<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- - ----- EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ---- SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended May 29, 1999 Commission File No. 0-5813
Herman Miller, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0837640
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
855 East Main Avenue
PO Box 302
Zeeland, Michigan 49464-0302
----------------- ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (616) 654 3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.20 Par Value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. .
---
The aggregate market value of the voting stock held by "nonaffiliates" of the
registrant (for this purpose only, the affiliates of the registrant have been
assumed to be the executive officers and directors of the registrant and their
associates) as of July 30, 1999, was $2,064,075,221 (based on $26.25 per share
which was the closing sale price in the over-the-counter market as reported by
NASDAQ).
The number of shares outstanding of the registrant's common stock, as of July
30, 1999: Common stock, $.20 par value--80,848,604 shares outstanding.
-----------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on September 27, 1999, are incorporated into Part III of
this report.
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PART 1
Item 1 BUSINESS
(a) General Development of Business
The company is engaged primarily in the design, manufacture, and sale of office
systems, products, and services principally for offices and, to a lesser extent,
for healthcare facilities and other uses. Through research, the company seeks to
define and clarify customer needs and problems existing in its markets and to
design, through innovation where appropriate and feasible, products, systems,
and services as solutions to such problems.
Herman Miller, Inc., was incorporated in Michigan in 1905. One of the company's
major plants and its corporate offices are located at 855 East Main Avenue, PO
Box 302, Zeeland, Michigan, 49464-0302, and its telephone number is (616) 654
3000. Unless otherwise noted or indicated by the context, the term "company"
includes Herman Miller, Inc., its predecessors and subsidiaries.
(b) Financial Information About Industry Segments
The company's operations are in a single industry segment - the design,
manufacture, and sale of office furniture systems and furniture, and related
products and services. Accordingly, no separate industry segment information is
presented.
(c) Narrative Description of Business
The company's principal business consists of the research, design, development,
manufacture, and sale of office systems, products and services. Most of these
systems and products are coordinated in design so that they may be used both
together and interchangeably. The company's products and services are purchased
primarily for offices, and, to a lesser extent, healthcare facilities and other
uses.
The company is a leader in design and development of furniture and furniture
systems. This leadership is exemplified by the innovative concepts introduced by
the company in its modular systems known as Action Office, Q System, and
Ethospace. Action Office, the company's series of three freestanding office
partition and furnishing systems, is believed to be the first such system to be
introduced and nationally marketed and as such popularized the "open plan"
approach to office space utilization. Ethospace interiors is a system of movable
full- and partial-height walls, with panels and individual wall segments that
interchangeably attach to wall framework. It includes wall-attached work
surfaces and storage/display units, electrical distribution, lighting,
organizing tools, and freestanding components. The company also offers a broad
array of seating (including Aeron, Equa, Ergon, and Ambi office chairs), storage
(including Meridian filing products), and freestanding furniture products.
The company's products are marketed worldwide by its own sales staff and its
owned dealer network. These sales persons work with dealers, the design and
architectural community, as well as directly with end users. Seeking and
strengthening the various distribution channels within the marketplace is a
major focus of the company. Independent dealerships concentrate on the sale of
Herman Miller products and a few complementary product lines of other
manufacturers. Approximately 73.6 percent of the company's sales in the fiscal
year ended May 29, 1999, were made to or through independent dealers. The
remaining sales (26.4 percent) were made directly to end-users, including
federal, state, and local governments, and several major corporations, by either
the company's own sales staff or its owned dealer network.
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The company's furniture systems, seating, storage, and freestanding furniture
products, and related services are used in (1) office/institution environments
including offices and related conference, lobby and lounge areas, and general
public areas including transportation terminals; (2) health/science environments
including hospitals and other healthcare facilities; (3) clinical, industrial,
and educational laboratories; and (4) other environments.
New Product and Industry Segment Information
During the past 12 months, the company has not made any public announcement of,
or otherwise made public information about, a new product or a new industry
segment which would require the investment of a material amount of the company's
assets or which would otherwise result in a material cost.
Raw Materials
The company's manufacturing materials are available from a significant number of
sources within the United States, Canada, Europe, and Asia. To date, the company
has not experienced any difficulties in obtaining its raw materials. The raw
materials used are not unique to the industry nor are they rare.
Patents, Trademarks, Licenses, Etc.
The company has approximately 225 active United States utility patents on
various components used in its products and approximately 108 active United
States design patents. Many of the inventions covered by the United States
patents also have been patented in a number of foreign countries. Various
trademarks, including the name and style "Herman Miller," and the "Herman Miller
Symbol" trademark, are registered in the United States and many foreign
countries. The company does not believe that any material part of its business
is dependent on the continued availability of any one or all of its patents or
trademarks, or that its business would be materially adversely affected by the
loss of any thereof, except the "Herman Miller," "Action Office," "Aeron,"
"Ambi," "Ergon," "Equa," "Ethospace," "Meridian," "1:1," "Passage," "Q,"
"Resolve," "SQA" (and "Herman Miller Symbol") trademarks.
Working Capital Practices
The company does not believe that it or the industry in general has any special
practices or special conditions affecting working capital items that are
significant for an understanding of the company's business.
Customer Base
No single dealer, excluding the company's owned dealer network, accounted for
more than 3.8 percent of the company's net sales in the fiscal year ended May
29, 1999. For fiscal 1999, the largest single end-user customer accounted for
approximately 7.1 percent of the company's net sales with the 10 largest of such
customers accounting for approximately 15.0 percent of the company's sales. The
company does not believe that its business is dependent on any single or small
number of customers, the loss of which would have a materially adverse effect
upon the company.
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Backlog of Orders
As of May 29, 1999, the company's backlog of unfilled orders was $216.0 million.
At May 30, 1998, the company's backlog totaled $229.1 million. It is expected
that substantially all the orders forming the backlog at May 29, 1999, will be
filled during the current fiscal year. Many orders received by the company are
filled from existing raw material inventories and are reflected in the backlog
for only a short period while other orders specify delayed shipments and are
carried in the backlog for up to one year. Accordingly, the amount of the
backlog at any particular time is not necessarily indicative of the level of net
sales for a particular succeeding period.
Government Contracts
Other than standard price reduction and other provisions contained in contracts
with the United States government, the company does not believe that any
significant portion of its business is subject to material renegotiation of
profits or termination of contracts or subcontracts at the election of various
government entities.
Competition
All aspects of the company's business are highly competitive. The principal
methods of competition utilized by the company include design, product and
service quality, speed of delivery, and product pricing. The company believes
that it is the second largest publicly held office furniture manufacturer in the
United States. However, in several of the markets served by the company, it
competes with over 400 smaller companies and with several manufacturers that
have significantly greater resources and sales. Price competition remained
relatively stable from 1997 through 1999.
Research, Design and Development
One of the competitive strengths of the company is its research, design and
development programs. Accordingly, the company believes that its research and
design activities are of significant importance. Through research, the company
seeks to define and clarify customer needs and problems and to design, through
innovation where feasible, products and services as solutions to these customer
needs and problems. The company utilizes both internal and independent research
and design resources. Exclusive of royalty payments, approximately $33.4
million, $29.0 million, and $25.7 million was spent by the company on design and
research activities in 1999, 1998, and 1997, respectively. Royalties are paid to
designers of the company's products as the products are sold and are not
included in research and development costs as they are considered to be a
variable cost of the product.
Environmental Matters
The company does not believe, based on existing facts known to management, that
existing environmental laws and regulations have had or will have any material
effects upon the capital expenditures, earnings, or competitive position of the
company. Further, the company continues to rigorously reduce, recycle, and reuse
the solid wastes generated by its manufacturing processes. Its accomplishments
and these efforts have been widely recognized.
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Human Resources
The company considers another of its major competitive strengths to be its human
resources. The company stresses individual employee participation and
incentives, and believes that this emphasis has helped to attract and retain a
capable work force. The company has a human resources group to provide employee
recruitment, education and development, and compensation planning and
counseling. There have been no work stoppages or labor disputes in the company's
history, and its relations with its employees are considered good. Approximately
542 of the company's employees are represented by collective bargaining agents,
most of whom are employees of its Integrated Metal Technology, Inc., and Herman
Miller, Limited (U.K.) subsidiaries. As such, these subsidiaries are parties to
collective bargaining agreements with these employees.
As of May 29, 1999, the company employed 8,185 full-time and 370 part-time
employees, representing an 8.2 percent increase in full-time employees and a 3.6
percent increase in part-time employees compared with May 30, 1998. In addition
to its employee work force, the company uses purchased labor to meet uneven
demand in its manufacturing operations.
(d) Information About International Operations
The company's sales in international markets primarily are made to
office/institution customers. Foreign sales mostly consist of office furniture
products such as Ethospace and Action Office systems, seating, and storage
products. The company segments its internal operations into the following major
markets: Canada, Europe, Latin America, and the Asia/Pacific region. In certain
other foreign markets, the company's products are offered through licensing of
foreign manufacturers on a royalty basis.
At the present time, the company's products sold in international markets are
manufactured by wholly owned subsidiaries in the United States, United Kingdom,
and Mexico. Sales are made through wholly owned subsidiaries in Australia,
Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, and the United
Kingdom. The company's products are offered in the Middle East, South America,
and Asia through dealers.
In several other countries, the company licenses manufacturing and selling
rights. Historically, these licensing arrangements have not required a
significant investment of funds or personnel by the company, and, in the
aggregate, have not produced material net income for the company.
Additional information with respect to operations by geographic area appears in
the note "Operating Segments" of the Notes to Consolidated Financial Statements
set forth on page 41. Fluctuating exchange rates and factors beyond the control
of the company, such as tariff and foreign economic policies, may affect future
results of international operations.
Item 2 PROPERTIES
The company owns or leases facilities which are located throughout the United
States and several foreign countries, including Australia, Canada, France,
Germany, Italy, Japan, Mexico, and the United Kingdom. The location, square
footage, and use of the most significant facilities at May 29, 1999, were as
follows:
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<TABLE>
<CAPTION>
Location
- - --------
Square
Owned Locations Footage Use
- - --------------- ------- ---
<S> <C> <C>
Zeeland, Michigan 749,000 Manufacturing, Warehouse, and Office
Spring Lake, Michigan 921,700 Manufacturing, Warehouse, and Office
Holland, Michigan 355,000 Manufacturing, Distribution, and Warehouse
Rocklin, California 338,100 Manufacturing and Warehouse
Holland, Michigan 216,700 Design Center
Holland, Michigan 200,000 Manufacturing and Warehouse
Holland, Michigan 293,100 Manufacturing, Warehouse, and Office
Leased Locations
Zeeland, Michigan 392,800 Manufacturing, Warehouse, and Office
Roswell, Georgia 225,000 Manufacturing and Warehouse
Chippenham, England, U.K. 168,900 Manufacturing and Warehouse
Stone Mountain, Georgia 84,500 Manufacturing and Warehouse
Mexico City, Mexico 59,400 Manufacturing, Warehouse, and Office
</TABLE>
The company also maintains showrooms or sales offices near most major
metropolitan areas throughout North America, Europe, the Middle East,
Asia/Pacific, and South America. The company considers its existing facilities
to be in excellent condition, efficiently utilized, well suited, and adequate
for its design, production, distribution, and selling requirements.
Item 3 PENDING LEGAL PROCEEDINGS
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. At any point in time, a number of GSA audits are either
scheduled or in progress. Management has been notified that the GSA has referred
an audit of the company to the Department of Justice for consideration of a
potential civil False Claims Act case. Management does not expect resolution of
the audits to have a material adverse effect on the company's consolidated
financial statements. Management does not have information that would indicate a
substantive basis for a civil False Claims Act case.
The company is also involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
company's consolidated financial statements.
Item 4 SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended May 29, 1999.
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ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to Executive Officers of the company is as follows:
<TABLE>
<CAPTION>
Year Elected an Position with
Name Age Executive Officer the Company
<S> <C> <C> <C>
James E. Christenson 52 1989 Vice President, Legal Services, and Secretary
Robert Frey 56 1996 Executive Vice President, President, International
David M. Knibbe 44 1997 Executive Vice President, Sales and Distribution
Andrew C. McGregor 49 1988 Executive Vice President, President, Business Services Group
Gary S. Miller 49 1984 Executive Vice President, Product Research and Development
Gene Miyamoto 44 1996 Executive Vice President, Human Resources and Corporate
Communications
Christopher A. Norman 51 1996 Executive Vice President and Chief Information Officer
Dan Rosema 40 1998 Executive Vice President, Casegoods and Seating
Vicki TenHaken 48 1996 Executive Vice President, Strategic Planning
Mike Valz 47 1998 Executive Vice President, Systems and SQA
Gary VanSpronsen 43 1998 Executive Vice President, Offer Development and Marketing
Michael A. Volkema 43 1995 President and Chief Executive Officer
Brian C. Walker 37 1996 Executive Vice President, Finance and Business Development,
Chief Financial Officer
</TABLE>
Except as discussed in this paragraph, each of the named officers has served the
company in an executive capacity for more than five years. Mr. Frey joined
Herman Miller, Inc., in November 1996, and prior to 1996 was chairman of the
board and chief executive officer of Asian operations and an elected executive
vice president at Whirlpool Corporation. Mr. Knibbe was the vice president of
sales and distribution for Herman Miller, Inc., from March 1996 to May 1997;
president of Workplace Resource, Inc., from March 1995 to April 1996; and vice
president of sales and distribution for Meridian, Inc., from April 1990 to March
1995. Mr. Miyamoto was the president at Community Medical Center Healthcare
System from January 1995 to February 1996 and executive vice president and chief
operating officer of St. Vincent Medical Center from June 1992 to January 1995.
Prior to May 1993 to January 1998, Mr. Norman was the president of Miller SQA.
Mr. Rosema was the vice president, casegoods, of Herman Miller, Inc., from March
1997 to September 1998; president of Coro Services, Inc., from June 1995 to
March 1997; and owner of Corporate Vision Interiors, Inc., from October 1993 to
June 1995. Ms. TenHaken was vice president and general manager of Herman Miller
for the Home through May 1996. Mr. Valz was vice president of systems for Herman
Miller, Inc., from March 1997 to September 1998, and vice president and general
manager of Hardwood Products at Hillenbrand Industries, Inc., from January 1994
to March 1997. Mr. VanSpronsen was the president of Miller SQA from January 1998
to September 1998, and vice president and general manager of Miller SQA from
June 1992 to December 1997. From February 1995 to May 1995, Mr. Volkema was
president and chief executive officer of Coro, Inc., and prior to May 1993 to
September 1994 was president and chairman of the board of Meridian, Inc. Mr.
Walker was the vice president of finance for Herman Miller, Inc., from May 1995
to March 1996; vice president of Finance and Management Information Systems of
Milcare, Inc., from July 1994 to May 1995; and vice president of finance for
Herman Miller Europe from December 1991 to July 1994.
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PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
SHARE PRICE, EARNINGS, AND DIVIDENDS SUMMARY
Herman Miller, Inc., common stock is quoted in the NASDAQ-National Market System
(NASDAQ-NMS Symbol: MLHR). As of July 30, 1999, there were approximately 24,000
shareholders of record of the company's common stock.
