maintained by the
Administrative Agent with respect to ownership of such Loan
Commitments and Loans and prior to such recordation all amounts
owing to the transferor with respect to such Loan Commitments and
Loans shall remain owing to the transferor. The registration of
assignment or transfer of all or part of any Loan Commitments and
Loans shall be recorded by the Administrative Agent on the
Register only upon the receipt by the Administrative Agent of a
properly executed and delivered Assignment and Assumption
Agreement pursuant to Section 9.2A. Coincident with the delivery
of such an Assignment and Assumption Agreement to the
Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Lender
shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes of the same type and in the same aggregate
principal amount shall be issued to the assigning or transferor
Lender and/or the new Lender. The Company agrees to indemnify
the Administrative Agent from and against any and all losses,
claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative
Agent in performing its duties under this Section 5.11.
5.12 Lenders Meeting
The Company will participate in a meeting with
the Lenders once during each fiscal year to be held at a location
and a time selected by the Company and reasonably satisfactory to
the Required Lenders.
5.13 End of Fiscal Years; Fiscal Quarters
The Company will cause (i) each of its, and
each of its Subsidiaries', fiscal years to end on December 31,
and (ii) each of its, and each of its Subsidiaries', fiscal
quarters to end on March 31, June 30, September 30 and December
31.
5.14 Performance of Obligations
The Company will, and will cause each of its
Subsidiaries to, perform all of its obligations under the terms
of each mortgage, indenture, security agreement and other debt
instrument by which it is bound, except such non-performances as
could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.15 Incorporation by Reference
The Company will cause each of Brown Bridge,
Central Products and Entoleter to comply with each of the
covenants contained in Sections 11(a) through 11(c) of the
Existing Brown Bridge Credit Agreement, Sections 6.2 through 6.5
of the Existing Central Products Credit Agreement and Sections
11(a) through 11(c) of the Existing Entoleter Credit Agreement,
respectively, which Sections, together with all definitions in
the Existing Brown Bridge Credit Agreement, in the Existing
Central Products Credit Agreement and in the Existing Entoleter
Credit Agreement applicable to such Sections, are hereby
incorporated by reference as if set forth herein in their
entirety (in each case as such Sections and definitions are in
effect on the Closing Date and without giving effect to any
changes thereto after the Closing Date, whether or not such
changes are permitted by this Agreement).
5.16 Additional Security; Further Assurances;
etc.
(a) (i) At the request of the Administrative
Agent or the Required Lenders, the Company will, at its own
expense, grant to the Collateral Agent, for the benefit of the
Lenders, security interests and mortgages in such assets and
properties of the Company as are not covered by the Pledge
Agreement or as may be requested from time to time by the
Administrative Agent or the Required Lenders (the "Additional
Security Documents"). Such security interests and mortgages
shall be granted pursuant to documentation satisfactory in form
and substance to the Administrative Agent and shall constitute
valid and enforceable perfected security interests superior to
and prior to the rights of all third Persons and subject to no
other Liens, except such Liens as are permitted by Section 6.2.
The Additional Security Documents or other instruments related
thereto shall have been duly recorded or filed in such manner and
in such places as are required by law to establish, perfect,
preserve and protect the Liens, in favor of the Collateral Agent
for the benefit of the Lenders, required to be granted pursuant
to the Additional Security Documents and all taxes, fees and
other charges payable in connection therewith shall have been
paid in full.
(b) The Company will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney,
certificates, real property surveys, appraisals, reports and
other assurances or instruments and take such further steps
relating to the collateral covered by the Pledge Agreement or any
of the Additional Security Documents as the Collateral Agent may
reasonably require. Furthermore, the Company shall cause to be
delivered to the Collateral Agent such opinions of counsel, title
insurance and other related documents as may be requested by the
Administrative Agent to assure themselves that this Section 5.16
has been complied with.
(c) The Company agrees that each action
required by this Section 5.16 shall be completed as soon as
possible, but in no event later than 60 days after such action is
requested to be taken by the Administrative Agent or the Required
Lenders.
5.17 Butler Warehouse
On or prior to April 30, 1996, the Company
shall have consummated the purchase of the Butler Warehouse from
Alco (or a Subsidiary thereof) and the Company shall have good,
sufficient and legal title to the Butler Warehouse free and clear
of all Liens except for Liens of the type described in clauses
(iii) and (viii) of the definition of Permitted Encumbrances
contained in Section 1.
5.18 Dividends and Intercompany Loan Payments
The Company shall cause (i) each of Brown
Bridge and Central Products to pay dividends to the Company and
(ii) Central Products to make payments to the Company in respect
of the $5,000,000 intercompany loan referred to in Section
3.1A(10)(c), in each case to the maximum extent permitted by the
Existing Brown Bridge Credit Agreement and the Existing Central
Products Credit Agreement, as the case may be.
5.19 Audited Financials
Within 15 days following the Closing Date, the
Company shall deliver a copy of its audited financial statements
for its fiscal year ended December 31, 1995, together with a
revised audit opinion of Ernst & Young, which opinion shall not
contain any qualifications.
SECTION 6. NEGATIVE COVENANTS.
The Company covenants and agrees that until the
Loans and the Notes and all other Obligations have been paid in
full, the Company will fully and timely perform all covenants in
this Section 6.
6.1 Indebtedness
The Company will not, nor will it permit any of
its Subsidiaries, directly or indirectly, to Incur, or remain or
become directly or indirectly liable with respect to, any
Indebtedness, except for the following:
(i) the Company may become and remain liable
with respect to the Obligations;
(ii) Existing Indebtedness to the extent the
same is listed on Schedule B annexed hereto, and any
refinancings or renewals thereof so long as (i) the
aggregate principal amount thereof does not exceed
the sum of (1) the outstanding principal amount of
the Existing Indebtedness to be refinanced or
renewed at the time of such refinancing or renewal
plus (2) the aggregate amount of any unutilized
commitments to make revolving loans in respect of
such Existing Indebtedness at such time, (ii) the
final maturity date and the interim amortization
payments (and the principal amounts of such interim
amortization payments) occur no earlier than (and
are in amounts no greater than) those respective
dates (and amounts) set forth in the Existing
Indebtedness to be refinanced or renewed, (iii) the
interest rate is no greater than the interest rate
on the Existing Indebtedness to be refinanced or
renewed, (iv) any such refinancing or renewal does
not encumber any additional assets or properties of
the Company or the Subsidiary thereof that incurred
such Existing Indebtedness and (v) all of the other
terms and conditions thereof (including, without
limitation, covenants and events of default) are no
more restrictive on the Company or any of its
Subsidiaries, or less favorable to the Lenders, in
each case than those terms and conditions contained
in the Existing Indebtedness to be refinanced or
renewed;
(iii) Indebtedness of the Company's
Subsidiaries evidenced by Capitalized Lease Ob-
ligations to the extent permitted pursuant to Sec-
tion 6.9, provided that in no event shall the
aggregate principal amount of Capitalized Lease
Obligations permitted by this clause (iii) exceed
$2,020,000 at any time outstanding;
(iv) Indebtedness of the Company's
Subsidiaries subject to Liens permitted under
Section 6.2(iv);
(v) intercompany Indebtedness among the
Company and its Subsidiaries to the extent provided
in Section 6.4(iii);
(vi) the Company may Incur and remain liable
with respect to the Take-Out Securities; and
(vii) the Company and the its Subsidiaries may
become and remain liable with respect to Contingent
Obligations permitted by Section 6.5 and, upon any
matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the
Contingent Obligations so extinguished.
6.2 Liens
The Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly, create, incur,
assume or permit to exist any Lien on or with respect to any
property or asset (including any document or instrument in
respect of goods or accounts receivable) of the Company or of any
of its Subsidiaries, whether now owned or hereafter acquired, or
assign or otherwise convey any right to receive any income or
profits therefrom, or file or permit the filing of, or permit to
remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under
any similar recording or notice statute, except for the
following:
(i) Permitted Encumbrances;
(ii) Liens created pursuant to the Loan
Documents;
(iii) Liens upon assets subject to Capitalized
Lease Obligations to the extent permitted by Section
6.1(iii), provided that (x) such Liens only serve to
secure the payment of Indebtedness arising under
such Capitalized Lease Obligation and (y) the Lien
encumbering the asset giving rise to the Capitalized
Lease Obligation does not encumber any other asset
of any Subsidiary of the Company; and
(iv) Liens placed upon equipment or machinery
used in the ordinary course of business of the
Company's Subsidiaries at the time of acquisition
thereof by such Subsidiary or within 60 days
thereafter to secure Indebtedness incurred to pay
all or a portion of the purchase price thereof,
provided that (x) the aggregate outstanding
principal amount of all Indebtedness secured by
Liens permitted by this clause (iv) shall not at any
time exceed $725,000 and (y) in all events, the Lien
encumbering the equipment or machinery so acquired
does not encumber any other asset of such
Subsidiary.
6.3 Restricted Payments
The Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly, (a) declare or pay
any dividend or make any distribution (other than dividends or
distributions payable solely in non-redeemable Common Stock of
such Person) on its shares of Capital Stock, whether outstanding
on the date hereof or hereafter, to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for
value any of its Capital Stock, or any warrants, rights or
options to acquire shares of any class of such Capital Stock,
(c) make any principal, interest or other payment on, purchase,
defease, redeem, repay, prepay, or otherwise acquire or retire
for value, any New Alco Subordinated Note or any 18% Subordinated
Promissory Note, (d) make any payment, distribution or advance
whatsoever to Lynch, LMC or any Affiliate or Subsidiary thereof
(other than a Subsidiary of the Company but only to the extent
otherwise permitted by this Agreement) or (e) make any Investment
in any Person (any such dividend, distribution, purchase,
redemption, acquisition, retirement, defeasance, prepayment,
payment, advance or Investment set forth in clauses (a), (b), (c)
(d) and (e) above a "Restricted Payment") except for the
following:
(i) any Subsidiary of the Company may pay cash
dividends to its shareholders generally so long as
the Company or the respective Subsidiary which owns
the equity interest or interests in the Subsidiary
paying such dividends receives at least its
proportions share thereof (based upon its relative
holdings of capital stock or other equity interests
in the Subsidiary paying such dividends);
(ii) Investments may be made to the extent
permitted by Section 6.4;
(iii) the Company may issue shares of its non-redeemable
Common Stock to satisfy its obligations
under the two Put Option Agreements, each dated as
of September 16, 1994, by and among the Company,
Brown Bridge and the respective holder named
therein; and
(iv) the Company may capitalize the regularly
scheduled interest payments on the New Alco
Subordinated Notes and add the same to the principal
amount of the New Alco Subordinated Notes in
accordance with the terms thereof, and the Company
may issue shares of its common stock to Alco upon
conversion of all or any portion of the principal or
interest on the New Alco Subordinated Notes issued
by the Company in accordance with the terms thereof,
and in each case subject to the subordination
provisions thereof;
(v) the Company may make certain payments to
the minority stockholders of Brown Bridge in
connection with the consummation of the transactions
contemplated by the Brown Bridge Shareholder Roll-Up
Agreement so long as the amount of such payments and
the final form of the documentation with respect to
the transactions contemplated thereby are in form
and substance satisfactory to the Required Lenders;
(vi) payments to Lynch and Boyle Fleming shall
be permitted to the extent specifically permitted by
clauses (iii) and (iv) of Section 6.10; and
(vii) so long as no Event of Default exists
and otherwise subject to the subordination
provisions thereof, the Company may make cash
interest payments on each 18% Subordinated
Promissory Note in an amount not to exceed for any
year that amount which equals the respective
holder's reasonable good faith estimate of its
federal income tax liabilities for the immediately
preceding year arising from such holder's right to
receive interest on the outstanding balance of such
18% Subordinated Promissory Note.
6.4 Investments; Joint Ventures
The Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly, make or own any
Investment in any Person, including any Joint Venture, except for
the following:
(i) the Company and its Subsidiaries may
acquire and hold Cash Equivalents;
(ii) the Company and its Subsidiaries may
continue to own the Investments owned by them as of
the Closing Date described on Schedule D annexed
hereto, provided that any additional Investments
with respect thereto made on or after the Closing
Date shall only be permitted to the extent allowed
to be made pursuant to another clause of this
Section 6.4;
(iii) (x) on the Closing Date, Central
Products may issue a $5,000,000 intercompany note to
the Company in consideration for the Company
assuming Central Products' obligations under the
Existing Alco Subordinated Note issued by Central
Products, and (y) Subsidiaries of the Company may
make intercompany loans to one another and to the
Company, provided that any such intercompany loans
made to the Company pursuant to this clause (iii)
shall be subject to the subordination provisions set
forth in Exhibit XIV annexed hereto;
(iv) the Company and its Subsidiaries may own
Investments received in connection with the
bankruptcy of suppliers and customers or received
pursuant to a plan of reorganization of any supplier
or customer, in each case in settlement of
delinquent obligations or disputes with such
suppliers or customers; and
(v) so long as no Potential Event of Default
or Event of Default shall have occurred and be
continuing, Subsidiaries of the Company may make
loans to their respective employees in the ordinary
course of business, provided that the aggregate
amount of all such loans (determined without regard
to any write-downs or write-offs thereof) shall not
exceed $200,000 at any time outstanding.
6.5 Contingent Obligations
The Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly, create or become or
remain liable with respect to any Contingent Obligation, except
that the Company and its Subsidiaries may remain liable with
respect to Existing Contingent Obligations described in
Schedule B annexed hereto.
6.6 Purchase or Sale of Assets, etc.
The Company will not, nor will it permit any of
its Subsidiaries to, convey, sell, lease or otherwise dispose of
(or agree to do any of the foregoing at any future time) all or
any part of its property or assets, or enter into any sale-leaseback
transactions, or purchase or otherwise acquire (in one
or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory,
materials and equipment in the ordinary course of business) of
any Person, except that:
(i) Capital Expenditures shall be permitted to
the extent not in violation of Section 6.9;
(ii) Subsidiaries of the Company may, in the
ordinary course of business, (x) sell, lease or
otherwise dispose of any equipment or materials
which, in the reasonable judgment of such Person,
are no longer useful in the conduct of such Person's
business, provided that the aggregate amount of all
proceeds received from such sales or other
dispositions shall not exceed $300,000 in any fiscal
year of the Company and (y) sell additional
equipment, materials or other assets (other than
capital stock of any Subsidiary), provided that the
aggregate amount of proceeds received from such
sales or dispositions shall not exceed $500,000 in
any fiscal year of the Company
(iii) Investments may be made to the extent
permitted by Section 6.4;
(iv) Subsidiaries of the Company may lease (as
lessee) real or personal property to the extent per-
mitted by Section 6.16 (so long as any such lease
does not create a Capitalized Lease Obligation);
(v) the Company and its Subsidiaries may make
sales of inventory in the ordinary course of
business; and
(vi) Entoleter may sell or discount, in each
case without recourse, up to $200,000 in the
aggregate of foreign accounts receivable arising in
the ordinary course of business.
6.7 Restriction on Fundamental Changes
The Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly, enter into any
transaction, or series of related transactions, of merger,
amalgamation, consolidation or combination, or consolidate, or
liquidate, wind-up or dissolve itself (or suffer any liquidation
or dissolution).
6.8 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries
The Company will not, nor will it permit any of
its Subsidiaries to, directly or indirectly, create or otherwise
cause or permit or suffer to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary of
the Company to (a) pay dividends or make any other distributions
on its Capital Stock or any other interest or participation in,
or measured by, such Subsidiary's profits; (b) make loans or
advances or pay any Indebtedness or other obligation owed to the
Company or to any Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or to any Subsidiary of
the Company, except for such encumbrances or restrictions
existing under or by reason of: (i) the Loan Documents; (ii)
applicable Law; (iii) any Existing Indebtedness pertaining to a
Subsidiary of the Company; (iv) restrictions on the transfer of
any asset subject to a Lien permitted by the Loan Documents; and
(v) customary non-assignment provisions of any lease governing a
leasehold interest of any Subsidiary of the Company.
6.9 Capital Expenditures
The Company will not, nor will it permit any of
its Subsidiaries to, make any Capital Expenditures, except that
(i) Subsidiaries of the Company may make Capital Expenditures so
long as the aggregate amount of such Capital Expenditures does
not exceed (x) $4,750,000 in each of the Company's fiscal years
ending December 31, 1996 and December 31, 1997 or (y) $3,750,000
in each of the Company's fiscal years thereafter and (ii) Brown
Bridge may make additional Capital Expenditures in an aggregate
amount not to exceed $4,100,000 to purchase a new silicone
coating equipment line to be installed in its plant located at 30
Maybill Drive, Troy, Ohio, so long as at least $2,500,000 of such
Capital Expenditures are financed through the incurrence by Brown
Bridge of loans under the Existing Brown Bridge Credit Agreement.
6.10 Transactions with Affiliates
The Company will not, nor will it permit any of
its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of
business, with any Affiliate of the Company or any of its
Subsidiaries, other than in the ordinary course of business and
on terms and conditions substantially as favorable to the Company
or such Subsidiary as would reasonably be obtained by the Company
or such Subsidiary at that time in a comparable arm's-length
transaction with a Person other than an Affiliate, except that
(i) Restricted Payments may be made to the extent provided in
Section 6.3, (ii) loans may be made and other transactions may be
entered into by the Company and its Subsidiaries to the extent
permitted by Sections 6.1 and 6.4, (iii) the Company may enter
into the Boyle Fleming Management Agreement, (iv) so long as no
Potential Event of Default or Event of Default then exists, the
Company may pay a management fee to Lynch in an aggregate amount
not to exceed $100,000 per year payable in equal monthly
installments, (v) the Company may perform its obligations in
respect of the transactions contemplated by the Brown Bridge
Shareholder Roll-Up Agreement so long as the final documentation
therefor, and all of the terms and conditions thereof, are in
form and substance satisfactory to the Required Lenders, (vi) the
Company may issue shares of its Common Stock to the extent
permitted by Section 6.1(iii), (vii) Subsidiaries of the Company
may pay management and other fees to the Company and may make
payments to the Company in respect of such Subsidiaries'
allocable share of the Company's tax liabilities and (viii) the
Company may make payments to Lynch pursuant to the existing Tax
Allocation Agreement among Lynch and its Consolidated
Subsidiaries in respect of Lynch's tax liabilities for years 1994
and 1995 so long as the Company receives from each of its
Subsidiaries such Subsidiaries' allocable share of such tax
liabilities.
6.11 Limitation on Issuance of Capital Stock
(a) The Company will not, nor will it permit
any of its Subsidiaries to, issue (i) any class of Preferred
Stock or (ii) any class of redeemable (except at the sole option
of the Company or such Subsidiary) Common Stock.
(b) The Company will not permit any of its
Subsidiaries to issue any Capital Stock (including by way of
sales of treasury stock) or any options or warrants to purchase,
or securities convertible into, Capital Stock, except (i) for
transfers and replacements of then outstanding shares of Capital
Stock, (ii) for stock splits, stock dividends and similar issu-
ances which do not decrease the percentage ownership of the
Company or any of its Subsidiaries in any class of the Capital
Stock of such Subsidiary, and (iii) to qualify directors to the
extent required by applicable law.
6.12 Business
The Company will not, nor will it permit any of
its Subsidiaries to, engage (directly or indirectly) in any
business other than the business in which the Company and its
Subsidiaries are engaged on the Closing Date and reasonable
extensions thereof.
6.13 Amendments or Waivers of Certain Documents
The Company will not, nor will it permit any of
its Subsidiaries to, (i) amend, modify or change, or permit the
amendment, modification or change of, any provision of any New
Alco Subordinated Note, any 18% Subordinated Promissory Note, the
Existing Brown Bridge Credit Agreement, the Existing Central
Products Credit Agreement, the Existing Entoleter Credit
Agreement except as otherwise required pursuant to Section 3A and
except for amendments, modifications or changes to the covenants
and/or defaults in the Existing Brown Bridge Credit Agreement,
the Existing Central Products Credit Agreement or the Existing
Entoleter Credit Agreement in each case so long as the effect
thereof is to make the covenants and/or defaults less stringent
or restrictive as applied to the respective Subsidiary of the
Company, (ii) enter into any new tax sharing or tax allocation
agreement except for any such agreement among the Company and its
Subsidiaries on terms acceptable to the Administrative Agent,
(iii) amend, modify or change the Boyle Fleming Management
Agreement in any manner that is adverse to the interests of the
Banks in any material respect or (iv) amend, modify or change the
Brown Bridge Shareholder Roll-Up Agreement.
6.14 Amendments to Charter Documents
The Company will not, nor will it permit any of
its Subsidiaries to, amend its Certificate or Articles of
Incorporation (including, without limitation, by the filing or
modification of any certificate of designation) or Bylaws other
than any such amendments or modifications that are not in any way
adverse to the interests of the Lenders.
6.15 Refinancing of the Loans in Part
The Company will not, nor will it cause or
permit any of its Subsidiaries to, Incur any Take-Out Securities
to refinance the Loans in part unless the terms, conditions,
covenants, events of default and other provisions in respect of
the instruments evidencing such Take-Out Securities shall have
been approved in writing by the Required Lenders prior to the
Incurrence thereof.
6.16 Leases
The Company will not permit the aggregate
payments (including, without limitation, any property taxes paid
as additional rent or lease payments) made by the Company and its
Subsidiaries on a consolidated basis under any agreement to rent
or lease any real or personal property (or any extension or
renewal thereof) (excluding Capitalized Lease Obligations) to
exceed $1,300,000 for any fiscal year of the Company.
6.17 Creation of Subsidiaries
The Company will not, nor will it permit any of
its Subsidiaries to, establish, create or acquire any new
Subsidiary.
SECTION 7. EVENTS OF DEFAULT.
If any of the following conditions or events
("Events of Default") shall occur and be continuing:
7.1 Failure To Make Payments When Due
Failure to pay any installment of principal of
the Loans when due, whether at stated maturity, by acceleration,
by notice of prepayment or otherwise; or failure to pay any
interest on the Loans or any other amount due under this
Agreement, the other Loan Documents or the Fee Letters within
three days after the date due; or
7.2 Default in Other Agreements
(i) The Company or any Subsidiary of the
Company shall (x) default in any payment of any Indebtedness
(other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which such
Indebtedness was created or (y) default in the observance or
performance of any agreement or condition relating to any
Indebtedness (other than the Obligations) or contained in any
instrument or agreement evidencing, securing or relating thereto,
or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee
or agent on behalf of such holder or holders) to cause (deter-
mined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity, or (ii)
any Indebtedness (other than the Obligations) of the Company or
any Subsidiary of the Company shall be declared to be due and
payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity
thereof, provided that it shall not be a Potential Event of
Default or an Event of Default under this Section 7.2 unless the
aggregate principal amount of all Indebtedness as described in
preceding clauses (i) and (ii) is at least $1,000,000; or
7.3 Breach of Certain Covenants
Failure by the Company to perform or comply
with any covenant, term or condition contained in (x) Section
2.5A(iv), 5.1(viii), 5.2, 5.13, 5.15, 5.16 or 5.18 or Section 6
or (y) in any Fee Letter; or
7.4 Breach of Warranty
Any representation, warranty or certification
made by the Company, LMC or Boyle Fleming in any Loan Document to
which they are a party or in any statement or certificate at any
time given by the Company in writing pursuant hereto or thereto
or in connection herewith or therewith shall be false or
incorrect in any material respect on the date as of which made or
deemed made; or
7.5 Other Defaults Under Agreement or Loan
Documents
The Company, LMC or Boyle Fleming shall default
in the performance of or compliance with any covenant, term or
condition contained in this Agreement or the other Loan Documents
to which they are a party to (other than those covered by
Sections 7.1, 7.3 or 7.4) and such default shall not have been
remedied or waived in accordance with this Agreement within 30
days after the date of written notice from the Administrative
Agent or the holder or holders of not less than 25% in aggregate
principal amount of the Loans then outstanding of such default;
or
7.6 Involuntary Bankruptcy; Appointment of
Custodian, Etc.
A court of competent jurisdiction enters a
Bankruptcy Order under any Bankruptcy Law that:
(A) is for relief against the Company or any
Subsidiary of the Company in an involuntary case or
proceeding, or
(B) appoints a Custodian of the Company or any
Subsidiary of the Company for all or substantially
all of its properties, or
(C) orders the liquidation of the Company or
any Subsidiary of the Company,
and in each case the order or decree remains unstayed and in
effect for 60 days; or
7.7 Voluntary Bankruptcy; Appointment of
Custodian, Etc.