<TABLE>
<CAPTION>
Per Share and Unaudited Market Market Market Earnings Dividends
Price Price Price Per Share- Per
High Low Close Diluted Share
<S> <C> <C> <C> <C> <C>
YEAR ENDED MAY 29, 1999
First quarter 30.313 23.000 23.000 .39 .03625
Second quarter 25.438 18.750 22.250 .45 .03625
Third quarter 26.875 15.875 17.000 .35 .03625
Fourth quarter 22.750 15.813 20.188 .48 .03625
Year 30.313 15.813 20.188 1.67 .14500
YEAR ENDED MAY 30, 1998
First quarter 25.875 17.344 25.875 .30 .03625
Second quarter 28.406 22.000 25.375 .33 .03625
Third quarter 31.750 23.250 30.625 .36 .03625
Fourth quarter 35.563 26.030 27.688 .40 .03625
Year 35.563 17.344 27.688 1.39 .14500
</TABLE>
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Item 6 SELECTED FINANCIAL DATA
REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales $1,766,239 $1,718,595 $1,495,885 $1,283,931 $1,083,050
Gross Margin 669,705 638,839 533,924 434,946 378,269
Selling, General, and Administrative 407,446 396,698 359,601 316,024 303,621
Design and Research Expense 37,946 33,846 29,140 27,472 33,682
Operating Income 224,313 208,295 130,683 74,935 9,066
Income (Loss) Before Income Taxes 229,912 209,531 125,883 70,096 4,039
Net Income (Loss) 141,812 128,331 74,398 45,946 4,339
Cash Flow from Operating Activities 205,613 268,723 218,170 124,458 29,861
Depreciation and Amortization 62,054 50,748 47,985 45,009 39,732
Capital Expenditures 103,404 73,561 54,470 54,429 63,359
Common Stock Repurchased plus
Cash Dividends Paid 179,766 215,498 110,425 38,116 13,600
KEY RATIOS
Sales Growth 2.8 14.9 16.5 18.5 13.6
Gross Margin(1) 37.9 37.2 35.7 33.9 34.9
Selling, General, and Administrative(1) 23.1 23.1 24.0 24.6 28.0
Design and Research Expense(1) 2.1 2.0 1.9 2.1 3.1
Operating Income(1) 12.7 12.1 8.7 5.8 0.8
Net Income Growth 10.5 72.5 61.9 958.9 (89.3)
After-Tax Return on Net Sales 8.0 7.5 5.0 3.6 0.4
After-Tax Return on Average
Assets 18.3 16.7 10.3 6.8 0.7
After-Tax Return on Average
Equity 64.4 49.5 25.0 15.4 1.5
SHARE AND PER SHARE DATA(2)
Earnings per Share-Diluted $ 1.67 $ 1.39 $ 0.77 $ 0.46 $ 0.04
Cash Dividends Declared per Share 0.15 0.15 0.13 0.13 0.13
Book Value per Share at Year End 2.46 2.51 2.99 3.07 2.89
Market Price per Share at Year End 20.19 27.69 17.88 7.72 5.42
Weighted Average Shares Outstanding-
Diluted 84,831 92,039 96,124 100,515 99,168
FINANCIAL CONDITION
Total Assets $ 761,506 $ 784,346 $ 755,587 $ 694,911 $ 659,012
Working Capital (1,247) 21,803 100,253 115,878 39,575
Current Ratio 1.0 1.06 1.35 1.53 1.15
Interest-Bearing Debt 147,590 130,655 127,369 131,710 144,188
Shareholders' Equity 209,075 231,002 287,062 308,145 286,915
Total Capital 356,665 361,657 414,431 439,855 431,103
EBITDA 299,261 268,579 182,711 123,015 50,070
Debt-to-EBITDA Ratio .5 .5 .7 1.1 2.9
EBITDA-to-Interest Expense Ratio 41.0 32.4 20.7 15.6 7.9
</TABLE>
(1) Shown as a percent of net sales
(2) Retroactively adjusted to reflect two-for-one stock splits occurring in
1998 and 1997.
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Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS The issues discussed in management's
discussion and analysis should be read in conjunction with the company's
consolidated financial statements and the notes to the consolidated financial
statements. FORWARD-LOOKING STATEMENTS This discussion and analysis of financial
condition and results of operations, as well as other sections of our Annual
Report, contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act, as amended, that are based on management's beliefs, assumptions,
current expectations, estimates, and projections about the office furniture
industry, the economy, and about the company itself. Words such as
"anticipates," "believes," "confident," "estimates," "expects," "forecasts,"
"likely," "plans," "projects," "should," variations of such words, and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties, and assumptions that are difficult to predict with regard to
timing, extent, likelihood, and degree of occurrence. Therefore, actual results
and outcomes may materially differ from what may be expressed or forecasted in
such forward-looking statements. Furthermore, Herman Miller, Inc., undertakes no
obligation to update, amend, or clarify forward-looking statements, whether as a
result of new information, future events, or otherwise.
(graph)
EARNINGS PER SHARE
in dollars
1995 $0.04
1996 $0.46
1997 $0.77
1998 $1.39
1999 $1.67
OVERVIEW
We had a record-setting year at Herman Miller in a number of categories,
including sales, net income, earnings per share and Economic Value Added (EVA).
While we set new reference points for all of these critical measures, we did not
achieve our goals for sales and net income growth. A key reason for our
shortfall was a significant decline in industry demand that began to affect our
order entry in the third quarter. We believe the driver behind this change in
industry dynamics was the expectation of lower corporate profits in the United
States (U.S.). Corporate profits were expected to decline in late calendar 1998
and early 1999. This was a result of economic difficulties in many international
regions. As we finished fiscal 1999, the outlook had improved. Corporate profits
were stronger than anticipated, the U.S. economy was still growing, and demand
for our industry's products appeared to be firming up. This is discussed in more
detail under the domestic operations section of this analysis.
This was a year of significant investment for Herman Miller. As we expected,
capital expenditures increased to an all-time high of $103.4 million. We also
made significant investments in the form of additional operating expenses. In
total, our operating expenses increased $14.8 million, or 3.4 percent. Our
design and research expenditures increased approximately 12.1 percent. Our
investments were in three primary areas: information technology to connect our
manufacturing, logistics, customer-care and administrative operations; an
electronic sales platform; and new products. These investments are core building
blocks that
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<PAGE> 11
will enable us to implement our strategy, get connected, and change the game in
the office furniture industry.
(graph)
EVA in millions of dollars
1995 ($13.4)
1996 $10.3
1997 $40.9
1998 $78.4
1999 $91.1
Despite less-than-anticipated sales growth, we continued to invest in our
future, improve our profitability and set a new record for EVA performance. This
was made possible by the continued efforts of our employee-owners to reduce and
eliminate waste, redeploy or eliminate nonproductive assets, and prioritize our
expenditures against our strategic imperatives.
Fiscal 1999 marked our third year of utilizing EVA as our business measurement
tool. As we indicated when we initiated the program, our Board of Directors had
set improvement targets for the initial three-year period, and has now
established new targets for the next three years. While establishing targets for
the future, we were able to reflect on the EVA program and the impact it has had
on the company. We believe there have been numerous benefits from this program,
with the most significant being the business literacy of our employee-owners.
Nearly all of our 8,185 employees worldwide have received training in EVA. Our
employee-owners know that capital is not free and that sustainable value is
created through continuous improvement and growth. They also understand that
their compensation is directly tied to EVA results. Extensive independent market
research has demonstrated that EVA more closely correlates with shareholder
value, in the long run, than any other measure. And this has been the case for
Herman Miller, over the past four years. However, it was not true for Herman
Miller in fiscal 1999. Our EVA increased 16.2 percent, while the value of one
share of Herman Miller common stock declined 27.1 percent. We believe that this
divergence in share price is a short-term phenomenon and that EVA will continue
to be the best long-term predictor of shareholder value. Therefore, again this
year, we have presented a summarized calculation of our EVA for fiscal 1999,
1998, and 1997. In addition, we have noted throughout our analysis the impact
that changes in performance had on EVA.
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<PAGE> 12
<TABLE>
<CAPTION>
CALCULATION OF ECONOMIC VALUE ADDED
(In Thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating income $ 224,313 $ 208,295 $ 130,683
Divestiture -- -- 14,500
Interest expense on noncapitalized leases (1) 4,071 4,166 4,509
Goodwill amortization 3,001 6,161 4,725
Other 4,621 13,765 5,093
Increase (decrease) in reserves (4,293) 1,290 18,649
Capitalized design and research 3,657 2,101 2,819
--------- --------- ---------
Adjusted operating profit 235,370 235,778 180,978
Cash taxes (2) (83,607) (90,703) (72,091)
--------- --------- ---------
Net operating profit after taxes (NOPAT) 151,763 145,075 108,887
Weighted-average capital employed (3) 551,600 606,018 617,727
Weighted-average cost of capital (4) 11% 11% 11%
--------- --------- ---------
Cost of capital 60,676 66,662 67,950
--------- --------- ---------
Economic Value Added $ 91,087 $ 78,413 $ 40,937
--------- --------- ---------
</TABLE>
(1) Imputed interest as if the total noncancelable lease payments were
capitalized.
(2) The reported current tax provision is adjusted for the statutory tax impact
of interest expense.
(3) Total assets less noninterest-bearing liabilities plus the LIFO, doubtful
accounts and notes receivable reserves, warranty reserve, amortized
goodwill, loss on sale of the German manufacturing operation, deferred
taxes, restructuring costs, and capitalized design and research expense.
Design and research expense is capitalized and amortized over 5 years.
(4) Management's estimate of the weighted average of the minimum equity and
debt returns required by the providers of capital.
As you can see, we generated $91.1 million of EVA this year, compared to $78.4
million last year, and $40.9 million in 1997. In 1999, our EVA increased 16.2
percent, after increasing 91.5 percent in 1998.
KEY DRIVERS
NET SALES Over the past three years, our sales have increased at a compound rate
of 11.2 percent. In fiscal 1999, our sales increased 2.8 percent, after
increasing 14.9 percent in 1998, and 16.5 percent in 1997. Our fiscal 1999
result was significantly below our goal of increasing sales 15 percent per
annum. These results brought home two facts. First, we will be affected from
time to time by macro factors that are not in our control. Second, we have just
begun our journey to reinvent our industry and ourselves.
(graph)
NET SALES in
millions of dollars
1995 $1,083.1
1996 $1,283.9
1997 $1,495.9
1998 $1,718.6
1999 $1,766.2
As we stated in the overview, much of the year-over-year decline in growth rates
can be attributed to poor industry dynamics in the U.S. Based on industry
information, we believe that we have continued to gain market share in the U.S.,
which is our largest market. Our international markets were also impacted by the
economic turmoil in Asia and Latin America. In addition, the strong U.S. dollar
made it more difficult to compete as an exporter. Each of these topics is
expanded upon below.
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<PAGE> 13
Our leadership team began their work together four years ago. The first two
years, we concentrated on practicing the fundamentals. We also implemented some
of our building blocks, such as EVA and lean manufacturing. In year three, we
refined our strategic vision and developed an implementation plan. This year, we
began the implementation. Of course, many of the key competencies and
capabilities have been in place for some time; however, we also have areas where
the development is still in process. In the end, we intend to connect our
historical strengths with our new capabilities to form new business models that
will redefine the competitive playing field.
We know that we will not achieve our aggressive growth goals in each and every
year. However, we continue to believe that, under normal industry conditions,
our overall growth strategy is appropriate and attainable.
DOMESTIC OPERATIONS Our domestic sales grew 3.8 percent this year, after growing
16.7 percent in 1998, and 19.2 percent in 1997. Excluding acquisitions, our
domestic sales increased 2.3 percent in 1999, 15.9 percent in 1998, and 16.4
percent in 1997. Individually, none of our acquisitions were material. Our
domestic growth has been primarily driven by unit volume increases. We have not
materially changed list prices in over three years. During 1999, incremental
discounts given to customers reduced our net sales by approximately $11 million.
Changes in discounts did not have a material impact on our sales in 1998 or
1997.
(graph)
DOMESTIC SALES GROWTH
as a percent
BIFMA Herman Miller
1995 9.4% 10.1%
1996 5.1% 16.7%
1997 10.1% 19.2%
1998 11.9% 16.7%
1999 1.9% 3.8%
The Business and Institutional Furniture Manufacturers Association (BIFMA)
reported that U.S. sales grew approximately 1.9 percent in the 12 months ended
May 1999, after increasing 11.9 percent in 1998, and 10.1 percent in 1997. Given
that our growth has exceeded the industry's growth, we believe we have gained
market share in each of the past three years.
We believe demand for office furniture in the U.S. is driven by three factors in
the macro economy: corporate profits, white-collar employment, and
nonresidential fixed investments. During fiscal years 1997 and 1998, each of
these factors had a positive impact. Secular trends, such as the deployment of
technology into work environments and new and emerging work styles, have also
positively influenced demand in recent years.
We believe the decline in industry demand experienced in the last two quarters
of fiscal 1999 was due to economic forecasts of weaker corporate profits. In
late summer and early fall of 1998, many economic analysts began to predict
declining corporate profits for the last quarter of calendar 1998 and much of
1999. Additionally, both white-collar employment and nonresidential fixed
investment were expected to increase at a lower rate than in 1998 and 1997. This
change in the macro economic outlook resulted in many companies delaying or
reducing investment plans. The impact of these changes began to negatively
affect our order entry at the beginning of our third quarter. This was further
exacerbated by our normal pattern of lower order entry during the Christmas and
New Year holiday season.
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<PAGE> 14
In retrospect, the actual decline in corporate profits was less than expected.
The U.S. economy continued to expand and the international markets began to
stabilize. Our industry has historically lagged behind changes in the macro
economy by approximately six months. Therefore, we continued to experience weak
demand throughout much of our fourth quarter. As we ended fiscal 1999, demand
patterns had begun to firm up. This was evidenced by a 15.8 percent increase in
order entry, from the third quarter to the fourth quarter. A portion of the
sequential quarter increase was due to the seasonal impact of the holidays.
However, renewed confidence that corporate profits will increase in 1999,
coupled with the positive bias in the other macro factors, should enable the
industry to return to more normal growth patterns. BIFMA is currently estimating
that industry shipments will increase 1 to 3 percent in calendar 1999, and 4 to
6 percent in calendar 2000.
Our next fiscal year will contain 53 weeks. This extra week will be included in
our results for the first quarter of fiscal 2000. Excluding the impact of this
event, we expect our sales in the first half of fiscal 2000 to be nearly the
same as the first half of 1999. Our sales growth in fiscal 2000 is likely to be
heavily weighted to the second half of the year, as the year-over-year
comparisons will be more favorable. In addition, we will still be rebuilding
momentum in the first half of the year.
INTERNATIONAL OPERATIONS AND EXPORTS FROM THE UNITED STATES Three years ago, we
stated our primary objective for our international business was to improve
profitability. We had experienced several years of net operating losses, failed
acquisitions and restructuring charges. Our plan was to right-size the business
and to retain those assets and operations that were adding value, as a
geographic segment, or supporting our multinational customers. We completed most
of this work in fiscal 1997 and 1998. This included the sale of our German
manufacturing operation in 1997, the realignment of our Italian operation in
1998, and a turnaround effort in Mexico in 1996. We are pleased to report that
these efforts have all had positive impacts on our profitability with minimal,
if any, impact on our sales. Fiscal 1999 marked our second year of positive
operating results in our international business as a whole. All of those efforts
are now driving tangible results. In spite of a decline in revenue, net income
for 1999 was $8.1 million, versus $7.6 million last year. In 1997, we reported a
net loss of $4.6 million, excluding the sale of our German manufacturing
operation. These numbers are different than we have reported in past years. We
have restated all years to conform to our internal reporting, where we allocate
the cost of certain corporate functions and assets. This accounting provides a
more accurate picture of the economic returns we receive from these operations.
While we continue to incur losses in some of our operations, no individual
location is generating a significant operating loss.
Net sales of international operations and export sales from the U.S. for the
year declined 2.8 percent in 1999 to $259.1 million, compared with $266.7
million last year, and $251.2 million in 1997. The decline in 1999 and increases
in 1998 and 1997 were primarily attributable to changes in unit volumes.
(graph)
INTERNATIONAL NET SALES
in millions of dollars
1995 $188.6
1996 $240.1
1997 $251.2
1998 $266.7
1999 $259.1
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<PAGE> 15
This year, our international sales have been negatively impacted by three macro
factors. First, the strong U.S. dollar has made it more difficult to compete as
an exporter. Our production capacity outside of the U.S. is largely limited to
the United Kingdom. Second, the crisis in Asia has led indigenous companies to
curtail investments and caused American multinationals to reevaluate the amount
of risk they are willing to take in these markets. Last, the economic situation
in Latin America has slowed activity levels in that region.
The sales decline for the year was primarily attributable to our Canadian
business and, to a lesser extent, South America. The decline in Canada is due,
in part, to the weak Canadian dollar. In addition, our sales in Canada are
heavily project driven and some project business from last year did not repeat
in the current year.
We continue to have very good results in our Mexico and United Kingdom
operations. Each of these regions has increased revenue for each of the past
three years. While our operations on the continent of Europe showed a decline in
revenue in 1999, we are very pleased with the progress we have made in
profitability and capability.
GROSS MARGIN Fiscal 1999 marked the third year in a row where we improved our
gross margin percentage. Gross margin, as a percent of sales, increased to 37.9
percent for the year, compared to 37.2 percent in the prior year, and 35.7
percent in 1997. This improvement contributed approximately $7.8 million to EVA
and net income in the current year.
Three primary factors are responsible for our improvements in gross margin:
manufacturing productivity, reductions in material costs, and favorable changes
in product mix. A decline in incentive compensation contributed to the
improvement in 1999. These incentives are paid to all employees and are tied to
year-over-year improvement in EVA. As discussed above, in 1999, these positive
factors were partially offset by increased discounts given to customers.
We began to make significant improvements in our manufacturing processes in
1995. At that time, we implemented a series of changes to our manufacturing and
logistical operations that eliminated or reduced non value-adding activities.
This resulted in the elimination of certain facilities. Those changes continued
to pay dividends to us over the past three years. In addition, we are in the
process of implementing lean manufacturing techniques throughout our operations.
These techniques are a process of continuous improvement that focuses on the
elimination of waste in all aspects of our business. While it's difficult to
quantify, we believe that this process began to have a significant impact on our
costs in 1999. If this is true, the good news is that we are in the very early
stages of this work and can anticipate an ongoing positive impact on costs.
Our improvements in manufacturing productivity have also led to a substantial
reduction in the amount of money we have invested in working capital. At the end
of 1999, the day's sales outstanding in the sum of our accounts receivable and
inventory had declined to 52.5 days, compared to 56.2 days and 63.3 days at the
end of 1998 and 1997, respectively. These improvements are the result of
eliminating steps in the physical distribution process, faster cycle times, and
improved connectivity with our vendors. In addition, as our operations become
more reliable, our customers pay on a more timely basis. These improvements have
had a significant impact on EVA. Over the past three years, these improvements
have resulted in a cumulative decrease in capital deployed of $28.3 million or a
$3.1 million increase in annual EVA.
Our manufacturing operations rely heavily on our supply base. In fact, 63.9
percent of our cost of goods sold is material cost. We believe this is a
competitive advantage. Not only are our costs more variable with sales, we can
be more flexible in selecting new materials and processes in the research,
design, and development of new products. However, to be cost competitive and
achieve the reliability and speed we demand, we must be connected with our
supply base technologically and in purpose. We are making progress on both
fronts. By partnering with our supply base, we were able to reduce our material
cost by approximately $10 million in 1999. This work also has
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<PAGE> 16
had and will continue to have a positive impact on our speed, reliability, and
working-capital investment.
Our product mix has continued to shift toward seating products, a trend that
started several years ago. Over the past four years, we introduced several new
seating products, which we believe have given us the strongest work-seating
offering in our industry. As a result, our sales in this product segment have
increased at a faster rate than our total sales. On average, these products have
higher gross margin levels.
While this has had a beneficial impact on margins, office furniture systems
still represent the largest industry segment. We have introduced several new
office systems products that we believe will enable us to increase our rate of
sales growth in this category. Q system, a product line that was introduced in
June of 1997, began to make a significant contribution to our sales in 1999.
Passage desk-based system, introduced in June of 1998, became available for
order in the third quarter of 1999. In June of 1999, we introduced Resolve
system. We believe this product line will set new reference points for function,
aesthetics, and costs in the systems furniture segment. Each of these products
received a gold award on their introduction at the industry's annual trade show,
NeoCon.
Over the last few years, we have had relatively stable pricing. The increased
discounting in 1999 was not confined to any one product. Discounting in 1999 was
more pronounced than we had anticipated at the beginning of the year, however,
given the slower demand pattern, pricing has remained rational. For the year,
the impact of increased discounting was approximately $11 million, or 0.6
percent of sales.
At the end of 1998, we began to implement a new Enterprise Resource Planning
(ERP) system in most of our U.S. operations. As part of this implementation, we
intend to reengineer many of our operating processes. We believe the
implementation of these investments, coupled with our implementation of lean
manufacturing techniques, will improve our quality and reliability and reduce
lead-times and the cost of producing product. Last year, we estimated the total
investment to implement the ERP system would be approximately $80 million. We
were wrong. The project will take longer than we anticipated and we now expect
the total cost to be $100 million. After a difficult start, we reorganized the
implementation, recruited several new information technology professionals, and
reduced our reliance on external consultants. While we are not pleased with the
increased time and money, we are confident that the revised plan will be
achieved and believe this investment will generate positive EVA and improve our
competitive position. To date, we have two West-Michigan manufacturing sites
operating on the new system. We also are using the system for the financial
operations of our largest operation in the U.S. All of these areas implemented
these systems with very little, if any, disruption. While it is still early, we
are seeing tangible benefits where we had anticipated them. We expect to
implement the new system at the majority of our manufacturing sites over the
next 12 to 18 months.
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<PAGE> 17
(graph)
GROSS MARGIN
as a percent of net sales
1995 34.9%
1996 33.9%
1997 35.7%
1998 37.2%
1999 37.9%
Going forward, we expect gross margins to remain in the range of 37.5 to 38.5
percent of sales. Continued productivity improvements and material cost
reductions will be offset, to some degree, by additional discounting. We also
could be negatively impacted by the cost of disruptions associated with
implementation of our ERP system, a new production facility in Atlanta, Georgia,
and new products that will be introduced over the next 12 months.
OPERATING EXPENSES Over the last four years, operating expense reductions have
been a key driver of our improvement in EVA. Since 1995, we have reduced our
operating expenses from 31.1 percent of sales to 25.2 percent in 1999. This
reduction accounts for $64.1 million of EVA on an annual basis. This year, we
had very little change in operating expenses. The 25.2 percent reported for 1999
is virtually the same as the 25.1 percent we reported in 1998.
(graph)
OPERATING EXPENSES
as a percent of net sales
1995 31.1%
1996 26.7%
1997 26.0%
1998 25.1%
1999 25.2%
Last year, we told you our goal was to reduce operating expenses to 23 percent
by 2001. Our goal is still 23 percent of sales, but it will take us until 2002
to achieve it. Two things prevented us from making progress toward our goal in
1999. First, as we discussed above, we did not have a great deal of top line
growth. Second, we have been and continue to be in a period of significant
investment. We believe these investments, both capital and expense, are critical
to building the capabilities we need to have a sustainable competitive
advantage. Three areas required significant incremental spending during 1999.
The first of these areas is the continued development of our electronic selling
platform, referred to internally as the 1:1 platform. Essentially, using this
tool, we are able to design, specify, quote, and place an order, from a laptop
personal computer brought to the customer's site. This tool has significantly
improved the buying experience for our customers, while having the added benefit
of streamlining the order-entry process. Our incremental investment in
developing and implementing this capability was $4.2 million, or 0.2 percent of
net sales in 1999.
As we have discussed throughout this report, the deployment of technology has
been and will continue to be a key focus for us. To support this work, we have
increased the size and expertise of our information technology staff. This year,
the team was focused on implementing our new ERP system and upgrading our
information technology infrastructure. In total, our spending in this area
increased $10.6 million. We expect our information technology costs to remain at
an increased level for the foreseeable future. This is due, in part, to our
ongoing ERP implementation. In addition, we believe that most companies who lead
their industry also lead in the deployment of technology.
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<PAGE> 18
The third area of incremental expenditure was design and research. Design and
research costs, excluding royalty payments, were $33.4 million in 1999, compared
to $29.0 million in 1998, and $25.7 million in 1997. Royalty payments made to
designers of the company's products as the products are sold are not included in
research and development costs, since they are considered to be a variable cost
of the product. As a percentage of net sales, research and development costs
were 1.9 percent in 1999, 1.7 percent in 1998, and 1.7 percent in 1997. As
discussed earlier, new product design and development has been, and continues to
be, a key business strategy. The increased expenditures are directly related to
the increased number of new products introduced and currently in development.
In addition to these areas, we had incremental operating expenses from
acquisitions completed during fiscal 1999 and 1998, and increases in wages and
benefits of approximately 3 percent. Our incremental expenditures were partially
offset by lower incentive compensation payments. Our executive incentives and
company-wide gain sharing programs are based on the annual improvement in EVA.
OPERATING INCOME The combination of improved gross margins and relatively
unchanged operating expenses has resulted in significant improvements in
operating income. As a percent of sales, operating income improved to 12.7
percent in 1999, after improving to 12.1 percent in 1998, and 9.7 percent in
1997. The 1997 amount excludes the charge for the sale of our German
manufacturing operation. The 12.7 percent recorded in 1999 was the highest
reported for a fiscal year in over 10 years.
(graph)
OPERATING INCOME
as a percent of net sales
1995 3.8%
1996 7.1%
1997 9.7%
1998 12.1%
1999 12.7%
INCOME TAXES Our effective tax rate was 38.3 percent in 1999, compared to 38.8
percent and 40.9 percent in 1998 and 1997, respectively. The lower tax rate is
due primarily to lower state taxes, international tax benefits and utilization
of net operating loss carryforwards. The 1997 tax rate was also negatively
impacted by the loss on the sale of the German manufacturing operation, which
provided a tax benefit that was lower than our statutory rate.
We expect the effective tax rate for fiscal 2000 to be in the range of 36.5 to
37.5 percent.
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<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES The table below shows certain key cash flow and
capital highlights:
<TABLE>
<CAPTION>
(In Thousands) 1999 1998 1997
<S> <C> <C> <C>
Cash and cash equivalents $ 79,952 $115,316 $106,161
Cash from operating activities $205,613 $268,723 $218,170
Days sales in accounts receivable and inventory 52.5 56.2 63.3
Capital expenditures $103,404 $ 73,561 $ 54,470
Debt-to-EBITDA ratio .5 .5 .7
EBITDA-to-interest expense ratio 41.0 32.4 20.7
EVA capital $577,122 $543,789 $615,120
NOPAT to EVA capital 26.3% 26.7% 17.7%
</TABLE>
Our cash flow from operations declined 23.5 percent in 1999, to $205.6 million,
from the all-time high we recorded last year of $268.7 million. The decrease
from last year was due to an incremental increase in working capital of $14.9
million. Last year we were able to reduce our dollars invested in working
capital by $85.2 million. As we discussed above, we continued to do an excellent
job of managing our working capital in 1999. Days sales outstanding in the total
of accounts receivable and inventory declined 3.7 days or 6.6 percent. Over the
past four years, we have reduced our days sales outstanding by 38.7 days or 42.4
percent. As noted above, this has significantly increased our return on invested
capital. Our progress in 1999 was offset by declines in accounts payable and
unfunded checks. These reductions were the result of lower inventory balances
and the timing of payments to vendors. We believe the investments we are making
in the deployment of lean manufacturing techniques and information technology
will allow us to achieve further improvements in working capital.
Fiscal 1999 capital expenditures were primarily for investments in our new ERP
system, overall information technology infrastructure, the development and
deployment of our electronic selling platform, new products, and machinery and
equipment to improve operational performance and expand capacity. At the end of
the fiscal year, $25.4 million of capital was committed for future expenditures.
In 1996, we established a plan to reduce the cash we had invested in
nonproductive or nonessential assets. This has resulted in the sale of certain
real estate assets over the past three years. During 1999, we completed the sale
of our manufacturing site and excess land in Roswell, Georgia, a building in
Grandville, Michigan, and excess land in the United Kingdom. Total proceeds from
the sale of these properties were $26.0 million. Our gain on the sale of these
assets, net of other capital losses, was $4.3 million or $.05 per share. The
Grandville site is no longer needed and will not be replaced. The Georgia
facility will be replaced by a new facility, which will be completed in 2000.
The new facility will enable us to consolidate the operations currently
performed on our Roswell site with operations performed at two leased locations,
thus lowering our total operating costs and providing increased capacity.
(graph)
CASH FLOW FROM OPERATING ACTIVITIES
in millions of dollars
1995 $29.9
1996 $124.5
1997 $218.2
1998 $268.7
1999 $205.6
We expect capital expenditures, net of redeployments, to increase to between
$110 million and $140 million in 2000. The largest planned expenditures will be
investments in our ERP system,
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<PAGE> 20
electronic selling platform, new products, the new facility in Georgia, and
facility enhancements in West Michigan.
In 1999, we acquired three privately owned North American dealers as part of our
service strategy. These local service organizations were acquired for
approximately $4.7 million. We also invested $3.7 million to enter into a joint
venture with one of our North American dealers. We expect to invest between $10
million and $20 million in acquiring additional local and regional service
operations in 2000.
At the end of 1999, we continued to have a high level of cash and cash
equivalents. We intend to utilize the cash to repurchase shares of the company's
stock, to fund acquisitions, and to fund future capital expenditures.
In the past year, we reexamined our use of the debt-to-capital ratio as a
financial statistic. Our debt-to-capital ratio at the end of 1999 was 41.4
percent, compared to 36.1 percent at the end of 1998. This was the highest
debt-to-capital ratio we have had in over 10 years, and is due to the large
amount of our common stock repurchased over the past four years.
We determined that it is more important for our company to look at the liquidity
of the business and its cash-generating potential than at historical retained
earnings. We need the financial flexibility to finance our growth and share
repurchase plans and to enable us to effectively manage our capital structure.
The covenants on our long-term debt and revolving credit loan contained minimum
net-worth requirements. In 1999, we renegotiated the covenants and obtained a
new $300 million unsecured revolving credit facility. Going forward, our capital
structure will be managed based on two tenets. First, we will maintain the
financial strength and flexibility that would enable our debt to be rated
investment grade. Second, we will maintain a minimum EBITDA-to-interest expense
ratio and a maximum debt-to-EBITDA ratio. EBITDA stands for Earnings Before
Interest Expense, Taxes, Depreciation, and Amortization.