The Company or any Subsidiary of the Company
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
or
(B) consents to the entry of a Bankruptcy
Order for relief against it in an involuntary case
or proceeding, or
(C) consents to the appointment of a Custodian
of it or for all or substantially all of its
property, or
(D) makes a general assignment for the benefit
of its creditors or files a proposal or scheme of
arrangement involving the rescheduling or
composition of its indebtedness, or
(E) consents to the filing of a petition in
bankruptcy, or
(F) shall generally not pay its debts when
such debts become due or shall admit in writing its
inability to pay its debts generally; or
7.8 Judgments and Attachments
One or more judgments or decrees shall be
entered against the Company or any Subsidiary of the Company
involving in the aggregate for all such Persons a liability (not
paid or fully covered by a reputable and solvent insurance
company) and such judgments and decrees either shall be final and
non-appealable or shall not be vacated, discharged or stayed or
bonded pending appeal for any period of 30 consecutive days, and
the aggregate amount of all such judgments equals or exceeds
$1,000,000; or
7.9 Dissolution
Any order, judgment or decree shall be entered
against the Company or any Subsidiary of the Company decreeing
the dissolution or split-up of the Company or any Subsidiary of
the Company and such order shall remain undischarged or unstayed
for a period in excess of 30 days; or
7.10 Pledge Agreement
The Pledge Agreement or, after the execution
and delivery thereof, any Additional Security Document, shall
cease to be in full force and effect, or shall cease to give the
Collateral Agent the Liens, rights, powers and privileges
purported to be created thereby, superior to and prior to the
rights of all third Persons (except to the extent set forth
therein); or
7.11 Boyle Fleming Warrant Exercise Agreement
The Boyle Fleming Warrant Exercise Agreement or
any provision thereof shall cease to be in full force and effect
or Boyle Fleming, Ned N. Fleming III or Richard J. Boyle shall
fail to observe or perform any of its obligations thereunder or
shall deny or disaffirm any of its obligations thereunder; or
7.12 ERISA
(a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a
waiver of such standard or extension of any amortization period
is sought or granted under Section 412 of the Code, any Plan is,
shall have been or is likely to be terminated or the subject of
termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, or the Company or any Subsidiary of
the Company or any ERISA Affiliate thereof has incurred or is
likely to incur a liability to or on account of a Plan under
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980
of the Code, or the Company or any Subsidiary of the Company has
incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1)
of ERISA) which provide benefits to retired employees (other than
as required by Section 601 of ERISA) or employee pension benefit
plans (as defined in Section 3(2) of ERISA); (b) there shall
result from any such event or events the imposition of a lien,
the granting of a security interest, or a liability or a material
risk of incurring a liability; and (c) which lien, security
interest or liability, either individually and/or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
THEN (i) upon the occurrence of any Event of
Default described in the foregoing Sections 7.6 or 7.7 with
respect to the Company, all of the unpaid principal amount of and
accrued interest on the Loans and all other Obligations shall
automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind,
all of which are hereby expressly waived by the Company, and the
obligations of the Lenders hereunder shall thereupon terminate,
(ii) upon the occurrence of any other Event of Default (including
any Event of Default under Section 7.6 or 7.7 with respect to any
Person covered thereby other than the Company), the
Administrative Agent may, upon written notice of the Required
Lenders, by written notice to the Company, declare all of the
unpaid principal amount of and accrued interest on the Loans and
all other Obligations to be, and the same shall forthwith become,
due and payable, and the obligations of the Lenders hereunder
shall thereupon terminate and (iii) upon the occurrence of any
Event of Default, the Administrative Agent or the Collateral
Agent may, upon written notice of the Required Lenders, enforce
all of the Liens, security interests and other rights, powers,
privileges and remedies created or afforded to it pursuant to the
Pledge Agreement, the Escrow Agreement and the Additional
Security Documents.
SECTION 8. THE ADMINISTRATIVE AGENT.
8.1 Appointment
Each Lender hereby irrevocably designates and
appoints BTCo as Administrative Agent of such Lender to act as
specified herein and in the other Loan Documents, and each such
Lender hereby irrevocably authorizes BTCo as the Administrative
Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent agrees to act as
such upon the express conditions contained in this Section 8.
Notwithstanding any provision to the contrary elsewhere in this
Agreement or in any other Loan Document, the Administrative Agent
shall not have any duties or responsibilities, except those
expressly set forth herein or in the other Loan Documents, or any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent. The provisions
of this Section 8 are solely for the benefit of the
Administrative Agent and the Lenders, and neither the Company nor
any of its Subsidiaries or Affiliates shall have any rights as a
third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the
Administrative Agent shall act solely as agent of the Lenders and
the Administrative Agent does not assume and shall not be deemed
to have assumed any obligation or relationship of agent or trust
with or for the Company or any of its Subsidiaries or Affiliates.
8.2 Delegation of Duties
The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or
through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care except to the extent
otherwise required by Section 8.3.
8.3 Exculpatory Provisions
Neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection
with this Agreement or the other Loan Documents (except for its
or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by LMC,
Boyle Fleming, the Company or any of the Company's Subsidiaries
or any of their respective officers contained in this Agreement,
any other Loan Documents, or in any certificate, report,
statement or other document referred to or provided for in, or
received by the Administrative Agent under or in connection with,
this Agreement or any other Loan Document or for any failure of
LMC, Boyle fleming, the Company or any of the Company's
Subsidiaries or any of their respective officers to perform its
obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or the
other Loan Documents, or to inspect the properties, books or
records of the Company any of its Subsidiaries. The
Administrative Agent shall not be responsible to any Lender for
the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any other Loan
Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral
statement or in any financial or other statements, instruments,
reports, certificates or any other documents in connection
herewith or therewith furnished or made by the Administrative
Agent to the Lenders or by or on behalf of the Company or any of
its Subsidiaries to the Administrative Agent or any Lender or be
required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence
of any Potential Event of Default or Event of Default.
8.4 Reliance by Administrative Agent
The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, facsimile, telex or teletype
message, statement, order or other document conversation believed
by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons upon advice and statements
of legal counsel (including, without limitation, counsel to any
Loan Party or any of its Subsidiaries), independent accountants
and other experts selected by the Administrative Agent. The
Administrative Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Lenders.
8.5 Notice of Default
The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Potential Event
of Default or Event of Default hereunder unless the
Administrative Agent has actually received notice from a Lender
the Company referring to this Agreement, describing such
Potential Event of Default or Event of Default and stating that
such notice is a "notice of default." In the event that the
Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such
Potential Event of Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided, that,
unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Potential Event of Default or Event
of Default as it shall deem advisable in the best interests of
the Lenders.
8.6 Non-Reliance on Administrative Agent and
Other Lenders
Each Lender expressly acknowledges that neither
the Administrative Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates
have made any representations or warranties to it and that no act
by the Administrative Agent hereinafter taken, including any
review of the affairs of the Company or any of its Subsidiaries
shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents
to the Administrative Agent that it has, independently and
without reliance upon the Administrative 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, assets, operations, property, financial and
other condition, prospects and creditworthiness of the Company
and its Subsidiaries and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of
the Company its Subsidiaries. The Administrative Agent shall not
have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations,
assets, property, financial and other condition, prospects or
creditworthiness of the Company any of its Subsidiaries which may
come into the possession of the Administrative Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
8.7 Indemnification
The Lenders agree to indemnify the
Administrative Agent in its capacity as such ratably according to
their respective "percentages" as used in determining the
Required Lenders at such time, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, reasonable expenses or disbursements of
any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Obligations)
be imposed on, incurred by or asserted against the Administrative
Agent in its capacity as such in any way relating to or arising
out of this Agreement or any other Loan Document, or any
documents contemplated by or referred to herein or the
transactions contemplated hereby of any action taken or omitted
to be taken by the Administrative Agent under or in connection
with any of the foregoing, but only to the extent that any of the
foregoing is not paid by the Company; provided, that no Lender
shall be liable to the Administrative Agent for the payment of
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the gross negligence or
willful misconduct of the Administrative Agent. If any indemnity
furnished to the Administrative Agent for any purpose shall, in
the opinion of the Administrative Agent be insufficient or become
impaired, the Administrative Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The
agreements in this Section 8.7 shall survive the payment of all
Obligations.
8.8 Administrative Agent in its Individual
Capacity
The Administrative Agent and its affiliates may
make loans to, accept deposits from and generally engage in any
kind of business with the Company, its Subsidiaries and their
respective Affiliates as though the Administrative Agent were not
the Administrative Agent hereunder. With respect to the Loans
made by it and all Obligations owing to it, the Administrative
Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the
Administrative Agent and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
8.9 Holders
The Administrative 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, transfer or
endorsement thereof, as the case may be, shall have been filed
with the Administrative Agent. Any request, authority or consent
of any Person or entity 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, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
8.10 Resignation of the Administrative Agent;
Successor Administrative Agent
The Administrative Agent may resign as the
Administrative Agent upon 20 days' notice to the Lenders. Upon
the resignation of the Administrative Agent, the Required Lenders
shall appoint from among the Lenders a successor Administrative
Agent which is a bank or a trust company for the Lenders,
whereupon such successor agent shall succeed to the rights,
powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall include such successor agent
effective upon its appointment, and the resigning Administrative
Agent's rights, powers and duties as the Administrative Agent
shall be terminated, without any other or further act or deed on
the part of such former Administrative Agent or any of the
parties to this Agreement. After the resignation of the
Administrative Agent hereunder, the provisions of this
Section 8.10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent
under this Agreement.
SECTION 9. MISCELLANEOUS.
9.1 Representation of the Lenders
Each Lender hereby represents that it is a
commercial lender which makes loans in the ordinary course of its
business and that it will make the Loans hereunder for its own
account or the account of its affiliates in the ordinary course
of such business.
9.2 Participations in and Assignments of
Loans and Notes
A. Each Lender shall have the right at any
time to sell, assign, transfer or negotiate all or any portion of
its Notes or its Loan Commitment to one or more Persons. In the
case of any sale, transfer or negotiation of all or part of the
Notes or any Loan Commitment authorized under this Section 9.2A,
the assignee, transferee or recipient shall become a party to
this Agreement as a Lender by execution of an Assignment and
Assumption Agreement, provided that (i) at such time Section 2.1A
or 2.2A, as the case may be, shall be deemed modified to reflect
the Loan Commitment of such new Lender and of the existing
Lenders, (ii) upon surrender of the Notes, new Notes will be
issued, at the Company's expense, to such new Lender and to the
assigning Lender, such new Notes to be in conformity with the
requirements of Section 2.1D or 2.2E, as the case may be (with
appropriate modifications), to the extent needed to reflect the
revised Loan Commitment, and (iii) the Administrative Agent shall
receive at the time of each such assignment, from the assigning
or assignee Lender, the payment of a non-refundable assignment
fee of $3,500 and, provided, further, that such transfer or
assignment will not be effective until recorded by the
Administrative Agent on the Register pursuant to Section 5.11.
To the extent of any assignment pursuant to this Section 9.2A,
the assigning Lender shall be relieved of its obligations
hereunder with respect to its assigned Loan Commitment, and the
assignee, transferee or recipient shall have, to the extent of
such sale, assignment, transfer or negotiation, the same rights,
benefits and obligations as it would if it were a Lender with
respect to such Notes or Loan Commitment, including, without
limitation, the right to approve or disapprove actions which, in
accordance with the terms hereof, require the approval of a
Lender. At the time of each assignment pursuant to this Section
9.2A to a Person which is not already a Lender hereunder and
which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Internal Revenue Code) for Federal
income tax purposes, the respective assignee Lender shall provide
to the Company and the Administrative Agent the appropriate
Internal Revenue Service Forms (and, if applicable, a Section
9.2F(ii) Certificate) described in Section 9.2F.
B. Each Lender may grant participations in
all or any part of its Notes or its Loan Commitment to one or
more Persons. The Company hereby acknowledges and agrees that
any such disposition will give rise to a direct obligation of the
Company to the participant and the participant shall for purposes
of Sections 9.3 and 9.4 be considered to be a "Lender."
C. Each Lender may deliver a copy of any
financial statement or any other information relating to the
business, assets or condition (financial and otherwise) of the
Company and its Subsidiaries which may be furnished to them under
this Agreement or otherwise to any prospective or other
participant, transferee or assignee to the extent reasonably
required by such participant, transferee or assignee in
connection with its interest or the proposed acquisition of an
interest in the Loans or the Notes. In connection with any
sales, assignments or transfers referred to in Section 9.2A, the
respective purchasers, assignees or transferees, as the case may
be, shall agree that all information given to such parties will
be held in strict confidence subject to customary exceptions.
D. The Company shall, at its own cost and
expense, provide such certificates, acknowledgments and further
assurances in respect of this Agreement and the Loans as any
Lender may reasonably require in connection with any
participation, transfer or assignment pursuant to this Section
9.2.
E. Nothing in this Agreement shall prevent
or prohibit any Lender from pledging its Loan and Notes hereunder
to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank.