Our available credit, combined with our existing cash and expected cash flow, is
adequate to fund our day-to-day operations, strategic investments, and share
repurchases. If necessary, we also have informal credit facilities that can be
accessed.
<TABLE>
<CAPTION>
COMMON STOCK TRANSACTIONS
(In Thousands, Except Share and Per Share Data)
1999 1998 1997
<S> <C> <C> <C>
Shares acquired 8,379,444 5,222,361 2,765,984
Cost of shares acquired $ 167,496 $ 201,982 $ 97,962
Cost per share acquired $ 19.99 $ 38.68 $ 35.42
Shares issued 958,347 1,347,483 470,082
Cost per share issued $ 16.18 $ 21.23 $ 28.13
Cash dividends $ 11,992 $ 13,361 $ 12,593
Dividends per share $ .15 $ .15 $ .13
</TABLE>
The Board of Directors first authorized the company to repurchase its common
stock in 1984, and has periodically renewed its authorization. During 1999, we
repurchased 8.1 million shares of our common stock for $160.5 million under the
Board-approved stock repurchase program. Over the past four years, we have
repurchased 26,141,915 shares of our common stock for $468.6 million, adjusted
for stock splits in fiscal 1998 and 1997. This represents approximately 26.3
percent of the common shares outstanding at the end of 1995. Management and the
Board of Directors believe the share repurchase program is an excellent means of
returning value to our shareholders and preventing dilution from
employee-ownership programs. In January of this year, our Board of Directors
approved an additional $100 million to be used for share repurchases. We
currently have $56.8 million remaining on this authorization.
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<PAGE> 21
(graph)
TOTAL CASH RETURNED TO SHAREHOLDERS
in millions of dollars
1995 $ 13.6
1996 $ 38.1
1997 $110.4
1998 $215.5
1999 $179.8
(graph)
TOTAL RETURN TO SHAREHOLDERS
as a percent
<TABLE>
<CAPTION>
Herman Miller S&P500
<S> <C> <C>
1995 (9.72%) 20.16%
1996 43.11% 28.55%
1997 133.33% 29.54%
1998 55.71% 30.61%
1999 (26.56%) 21.03%
</TABLE>
YEAR 2000
This Year 2000 readiness disclosure is the most current information
available and replaces all previous disclosures made by the company in its
filings on form 10-Q and form 10-K, and in its annual report to shareholders.
During fiscal year 1998, the company performed an analysis of the work necessary
to assure that its existing information systems and manufacturing equipment for
both domestic and international operations will be able to address the issues
surrounding the advent of the year 2000.
Company's State of Readiness:
Herman Miller has a comprehensive, written plan that is regularly updated and
monitored by technical personnel and company management, and reported to senior
management and the Board of Directors.
All of our domestic locations are now substantially Year 2000 compliant. For
international locations, the company presently believes that all remediation and
testing will be completed prior to August 1999.
The company has also verified Year 2000 conversion plans with its significant
vendors and independent dealers. All significant vendors and independent dealers
confirmed that they were Year 2000 compliant or are in the process of completing
their Year 2000 conversion plans.
Costs to Address the Company's Year 2000 Issues:
To date, the company has spent approximately $5 million on Year 2000
renovations. These are renovations to existing systems and are exclusive of the
implementation of our new ERP system. The company does not separately track the
internal costs incurred for the Year 2000 project, and such costs incurred are
principally related to payroll costs for employees involved with the project.
Based on costs incurred to date, the company does not believe the expenses
related to Year 2000 compliance will be material to the results of its
operations, financial position, or cash flows. The
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<PAGE> 22
company does not expect to spend any significant additional amounts to complete
the renovation.
Risks of the Company's Year 2000 Issues:
The company expects to have completed its Year 2000 remediation plan prior to
any Year 2000 issues having an adverse impact on its operations. Due to the
uncertain and unprecedented nature of the Year 2000 issue, however, and
especially the uncertainty surrounding the readiness of third-party vendors,
independent dealers, and customers, the company cannot provide assurance at this
time that the consequences of the Year 2000 dating issue will not have a
material impact on its results of operations, financial position, or cash flows.
Possible business consequences of the Year 2000 dating issues include, but are
not limited to, higher than expected costs of remediation; or a temporary
inability to manufacture or ship product, process transactions, communicate with
customers, vendors, subsidiary locations and employees, or conduct other similar
corporate activities in a normal business environment.
Company's Contingency Plans:
In the event that additional actions beyond those described above are necessary,
the company will immediately, upon identifying the need, begin developing and
implementing remedial actions to address the issues.
CONTINGENCIES
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. At any point in time, a number of GSA audits are either
scheduled or in progress. Management has been notified that the GSA referred an
audit of the company to the Department of Justice for consideration of a
potential civil False Claims Act case. Management does not expect resolution of
the audit to have a material adverse effect on the company's consolidated
financial statements. Management does not have information that would indicate a
substantive basis for a civil False Claims Act case.
We are not aware of any other litigation or threatened litigation that would
have a material impact on the company's consolidated financial statements.
CONCLUSION
In conclusion, we have shared with you the key elements of our financial
performance, including how we intend to increase our market opportunity and
improve our operational performance. Each of these elements played a key role in
our EVA and net income improvement over the past three years and, we believe,
will continue to enable us to improve EVA and net income and provide superior
returns to our shareholders in the future. We also hope you have gained some
insight into the risks and challenges we face.
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<PAGE> 23
Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company has no material financial exposure to the various financial
instrument market risks covered under this item. Foreign currency exchange rate
fluctuations related to the company's foreign operations did not have a material
impact on the financial results of the company during fiscal 1999. The company
has no material sensitivity to changes in foreign currency exchange rates. For
further information, refer to the Fair Value of Financial Instruments and
Financial Instruments with Off-Balance-Sheet Risk disclosures in the Notes to
Consolidated Financial Statements filed as part of this report.
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA
Summary of the quarterly operating results on a consolidated basis:
<TABLE>
<CAPTION>
May 29, 1999; May 30, 1998; May 31, 1997 First Second Third Fourth
(In Thousands, Except Per Share Data) Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
1999 Net sales $447,503 $464,818 $421,550 $432,368
Gross margin 170,212 176,112 155,975 167,406
Net income 34,005 38,913 29,927 38,967
Earnings per share-diluted $ .39 $ .45 $ .35 $ .48
1998 Net sales $401,545 $415,086 $436,708 $465,256
Gross margin 147,001 151,643 164,896 175,299
Net income 27,807 30,446 32,639 37,439
Earnings per share-diluted $ .30 $ .33 $ .36 $ .40
1997 Net sales $342,484 $377,137 $365,060 $411,204
Gross margin 118,272 134,300 131,933 149,419
Net income 15,586 17,852 13,535 27,425
Earnings per share-diluted $ .16 $ .18 $ .14 $ .29
</TABLE>
-23-
<PAGE> 24
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
May 29, 1999; May 30, 1998; May 31, 1997 1999 1998 1997
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
NET SALES $1,766,239 $1,718,595 $1,495,885
COST OF SALES 1,096,534 1,079,756 961,961
---------- ---------- ----------
GROSS MARGIN 669,705 638,839 533,924
---------- ---------- ----------
Operating Expenses:
Selling, general, and administrative 407,446 396,698 359,601
Design and research 37,946 33,846 29,140
Loss on divestiture -- -- 14,500
---------- ---------- ----------
TOTAL OPERATING EXPENSES 445,392 430,544 403,241
---------- ---------- ----------
OPERATING INCOME 224,313 208,295 130,683
---------- ---------- ----------
Other Expenses (Income):
Interest expense 7,295 8,300 8,843
Interest income (7,128) (11,262) (8,926)
Loss on foreign exchange 300 270 1,687
Other, net (6,066) 1,456 3,196
---------- ---------- ----------
NET OTHER EXPENSES (INCOME) (5,599) (1,236) 4,800
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 229,912 209,531 125,883
Income Taxes 88,100 81,200 51,485
---------- ---------- ----------
NET INCOME $ 141,812 $ 128,331 $ 74,398
---------- ---------- ----------
EARNINGS PER SHARE--BASIC $ 1.69 $ 1.42 $ .79
---------- ---------- ----------
EARNINGS PER SHARE--DILUTED $ 1.67 $ 1.39 $ .77
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
-24-
<PAGE> 25
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
May 29, 1999, and May 30, 1998 1999 1998
(In Thousands, Except Share and Per Share Data)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 79,952 $115,316
Accounts receivable, less allowances of $14,144 in 1999, and
$13,792 in 1998 192,374 192,384
Inventories 32,615 47,657
Prepaid expenses and other 45,161 44,778
------- --------
TOTAL CURRENT ASSETS 350,102 400,135
------- --------
Property and Equipment:
Land and improvements 25,073 27,279
Buildings and improvements 137,367 156,605
Machinery and equipment 428,867 364,817
Construction in progress 55,356 47,171
------- --------
646,663 595,872
Less: accumulated depreciation 329,944 305,208
------- --------
NET PROPERTY AND EQUIPMENT 316,719 290,664
------- --------
Notes Receivable, less allowances of $5,469 in 1999, and $8,430 in 1998 17,400 27,522
Other Assets 77,285 66,025
------- --------
TOTAL ASSETS $761,506 $784,346
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Unfunded checks $ 22,605 $ 35,241
Current portion of long-term debt 10,130 10,203
Notes payable 46,568 19,542
Accounts payable 82,404 92,241
Accrued liabilities 189,642 195,489
------- -------
TOTAL CURRENT LIABILITIES 351,349 352,716
Long-Term Debt, less current portion above 90,892 100,910
Other Liabilities 110,190 99,718
------- -------
TOTAL LIABILITIES 552,431 553,344
------- -------
Shareholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, none issued) -- --
Common stock, $.20 par value (240,000,000 shares authorized, 79,565,860
and 86,986,957 shares issued and outstanding in 1999 and 1998) 15,913 17,397
Additional paid-in capital -- --
Retained earnings 210,084 227,464
Accumulated other comprehensive loss (10,683) (9,360)
Key executive stock programs (6,239) (4,499)
------- -------
TOTAL SHAREHOLDERS' EQUITY 209,075 231,002
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $761,506 $784,346
-------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-25-
<PAGE> 26
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
(In Thousands, Additional Other Key Exec. Total
Except Share and Common Paid-In Retained Comprehensive Stock Shareholders'
Per Share Data) Stock Capital Earnings Loss Programs Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 1, 1996 $ 4,934 $ 14,468 $ 303,578 $(11,633) $(3,202) $ 308,145
Net income -- -- 74,398 -- -- 74,398
Current year translation adjustment -- -- -- 770 -- 770
---------
Total comprehensive income 75,168
Cash dividends ($.134 per share) -- -- (12,593) -- -- (12,593)
Exercise of stock options 63 9,049 -- -- -- 9,112
Employee stock purchase plan 14 2,637 -- -- -- 2,651
Repurchase and retirement of
2,765,984 shares of common stock (553) (29,374) (68,414) -- 379 (97,962)
Stock dividend 4,732 -- (4,732) -- -- --
Directors' fees 1 225 -- -- -- 226
Stock grants earned -- -- -- -- 387 387
Stock grants issued 16 2,995 -- -- (1,776) 1,235
Stock purchase assistance plan -- -- -- -- 693 693
------- -------- --------- -------- ------- ---------
BALANCE MAY 31, 1997 $ 9,207 $ -- $ 292,237 $(10,863) $(3,519) $ 287,062
------- -------- --------- -------- ------- ---------
Net income -- -- 128,331 -- -- 128,331
Current year translation adjustment -- -- -- 1,503 -- 1,503
---------
Total comprehensive income 129,834
Cash dividends ($.145 per share) -- -- (13,361) -- -- (13,361)
Exercise of stock options 246 14,105 -- -- -- 14,351
Employee stock purchase plan 21 3,831 -- -- -- 3,852
Tax benefit relating to employee
stock plans -- 10,074 -- -- -- 10,074
Repurchase and retirement of
5,222,361 shares of common stock (1,044) (30,161) (170,777) -- -- (201,982)
Stock dividend 8,966 -- (8,966) -- -- --
Directors' fees 1 325 -- -- -- 326
Stock grants earned -- -- -- -- 718 718
Deferred compensation plan -- 1,826 -- -- (1,826) --
Stock purchase assistance plan -- -- -- -- 128 128
------- -------- --------- -------- ------- ---------
BALANCE MAY 30, 1998 $17,397 $ -- $ 227,464 $ (9,360) $(4,499) $ 231,002
------- -------- --------- -------- ------- ---------
Net income -- -- 141,812 -- -- 141,812
Current year translation adjustment -- -- -- (1,323) -- (1,323)
--------
Total comprehensive income 140,489
Cash dividends ($.145 per share) -- -- (11,992) -- -- (11,992)
Exercise of stock options 135 8,662 -- -- -- 8,797
Employee stock purchase plan 51 4,345 -- -- -- 4,396
Tax benefit relating to
employee stock plans -- 1,978 -- -- -- 1,978
Repurchase and retirement of
8,379,444 shares of common stock (1,676) (18,620) (147,200) -- -- (167,496)
Directors' fees 3 314 -- -- -- 317
Stock grants earned -- -- -- -- 1,222 1,222
Stock grants issued 3 424 -- -- (409) 18
Deferred compensation plan -- 2,897 -- -- (2,897) --
Stock purchase assistance plan -- -- -- -- 344 344
------- -------- --------- -------- ------- ---------
BALANCE MAY 29, 1999 $15,913 $ -- $ 210,084 $(10,683) $(6,239) $ 209,075
======= ======== ========= ======== ======= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-26-
<PAGE> 27
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
May 29, 1999; May 30, 1998; and May 31, 1997 1999 1998 1997
<S> <C> <C> <C>
(In Thousands)
Cash Flows from Operating Activities:
Net Income $ 141,812 $ 128,331 $ 74,398
Adjustments to reconcile net income
to net cash provided by operating activities 63,801 140,392 143,772
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 205,613 268,723 218,170
--------- --------- ---------
Cash Flows from Investing Activities:
Notes receivable repayments 491,077 561,923 449,405
Notes receivable issued (486,525) (544,182) (460,956)
Property and equipment additions (103,404) (73,561) (54,470)
Proceeds from sales of property and equipment 28,853 870 5,336
Net cash paid for acquisitions (4,689) (4,076) (9,743)
Other, net (15,899) (7,102) 1,548
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (90,587) (66,128) (68,880)
--------- --------- ---------
Cash Flows from Financing Activities:
Short-term debt borrowings 65,589 192,808 236,627
Short-term debt repayments (38,563) (189,619) (239,417)
Long-term debt repayments, net (10,091) (179) (302)
Dividends paid (12,270) (13,516) (12,463)
Common stock issued 13,528 18,529 11,989
Common stock repurchased and retired (167,496) (201,982) (97,962)
--------- --------- ---------
NET CASH USED FOR FINANCING ACTIVITIES (149,303) (193,959) (101,528)
--------- --------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (1,087) 519 1,346
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (35,364) 9,155 49,108
--------- --------- ---------
Cash and Cash Equivalents, Beginning of Year 115,316 106,161 57,053
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 79,952 $ 115,316 $ 106,161
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
-27-
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The following is a summary of significant accounting and reporting policies not
reflected elsewhere in the accompanying financial statements.