F. Each Lender that is an assignee or
transferee of an interest under this Agreement pursuant to
Section 9.2A (unless the respective Lender was already a Lender
hereunder immediately prior to such assignment or transfer) and
that is not a United States person (as such term is defined in
Section 7701(a)(30) of the Internal Revenue Code) agrees to
deliver to the Company and the Administrative Agent, on the date
of such assignment or transfer to such Lender, (i) two accurate
and complete original signed copies of Internal Revenue Service
Form 4224 or 1001 (or successor forms) certifying to such
Lender's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this
Agreement and under any Note, or (ii) if the Lender is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (i) above, two accurate and
complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Lender's entitlement
to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement
and under any Note and a certificate substantially in the form of
Exhibit VI annexed hereto (a "Section 9.2F(ii) Certificate"). In
addition, each Lender agrees that, when a lapse in time or change
in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the
Company and the Administrative Agent two new accurate and
complete original signed copies of Internal Revenue Service Form
4224 or 1001, or Form W-8 and a Section 9.2F(ii) Certificate, as
the case may be, and such other forms as may be required in order
to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and
any Note, or it shall immediately notify the Company and the
Administrative Agent of its inability to deliver any such Form or
Certificate. Subject to Section 9.2A and the immediately
succeeding sentence, the Company shall be entitled, to the extent
it is required to do so by law, to deduct or withhold income or
similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from
interest, fees or other amounts payable hereunder for the account
of any Lender which is not a United States person (as such term
is defined in Section 7701(a)(30) of the Internal Revenue Code)
for U.S. Federal income tax purposes to the extent that such
Lender has not provided to the Company U.S. Internal Revenue
Service Forms that establish a complete exemption from such
deduction or withholding. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this
Section 9.2F and except as set forth in Section 9.2A, the Company
agrees to pay additional amounts and to indemnify and hold
harmless each Lender (without regard to the identity of the
jurisdiction requiring the deduction or withholding), and
reimburse such Lender upon its written request, in respect of any
amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after
the date of such assignment or transfer in any applicable law,
treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or
withholding of income or similar Taxes.
9.3 Expenses
Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to promptly pay
(i) the reasonable costs and expenses of preparation of the Loan
Documents and the reasonable costs of furnishing all opinions by
counsel required to be delivered hereunder, and of LMC, Boyle
Fleming's and the Company's performance of and compliance with
all agreements and conditions contained herein or in the other
Loan Documents on their part to be performed or complied with;
(ii) the reasonable fees, expenses and disbursements of the
Administrative Agent (including the reasonable fees, expenses and
disbursements of counsel) in connection with the negotiation,
preparation, execution, administration and syndication of the
Loan Documents and the Loans hereunder, and any amendments,
modifications and waivers hereto or thereto and consents to
departures from the terms hereof and thereof; and (iii) after the
occurrence of an Event of Default, all costs and expenses
(including attorneys fees and costs of settlement) incurred by
the Lenders or the Administrative Agent in enforcing any
Obligations of or in collecting any payments due from the Company
hereunder or under the Notes by reason of such Event of Default
or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature
of a "work-out" or of any insolvency or bankruptcy proceedings.
9.4 Indemnity
In addition to the payment of expenses pursuant
to Section 9.3, whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to indemnify, pay
and hold each of the Lenders, the Administrative Agent and any
holder of any of the Notes, and each of their officers,
directors, employees, agents, and affiliates (collectively called
the "Indemnitees"), harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of
any kind or nature whatsoever (including, without limitation, the
fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such
Indemnitee shall be designated as a party thereto), which may be
suffered by, imposed on, incurred by, or asserted against that
Indemnitee, in any manner resulting from, connected with, in
respect of, relating to or arising out of (i) this Agreement, the
other Loan Documents, the transactions contemplated hereby, the
Fee Letters, the Lenders' agreements to make the Loans or the use
or intended use of any of the proceeds of the Loans hereunder,
the issuance of the Take-Out Securities or the Refinancing or
(ii) the actual or alleged presence of Hazardous Materials in the
air, surface water or groundwater or on the surface or subsurface
of any real property owned or at any time operated by the Company
or any of its Subsidiaries, the generation, storage, transporta-
tion, handling or disposal of Hazardous Materials at any loca-
tion, whether or not owned or operated by the Company or any of
its Subsidiaries, the non-compliance of any real property with
foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable
to any real property, or any Environmental Claim asserted against
the Company, any of its Subsidiaries or any real property owned
or at any time operated by the Company or any of its
Subsidiaries, including, in each case, without limitation, the
fees and disbursements of counsel and other consultants incurred
in connection with any such investigation, litigation or other
proceeding (collectively, the "indemnified liabilities");
provided, however, that, the Company shall have no obligation to
an Indemnitee hereunder with respect to indemnified liabilities
to the extent such is finally judicially determined to have
resulted solely from the gross negligence or willful misconduct
of that Indemnitee. To the extent that the undertaking to indem-
nify, pay and hold harmless set forth in the preceding sentence
may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it
is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all indemnified liabilities incurred
by the Indemnitees or any of them.
9.5 Setoff
In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any
such rights, upon the occurrence of any Event of Default, each
Lender and the Administrative Agent and each subsequent holder of
any Note is hereby authorized by the Company at any time or from
time to time, without notice to the Company, or to any other
Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other Indebtedness at any time
held or owing by such Person or that subsequent holder to or for
the credit or the account of the Company against and on account
of the obligations and liabilities of the Company to such Person
or that subsequent holder under this Agreement and the Notes,
including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement or
the Notes, irrespective of whether or not (a) such Person or that
subsequent holder shall have made any demand hereunder or
(b) such Person or that subsequent holder shall have declared the
principal of or the interest on its portion of the Loans and its
Notes and other amounts due hereunder to be due and payable as
permitted by Section 7 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
9.6 Amendments and Waivers
No amendment, modification, termination or
waiver of any term or provision of this Agreement, of the Notes,
any other Loan Document or the Boyle Fleming Warrant Exercise
Agreement or consent to any departure by the Company or any other
party to any of the foregoing agreements therefrom, shall in any
event be effective without the prior written concurrence of the
Company and the Required Lenders; provided, however, that without
the prior written consent of each Lender affected, an amendment,
modification, termination or waiver of this Agreement, any Notes,
or the Pledge Agreement or any Additional Security Document or
consent to departure from a term or provision hereof or thereof
may not: (i) reduce the principal amount of Notes whose holders
must consent to any such amendment, modification, termination,
waiver or consent; (ii) reduce the rate of or extend the time for
payment of principal or interest on any Note; (iii) reduce the
principal amount of any Note; (iv) make any Note payable in money
other than that stated in the Note; (v) make any change in
Section 2.5A(iv) or in the definition of Change of Control, in
the last paragraph of Section 7 or in Section 9.6; (vi) reduce
the rate or extend the time of payment of fees or other
compensation payable hereunder; (vii) waive performance by the
Company of its obligations under, or consent to any departure
from any of the terms and provisions of, Section 2.5A(iv); or
(viii) release all or substantially all of the collateral under
the Pledge Agreement and the Additional Security Documents
(except as otherwise provided therein), and provided, further,
that without the consent of the Administrative Agent, no such
amendment, modification, termination or waiver may amend, modify,
terminate or waive any provision of Section 8 as the same applies
to the Administrative Agent or any other provision of this
Agreement as it relates to the rights or obligations of the
Administrative Agent. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Company in any
case shall entitle the Company to any further notice or demand in
similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this
Section 9.6 shall be binding upon each holder of the Notes at the
time outstanding, each further holder of the Notes, and, if
signed by the Company, on the Company.
9.7 Independence of Covenants
All covenants hereunder shall be given
independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of
an Event of Default or a Potential Event of Default if such
action is taken or condition exists.
9.8 Notices
Unless otherwise provided herein, any notice or
other communications herein required or permitted to be given
shall be in writing and may be personally served, telecopied,
telexed or sent by mail and shall be deemed to have been given
when delivered in person, receipt of telecopy or telex against
receipt of answer back or four Business Days after depositing it
in the mail, registered or certified, with postage prepaid and
properly addressed; provided, however, that notices to the
Administrative Agent shall not be effective until received. For
the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this
Section 9.8) shall be set forth under each party's name on the
signature pages hereto.
9.9 Survival of Warranties and Certain
Agreements
A. All agreements, representations and
warranties made herein and in the other Loan Documents shall
survive the execution and delivery of this Agreement, the making
of the Loans hereunder and the execution and delivery of the
Notes and, notwithstanding the making of the Loans, the execution
and delivery of the Notes or any investigation made by or on
behalf of any party, shall continue in full force and effect.
The closing of the transactions herein contemplated shall not
prejudice any right of one party against any other party in
respect of any thing done or omitted hereunder or in respect of
any right to damages or other remedies.
B. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of
the Company set forth in Sections 9.3 and 9.4 shall survive the
payment of the Loans and the Notes and the termination of this
Agreement.
9.10 Failure or Indulgence Not Waiver;
Remedies Cumulative
No failure or delay on the part of the
Administrative Agent or any Lender or any holder of any Note in
the exercise of any power, right or privilege hereunder, under
the Notes or under any other Loan Document shall impair such
power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this
Agreement, the Notes or under any other Loan Document are
cumulative to and not exclusive of any rights or remedies
otherwise available.
9.11 Headings
Section and Section headings in this Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose or
be given any substantive effect.
9.12 Applicable Law
THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN
DOCUMENT SHALL BE GOVERNED BY AND SHALL BE INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
9.13 Successors and Assigns; Subsequent
Holders of Notes
This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and
shall inure to the benefit of the parties hereto and the
successors and assigns of the Lenders. The terms and provisions
of this Agreement and each other Loan Document shall inure to the
benefit of any assignee or transferee of the Notes pursuant to
Section 9.2A, and in the event of such transfer or assignment,
the rights and privileges herein conferred upon the Lenders shall
automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.
Notwithstanding any other provision of this Agreement, in
determining whether the holders of a sufficient aggregate
principal amount of the Loans shall have consented to any action
under this Agreement, any amount of the Loans owned or held by
the Company or any of its Affiliates shall be disregarded. The
Company's rights or any interest therein hereunder may not be
assigned without the prior express written consent of each of the
Lenders.
9.14 Counterparts; Effectiveness
This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by
each of the parties hereto, and delivery thereof to the
Administrative Agent or, in the case of the Lenders, written
telex or facsimile notice or telephonic notification (confirmed
in writing) of such execution and delivery. The Administrative
Agent will give the Company and each Lender prompt notice of the
effectiveness of this Agreement.
9.15 Consent to Jurisdiction; Venue;
Waiver of Jury Trial
A. Any legal action or proceeding with
respect to this Agreement or any other Loan Document may be
brought in the courts of the State of New York or of the United
States for the Southern District of New York, and, by execution
and delivery of this Agreement, the Company hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The
Company hereby further irrevocably waives any claim that any such
courts lack jurisdiction over the Company, and agrees not to
plead or claim, in any legal action or proceeding with respect to
this Agreement or any other Loan Document brought in any of the
aforesaid courts, that any such court lacks jurisdiction over the
Company. The Company irrevocably consents to the service of
process in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the
Company, at its address for notices pursuant to Section 9.8, such
service to become effective 30 days after such mailing. The
Company each hereby irrevocably waives any objection to such
service of process and further irrevocably waives and agrees not
to plead or claim in any action or proceeding commenced hereunder
or under any other Loan Document that service of process was in
any way invalid or ineffective. Nothing herein shall affect the
right of the Administrative Agent, any Lender or the holder of
any Note to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the
Company in any other jurisdiction.
B. The Company hereby irrevocably waives any
objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement or any other Loan
Document brought in the courts referred to in clause A above and
hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient
forum.
C. Each of the parties to this Agreement
hereby irrevocably waives all right to a trial by jury in any
action, proceeding or counterclaim arising out of or relating to
this Agreement, the other Loan Documents or the transactions
contemplated hereby or thereby.
9.16 Payments Pro Rata
A. The Administrative Agent agrees that
promptly after its receipt of each payment of any interest or
premium on or principal of the Notes from or on behalf of the
Company, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Lenders (other than any
Lender that has consented in writing to waive its pro rata share
of such payment) pro rata based upon their respective pro rata
shares, if any, of such payment.
B. Each of the Lenders agrees that, if it
should receive any amount hereunder (whether by voluntary
payment, by realization upon security, by the exercise of the
right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan
Documents, or otherwise) which is applicable to the payment of
the principal of, or interest on, the Loans of a sum which with
respect to the related sum or sums received by other Lenders is
in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation
then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall
purchase for cash without recourse or warranty from the other
Lenders an interest in the Obligations of the Company to such
Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount; provided
that, if all or any portion of such excess amount is thereafter
recovered from such Lender, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but
without interest.