Principles of Consolidation The consolidated financial statements include the
accounts of Herman Miller, Inc., and its wholly owned domestic and foreign
subsidiaries (the company). All significant intercompany accounts and
transactions have been eliminated.
Description of Business The company is engaged in the design, manufacture, and
sale of office systems, products, and services principally for offices and, to a
lesser extent, for healthcare facilities and other uses. The company's products
are sold primarily to or through independent contract office furniture dealers.
Accordingly, accounts and notes receivable in the accompanying balance sheets
principally are amounts due from the dealers.
Fiscal Year The company's fiscal year ends on the Saturday closest to May 31.
The years ended May 29, 1999, May 30, 1998, and May 31, 1997, each contained 52
weeks.
Foreign Currency Translation The functional currency for most foreign
subsidiaries is the local currency. The cumulative effects of translating the
balance sheet accounts from the functional currency into the United States
dollar at current exchange rates and revenue and expense accounts using average
exchange rates for the period are included as a separate component of
shareholders' equity. The United States dollar is used as the functional
currency for subsidiaries in highly inflationary foreign economies, and the
financial results are translated using a combination of current and historical
exchange rates, and the resulting translation adjustments are included along
with gains or losses arising from remeasuring all foreign currency transactions
into the appropriate currency in determining net income.
Cash Equivalents The company invests in certain debt and equity securities as
part of its cash management function. Due to the relative short-term maturities
and high liquidity of these securities (consisting primarily of money market
investments), they are included in the accompanying consolidated balance sheets
as cash equivalents at market value and totaled $46.5 million and $67.3 million
as of May 29, 1999, and May 30, 1998, respectively.
The company's cash equivalents are considered "available for sale." As of May
29, 1999, and May 30, 1998, the market value approximated the securities' cost.
All cash and cash equivalents are high-credit quality financial instruments, and
the amount of credit exposure to any one financial institution or instrument is
limited.
Property, Equipment, and Depreciation Property and equipment are stated at cost.
The cost is depreciated over the estimated useful lives of the assets, using the
straight-line method. The average useful lives of the assets are 32 years for
buildings and seven years for all other property and equipment.
The company capitalizes certain external and internal costs incurred in
connection with the development, testing, and installation of software for
internal use. Software for internal use is included in property and equipment
and is depreciated over an estimated useful life of five years.
Notes Receivable The notes receivable are primarily from certain independent
contract office furniture dealers. The notes are collateralized by the assets of
the dealers and bear interest based on the prevailing prime rate. Interest
income relating to these notes was $3.0, $4.3, and $4.8 million in 1999, 1998,
and 1997, respectively.
-28-
<PAGE> 29
Long-Lived Assets The company assesses the recoverability of its long-lived
assets whenever events or circumstances such as current and projected future
operating losses or changes in the business climate indicate that the carrying
amount may not be recoverable. Assets are grouped and evaluated at the lowest
level for which there are independent and identifiable cash flows. The company
considers historical performance and future estimated results in its evaluation
of potential impairment and then compares the carrying amount of the asset to
the estimated future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset. If the carrying amount of the
asset exceeds the expected future cash flows, the company measures and records
an impairment loss for the excess of the carrying value of the asset over its
fair value. The estimation of fair value is made by discounting the expected
future cash flows at the rate the company uses to evaluate similar potential
investments based on the best information available at that time. If the assets
being tested for recoverability were acquired in a purchase business
combination, the goodwill that arose in that transaction is included in the
asset group's carrying values on a pro-rata basis using the relative fair
values.
In situations where goodwill and intangible balances remain after applying the
impairment measurements to business unit asset groupings under Statement of
Financial Accounting Standards (SFAS) No. 121, the company assesses the
recoverability of the remaining balances at the enterprise level under the
provisions of Accounting Principles Board (APB) Opinion 17. Applying these
provisions, when the estimated undiscounted future operating income (before
interest and amortization) for individual business units is not sufficient to
recover the remaining carrying value over the remaining amortization period, the
company recognizes an impairment loss for the excess.
Excluding the impairment incurred in connection with the divestiture of the
company's German manufacturing operation in 1997 (see Acquisitions and
Divestitures note), such provisions were not significant in 1999, 1998, or 1997.
Intangible assets included in other assets consist mainly of goodwill, patents,
and other acquired intangibles, and are carried at cost, less applicable
amortization of $19.5 and $16.0 million in 1999 and 1998, respectively. These
assets are amortized using the straight-line method over periods of five to 15
years.
Unfunded Checks As a result of maintaining a consolidated cash management
system, the company utilizes controlled disbursement bank accounts. These
accounts are funded as checks are presented for payment, not when checks are
issued. The resulting book overdraft position is included in current liabilities
as unfunded checks.
Self-Insurance The company is partially self-insured for general liability,
workers' compensation, and certain employee health benefits. The general and
workers' compensation liabilities are managed through a wholly owned insurance
captive; the related liabilities are included in the accompanying consolidated
financial statements. The company's policy is to accrue amounts equal to the
actuarially determined liabilities. The actuarial valuations are based on
historical information along with certain assumptions about future events.
Changes in assumptions for such matters as legal actions, medical costs, and
changes in actual experience could cause these estimates to change in the near
term.
Research, Development, Advertising, and Other Related Costs Research,
development, advertising materials, preproduction and start-up costs are
expensed as incurred. Research and development costs consist of expenditures
incurred during the course of planned search and investigation aimed at
discovery of new knowledge that will be useful in developing new products or
processes, or significantly enhancing existing products or production processes,
and the implementation of such through design, testing of product alternatives,
or construction of prototypes. Royalty payments made to designers of the
company's products as the products are sold are not included in research and
development costs, as they are considered to be a variable
-29-
<PAGE> 30
cost of the product. Research and development costs, included in design and
research expense in the accompanying statements of income, were $33.4, $29.0,
and $25.7 million in 1999, 1998, and 1997, respectively.
Income Taxes Deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to reverse.
Earnings per Share Basic earnings per share (EPS) exclude the dilutive effect of
common shares that could potentially be issued, due to the exercise of stock
options, and is computed by dividing net income by the weighted-average number
of common shares outstanding for the period. Diluted EPS is computed by dividing
net income by the weighted-average number of shares outstanding plus all shares
that could potentially be issued.
Revenue Recognition Revenues are recorded when product is shipped and invoiced
and performance of services is complete.
Comprehensive Income The company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," as of May 31, 1998, the
beginning of its 1999 fiscal year. SFAS No. 130 establishes new standards for
the reporting and display of comprehensive income and its components; however,
the adoption of this Statement had no impact on the company's net income or
shareholders' equity. The company's comprehensive income consists of net income
and foreign currency translation adjustments. Prior years' financial statements
have been reclassified to conform to these requirements.
Use of Estimates in the Preparation of Financial Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
New Accounting Standards In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability, measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. SFAS 133 is effective in the company's fiscal year 2002. The company
has not yet determined the timing or method of adoption of SFAS 133; however,
the Statement is not expected to have a material impact on the company's
consolidated financial statements.
Reclassifications Certain prior year information has been reclassified to
conform to the current year presentation.
-30-
<PAGE> 31
ACQUISITIONS AND DIVESTITURES
During 1999, 1998, and 1997, the company made several acquisitions, all of
which were recorded using the purchase method of accounting. Accordingly, the
purchase price of these acquisitions has been allocated to the assets acquired
and liabilities assumed based on the estimated fair values at the date of the
acquisition. The cost of the acquisitions in excess of net identifiable assets
acquired has been recorded as goodwill.
During 1999, 1998, and 1997, the company purchased various privately owned North
American dealers. These companies were acquired for approximately $18.5 million
in cash, which resulted in approximately $11.1 million of goodwill. The results
of the acquisitions were not material to the company's consolidated operating
results.
During the second quarter of fiscal 1997, declining sales and continuing losses
at the company's German subsidiary led the company, in accordance with its
accounting policies, to assess the realizability of the subsidiary's long-lived
assets. At that time, estimates of expected future cash flows under various
options to improve the company's operating results in Germany were evaluated to
determine if any potential impairment existed. Although none of the options were
developed to the extent required to enable the company to reach a decision and
plan for implementation, based on the results of its various evaluations of
potential impairment, the company determined at the enterprise level the
goodwill and intangibles associated with the acquisition were no longer
recoverable. As a result, a pretax charge of $5.5 million ($4.5 million, or $.05
per share after tax) was recorded for the write-off of the goodwill and
brand-name assets of the subsidiary.
During the third quarter of fiscal 1997, management authorized and committed the
company to a plan to restructure the manufacturing component of its German
operation. Based on the most current information available at that time,
management believed that closing the facility was the most viable option. As a
result, the company recorded a pretax restructuring charge of $13.7 million
($5.4 million, or $.06 per share after tax).
During the fourth quarter of fiscal 1997, the company sold the German
manufacturing operation. The sale had the effect of reducing both the pretax
restructuring costs recorded in the third quarter by $4.7 million, and the
anticipated tax benefit by $5.2 million. In summary, after adjusting for the
effects of the sale, the divestiture of the company's investments in its German
manufacturing operation resulted in a pretax loss of $14.5 million ($10.4
million, or $.11 per share after tax) for fiscal 1997.
The following is a summary of significant accounting and reporting policies not
reflected elsewhere in the accompanying financial statements.
<TABLE>
<CAPTION>
INVENTORIES
<S> <C> <C>
(In Thousands) 1999 1998
Finished products $11,946 $19,807
Work in process 7,446 8,844
Raw materials 13,223 19,006
------- -------
$32,615 $47,657
======= =======
</TABLE>
Inventories are valued at the lower of cost or market and include material,
labor, and overhead. The inventories of certain subsidiaries are valued using
the last-in, first-out (LIFO) method. The inventories of all other subsidiaries
are valued using the first-in, first-out method. Inventories valued using the
LIFO method amounted to $18.4 and $25.2 million at May 29, 1999, and May 30,
1998, respectively.
-31-
<PAGE> 32
If all inventories had been valued using the first-in, first-out method,
inventories would have been $11.8 and $13.6 million higher than reported at May
29, 1999, and May 30, 1998, respectively.
<TABLE>
<CAPTION>
PREPAID EXPENSES AND OTHER
(In Thousands) 1999 1998
<S> <C> <C>
Current deferred income taxes $ 20,906 $ 27,154
Other 24,255 17,624
-------- --------
$ 45,161 $ 44,778
======== ========
ACCRUED LIABILITIES
(In Thousands) 1999 1998
Compensation and employee benefits $ 75,125 $ 85,068
Income taxes 39,499 22,809
Other 75,018 87,612
-------- --------
$189,642 $195,489
======== ========
OTHER LIABILITIES
(In Thousands) 1999 1998
Pension benefits $ 41,907 $ 41,898
Postretirement benefits 9,510 9,618
Other 58,773 48,202
-------- --------
$110,190 $ 99,718
======== ========
NOTES PAYABLE
(In Thousands) 1999 1998
U.S. dollar currencies $ 36,000 $ --
Non-U.S. dollar currencies 10,568 19,542
-------- --------
$ 46,568 $ 19,542
======== ========
</TABLE>
The following information relates to short-term borrowings in 1999:
<TABLE>
<CAPTION>
(In Thousands) Domestic Foreign
<S> <C> <C>
Weighted-average interest rate at May 29, 1999 5.3% 3.9%
Weighted-average interest rate at May 30, 1998 -- 4.8%
Weighted-average interest rate during 1999 5.3% 4.8%
Unused short-term credit lines $-- $ 39,400
</TABLE>
In addition to the company's formal short-term credit lines shown above, the
company has available informal lines of credit totaling $41.5 million.
<TABLE>
<CAPTION>
LONG-TERM DEBT
(In Thousands) 1999 1998
<S> <C> <C>
Series A senior notes, 6.37%, due March 5, 2006 $ 70,000 $ 70,000
Series B senior notes, 6.08%, due March 5, 2001 15,000 15,000
Series C senior notes, 6.52%, due March 5, 2008 15,000 15,000
Finance lease obligation -- 10,000
Other 1,022 1,113
-------- --------
101,022 111,113
Less current portion 10,130 10,203
-------- --------
$ 90,892 $100,910
======== ========
</TABLE>
During the third quarter of 1996, the company entered into a private placement
of $100.0 million of senior notes with seven insurance companies. The Series A,
B, and C notes have interest-only payments until March 5, 2000, March 5, 2001,
and March 5, 2004, respectively.
-32-
<PAGE> 33
The company has available an unsecured revolving credit loan that provides for a
$300.0 million line of credit of which $36.0 million is currently outstanding.
The loan permits borrowings in multiple currencies and matures on April 16,
2004. Outstanding borrowings bear interest, at the option of the company, at
rates based on the prime rate, certificates of deposit, LIBOR, or negotiated
rates. Interest is payable periodically throughout the period a borrowing is
outstanding. During 1999 and 1998, the company borrowed at the LIBOR contractual
rate or other negotiated rates.
Provisions of the senior notes and the unsecured senior revolving credit loan
restrict, without prior consent, the company's borrowings, long-term leases, and
sale of certain assets. In addition, the company has agreed to maintain certain
financial performance ratios. At May 29, 1999, the company was in compliance
with all of these provisions.
Annual maturities of long-term debt for the five years subsequent to May 29,
1999 (in millions), are as follows: 2000-$10.1; 2001-$25.1; 2002-$10.2;
2003-$10.2; 2004-$13.1; thereafter-$32.3.
OPERATING LEASES
The company leases real property and equipment under agreements
that expire on various dates. Certain leases contain renewal provisions and
generally require the company to pay utilities, insurance, taxes, and other
operating expenses.
Future minimum rental payments (in millions) required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of May 29, 1999, are as follows: 2000-$20.5; 2001-$12.4; 2002-$9.1;
2003-$7.1; 2004-$5.8; thereafter-$5.4.
Total rental expense charged to operations was $17.6, $20.4, and $20.9 million
in 1999, 1998, and 1997, respectively. Substantially all such rental expense
represented the minimum rental payments under operating leases.
EMPLOYEE BENEFIT PLANS
The company maintains plans which provide retirement benefits for substantially
all employees.
Pension Plans The principal domestic plan is a defined-benefit pension plan.
Effective December 1, 1998, the defined-benefit pension plan was converted from
the existing average final pay benefit calculation to a cash-balance
calculation. As part of the redesign, the company bought out the postretirement
healthcare obligation for active employees through a one-time, lump-sum transfer
contribution to the cash-balance plan. Benefits under this plan are based upon
an employee's years of service and earnings.
The amendment converting the plan to the cash-balance formula was the primary
reason for the $43.9 million change in the projected benefit obligation in 1998.