9.17 Taxes and Other Taxes
A. Any and all payments by the Company
hereunder or under any of the other Loan Documents shall be made
free and clear of and without deduction or withholding for any
and all present or future Taxes, but excluding (i) in the case of
each such Lender and the Administrative Agent, taxes imposed on
its net income by the jurisdiction under the laws of which such
Person is organized or any political subdivision thereof, (ii) in
the case of each Lender, taxes imposed on its net income by the
jurisdiction of such Lender's applicable lending office or any
political subdivision thereof, (iii) in the case of each such
Lender and the Administrative Agent, any Taxes that are in effect
and that would apply to a payment to such Person, as applicable,
as of the Closing Date, and (iv) if any person acquires any
interest in this Agreement, or a Lender or the Administrative
Agent changes the office in which the Loan is made, accounted for
or booked (any such person, or such Lender or the Administrative
Agent in that event, being referred to as a "Tax Transferee"),
any Taxes to the extent that they are in effect and would apply
to a payment to such Tax Transferee as of the date of the
acquisition of such interest or change in office, as the case may
be (all such nonexcluded Taxes being hereinafter referred to as
"Covered Taxes"). If the Company shall be required by Law or
the administration thereof to deduct or withhold any Covered
Taxes from or in respect of any sum payable hereunder, (i) the
sum payable shall be increased as may be necessary so that after
making all required deductions or withholdings (including
deductions or withholdings applicable to additional amounts paid
under this paragraph), the Lender receives an amount equal to the
sum they would have received if no such deduction or withholding
had been made; (ii) the Company shall make such deductions or
withholdings; and (iii) the Company forthwith shall pay the full
amount deducted or withheld to the relevant taxation or other
authority in accordance with applicable Law.
B. The Company agrees to pay forthwith any
present or future stamp documentary taxes or any other excise or
property taxes, charges or similar levies (all such taxes,
charges and levies being herein referred to as "Other Taxes")
imposed by any jurisdiction (or any political subdivision or
taxing authority thereof or therein) which arise from any payment
made by the Company hereunder or under any of the other Loan
Documents or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any of the other
Loan Documents.
C. The Company agrees to indemnify the
Administrative Agent and each of the Lenders for the full amount
of Covered Taxes or Other Taxes not deducted or withheld and paid
by the Company in accordance with Section 9.17(A) and (B) to the
relevant taxation or other authority and any Taxes other than
Covered Taxes or Other Taxes imposed by any jurisdiction on
amounts payable by the Company under this Section 9.17 paid by
the Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not any such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made
within 30 days from the date the Administrative Agent or such
Lender makes written demand therefor. A certificate as to the
amount of such Taxes or Other Taxes and evidence of payment
thereof submitted to the Company shall be conclusive, absent
manifest error, of the amount due from the Company to the
Administrative Agent or such Lender.
D. The Company shall furnish to the
Administrative Agent and each of the Lenders the original or a
certified copy of a receipt evidencing any payment of Taxes or
Other Taxes made by the Company, as soon as such receipt becomes
available.
E. The provisions of this Section 9.17 shall
survive the termination of the Agreement and repayment of all
Obligations.
9.18 Waiver of Stay, Extension or Usury Laws
The Company covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all or
any portion of the principal of or interest on the Loans as
contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the
performance of this Agreement; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit
or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Administrative Agent, but will suffer and permit the
execution of every such power as though no such law had been
enacted.
9.19 Compensation
The Company shall compensate each Lender, upon
its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses,
expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation
or reemployment of deposits or other funds required by such
Lender to fund its LIBOR Rate Loans or Treasury Rate Loans but
excluding loss of anticipated profit with respect to any Loans)
which such Lender may sustain: (i) if for any reason (other than
a default by such Lender or the Administrative Agent) a borrowing
of LIBOR Rate Loans or Treasury Rate Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Company); (ii) if any
repayment of LIBOR Rate Loans or Treasury Rate Loans occurs on a
date which is not the last day of a Monthly Period applicable
thereto; (iii) if any prepayment of any LIBOR Rate Loans is not
made on any date specified in a notice of prepayment given by the
Company; or (iv) as a consequence of any other default by the
Company to repay its LIBOR Rate Loans or Treasury Rate Loans when
required by the terms of this Agreement. Calculation of all
amounts payable to a Lender under this Section 9.19 shall be made
as though that Lender had actually funded its relevant LIBOR Rate
Loan or Treasury Rate Loan, as the case may be, through the
purchase of a LIBOR rate deposit bearing interest at the LIBOR
Reference Rate or through the purchase of a United States
Treasury Security bearing interest at the Treasury Rate, in
either case in an amount equal to the amount of that Loan, having
a maturity comparable to the relevant Monthly Period.
9.20 Requirements of Law
In the event that any change in law occurring
after the date that any lender becomes a Lender party to this
Agreement with respect to any such Lender shall, in the opinion
of such Lender, require that any Loan Commitment of such Lender
be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by
such Lender or any corporation controlling such Lender, and such
change in law shall have the effect of reducing the rate of
return on such Lender's or such corporation's capital, as the
case may be, as a consequence of such Lender's obligations
hereunder to a level below that which such Lender or such
corporation, as the case may be, could have achieved but for such
change in law (taking into account such Lender's or such
corporation's policies, as the case may be, with respect to
capital adequacy) by an amount deemed by such Lender to be
material, then from time to time following notice by such Lender
to the Company of such change in law within 15 days after demand
by such Lender, the Company shall pay to such Lender such
additional amount or amounts as will compensate such Lender or
such corporation, as the case may be, for such reduction. Each
Lender, upon determining that any additional amounts will be
payable pursuant to this Section 9.20, will give prompt written
notice thereof to the Company, which notice shall show the basis
for calculation of such additional amounts (which calculation
shall, absent manifest error, be final and conclusive and binding
on the Company).
<PAGE>
WITNESS the due execution hereof by the
respective duly authorized officers of the undersigned as of the
date first written above.
COMPANY:
SPINNAKER INDUSTRIES, INC.
By: /s/ Ned N. Fleming III
Name: Ned N. Fleming III
Title: President
Notice Address:
600 North Pearl Street
Suite 2160
Dallas, Texas 75201
Attention: Mark R. Matteson
Telephone: 214-855-0322
Telecopy: 214-855-0093
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY,
as administrative agent
By: /s/ Mary Kay Coyle
Name: Mary Kay Coyle
Title: Managing Director
Notice Address:
One Bankers Trust Plaza
130 Liberty Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Telecopy: (212) 250-7218
<PAGE>
BRIDGE COMMITMENTS: LENDERS:
$8,500,000 BANKERS TRUST COMPANY
By:
Name:
Title:
Notice Address:
One Bankers Trust Plaza
130 Liberty Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Telecopy: (212) 250-7218
WARRANT EXERCISE AGREEMENT
WARRANT EXERCISE AGREEMENT, dated as of April 5, 1996 (as
amended, modified or supplemented from time to time, this "Agree-
ment") among BOYLE, FLEMING, GEORGE & CO., INC., a Texas
corporation ("BFG"), Richard J. Boyle, in his individual capacity
("Boyle"), Ned N. Fleming III, in his individual capacity
("Fleming"), SPINNAKER INDUSTRIES, INC., a Delaware corporation
(the "Company") and BANKERS TRUST COMPANY, as Administrative Agent
(in such capacity, the "Administrative Agent") under the Credit
Agreement (as defined below). Unless otherwise defined herein,
capitalized terms used herein shall have the respective meanings
provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, BFG and the Company are parties to that certain
Warrant Purchase Agreement, dated June 10, 1994 (as amended,
modified or supplemented from time to time, the "Warrant Purchase
Agreement"), pursuant to which BFG holds Class A Warrants (the "A
Warrants") to purchase up to 678,945 shares of common stock, no par
value, of the Company (subject to adjustment as provided in the A
Warrants) for an aggregate exercise price of $1,810,518.
WHEREAS, the Company, the Lenders named therein and the
Administrative Agent have entered into the Senior Credit Agreement,
dated as of April 5, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), providing for the
making of Loans to the Company as contemplated therein; and
WHEREAS, each of Boyle and Fleming are shareholders of
BFG;
WHEREAS, in order to induce the Lenders to make the Loans
to the Company, BFG has agreed, on the terms and conditions set
forth herein, to exercise its A Warrants to purchase shares of
common stock of the Company to provide the Company with additional
funds to facilitate the payment of interest on the Bridge Loans and
the Term Loans, and each of Boyle and Fleming have agreed to
guaranty the obligations of BFG hereunder;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. On the date hereof, BFG shall exercise A Warrants to
purchase 187,476 shares of common stock of the Company resulting in
cash proceeds to the Company equal to $500,000, which amount equals
the amount of interest on the Bridge Loans that will be due and
payable on the first two quarterly interest payment dates that
occur after the Closing Date (based on the Applicable Rate plus the
Applicable Spread as in effect on the Closing Date).
2. So long as any Obligations are outstanding and
interest on the Bridge Loans or any Term Loans, as the case may be,
shall be payable on a quarterly basis, no later than December 15
and June 15 of each year (commencing on December 15, 1996), BFG
shall exercise A Warrants to purchase shares of common stock of the
Company in an amount determined by the Administrative Agent to be
necessary to provide the Company with sufficient funds to pay in
full the interest on such Bridge Loans or Term Loans, as the case
may be, that will be due on the two quarterly interest payment
dates immediately following each such December 15 and June 15.
3. In addition to any payment that may be required
pursuant to Section 2 above, so long as any Obligations are
outstanding and if the interest on any Term Loans shall be payable
on a semi-annual basis, no later than 30 days prior to the first
semi-annual interest payment on the Term Loans and no later than
each anniversary of such 30th day (each an "Exercise Date"), BFG
shall exercise A Warrants to purchase shares of common stock of the
Company in an amount determined by the Administrative Agent to be
necessary to provide the Company with sufficient funds to pay in
full the interest on such Term Loans that will be due on the two
semi-annual interest payment dates immediately following each such
Exercise Date.
4. In addition, if, on any date on which a payment of
interest is due on the Bridge Loans or any Term Loans, as the case
may be, the amount of Escrowed Property (as defined in the Escrow
Agreement) is insufficient to pay in full the interest on such
Loans that is due on such date and to the extent that the Company
has not otherwise made such interest payment in full, BFG shall
exercise A Warrants to purchase shares of common stock of the
Company on such date resulting in cash proceeds to the Company
equal to such shortfall.
5. The Company hereby agrees that all moneys received
by the Company at any time, or from time to time, from the exercise
of A Warrants by BFG (whether such exercise occurs on a date
specified above or otherwise) shall immediately be deposited into
the Escrow Account in accordance with the provisions of the Escrow
Agreement.
6. Notwithstanding anything to the contrary contained
in the Warrant Purchase Agreement or in any A Warrant (including,
without limitation, the restrictions set forth in Sections 3.3 and
3.4 of the A Warrants), the Company hereby agrees that BFG shall be
permitted to (i) exercise the A Warrants on the terms, and at the
times, set forth in this Agreement and (ii) pledge the A Warrants
and the shares of common stock of the Company issuable upon the
exercise of the A Warrants pursuant to the terms of the Pledge
Agreement. The Company further agrees that notwithstanding
anything to the contrary contained in the Warrant Purchase
Agreement or in any A Warrant, the Company may not exercise its
repurchase right set forth in Section 9.01 of the Warrant Purchase
Agreement without the prior written consent of the Required
Lenders. The Company and BFG hereby agree that the terms of the
Warrant Purchase Agreement and the A Warrants are hereby modified
to give effect to this Section 6.
7. BFG hereby agrees that it shall not sell, transfer,
assign, pledge or otherwise encumber the A Warrants other than
pursuant to the Pledge Agreement.
8. (A) BFG, Boyle and Fleming each hereby represents
and warrants (as to itself) to the Administrative Agent and the
Company that:
(a) BFG (i) is a duly organized and validly existing
corporation in good standing under the laws of the State of
Texas and (ii) has the corporate power and authority to own
its property and assets and to transact the business in which
it is engaged and presently proposes to engage in.
(b) BFG has the corporate power and authority to
execute, deliver and perform the terms and provisions of this
Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance by it of
this Agreement.
(c) Each of BFG, Boyle and Fleming has duly executed and
delivered this Agreement and this Agreement constitutes the
legal, valid and binding obligation of each of BFG, Boyle and
Fleming enforceable in accordance with its terms except to the
extent that the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
(d) Each of BFG, Boyle and Fleming have the financial
resources to comply with its obligations under this Agreement.
(e) On the date hereof, BFG holds A Warrants to purchase
678,945 shares of common stock of the Company (subject to
adjustment as provided in the A Warrants), each with an
exercise price of approximately $2.667 (subject to adjustment
as provided in the A Warrants). The A Warrants may be
exercised at any time or from time to time on or after the
date hereof and prior to 5:00 p.m. (Dallas, Texas time) on
June 10, 1999.
(f) The unaudited balance sheet of Richard J. and Karen
A. Boyle as at May 30, 1995 and the unaudited balance sheet of
Ned N. Fleming III as at February 28, 1996 and furnished to
the Administrative Agent prior to the Closing Date, in each
case present fairly the financial condition of such persons as
at the date of such balance sheets. The brokerage statement
of Richard J. Boyle for the month ending February 29, 1996 and
the brokerage statement for Ned N. Fleming III for the month
ending December 31, 1995 and furnished to the Administrative
Agent prior to the Closing Date, in each case are true and
correct in all material respects as of such dates. In
addition, since the date of such balance sheets and brokerage
statements, as the case may be, there has been no material
adverse change in the financial condition of such persons.