In addition to the domestic pension plan and the retiree healthcare and life
insurance plan, one of Herman Miller, Inc.'s wholly owned foreign subsidiaries
has a defined-benefit pension plan which is based upon an average final pay
benefit calculation. The plan has not been amended and is included in the
following information:
-33-
<PAGE> 34
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
---------------- --------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligations at beginning of year $193,723 $188,743 $10,387 $24,467
Service cost 11,507 11,722 -- 1,168
Interest cost 14,293 14,678 773 1,713
Transfer of obligations -- 15,822 -- (15,822)
Actuarial effects of plan redesign (7) (43,878) 774 --
Actuarial (gain) loss 4,462 10,018 (185) (480)
Benefits paid (7,219) (4,387) (968) (721)
Other 651 1,005 37 62
-------- -------- ------- -------
Benefit obligations at end of year 217,410 193,723 10,818 10,387
-------- -------- ------- -------
Change in plan assets
Fair value of plan assets at beginning of year 236,568 184,178 -- --
Actual return on plan assets 21,341 47,692 -- --
Employer contribution 1,387 9,085 -- 721
Benefits paid (7,219) (4,387) -- (721)
-------- -------- ------- -------
Fair value of plan assets at end of year 252,077 236,568 -- --
-------- -------- ------- -------
Funded status 34,667 42,845 (10,818) (10,387)
Unrecognized transition amount (1,448) (1,975) -- --
Unrecognized net actuarial (gain) loss (33,978) (38,651) 584 769
Unrecognized prior service cost (41,148) (44,117) 724 --
-------- -------- ------- -------
Accrued benefit cost ($41,907) ($41,898) ($9,510) ($9,618)
======== ======== ======= =======
Weighted average assumptions
Discount rate 7.25% 7.25% 7.25% 7.25%
Expected return on plan assets 9.00% 9.00% N/A N/A
Rate of compensation increase 5.00% 5.00% N/A N/A
</TABLE>
For measurement purposes, a 7.0 percent annual rate of increase in the per
capita cost of covered healthcare benefits was assumed for 2000. The rate was
assumed to decrease to 6.0 percent for 2001 and remain at that level thereafter.
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<PAGE> 35
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost $11,507 $11,722 $ 9,620 $ -- $1,168 $1,132
Interest cost 14,293 14,678 12,683 773 1,713 1,653
Expected return on plan assets (20,884) (16,913) (11,008) -- -- --
Net amortization (4,251) (523) (514) 50 (50) (44)
------- ------- ------- ---- ------ ------
Net periodic benefit cost $ 665 $ 8,964 $10,781 $823 $2,831 $2,741
======= ======= ======= ==== ====== ======
</TABLE>
Assumed healthcare cost trend rates have a significant effect on the amounts
reported for the healthcare plans. A one-percentage-point change in assumed
healthcare cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage-Point 1-Percentage-Point
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost
components $48 $(45)
Effect on postretirement benefit obligation $703 $(667)
</TABLE>
Plan assets consist primarily of listed common stocks, mutual funds, and
corporate obligations. Plan assets at May 29, 1999, and May 30, 1998, included
1,043,619 and 888,346 shares of Herman Miller, Inc., common stock, respectively.
Profit Sharing and 401(k) Plan Domestically, Herman Miller, Inc., has a trusteed
profit sharing plan that covers substantially all employees. These employees are
eligible to begin participating at the beginning of the quarter following the
date of hire. The plan provides for discretionary contributions (payable in the
company's common stock) of not more than 6.0 percent of employees' wages based
on the company's EVA performance. The cost of the plan charged against
operations was $14.0, $8.1, and $6.6 million in 1999, 1998, and 1997,
respectively.
Effective December 1, 1998, the company began to match the employees'
contribution to their 401(k) account. The match is equal to half of the
employees' contribution up to the first 6.0 percent of the employees' pay. The
company's contribution charged against operations was $2.9 million in fiscal
1999.
COMMON STOCK AND PER SHARE INFORMATION
On January 20, 1998, the Board of Directors approved a 2-for-1 stock split
effected in the form of a 100 percent dividend to shareholders of record on
February 27, 1998, payable on March 16, 1998. The distribution increased the
number of shares outstanding from 44,831,103 to 89,662,206. All share and per
share information, including stock plan information, has been restated to
reflect the split.
On March 18, 1997, the Board of Directors approved a 2-for-1 stock split
effected in the form of a 100 percent dividend to shareholders of record on
March 31, 1997, payable on April 15, 1997. The Board of Directors also approved
an increase in the quarterly cash dividend from $.03250 to $.03625 per share for
shareholders of record on May 31, 1997.
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<PAGE> 36
The following table reconciles the numerators and denominators used in the
calculations of basic and diluted EPS for each of the last three years:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1999 1998 1997
<S> <C> <C> <C>
Numerators:
Numerators for both basic and diluted EPS, net
income $ 141,812 $ 128,331 $ 74,398
========== ========== ==========
Denominators:
Denominators for basic EPS,
weighted-average common shares outstanding
83,734,707 90,240,102 94,627,772
Potentially dilutive shares resulting from stock
option plans 1,096,375 1,799,067 1,496,428
---------- ---------- ----------
Denominator for diluted EPS 84,831,082 92,039,169 96,124,200
========== ========== ==========
</TABLE>
Certain exercisable stock options were not included in the computations of
diluted EPS because the option prices were greater than average quarterly market
prices for the periods presented. The number of stock options outstanding at the
end of each year presented which were not included in the calculation of diluted
EPS and the ranges of exercise prices were: 3,346,421 at $19.88-$32.50 in 1999;
and 132,368 at $32.50 in 1998. All exercisable stock options were included in
the computation of EPS in 1997 as the option prices were not greater than the
average quarterly market prices.
STOCK PLANS
Under the terms of the company's 1995 Employee Stock Purchase Plan, 4.1 million
shares of authorized common stock were reserved for purchase by plan
participants at 85.0 percent of the market price. At May 29, 1999, 3,356,980
shares remained available for purchase through the plan, and there were 7,109
employees eligible to participate in the plan, of which 2,401, or 33.8 percent,
were participants. During 1999, 1998, and 1997, employees purchased 253,076;
107,182; and 71,213 shares, respectively.
The company has stock option plans under which options are granted to employees
and nonemployee officers and directors at a price not less than the market price
of the company's common stock on the date of grant. All options become
exercisable one year from date of grant and expire 10 years from date of grant.
At May 29, 1999, there were 164 employees and 11 nonemployee officers and
directors eligible, all of whom were participants in the plans. At May 29, 1999,
there were 5,044,110 shares available for future options.
The company's Long-Term Incentive Plan, along with the Nonemployee Officer and
Director Stock Option Plan, authorize reload options. Reload options provide for
the purchase of shares equal to the number of shares delivered upon exercise of
the original options plus the number of shares delivered to satisfy the tax
liability incurred in the exercise. The reload options retain the expiration
date of the original options; however, the exercise price must equal the fair
market value on the date the reload options are granted. During fiscal 1999,
252,998 reload options were automatically granted.
-36-
<PAGE> 37
A summary of shares subject to options follows:
<TABLE>
<CAPTION>
1999 1998 1997
Weighted- Weighted- Weighted-
Average Average Average
1999 Exercise 1998 Exercise 1997 Exercise
Shares Prices Shares Prices Shares Prices
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year: 3,463,814 $14.19 4,028,196 $ 7.27 4,863,840 $ 6.48
Granted 2,174,247 $26.50 1,599,152 $22.12 338,000 $15.92
Exercised (676,584) $13.01 (2,081,834) $ 6.90 (1,102,644) $ 5.78
Terminated (61,710) $25.86 (81,700) $17.60 (71,000) $ 7.74
--------- --------- ---------
Outstanding at
end of year: 4,899,767 $19.67 3,463,814 $14.19 4,028,196 $ 7.27
--------- --------- ---------
Exercisable at
end of year: 2,744,960 $14.33 1,921,162 $ 7.58 3,770,196 $ 6.68
========= ========= =========
Weighted-average
fair-market value
of options
granted $ 8.71 $ 6.54 $ 4.42
</TABLE>
A summary of stock options outstanding at May 29, 1999, follows:
<TABLE>
<CAPTION>
Exercisable Stock
Outstanding Stock Options Options
------------------------- -------------------
Weighted-
Average Weighted- Weighted-
Shares Remaining Average Average
Range of Exercise (In Contractual Exercise Shares Exercise
Price Thousands) Life Price (In Thousands) Price
<S> <C> <C> <C> <C> <C>
$ 4.66- $ 8.00 1,370 5.05 years $ 6.75 1,370 $ 6.75
$ 8.04- $22.50 1,698 8.64 years $20.51 897 $18.84
$ 24.44- $32.50 1,832 8.35 years $28.57 478 $27.60
----- -----
Total 4,900 7.53 years $19.67 2,745 $14.33
===== =====
</TABLE>
The company accounts for its employee stock purchase plan and its stock option
plans under APB Opinion 25; therefore, no compensation costs are recognized when
employees purchase stock or when stock options are authorized, granted, or
exercised. If compensation costs had been computed under SFAS No. 123,
"Accounting for Stock-Based Compensation," the company's net income and earnings
per share would have been reduced by approximately $12.8 million, or $.15 per
share in 1999, and $7.2 million, or $.08 per share in 1998, and $1.0 million, or
$.01 per share in 1997.
-37-
<PAGE> 38
For purposes of computing compensation costs of stock options granted, the fair
value of each stock option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Risk-free interest rates 4.39%-5.48% 5.39%-6.26% 5.93%-6.35%
Expected term of options 3-5 years 3 years 3 years
Expected volatility 37%-46% 34% 31%
Dividend yield .5% .5% .5%
</TABLE>
Black-Scholes is a widely accepted stock option pricing model; however, the
ultimate value of stock options granted will be determined by the actual lives
of options granted and future price levels of the company's common stock.
KEY EXECUTIVE AND DIRECTOR STOCK PROGRAMS
Restricted Stock Grants The company has granted restricted common shares to
certain key employees. Shares were awarded in the name of the employee, who has
all rights of a shareholder, subject to certain restrictions on transferability
and a risk of forfeiture. The forfeiture provisions on the awards expire
annually, over a period not to exceed six years, as certain financial goals are
achieved. During fiscal 1999, 8,100 shares were granted under the company's
long-term incentive plan, no shares were forfeited, and the forfeiture
provisions expired on 72,174 shares. As of May 29, 1999, 96,005 shares remained
subject to forfeiture provisions and restrictions on transferability.
The remaining shares subject to forfeiture provisions have been recorded as
unearned stock grant compensation and are included as a separate component of
shareholders' equity under the caption Key Executive Stock Programs. The
unearned compensation is being charged to selling, general, and administrative
expense over the five-year vesting period and was $1.2, $.7, and $.4 million in
1999, 1998, and 1997, respectively.
Key Executive Deferred Compensation Plan During fiscal 1997, the company
established the Herman Miller, Inc., Key Executive Deferred Compensation Plan,
which allows certain executives to defer receipt of all or a portion of their
EVA cash incentive. The company may make a matching contribution of 30 percent
of the executive's contribution up to 50 percent of the deferred EVA cash
incentive. The company matching contribution vests at the rate of 33 1/3 percent
annually. In accordance with the terms of the plan, the executive deferral and
company matching contribution have been placed in a "Rabbi" trust, which invests
solely in the company's common stock. These Rabbi trust arrangements offer the
executive a degree of assurance for ultimate payment of benefits without causing
constructive receipt for income tax purposes. Distributions to the executive
from the Rabbi trust can only be made in the form of the company's common stock.
The assets in the Rabbi trust remain subject to the claims of creditors of the
company and are not the property of the executive and are, therefore, included
as a separate component of shareholders' equity under the caption Key Executive
Stock Programs.
Key Executive Stock Purchase Assistance Plan During fiscal 1995, the company
adopted a key executive stock purchase assistance plan whereby the company may
extend credit to officers and key executives to purchase the company's stock
through the exercise of options or on the open market. These loans are secured
by the shares acquired and are repayable under full recourse promissory notes.
The sale or transfer of shares is restricted for five years after the loan is
fully paid. The plan provides for the key executives to earn repayment of a
portion of the notes, including interest, based on meeting annual performance
objectives as set forth by the Executive Compensation Committee of the Board of
Directors. The notes bear interest at 7.0 percent per annum. Interest is payable
annually and principal is due on various dates through September 1, 2007. As of
May 29, 1999, the notes outstanding relating to the exercise of options were $.3
million and are included as a separate component of shareholders' equity under
the caption Key
-38-
<PAGE> 39
Executive Stock Programs. Notes outstanding related to open-market purchases
were $2.6 million and are recorded in other assets. Compensation expense related
to earned repayment was $1.7 million in 1999, $2.5 million in 1998, and $3.9
million in 1997.
Director Fees During fiscal 1997, the Board of Directors approved a plan that
allows the Board members to elect to receive their director fees in the form of
unrestricted company stock at the then fair market value rather than in cash.
Under this plan, the Board members received 14,587 and 12,409 shares of the
company's stock in fiscal 1999 and 1998, respectively.
INCOME TAXES
Pretax income consisted of the following:
<TABLE>
<CAPTION>
(In Thousands) 1999 1998 1997
<S> <C> <C> <C>
Domestic $206,002 $186,266 $141,742
Foreign 23,910 23,265 (15,859)
-------- -------- --------
$229,912 $209,531 $125,883
======== ======== ========
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
(In Thousands) 1999 1998 1997
<S> <C> <C> <C>
Current: Domestic--Federal $62,534 $77,161 $66,003
Domestic--State 4,140 4,430 4,957
Foreign 7,923 6,184 (2,287)
------- ------- -------
74,597 87,775 68,673
------- ------- -------
Deferred: Domestic--Federal 13,666 (7,019) (15,938)
Domestic--State (258) 321 (677)
Foreign 95 123 (573)
------- ------- -------
13,503 (6,575) (17,188)
------- ------- -------
Total income tax provision $88,100 $81,200 $51,485
======= ======= =======
</TABLE>
The tax effects and types of temporary differences that give rise to significant
components of the deferred tax assets and liabilities at May 29, 1999, and May
30, 1998, are presented below:
<TABLE>
<CAPTION>
(In Thousands) 1999 1998
<S> <C> <C>
Deferred tax assets:
Foreign net operating loss carryforwards $ 1,140 $ 8,114
Book over tax loss on sale of fixed assets 6,828 5,845
Compensation-related accruals 16,653 9,475
Accrued pension and postretirement benefit obligations 19,119 21,743
Reserves for inventory 3,995 4,317
Reserves for uncollectible accounts and notes receivable 4,517 5,756
Other 30,717 31,703
Valuation allowance (1,140) (8,114)
-------- --------
$ 81,829 $ 78,839
======== ========
Deferred tax liabilities:
Book basis in property in excess of tax basis $(19,079) $(19,828)
Capitalized software costs (15,635) (5,340)
Prepaid employee benefits (3,123) (2,665)
Other (15,875) (9,386)
-------- --------
$(53,712) $(37,219)
======== ========
</TABLE>
The company has foreign net operating loss carryforwards, the tax benefit of
which is $1.1 million, of which $.1 million expires at various dates through
2008, and of which $1.0 million has unlimited expiration. For financial
statement purposes, the tax benefit of the foreign net operating loss
carryforward has been recognized as a deferred tax asset, subject to a valuation
allowance.