(B) The Company hereby represents and warrants to the
Administrative Agent that:
(a) The Company had all the necessary corporate power
and authority to issue and deliver the A Warrants, and that
the issuance and delivery of the A Warrants had been duly
authorized by all necessary corporate action.
(b) The Company had duly issued and delivered the A
Warrants and the A Warrants constitute the legal, valid and
binding obligation of the Company enforceable in accordance
with its terms except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally
affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at
law).
9. As security for the prompt and complete payment and
performance when due of all the Obligations of the Company under
the Loan Documents, the Company hereby sells, assigns, and
transfers unto the Administrative Agent for the benefit of the
Lenders a security interest in all of the Company's rights under
this Agreement.
10. BFG and the Administrative Agent agree that the
Administrative Agent and the Lenders will suffer damages if BFG is
unable to fulfill its obligations under this Agreement and that it
would not be feasible to ascertain the extent of such damages with
precision. Accordingly, in the event that BFG does not comply with
any of its obligations under this Agreement as provided herein, BFG
shall pay to the Administrative Agent for the benefit of the
Lenders, as liquidated damages, an amount in cash equal to the cash
proceeds that the Company would have received on any date on which
BFG was required to exercise A Warrants less the amount of cash
proceeds, if any, received by the Company as a result of any such
exercise.
11. (a) In order to induce the Lenders to enter into
the Credit Agreement and to extend credit thereunder and in
recognition of the direct benefits to be received by each of Boyle
and Fleming (collectively, the "Guarantors," and each a
"Guarantor") from the proceeds of the Loans, each Guarantor hereby
agrees with the Administrative Agent for the benefit of the Lenders
as follows: Each Guarantor hereby unconditionally and irrevocably,
jointly and severally, guarantees, as primary obligor and not
merely as surety, the full and prompt payment and performance when
due, whether upon maturity, acceleration or otherwise, of any and
all of the obligations of BFG under this Agreement, including all
such obligations under Section 10 hereof (the "Guaranteed
Obligations"). Additionally, each Guarantor unconditionally and
irrevocably, jointly and severally, guarantees the payment and
performance of any and all of the Guaranteed Obligations of BFG
whether or not due or payable by BFG upon the occurrence of any of
the events of the type specified in Section 7.6 or 7.7 of the
Credit Agreement with respect to BFG.
(b) The liability of each Guarantor hereunder is joint
and several and exclusive and independent of any security for or
other guaranty of the Guaranteed Obligations of BFG whether
executed by such Guarantor, any other guarantor or by any other
party, and the liability of each Guarantor hereunder is not
affected or impaired by (a) any direction as to application of
payment by BFG or by any other party, or (b) any other continuing
or other guaranty, undertaking or maximum liability of a guarantor
or of any other party as to the Guaranteed Obligations of BFG, or
(c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by BFG, or (e) any payment made to
the Lenders on the Guaranteed Obligations which any such Lender
repays to BFG pursuant to court order in any bankruptcy, reorgani-
zation, arrangement, moratorium or other debtor relief proceeding,
and each Guarantor waives any right to the deferral or modification
of its obligations hereunder by reason of any such proceeding.
(c) The obligations of each Guarantor hereunder are
independent of the obligations of any other Guarantor, any other
guarantor, any other party or BFG, and a separate action or actions
may be brought and prosecuted against each Guarantor whether or not
action is brought against any other Guarantor, any other guarantor,
any other party or BFG and whether or not any other guarantor, any
other party or BFG be joined in any such action or actions. Each
Guarantor waives, to the full extent permitted by law, the benefit
of any statute of limitations affecting its liability hereunder or
the enforcement thereof. Any payment by BFG or other circumstance
which operates to toll any statute of limitations as to BFG shall
operate to toll the statute of limitations as to any Guarantor.
Each Guarantor hereby agrees with the Administrative Agent that it
will not exercise any right of subrogation it may at any time
otherwise have as a result of this guaranty (whether contractual,
under Section 509 of the Bankruptcy Code or otherwise) until all
Guaranteed Obligations have been irrevocably paid in full in cash.
(d) Each Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require any
Lender to (i) proceed against the Company, BFG, any other
Guarantor, any other guarantor or any other party, (ii) proceed
against or exhaust any security held from the Company, BFG, any
other Guarantor, any other guarantor or any other party or (iii)
pursue any other remedy in any Lender's power whatsoever. Each
Guarantor waives any defense based on or arising out of any defense
of the Company, BFG, any other Guarantor, any other guarantor or
any other party, other than payment in full of the Guaranteed
Obligations, based on or arising out of the disability of the
Company, BFG, any other Guarantor, any other guarantor or any other
party, or the unenforceability of the Guaranteed Obligations or any
part thereof from any cause, or the cessation from any cause of the
liability of the Company or BFG other than payment in full of the
Guaranteed Obligations.
(e) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation,
notices of nonperformance, notices of protest, notices of dishonor,
notices of acceptance of this guaranty, and notices of the
existence, creation or incurring of new or additional Guaranteed
Obligations.
12. This Agreement shall terminate on the earlier of (x)
the repayment in full of all Obligations and (y) the date and time
upon which BFG has exercised in full all of its A Warrants to
purchase shares of common stock of the Company and all of the cash
proceeds received by the Company therefrom shall have been
deposited into the Escrow Account.
13. This Agreement may only be modified by a writing
signed by BFG, Boyle, Fleming, the Company and the Administrative
Agent (with the consent of the Required Lenders), and no waiver
hereunder shall be effective unless in a writing signed by the
party or parties against whom enforcement of such waiver is sought.
14. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action
or proceeding with respect to this Agreement may be brought in the
courts of the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery of
this Agreement, BFG, Boyle, Fleming and the Company each hereby
irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid
courts. BFG, Boyle, Fleming and the Company each hereby further
irrevocably waives any claim that any such courts lack jurisdiction
over such party, and agrees not to plead or claim, in any legal
action or proceeding with respect to this Agreement brought in any
of the aforesaid courts, that any such court lacks jurisdiction
over such party. BFG, Boyle, Fleming and the Company each
irrevocably consents to the service of process in any such action
or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set
forth opposite its signature below, such service to become
effective 30 days after such mailing. BFG, Boyle, Fleming and the
Company each hereby irrevocably waives any objection to such
service of process and further irrevocably waives and agrees not to
plead or claim in any action or proceeding commenced hereunder that
service of process was in any way invalid or ineffective. Nothing
herein shall affect the right of the Administrative Agent to serve
process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against BFG, Boyle, Fleming or the
Company in any other jurisdiction.
(b) BFG, Boyle, Fleming and the Company each hereby
irrevocably waives any objection which it may now or hereafter have
to the laying of venue of any of the aforesaid actions or proceed-
ings arising out of or in connection with this Agreement brought in
the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
15. None of BFG, Boyle, Fleming or the Company may
assign any of its rights or obligations under this Agreement except
as set forth in Section 9 of this Agreement.
16. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the
same instrument.
17. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter
hereof and supersedes all previous negotiations and writings with
respect to such subject matter.<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into
this Agreement as of the date first above written.
BOYLE, FLEMING, GEORGE & CO.,
INC.
Address:
600 N. Pearl Street
Suite 2160 By /s/ Ned N. Fleming III
Dallas, Texas 75201 Title: President
Attention: Ned N. Fleming III
Address: RICHARD J. BOYLE
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 /s/ Richard J. Boyle
Attention: Richard J. Boyle
Address: NED N. FLEMING III
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 /s/ Ned N. Fleming III
Attention: Ned N. Fleming III
Address: SPINNAKER INDUSTRIES, INC.
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201 By /s/ Ned N. Fleming III
Attention: Mark R. Matteson Title: President
Address: BANKERS TRUST COMPANY,
130 Liberty Street as Administrative Agent
New York, New York 10006
Attention: Mary Kay Coyle
By /s/ Mary Kay Coyle
Title: Managing Director
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as April 5, 1996 (as amended,
modified or supplemented from time to time, this "Agreement"), made
by each of the undersigned pledgors (each a "Pledgor" and,
collectively, the "Pledgors"), in favor of BANKERS TRUST COMPANY,
as Collateral Agent for the benefit of the Secured Creditors
referred to below (in such capacity, the "Pledgee"). Except as
otherwise defined herein, capitalized terms used herein and defined
in the Credit Agreement (as defined below) shall be used herein as
therein defined.
W I T N E S S E T H :
WHEREAS, Spinnaker Industries, Inc. (the "Company"), the
Lenders named therein and Bankers Trust Company, as Administrative
Agent, have entered into a Senior Credit Agreement, dated as of
April 5, 1996 (as amended, modified or supplemented from time to
time, the "Credit Agreement"), providing for the making of the
Loans to the Company as contemplated therein, (each such Lender,
together with the Pledgee, are herein called) the "Secured
Creditors");
WHEREAS, it is a condition precedent to the making of the
Loans to the Company under the Credit Agreement that each Pledgor
shall have executed and delivered to the Pledgee this Agreement;
and
WHEREAS, each Pledgor desires to execute this Agreement
to satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing
to each Pledgor, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor hereby makes the following
representations and warranties to the Pledgee and hereby covenants
and agrees with the Pledgee, in each case for the benefit of the
Secured Creditors, as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by
each Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the
Borrower, whether now existing or hereafter incurred
under, arising out of, or in connection with, the
Credit Agreement and any other Loan Document to which
the Borrower is a party and the due performance and
compliance by the Borrower with the terms of each such
Loan Document;
(ii) any and all sums advanced by the Pledgee in
order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Col-
lateral;
(iii) in the event of any proceeding for the col-
lection or enforcement of any indebtedness,
obligations, or liabilities referred to in clause (i)
above, after an Event of Default shall have occurred
and be continuing, the reasonable expenses of
retaking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the
Collateral, or of any exercise by the Pledgee of its
rights hereunder, together with reasonable attorneys'
fees and court costs; and
(iv) all amounts paid by any Indemnitee (as
defined in Section 11 hereof) as to which such
Indemnitee has the right to reimbursement under
Section 11 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in
clauses (i) through (iv) of this Section 1 being herein
collectively called the "Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As
used herein: (i) the term "Stock" shall mean all of the issued and
outstanding shares of capital stock at any time owned by (x) the
Company in any corporation (other than Central Products, except as
provided below), including Entoleter and Brown Bridge, provided
that the term Stock shall include (and the Company shall pledge
hereunder) the capital stock of Central Products upon the earlier
of (A) the payment in full of all amounts outstanding under the
Existing Central Products Credit Agreement and (B) the release by
the lenders under the Existing Central Products Credit Agreement of
their lien on such capital stock, (y) each other Pledgor in the
Company (including any capital stock issued upon the exercise of
any option's, rights or warrants to purchase capital stock of the
Company), Entoleter and Brown Bridge and (z) Boyle Fleming in any
warrants (the "Warrants") to purchase shares of the capital stock
of the Company; (ii) the term "Notes" shall mean all promissory
notes from time to time issued to, or held by, the Company; and
(iii) the term "Securities" shall mean all of the Stock and Notes.
Each Pledgor represents and warrants that on the date hereof (i)
the Stock held by such Pledgor consists of the number and type of
shares of (or Warrants to purchase shares of) the stock of the
corporations as described in Annex A hereto; (ii) such Stock
constitutes that percentage of the issued and outstanding capital
stock of (or, in the case of Warrants, the right to purchase that
percentage of the issued and outstanding capital stock of) the
issuing corporation as is set forth in Annex A hereto; (iii) the
Notes held by the Company consist of the promissory notes described
in Annex B hereto; and (iv) on the date hereof, such Pledgor owns
no other Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1 Pledge. To secure the Obligations and for the
purposes set forth in Section 1 hereof, each Pledgor hereby: (i)
grants to the Pledgee for the benefit of the Secured Creditors a
security interest in all of the Collateral at any time owned by
such Pledgor; (ii) pledges and deposits as security with the
Pledgee the Securities owned by such Pledgor on the date hereof,
and delivers to the Pledgee certificates or instruments therefor,
duly endorsed in blank in the case of Notes and accompanied by un-
dated stock powers duly executed in blank by such Pledgor in the
case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee; and (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all
of such Pledgor's right, title and interest in and to such
Securities (and in and to all certificates or instruments evi-
dencing such Securities) at any time owned by such Pledgor, to be
held by the Pledgee, upon the terms and conditions set forth in
this Agreement.
3.2 Subsequently Acquired Securities. If any Pledgor
shall acquire (by purchase, stock dividend, exercise of any Warrant
or otherwise) any additional Securities at any time or from time to
time after the date hereof, such Pledgor will forthwith pledge and
deposit such Securities (or certificates or instruments
representing such Securities) as security with the Pledgee and
deliver to the Pledgee certificates therefor or instruments
thereof, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank in the
case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee, and will promptly thereafter deliver to
the Pledgee a certificate executed by a principal executive officer
of such Pledgor describing such Securities and certifying that the
same have been duly pledged with the Pledgee hereunder.