-39-
<PAGE> 40
The company has not provided for United States income taxes on undistributed
earnings of foreign subsidiaries totaling $52.5 million. Recording of deferred
income taxes on these undistributed earnings is not required, since these
earnings have been permanently reinvested. These amounts would be subject to
possible U.S. taxation only if remitted as dividends. The determination of the
hypothetical amount of unrecognized deferred U.S. taxes on undistributed
earnings of foreign entities is not practicable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the company's financial instruments included in current
assets and current liabilities approximates their fair value due to their
short-term nature. The fair value of the notes receivable is estimated by
discounting expected future cash flows using current interest rates at which
similar loans would be made to borrowers with similar credit ratings and
remaining maturities. As of May 29, 1999, and May 30, 1998, the fair value of
the notes receivable approximated the carrying value. The company intends to
hold these notes to maturity and has recorded allowances to reflect the terms
negotiated for carrying value purposes. As of May 29, 1999, and May 30, 1998,
the carrying value approximated the fair value of the company's long-term debt.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The company utilizes derivative financial instruments to manage its exposure to
foreign currency volatility at the transactional level. The majority of these
contracts relate to major currencies such as the Japanese yen, the Australian
dollar, and the British pound. The exposure to credit risk is minimal, since the
counterparties are major financial institutions. The market risk exposure is
essentially limited to currency rate movements. The gains or losses arising from
these financial instruments are applied to offset exchange gains or losses on
related hedged exposures. Realized gains or losses in 1999, 1998, and 1997 were
not material to the company's results of operations. At May 29, 1999, and May
30, 1998, the company had no outstanding derivative financial instruments.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following table presents the adjustments to reconcile net income to net cash
provided by operating activities:
<TABLE>
<CAPTION>
(In Thousands) 1999 1998 1997
<S> <C> <C> <C>
Depreciation and amortization $ 62,054 $ 50,748 $ 47,985
Loss on divestiture -- -- 14,500
Provision for losses on accounts
and notes receivable 4,433 5,245 7,302
Loss (gain) on sales of property and equipment (6,947) 2,243 1,575
Deferred taxes 13,503 (6,575) (17,188)
Other liabilities 4,479 2,815 17,070
Stock grants earned 1,222 718 387
Changes in current assets and liabilities:
Decrease (increase) in assets:
Accounts receivable 5,439 (12,706) (11,735)
Inventories 15,179 5,237 11,130
Prepaid expenses and other (6,535) 3,715 (4,096)
Increase (decrease) in liabilities:
Accounts payable (11,650) 13,691 15,296
Accrued liabilities (17,376) 75,261 61,546
-------- -------- --------
Total changes in current assets and liabilities (14,943) 85,198 72,141
-------- -------- --------
Total adjustments $ 63,801 $140,392 $143,772
======== ======== ========
</TABLE>
Cash payments for interest and income taxes were as follows:
-40-
<PAGE> 41
<TABLE>
<CAPTION>
(In Thousands) 1999 1998 1997
<S> <C> <C> <C>
Interest paid $ 8,103 $ 7,709 $ 8,759
Income taxes paid $78,674 $66,023 $53,185
</TABLE>
CONTINGENCIES
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. At any point in time, a number of GSA audits are either
scheduled or in progress. On July 15, 1996, management was notified by the
Department of Justice that the GSA referred an audit of the company to the
Department of Justice for consideration of a potential civil False Claims Act
case. Management does not expect resolution of the audit to have a material
adverse effect on the company's consolidated financial statements. Management
does not have information that would indicate a substantive basis for a civil
False Claims Act case. The company is also involved in legal proceedings and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such proceedings and litigation currently pending
will not materially affect the company's consolidated financial statements.
OPERATING SEGMENTS
The company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," effective
with its 1999 fiscal year beginning May 31, 1998. All prior period information
has been restated to conform to this statement.
The company is engaged worldwide in the design, manufacture, and sale of office
furniture systems, products, and related services through its wholly owned
subsidiaries. Throughout the world the product offerings, the production
processes, the methods of distribution, and the customers serviced are
consistent. The product lines consist primarily of office furniture systems,
seating, storage solutions, and casegoods. Management evaluates the company as
one operating segment in the office furniture industry.
Sales to customers are attributed to the geographic areas based on the location
of the customer. Long-lived assets consist of property and equipment. Geographic
information is as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Net sales:
United States $1,507,107 $1,451,885 $1,244,645
International 259,132 266,710 251,240
---------- ---------- ----------
$1,766,239 $1,718,595 $1,495,885
========== ========== ==========
Long-lived assets:
United States $ 305,362 $ 278,185 $ 253,493
International 11,357 12,479 11,734
---------- ---------- ----------
$ 316,719 $ 290,664 $ 265,227
========== ========== ==========
</TABLE>
-41-
<PAGE> 42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Herman Miller, Inc.:
We have audited the accompanying consolidated balance sheets of Herman Miller,
Inc., (a Michigan corporation) and subsidiaries as of May 29, 1999, and May 30,
1998, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended May 29, 1999.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Herman Miller, Inc., and
subsidiaries as of May 29, 1999, and May 30, 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
May 29, 1999, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Grand Rapids, Michigan
June 25, 1999
-42-
<PAGE> 43
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements of Herman Miller, Inc., and subsidiaries
were prepared by, and are the responsibility of, management. The statements have
been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances and include amounts that are based on
management's best estimates and judgments.
The company maintains systems of internal accounting controls designed to
provide reasonable assurance that all transactions are properly recorded in the
company's books and records, that policies and procedures are adhered to, and
that assets are protected from unauthorized use. The systems of internal
accounting controls are supported by written policies and guidelines and are
complemented by a staff of internal auditors and by the selection, training, and
development of professional financial managers.
The consolidated financial statements have been audited by the independent
public accounting firm Arthur Andersen LLP, whose appointment is ratified
annually by shareholders at the annual shareholders' meeting. The independent
public accountants conduct a review of internal accounting controls to the
extent required by generally accepted auditing standards and perform such tests
and related procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements.
The Financial Audit Committee of the Board of Directors, composed solely of
directors from outside the company, regularly meets with the independent public
accountants, management, and the internal auditors to satisfy itself that they
are properly discharging their responsibilities. The independent public
accountants have unrestricted access to the Financial Audit Committee, without
management present, to discuss the results of their audit and the quality of
financial reporting and internal accounting control.
Michael A. Volkema, President and Chief Executive Officer
Brian C. Walker, Executive Vice President, Finance and Business Development, and
Chief Financial Officer
June 25, 1999
-43-
<PAGE> 44
Item 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No changes in, or disagreements with, accountants referenced in Item 304 of
Regulation S-K occurred during the 24-month period ended May 29, 1999.
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of Registrant
Information relating to directors and director nominees of the registrant is
contained under the caption "Director and Executive Officer Information," in the
company's definitive Proxy Statement, dated August 16, 1999, relating to the
company's 1999 Annual Meeting of Shareholders and the information within that
section is incorporated by reference. Information relating to Executive Officers
of the company is included in Part I hereof entitled "Executive Officers of the
Registrant."
There are no family relationships between or among the above-named executive
officers. There are no arrangements or understandings between any of the
above-named officers pursuant to which any of them was named an officer.
Item 11 EXECUTIVE COMPENSATION
Information relating to management remuneration is contained under the tables
and discussions on pages 7-13 in the company's definitive Proxy Statement, dated
August 16, 1999, relating to the company's 1999 Annual Meeting of Shareholders,
and the information within those sections is incorporated by reference.
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The sections entitled "Voting Securities and Principal Shareholders" and
"Director and Executive Officer Information" in the definitive Proxy Statement,
dated August 16, 1999, relating to the company's 1999 Annual Meeting of
Shareholders and the information within those sections is incorporated by
reference.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions contained
under the captions "Director and Executive Officer Information" and
"Compensation of Board Members and Non-Employee Officers" in the definitive
Proxy Statement, dated August 16, 1999, relating to the company's 1999 Annual
Meeting of Shareholders is incorporated by reference.
-44-
<PAGE> 45
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the company are
included in this Form 10-K on the pages noted:
Page Number in
the Form 10-K
--------------
Consolidated Statements of Income 24
Consolidated Balance Sheets 25
Consolidated Statements of Shareholders' Equity 26
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 28-41
Report of Independent Public Accountants 42
Management's Report on Financial Statements 43
(a) 2. Financial Statement Schedule
The following financial statement schedule and related Report of
Independent Public Accountants on the Financial Statement Schedule are
included in this Form 10-K on the pages noted:
Page Number in
this Form 10-K
---------------
Report of Independent Public Accountants
on Financial Statement Schedule 46
Schedule II- Valuation and Qualifying
Accounts and Reserves for the
Years Ended May 29, 1999; May
30, 1998; and May 31, 1997 48
All other schedules required by Form 10-K Annual Report have been
omitted because they were inapplicable, included in the notes to
consolidated financial statements, or otherwise not required under
instructions contained in Regulation S-X.
(a) 3. Exhibits
Reference is made to the Exhibit Index which is included in this
Form 10-K Annual Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
the year ended May 29, 1999.
-45-
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of Herman Miller, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Herman Miller, Inc., and subsidiaries
included in this Form 10-K, and have issued our report thereon dated June 25,
1999. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed at Item 14(a)2
above is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
-----------------------
Grand Rapids, Michigan
June 25, 1999
-46-
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HERMAN MILLER, INC.
/s/ Michael A. Volkema /s/ Brian C. Walker
- - ------------------------------------- and ----------------------------------
By Michael A. Volkema Brian C. Walker
(President and Chief Executive Officer) (Chief Financial Officer)
Date: August 16, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on August 16, 1999, by the following persons on behalf of
the Registrant in the capacities indicated. Each Director of the Registrant,
whose signature appears below, hereby appoints Michael A. Volkema as his
attorney-in-fact, to sign in his name and on his behalf, as a Director of the
Registrant, and to file with the Commission any and all amendments to this
Report on Form 10-K.
/s/ David L. Nelson /s/ Michael A. Volkema
----------------------------- -----------------------------
David L. Nelson Michael A. Volkema
(Chairman of the Board) (President, Chief Executive
Officer and Director)
/s/ William K. Brehm /s/ E. David Crockett
----------------------------- -----------------------------
William K. Brehm E. David Crockett
(Director) (Director)
/s/ Richard H. Ruch /s/ Lord Griffiths of Fforestfach
----------------------------- ---------------------------------
Richard H. Ruch Lord Griffiths of Fforestfach
(Director) (Director)
/s/ Dorothy A. Terrell /s/ C. William Pollard
----------------------------- ----------------------------
Dorothy A. Terrell C. William Pollard
(Director) (Director)
/s/ J. Harold Chandler /s/ Ruth A. Reister
----------------------------- ----------------------------
J. Harold Chandler Ruth A. Reister
(Director) (Director)
-47-
<PAGE> 48
HERMAN MILLER, INC., AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- - -------- -------- ---------------------- ----------------- --------
Additions Increased Uncollectible
Balance at charged to net accounts Balance
beginning costs and operating written off Losses at end
Description of period expenses losses (net) (1) Utilized (2) of period
- - ----------- --------- -------- ------ ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended May 29, 1999:
Allowance for possible losses
on accounts receivable $13,792 $3,213 $ -- $2,861 $ -- $14,144
Allowance for possible losses
on notes receivable $ 8,430 $1,220 $ -- $4,181 $ -- $ 5,469
Valuation allowance for deferred tax asset $ 8,114 $ -- $ 185 $ -- $ 7,159 $ 1,140
Year ended May 30, 1998:
Allowance for possible losses
on accounts receivable $12,943 $4,558 $ -- $3,709 $ -- $13,792
Allowance for possible losses
on notes receivable $ 8,489 $2,881 $ -- $2,940 $ -- $ 8,430
Valuation allowance for deferred tax asset $10,791 $ -- $ 378 $ -- $ 3,055 $ 8,114
Year ended May 31, 1997:
Allowance for possible losses $10,423 $4,809 $ -- $2,289 $ -- $12,943
on accounts receivable
Allowance for possible losses $ 4,415 $4,074 $ -- $ -- $ -- $ 8,489
on notes receivable
Valuation allowance for deferred tax asset $22,475 $ -- $1,034 $ -- $12,718 $10,791
</TABLE>
(1) Includes effects of foreign currency translation.
(2) Includes utilization of capital and net operating losses. In 1999,
this includes write-off of net operating loss carryforwards that cannot be
utilized. In 1997, this includes the write-off related to the German
divestiture.
-48-
<PAGE> 49
HERMAN MILLER, INC., AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
<S> <C>
(3) Articles of Incorporation and Bylaws
(a) Articles of Incorporation are incorporated by reference to
Exhibit 3(a) and 3(b) of the Registrant's 1986 Form 10-K
Annual Report.
(b) Certificate of Amendment to the Articles of Incorporation,
dated October 15, 1987, are incorporated by reference to
Exhibit 3(b) of the Registrant's 1988 Form 10-K Annual Report.
(c) Certificate of Amendment to the Articles of Incorporation,
dated May 10, 1988, are incorporated by reference to Exhibit
3(c) of the Registrant's 1988 Form 10-K Annual Report.
(d) Amended and Restated Bylaws, dated January 6, 1997, are
incorporated by reference to Exhibit 3(d) of the Registrant's
1997 Form 10-K Annual Report.
(4) Instruments Defining the Rights of Security Holders
(a) Specimen copy of Herman Miller, Inc., common stock is
incorporated by reference to Exhibit 4(a) of Registrant's 1981
Form 10-K Annual Report.
(b) Note Purchase Agreement dated March 1, 1996, is incorporated
by reference to Exhibit 4(b) of the Registrant's 1996 Form
10-K Annual Report.
(c) First Amendment to the Note Purchase Agreement, dated February
11, 1999, is incorporated by reference to Exhibit 4(c) of the
Registrant's 1999 Form 10-K Annual Report.
(d) Other instruments which define the rights of holders of
long-term debt individually represent debt of less than 10% of
total assets. In accordance with item 601(b)(4)(iii)(A) of
regulation S-K, the Registrant agrees to furnish to the
Commission copies of such agreements upon request.
(e) Dividend Reinvestment Plan for Shareholders of Herman Miller,
Inc., dated January 6, 1997, is incorporated by reference to
Exhibit 4(d) of the Registrant's 1997 Form 10-K Annual Report.
(10) Material Contracts
(a) Officers' Supplemental Retirement Income Plan is incorporated
by reference to Exhibit 10(f) of the Registrant's 1986 Form
10-K Annual Report. *
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C>
Exhibit Index (continued)
(b) Officers' Salary Continuation Plan is incorporated by
reference to Exhibit 10(g) of the Registrant's 1982 Form
10-K Annual Report. *
(c) Herman Miller, Inc., Plan for Severance Compensation after
Hostile Takeover is incorporated by reference to Exhibit 10(f)
of the Registrant's 1986 Form 10-K Annual Report. *
(d) Amended Herman Miller, Inc., Plan for Severance Compensation
after Hostile Takeover, dated January 17, 1990, is
incorporated by reference to Exhibit 10(n) of the Registrant's
1990 Form 10-K Annual Report. *
(e) Herman Miller, Inc., 1994 Key Executive Stock Purchase
Assistant Plan, dated October 6, 1994, is incorporated by
reference to Appendix C of the Registrant's 1994 Proxy
Statement. *
(f) First Amendment to the Herman Miller, Inc., 1994 Key Executive
Stock Purchase Assistant Plan, dated April 28, 1998, is
incorporated by reference to Exhibit 10(g) of the Registrant's
1998 Form 10-K Annual Report. *
(g) Incentive Share Grant Agreement, dated October 4, 1995,
between the company and Michael A. Volkema is incorporated by
reference to Exhibit 10(g) of the Registrant's 1996 Form 10-K
Annual Report. *
(h) Incentive Share Grant Agreement, dated May 15, 1996, between
the company and Michael A. Volkema is incorporated by
reference to Exhibit 10(h) of the Registrant's 1996 Form 10-K
Annual Report. *
(i) Herman Miller, Inc., Long-Term Incentive Plan, dated October
6, 1994, is incorporated by reference to Exhibit 4 of the
Registrant's May 22, 1996, Form
S-8 Registration No. 33-04369.*
(j) Herman Miller, Inc., 1994 Nonemployee Officer and Director
Stock Option Plan, dated October 6, 1994, is incorporated by
reference to Exhibit 4 of the Registrant's May 22, 1996, Form
S-8 Registration No. 33-04367. *
(k) First Amendment to Herman Miller, Inc., 1994 Nonemployee
Officer and Director Stock Option Plan, dated January 7, 1997,
is incorporated by reference to Exhibit 10(m) of the
Registrant's 1998 Form 10-K Annual Report. *
</TABLE>
<PAGE> 51
Exhibit Index (continued)
(l) Herman Miller, Inc., Key Executive Deferred Compensation Plan
and form of Deferred Compensation Agreement, dated February
28, 1997, is incorporated by reference to Exhibit 10(l) of the
Registrant's 1997 Form 10-K Annual Report.