3.3 Uncertificated Securities. Notwithstanding anything
to the contrary contained in Sections 3.1 and 3.2 hereof, if any
Securities (whether now owned or hereafter acquired) are
uncertificated securities, the respective Pledgor shall promptly
notify the Pledgee thereof, and shall promptly take all actions
required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and
8-321 of the New York UCC, if applicable). Each Pledgor further
agrees to take such actions as the Pledgee deems necessary or
desirable to effect the foregoing and to permit the Pledgee to
exercise any of its rights and remedies hereunder, and agrees to
provide an opinion of counsel reasonably satisfactory to the
Pledgee with respect to any such pledge of uncertificated
Securities promptly upon request of the Pledgee.
3.4 Definition of Pledged Stock, Pledged Notes, Pledged
Securities and Collateral. All Stock at any time pledged or
required to be pledged hereunder is hereinafter called the "Pledged
Stock;" all Notes at any time pledged or required to be pledged
hereunder are hereinafter called the "Pledged Notes;" all of the
Pledged Stock and Pledged Notes together are hereinafter called the
"Pledged Securities," which together with all proceeds thereof,
including any securities and moneys received and at the time held
by the Pledgee hereunder, is hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The
Pledgee shall have the right to appoint one or more sub-agents for
the purpose of retaining physical possession of the Pledged
Securities, which may be held (in the discretion of the Pledgee) in
the name of such Pledgor, endorsed or assigned in blank or in favor
of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent
appointed by the Pledgee. The Pledgee agrees to promptly
notify the relevant Pledgor after the appointment of any sub-agent;
provided, however, that the failure to give such notice shall not
affect the validity of such appointment. Notwithstanding anything
to the contrary contained in this Agreement, the agent or any
lender under the Existing Brown Bridge Credit Agreement and the
Existing Entoleter Credit Agreement, as the case may be, which
holds the capital stock of Brown Bridge and Entoleter shall act as
a sub-agent for the Pledgee for purposes of retaining physical
possession of the shares of capital stock of Brown Bridge and
Entoleter, as the case may be, so long as the shares of Brown
Bridge and Entoleter remain subject to the pledge under the
Existing Brown Bridge Credit Agreement and the Existing Entoleter
Credit Agreement, as the case may be.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and
until (i) an Event of Default shall have occurred and be continuing
and (ii) written notice thereof shall have been given by the
Pledgee to the relevant Pledgor (provided, that if an Event of
Default specified in Section 7.6 or 7.7 of the Credit Agreement
shall occur, no such notice shall be required), each Pledgor shall
be entitled to exercise any and all voting and other consensual
rights pertaining to the Pledged Securities and to give all
consents, waivers or ratifications in respect thereof; provided,
that no vote shall be cast or any consent, waiver or ratification
given or any action taken which would violate or be inconsistent
with any of the terms of this Agreement or any other Loan Document,
or which would have the effect of impairing the position or
interests of the Pledgee in the Collateral. All such rights of
such Pledgor to vote and to give consents, waivers and ratifica-
tions shall cease in case an Event of Default shall occur and be
continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event
of Default shall have occurred and be continuing, all cash
dividends payable in respect of the Pledged Stock and all payments
in respect of the Pledged Notes shall be paid to the respective
Pledgor to the extent that the payment thereof is permitted by the
Credit Agreement; provided, that all cash dividends payable in re-
spect of the Pledged Stock which are (i) not permitted to be paid
pursuant to the Credit Agreement or (ii) determined by the Pledgee
to represent in whole or in part an extraordinary, liquidating or
other distribution in return of capital shall be paid, to the
extent so determined to represent an extraordinary, liquidating or
other distribution in return of capital, to the Pledgee and
retained by it as part of the Collateral. The Pledgee shall also
be entitled to receive directly, and to retain as part of the
Collateral:
(i) all other or additional stock or other
securities or property (other than cash) paid or
distributed by way of dividend or otherwise in respect
of the Pledged Stock;
(ii) all other or additional stock or other secu-
rities or property (including cash) paid or
distributed in respect of the Pledged Stock by way of
stock-split, spin-off, split-up, reclassification,
combination of shares or similar rearrangement; and
(iii) all other or additional stock or other secu-
rities or property (including cash) which may be paid
in respect of the Collateral by reason of any con-
solidation, merger, exchange of stock, conveyance of
assets, liquidation or similar corporate reorgani-
zation;
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an
Event of Default shall have occurred and be continuing, the Pledgee
shall be entitled to exercise all of the rights, powers and
remedies (whether vested in it by this Agreement or by any other
Loan Document or by law) for the protection and enforcement of its
rights in respect of the Collateral, and the Pledgee shall be en-
titled, without limitation, to exercise the following rights, which
each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of
the Collateral payable to such Pledgor under Section
6 hereof;
(ii) to transfer all or any part of the Pledged
Securities into the Pledgee's name or the name of its
nominee or nominees (the Pledgee agrees to promptly
notify the relevant Pledgor after such transfer;
provided, however, that the failure to give such
notice shall not affect the validity of such
transfer);
(iii) to accelerate any Pledged Note which may be
accelerated in accordance with its terms, and take any
other action to collect upon any Pledged Note (includ-
ing, without limitation, to make any demand for
payment thereon);
(iv) subject to the giving of written notice to
the relevant Pledgor in accordance with (and to the
extent required by) clause (ii) of Section 5 hereof,
to vote all or any part of the Pledged Stock (whether
or not transferred into the name of the Pledgee) and
give all consents, waivers and ratifications in
respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner
thereof (each Pledgor hereby irrevocably constituting
and appointing the Pledgee the proxy and attorney-in-fact of
such Pledgor, with full power of substitution
to do so); and
(v) at any time or from time to time to sell,
assign and deliver, or grant options to purchase, all
or any part of the Collateral, or any interest
therein, at any public or private sale, without demand
of performance, advertisement or notice of intention
to sell or of the time or place of sale or adjournment
thereof or to redeem or otherwise (all of which are
hereby waived by each Pledgor), for cash, on credit or
for other property, for immediate or future delivery
without any assumption of credit risk, and for such
price or prices and on such terms as the Pledgee in
its absolute discretion may determine; provided, that
at least 10 days' notice of the time and place of any
such sale shall be given to such Pledgor. Each
Pledgor hereby waives and releases to the fullest
extent permitted by law any right or equity of re-
demption with respect to the Collateral, whether
before or after sale hereunder, and all rights, if
any, of marshalling the Collateral and any other
security for the Obligations or otherwise. At any
such sale, unless prohibited by applicable law, the
Pledgee or any other Secured Creditor may bid for and
purchase all or any part of the Collateral so sold
free from any such right or equity of redemption. The
Pledgee shall not be liable for failure to collect or
realize upon any or all of the Collateral or for any
delay in so doing nor shall any of them be under any
obligation to take any action whatsoever with regard
thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and
remedy of the Pledgee provided for in this Agreement or any other
Loan Document or now or hereafter existing at law or in equity or
by statute shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise
or beginning of the exercise by the Pledgee or any other Secured
Creditor of any one or more of the rights, powers or remedies pro-
vided for in this Agreement or any other Loan Document or now or
hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by the
Pledgee or any other Secured Creditor of all such other rights,
powers or remedies, and no failure or delay on the part of the
Pledgee or any other Secured Creditor to exercise any such right,
power or remedy shall operate as a waiver thereof. No notice to or
demand on any Pledgor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Pledgee or any
other Secured Creditor to any other or further action in any
circumstances without notice or demand. The Secured Creditors
agree that this Agreement may be enforced only by the action of the
Administrative Agent or the Pledgee, in each case acting upon the
instructions of the Required Lenders, and that no other Secured
Creditor shall have any right individually to seek to enforce or to
enforce this Agreement or to realize upon the security to be
granted hereby, it being understood and agreed that such rights and
remedies may be exercised by the Administrative Agent or the
Pledgee, as the case may be, for the benefit of the Secured
Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected
by the Pledgee upon any sale or other disposition of the
Collateral, together with all other moneys received by the Pledgee
hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations
owing the Pledgee of the type described in clauses
(ii) and (iii) of Section 1 of this Agreement;
(ii) second, to the extent proceeds remain after
the application pursuant to the preceding clause (i),
an amount equal to the outstanding Obligations shall
be paid to the Secured Creditors as provided in
Section 9(c) hereof with each Secured Creditor
receiving an amount equal to its outstanding
Obligations or, if the proceeds are insufficient to
pay in full all such Obligations, its Pro Rata Share
(as defined below) of the amount remaining to be
distributed; and
(iii) third, to the extent proceeds remain after
the application pursuant to the preceding clauses (i)
and (ii), and following the termination of this
Agreement pursuant to Section 18(a) hereof, to the
relevant Pledgor or, to the extent directed by such
Pledgor or a court of competent jurisdiction, to
whomever may be lawfully entitled to receive such
surplus.
(b) For purposes of this Agreement, "Pro Rate Share"
shall mean, when calculating a Secured Creditor's portion of
any distribution or amount, that amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Secured Creditor's Obligations and
the denominator of which is the then outstanding amount of all
Obligations.
(c) All payments required to be made to the Secured
Creditors hereunder shall be made to the Administrative Agent
under the Credit Agreement for the account of the Secured
Creditors.
(d) For purposes of applying payments received in
accordance with this Section 9, the Pledgee shall be entitled
to rely upon the Administrative Agent under the Credit
Agreement for a determination (which the Administrative Agent
and the Secured Creditors agree (or shall agree) to provide
upon request of the Pledgee) of the outstanding Obligations
owed to the Secured Creditors. Unless it has actual knowledge
(including by way of written notice from a Secured Creditor)
to the contrary, the Administrative Agent under the Credit
Agreement, in furnishing information pursuant to the preceding
sentence, and Pledgee, in acting hereunder, shall be entitled
to assume that no Obligations other than principal, interest
and regularly accruing fees are owing to any Secured Creditor.
(e) It is understood and agreed that the Company shall
remain liable to the extent of any deficiency between the
amount of the proceeds of the Collateral hereunder and the
aggregate amount of the Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Col-
lateral by the Pledgee hereunder (whether by virtue of the power of
sale herein granted, pursuant to judicial process or otherwise),
the receipt of the Pledgee or the officer making the sale shall be
a sufficient discharge to the purchaser or purchasers of the Col-
lateral so sold, and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase
money paid over to the Pledgee or such officer or be answerable in
any way for the misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally
agrees (i) to indemnify and hold harmless the Pledgee, each other
Secured Creditor and their respective officers, directors,
employees, agents, servants, affiliates, successors and assigns
(each an "Indemnitee") from and against any and all claims,
demands, losses, judgments and liabilities of whatsoever kind or
nature, and (ii) to reimburse each Indemnitee for all costs and
expenses, including reasonable attorneys' fees, growing out of or
resulting from this Agreement or the exercise by the Pledgee of any
right or remedy granted to it hereunder or under any other Loan
Document except, with respect to clauses (i) and (ii) above, for
those arising solely from such Indemnitee's gross negligence or
willful misconduct. In no event shall the Pledgee be liable, in
the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other
than to account for moneys actually received by it in accordance
with the terms hereof. If and to the extent that the obligations
of the Pledgors under this Section 11 are unenforceable for any
reason, each Pledgor hereby agrees to make the maximum contribution
to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each
Pledgor agrees that it will join with the Pledgee in executing and,
at such Pledgor's own expense, file and refile under the applicable
Uniform Commercial Code in any jurisdiction such financing
statements, continuation statements and other documents in such
offices as the Pledgee may deem necessary or appropriate and
wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and
hereby authorizes the Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where permitted by law, and
agrees to do such further acts and things and to execute and
deliver to the Pledgee such additional conveyances, assignments,
agreements and instruments as the Pledgee may reasonably require or
deem advisable to carry into effect the purposes of this Agreement
or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such
Pledgor's attorney-in-fact, with full authority in the place and
stead of such Pledgor and in the name of such Pledgor or otherwise,
from time to time after the occurrence and during the continuance
of an Event of Default, in the Pledgee's discretion to take any
action and to execute any instrument which the Pledgee may
reasonably deem necessary or advisable to accomplish the purposes
of this Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in
accordance with this Agreement all items of the Collateral at any
time received under this Agreement. It is expressly understood and
agreed that the obligations of the Pledgee as holder of the
Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement and in the Credit
Agreement. The Pledgee shall act hereunder on the terms and
conditions set forth herein and in Section 8 of the Credit
Agreement.
14. TRANSFER BY PLEDGORS. (a) The Company will not sell
or otherwise dispose of, grant any option with respect to, or
mortgage, pledge or otherwise encumber any of the Collateral owned
by it or any interest therein except as otherwise permitted by the
Credit Agreement.
(b) LMC and Boyle Fleming will not sell, assign,
transfer, or otherwise dispose of, grant any option with respect
to, or mortgage, pledge or otherwise encumber any of the Collateral
owned by them or any interest therein except pursuant to this
Agreement or with the prior written consent of the Required Lenders
or all of the Lenders to the extent required by Section 9.6 of the
Credit Agreement, provided, however, LMC shall have the right to
transfer shares of the capital stock of the Company owned by it to
Lynch so long as (i) at least ten days prior written notice thereof
is given by LMC to the Pledgee and (ii) Lynch shall have executed
a counterpart of this Agreement and delivered the same to the
Pledgee pursuant to which Lynch shall become a "Pledgor" hereunder
with respect to the shares of capital stock of the Company so
transferred to it and Lynch shall assume all obligations and
liabilities of a "Pledgor" hereunder and shall duly pledge and
deliver to the Pledgee the shares of capital stock of the Company
so transferred to it accompanied by undated stock powers duly
executed in blank.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PLEDGOR. Each Pledgor represents, warrants and covenants as to
itself that (i) it is the legal, record and beneficial owner of,
and has good and marketable title to, all Securities pledged by it
hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever,
except (x) the liens and security interests created by this
Agreement; (y) the liens and security interests created by the
Existing Brown Bridge Credit Agreement in the shares of capital
stock of Brown Bridge; and (z) the liens and security interests
created by the Existing Entoleter Credit Agreement in the shares of
capital stock of Entoleter; (ii) it has full power, authority and
legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (iii) this Agreement has been duly authorized, exe-
cuted and delivered by such Pledgor and constitutes a legal, valid
and binding obligation of such Pledgor enforceable in accordance
with its terms, except to the extent that the enforceability hereof
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting credi-
tors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); (iv) except to
the extent already obtained or made no consent of any other party
(including, without limitation, any stockholder or creditor of such
Pledgor or any of its Subsidiaries) and no consent, license,
permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any
governmental authority is required to be obtained by such Pledgor
in connection with the execution, delivery or performance of this
Agreement, or in connection with the exercise of its rights and
remedies pursuant to this Agreement, except as may be required in
connection with the disposition of the Securities by laws affecting
the offering and sale of securities generally; (v) the execution,
delivery and performance of this Agreement by such Pledgor does not
violate any provision of any applicable law or regulation or of any
order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of the Certificate
or Articles of Incorporation or By-Laws of such Pledgor or any of
its Subsidiaries or of any securities issued by such Pledgor or any
of its Subsidiaries, or of any mortgage, indenture, lease, deed of
trust, agreement, instrument or undertaking to which such Pledgor
or any of its Subsidiaries is a party or which purports to be
binding upon such Pledgor or any of its Subsidiaries or upon any of
their respective assets and will not result in the creation or
imposition (or the obligation to create or impose) of any lien or
encumbrance on any of the assets of such Pledgor or any of its Sub-
sidiaries except as contemplated by this Agreement; (vi) all the
shares of the Stock have been duly and validly issued, are fully
paid and nonassessable and are subject to no options to purchase or
similar rights; (vii) each of the Pledged Notes constitutes, or
when executed by the obligor thereof will constitute, the legal,
valid and binding obligation of such obligor, enforceable in
accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law);
and (viii) the pledge and assignment of the Securities pursuant to
this Agreement, together with the delivery of the Securities
pursuant to this Agreement (which delivery has been made), creates
a valid and perfected first security interest in such Securities
and the proceeds thereof (or (x) in the case of the shares of
capital stock of Brown Bridge and the proceeds thereof, a valid and
perfected second security interest so long as the shares of Brown
Bridge remain subject to the pledge under the Existing Brown Bridge
Credit Agreement and (y) in the case of the shares of capital stock
of Entoleter and the proceeds thereof, a valid and perfected second
security interest so long as the shares of Entoleter remain subject
to the pledge under the Existing Entoleter Credit Agreement)
subject to no prior lien or encumbrance or to any agreement
purporting to grant to any third party a lien or encumbrance on the
property or assets of such Pledgor which would include the
Securities (other than as set forth above). Each Pledgor covenants
and agrees that it will defend the Pledgee's right, title and
security interest in and to the Securities and the proceeds thereof
against the claims and demands of all persons whomsoever; and such
Pledgor covenants and agrees that it will have like title to and
right to pledge any other property at any time hereafter pledged to
the Pledgee as Collateral hereunder and will likewise defend the
right thereto and security interest therein of the Pledgee.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obliga-
tions of each Pledgor under this Agreement shall be absolute and
unconditional and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement
to or deletion from any Loan Document or any other instrument or
agreement referred to therein, or any assignment or transfer of any
thereof; (ii) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or
instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any
acceptance thereof or any release of any security by the Pledgee or
its assignee; (iv) any limitation on any party's liability or
obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (v) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to such Pledgor or
any Subsidiary of such Pledgor, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in any
such proceeding, whether or not such Pledgor shall have notice or
knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default
shall have occurred and be continuing and any Pledgor shall have
received from the Pledgee a written request or requests that such
Pledgor cause any registration, qualification or compliance under
any Federal or state securities law or laws to be effected with
respect to all or any part of the Pledged Stock, such Pledgor as
soon as practicable and at its expense will use its best efforts to
cause such registration to be effected (and be kept effective) and
will use its best efforts to cause such qualification and compli-
ance to be effected (and be kept effective) as may be so requested
and as would permit or facilitate the sale and distribution of such
Pledged Stock, including, without limitation, registration under
the Securities Act of 1933 as then in effect (or any similar stat-
ute then in effect), appropriate qualifications under applicable
blue sky or other state securities laws and appropriate compliance
with any other government requirements; provided, that the Pledgee
and each other Secured Creditor shall furnish to such Pledgor such
information regarding the Pledgee or such other Secured Creditor as
such Pledgor may request in writing and as shall be required in
connection with any such registration, qualification or compliance.
Such Pledgor will cause the Pledgee to be kept advised in writing
as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the
Pledgee such number of prospectuses, offering circulars or other
documents incident thereto as the Pledgee from time to time may
reasonably request, and will indemnify the Pledgee and each other
Secured Creditor and all others participating in the distribution
of the Pledged Stock against all claims, losses, damages and lia-
bilities caused by any untrue statement (or alleged untrue
statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same may have been
caused by an untrue statement or omission based upon information
furnished in writing to such Pledgor by the Pledgee or such other
Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged
Securities pursuant to Section 7 hereof, such Pledged Securities or
the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act of 1933, as then
in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in
such manner and under such circumstances as the Pledgee may deem
necessary or advisable in order that such sale may legally be
effected without such registration. Without limiting the
generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion: (i) may proceed to make such private
sale notwithstanding that a registration statement for the purpose
of registering such Pledged Securities or part thereof shall have
been filed under such Securities Act; (ii) may approach and
negotiate with a single possible purchaser to effect such sale; and
(iii) may restrict such sale to a purchaser who will represent and
agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such
Pledged Securities or part thereof. In the event of any such sale,
the Pledgee shall incur no responsibility or liability for selling
all or any part of the Pledged Securities at a price which the
Pledgee, in its sole and absolute discretion, may in good faith
deem reasonable under the circumstances, notwithstanding the possi-
bility that a substantially higher price might be realized if the
sale were deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination
Date (as defined below), this Agreement shall terminate (provided
that all indemnities set forth herein including, without
limitation, in Section 11 hereof, shall survive any such termina-
tion) and the Pledgee, at the request and expense of the respective
Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and
deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as may be in the
possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together
with any moneys at the time held by the Pledgee hereunder. As used
in this Agreement, "Termination Date" shall mean the date upon
which no Note (as defined in the Credit Agreement) is outstanding
and the Loans and all other Obligations have been paid in full.
(b) In the event that any part of the Collateral is sold
in connection with a sale permitted by Section 6.6 of the Credit
Agreement or is otherwise released at the direction of the Required
Lenders (or all the Lenders if required by Section 9.6 of the
Credit Agreement), the Pledgee, at the request and expense of such
Pledgor, will duly assign, transfer and deliver to such Pledgor
(without recourse and without any representation or warranty) such
of the Collateral as is then being (or has been) so sold or
released and as may be in possession of the Pledgee and has not
heretofore been released pursuant to this Agreement.
(c) Notwithstanding anything to the contrary contained
above, upon the presentment of satisfactory evidence to the Pledgee
in its sole discretion that all obligations evidenced by any
Pledged Note have been repaid in full, and that any payments
received by the relevant Pledgor were permitted to be received by
such Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon
the request and at the expense of such Pledgor, duly assign, tran-
sfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such Pledged Note if same is then in
the possession of the Pledgee and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement.
(d) Notwithstanding anything to the contrary contained
above, upon the exercise by Boyle Fleming of any A Warrants (or any
portion thereof) (as defined in the Boyle Fleming Warrant Exercise
Agreement), the Pledgee shall duly assign, transfer and deliver to
Boyle Fleming (without recourse and without any representation or
Warranty) the A Warrants (or portion thereof) so exercised so long
as any A Warrants still held by Boyle Fleming (and any capital
stock of the Company issued upon the exercise of the A Warrants so
exercised) shall be pledged and deposited with the Pledgee as
provided herein.
(e) At any time that a Pledgor desires that Collateral
be released as provided in the foregoing Section 18(a), (b), (c) or
(d), it shall deliver to the Pledgee a certificate signed by a
principal executive officer of such Pledgor stating that the
release of the respective Collateral is permitted pursuant to
Section 18(a), (b), (c) or (d).
19. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by
first class mail, postage prepaid, addressed:
(a) if to any Pledgor, at its address set forth opposite
its signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.:(212) 250-9094
Telecopier No.:(212) 250-7218
or at such other address as shall have been furnished in writing by
any Person described above to the party required to give notice
hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions
of this Agreement may be changed, waived, modified or varied in any
manner whatsoever unless in writing duly signed by each Pledgor
directly affected thereby and the Pledgee (with the written consent
of the Required Lenders or all of the Lenders to the extent
required by Section 9.6 of the Credit Agreement).
21. MISCELLANEOUS. This Agreement shall be binding upon
the successors and assigns of each Pledgor and shall inure to the
benefit of the Secured Creditors and their respective successors
and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
The headings in this Agreement are for purposes of reference only
and shall not limit or define the meaning hereof. This Agreement
may be executed in any number of counterparts, each of which shall
be an original, but all of which shall constitute one instrument.
22. RECOURSE. (a) This Agreement is made with full
recourse to the Company and pursuant to and upon all the
representations, warranties, covenants and agreements on the part
of the Company contained herein, in the other Loan Documents and
otherwise in writing in connection herewith or therewith.
(b) The Pledgee and each other Secured Creditor hereby
acknowledge and agree that Boyle Fleming and LMC shall not be
personally liable for the payment of any sums now or hereafter
owing to the Secured Creditors in respect of the Obligations owing
by the Borrower to the Secured Creditors pursuant to the Credit
Agreement and the Notes. Upon the occurrence and during the
continuance of an Event of Default, the Pledgee's and the other
Secured Creditors' rights against Boyle Fleming and LMC in respect
of such Obligations shall be limited to the foreclosure of the Lien
created hereunder in the Securities pledged by Boyle Fleming and
LMC.
23. ACKNOWLEDGEMENT. The Secured Creditors acknowledge
and agree that the security interest in the capital stock of Brown
Bridge and Entoleter and the ability to exercise remedies with
respect to such capital stock are subject to the Lien and security
interest of the lenders under the Existing Brown Bridge Credit
Agreement and the Existing Entoleter Credit Agreement, as the case
may be.<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have
caused this Agreement to be executed by their duly elected officers
duly authorized as of the date first above written.
<PAGE>
Address:
8 Sound Shore Drive
Suite 290
Greenwich, Connecticut 06830
Attention: Robert A. Hurwich<PAGE>
LYNCH MANUFACTURING
CORPORATION, as a Pledgor
By /s/ Robert A. Hurwich
Title: President<PAGE>
Address:
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201
Attention: Mark R. Matteson
Address:
600 N. Pearl Street
Suite 2160
Dallas, Texas 75201
Attention: Ned N. Fleming,
III
<PAGE>
SPINNAKER INDUSTRIES, INC., as a
Pledgor
By /s/ Ned N. Fleming III
Title: President
BOYLE, FLEMING, GEORGE & CO.,
INC.,
as a Pledgor
By /s/ Ned N. Fleming III
Title:
<PAGE>
BANKERS TRUST COMPANY,
as Pledgee
By /s/ Mary Kay Coyle
Title: President<PAGE>
ANNEX A
to
PLEDGE AGREEMENT
LIST OF STOCKS
[To be provided by Pledgor]
<PAGE>
ANNEX B
to
PLEDGE AGREEMENT
LIST OF NOTES
[To be provided by Pledgor]