(m) First Amendment to the Herman Miller, Inc., Key Executive
Deferred Compensation Plan, dated January 20, 1998, is
incorporated by reference to Exhibit 10(o) of the Registrant's
1998 Form 10-K Annual Report.
(n) Herman Miller, Inc., Incentive Cash Bonus Plan, dated
September 29, 1998, is incorporated by reference to Appendix A
of the Registrant's 1998 Proxy Statement.*
(o) Credit Agreement dated April 16, 1999, is incorporated by
reference to Exhibit 10(o) of the Registrant's 1999 Form 10-K
Annual Report.
* denotes compensatory plan or arrangement.
(21) Subsidiaries.
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule (exhibit available upon request)
<PAGE> 1
EXHIBIT 4(c)
================================================================================
HERMAN MILLER, INC.
----------------------------
FIRST AMENDMENT
Dated as of February 11, 1999
to
NOTE PURCHASE AGREEMENT
Dated as of March 1, 1996
----------------------------
Re: $70,000,000 6.37% Series A Senior Notes
Due March 5, 2006
$15,000,000 6.08% Series B Senior Notes
Due March 5, 2001
$15,000,000 6.52% Series C Senior Notes
Due March 5, 2008
================================================================================
<PAGE> 2
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of February 11, 1999 (this "First
Amendment") to the Note Purchase Agreement dated as of March 1, 1996 is between
HERMAN MILLER, INC., a Michigan corporation (the "Company"), and each of the
institutions which is a signatory to this First Amendment (collectively, the
"Noteholders").
RECITALS
A. The Company and the Noteholders have heretofore entered into a Note
Purchase Agreement dated as of March 1, 1996 (the "Note Agreement"). The Company
has heretofore issued its $70,000,000 6.37% Series A Senior Notes due March 5,
2006, its $15,000,000 6.08% Series B Senior Notes due March 5, 2001 and its
$15,000,000 6.52% Series C Senior Notes due March 5, 2008 (collectively, the
"Notes"), all dated March 5, 1996, pursuant to the Note Agreement.
B. The Company and the Noteholders now desire to amend the Note
Agreement in the respects, but only in the respects, hereinafter set forth.
NOW, THEREFORE, upon the satisfaction of the condition precedent to the
effectiveness of this First Amendment set forth in Section 3.1 hereof, and in
consideration of good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and the Noteholders do hereby agree as
follows:
SECTION 1. AMENDMENTS
Section 1.1. Section 10.3 of the Note Agreement shall be and is hereby
deleted.
Section 1.2. Section 10.4(d) of the Note Agreement shall be and is
hereby amended to read as follows:
"(d) Additional Funded Debt, provided that at the time of
incurrence and after giving effect thereto and to the application of
the proceeds thereof, the ratio of (i) Consolidated Funded Debt to (ii)
Consolidated EBITDA for the four fiscal quarters ending immediately
preceding the time of such incurrence does not exceed 3 to 1."
Section 1.3. Section 10.5 of the Note Agreement shall be and is hereby
amended in its entirety to read as follows:
"10.5 Limitation on Consolidated Short-Term Debt. The Company
will not, and will not permit any Restricted Subsidiary to, have
outstanding Consolidated Short-Term Debt unless, for a period of not
less than 45 consecutive days during the preceding 12 month period on
each day of which the ratio of (v) the sum of (i)
1
<PAGE> 3
Consolidated Short-Term Debt on such day and (ii) Consolidated Funded
Debt on such day to (z) Consolidated EBITDA did not exceed 3 to 1."
Section 1.4. Section 10.6(b) of the Note Agreement shall be and is
hereby amended to read as follows:
"(b) Additional Indebtedness, provided that at the time of
incurrence thereof and after giving effect thereto and to the
application of the proceeds therefrom, the sum (without duplication) of
outstanding (i) Indebtedness of Restricted Subsidiaries (other than
Indebtedness referred to in paragraph (a) of this Section 10.6), and
(ii) Consolidated Indebtedness secured by Liens permitted by Section
10.7(g), does not at any time exceed 5% of Consolidated Total Assets".
Section 1.5. Section 10.7(g) of the Note Agreement shall be and is
hereby amended as follows:
"(g). Liens not otherwise permitted by paragraphs (a) through
(f) above incurred subsequent to the date of Closing to secure
Indebtedness, provided that at the time of incurring such additional
Indebtedness and after giving effect thereto and to the application of
the proceeds therefrom, the sum of such additional Indebtedness and
Indebtedness of Restricted Subsidiaries permitted by Section 10.6
(other than Indebtedness referred to in paragraph (a) of Section 10.6)
does not exceed 5% of Consolidated Total Assets."
Section 1.6. The following shall be and is hereby added as a new
Section 10.13 to the Note Agreement:
"Section 10.13. Restricted Investments. The Company will not,
and will not permit any Restricted Subsidiary to, make any Restricted
Investment if the aggregate of Restricted Investments would exceed 5%
of Consolidated Total Assets."
Section 1.7. The following shall be and is hereby added as a new
Section 10.14 to the Note Agreement:
"Section 10.14. Interest Coverage. The Company will not permit
its ratio of Consolidated EBITDA to Consolidated Interest Expense for
the four quarters ending as of each fiscal quarter to be less than 3.75
to 1."
Section 1.8. The definitions in Schedule B to the Note Agreement of the
terms "Adjusted Consolidated Net Worth" and "Consolidated Total Capitalization"
shall be and are hereby deleted.
Section 1.9. The following terms and definitions shall be added as new
defined terms in alphabetical order in Schedule B to the Note Agreement:
2
<PAGE> 4
"Consolidated EBITDA" means the sum of (i) net income, (ii) interest
expense, (iii) income tax expense, (iv) depreciation expense, and (v)
amortization expense, all determined in accordance with GAAP, for the
Company and its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the consolidated
interest expense of the Company and its Restricted Subsidiaries for
such period determined in accordance with GAAP (including imputed
interest on Capital Lease Obligations).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1. To induce the Noteholders to execute and deliver this
First Amendment, the Company represents and warrants (which representations and
warranties shall survive the execution and delivery of this First Amendment) to
the Noteholders that:
(a) this First Amendment has been duly authorized, executed and
delivered by it and this First Amendment constitutes the legal, valid
and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Agreement, as amended by this First Amendment,
constitutes the legal, valid and binding obligation, contract and
agreement of the Company enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this First Amendment (i) has been duly authorized by all requisite
corporate action, (ii) does not require the consent or approval of any
governmental or regulatory body or agency, and (iii) will not (A)
violate (1) any provision of law, statute, rule or regulation or its
articles of incorporation or bylaws, (2) any order of any court or any
rule, regulation or order of any other agency or government binding
upon it, or (3) any provision of any material indenture, agreement or
other instrument to which it is a party or by which its properties or
assets are or may be bound, or (B) result in a breach or constitute
(alone or with due notice or lapse of time or both) a default under any
indenture, agreement or other instrument referred to in clause
(iii)(A)(3) of this Section 2.1(c); and
(d) as of the date hereof and after giving effect to this First
Amendment, no Default or Event of Default has occurred which is
continuing.
SECTION 3. CONDITION TO EFFECTIVENESS OF THIS FIRST AMENDMENT
Section 3.1. This First Amendment shall not become effective until, and
shall become effective when, executed counterparts of this First Amendment, duly
executed by the Company and
3
<PAGE> 5
the holders of at least 51% of the outstanding principal of the Notes, shall
have been delivered to the Noteholders.
SECTION 4. AMENDMENT FEE
Section 4.1. As consideration for the approval of this First Amendment,
the Company will pay to each Holder an amendment fee equal to 0.25% of the
principal amount of the outstanding Notes held by such Holder payable on the
effective date of this First Amendment.
SECTION 5. MISCELLANEOUS
Section 5.1 This First Amendment shall be construed in connection with
and as part of the Note Agreement, and except as modified and expressly amended
by this First Amendment, all terms, conditions and covenants contained in the
Note Agreement and the Notes are hereby ratified and shall be and remain in full
force and effect.
Section 5.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
First Amendment may refer to the Note Agreement without making specific
reference to this First Amendment, but nevertheless all such references shall
include this First Amendment unless the context otherwise requires.
Section 5.3. The descriptive headings of the various Sections or parts
of this First Amendment are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
Section 5.4. This First Amendment shall be governed by and construed in
accordance with Illinois law.
Section 5.5. The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this First
Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one agreement.
IN WITNESS WHEREOF, the Company and the Holders have caused this First
Amendment to be executed and delivered by their respective officer or officers
thereunto duly authorized.
HERMAN MILLER, INC.
NOTEHOLDERS:
4
<PAGE> 1
EXHIBIT 10(o)
CREDIT AGREEMENT
among
HERMAN MILLER, INC.
as a Borrower and as Guarantor
CERTAIN OF ITS FOREIGN SUBSIDIARIES
as Designated Borrowers
VARIOUS LENDERS
NATIONSBANK, N.A.
as Administrative Agent
NBD BANK
as Syndication Agent
and
FIRST UNION NATIONAL BANK
THE HUNTINGTON NATIONAL BANK
and
WACHOVIA BANK, N.A.
as Co-Agents
Dated as of April 16, 1999
NATIONSBANC MONTGOMERY SECURITIES LLC
Lead Arranger and Book Manager
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS, ETC.......................................................................................1
SECTION 1.1 Definitions..................................................................................1
SECTION 1.2 General.....................................................................................20
SECTION 1.3 Other Definitions and Provisions............................................................20
SECTION 1.4 Currency Equivalents Generally..............................................................21
SECTION 1.5 Introduction of Euro; National Currency Unit Advances; Etc..................................21
ARTICLE II CREDIT FACILITIES....................................................................................22
SECTION 2.1 Amount and Terms of Credit..................................................................22
SECTION 2.2 Procedure for Advances of Revolving Credit Loans............................................23
SECTION 2.3 Repayment of Loans..........................................................................24
SECTION 2.4 Revolving Credit Notes......................................................................25
SECTION 2.5 Competitive Bid Loans and Procedure.........................................................26
SECTION 2.6 Swingline Loans and Procedure...............................................................29
SECTION 2.7 Commitment Reductions and Increases.........................................................32
SECTION 2.8 Termination; Extension Options..............................................................34
SECTION 2.9 Utilization of Revolving Commitments in Offshore Currencies................................35
SECTION 2.10 Designated Borrowers.......................................................................36
ARTICLE III LETTER OF CREDIT FACILITY...........................................................................37
SECTION 3.1 L/C Commitment..............................................................................37
SECTION 3.2 Procedure for Issuance of Letters of Credit.................................................38
SECTION 3.3 Fees and Other Charges......................................................................38
SECTION 3.4 L/C Participations..........................................................................39
SECTION 3.5 Reimbursement Obligation of the Borrowers...................................................40
SECTION 3.6 Obligations Absolute........................................................................40
SECTION 3.7 Effect of L/C Application...................................................................41
ARTICLE IV GENERAL LOAN PROVISIONS..............................................................................41
SECTION 4.1 Interest....................................................................................41
SECTION 4.2 Conversion and Continuation of Revolving Credit Loans.......................................43
SECTION 4.3 Facility Fees...............................................................................44
SECTION 4.4 Manner of Payment...........................................................................45
SECTION 4.5 Crediting of Payments and Proceeds..........................................................45
SECTION 4.6 Adjustments.................................................................................46
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the
Administrative Agent....................................................................................46
SECTION 4.8 Changed Circumstances.......................................................................47
SECTION 4.9 Indemnity...................................................................................50
SECTION 4.10 Capital Requirements.......................................................................51
SECTION 4.11 Taxes......................................................................................51
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING..........................................................53
SECTION 5.1 Closing.....................................................................................53
SECTION 5.2 Conditions to Closing.......................................................................54
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5.3 Conditions to All Extensions of Credit......................................................56
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES.................................................57
SECTION 6.1 Representations and Warranties..............................................................57
SECTION 6.2 Survival of Representations and Warranties, Etc.............................................64
ARTICLE VII FINANCIAL INFORMATION AND NOTICES...................................................................65
SECTION 7.1 Financial Statements........................................................................65
SECTION 7.2 Officer's Compliance Certificate............................................................66
SECTION 7.3 Accountants'Certificate.....................................................................66
SECTION 7.4 Other Reports...............................................................................66
SECTION 7.5 Notice of Litigation and Other Matters......................................................66
SECTION 7.6 Accuracy of Information.....................................................................67
ARTICLE VIII AFFIRMATIVE COVENANTS..............................................................................67
SECTION 8.1 Preservation of Corporate Existence and Related Matters.....................................68
SECTION 8.2 Maintenance of Property.....................................................................68
SECTION 8.3 Insurance...................................................................................68
SECTION 8.4 Accounting Methods and Financial Records....................................................68
SECTION 8.5 Payment and Performance of Obligations......................................................68
SECTION 8.6 Compliance With Laws and Approvals..........................................................69
SECTION 8.7 Environmental Laws..........................................................................69
SECTION 8.8 Compliance with ERISA.......................................................................69
SECTION 8.9 Conduct of Business.........................................................................70
SECTION 8.10 Visits and Inspections.....................................................................70
SECTION 8.11 Use of Proceeds............................................................................70
SECTION 8.12 Year 2000 Compatibility....................................................................70
ARTICLE IX NEGATIVE COVENANTS...................................................................................70
SECTION 9.1 Financial Covenants.........................................................................71
SECTION 9.2 Limitations on Liens........................................................................71
SECTION 9.3 Limitations on Mergers and Liquidation......................................................72
SECTION 9.4 Limitations on Sale or Transfer of Assets...................................................72
SECTION 9.5 Prohibitions on Limitations on Dividends and Distributions..................................73
SECTION 9.6 Transactions with Affiliates................................................................73
SECTION 9.7 Certain Accounting Changes..................................................................73
SECTION 9.8 Amendments; Payments and Prepayments of Subordinated Debt...................................74
SECTION 9.9 Sale Leaseback Transactions.................................................................74
ARTICLE X GUARANTY OF THE COMPANY...............................................................................74
SECTION 10.1 Guaranty of Payment........................................................................74
SECTION 10.2 Obligations Unconditional..................................................................74
SECTION 10.3 Modifications..............................................................................75
SECTION 10.4 Waiver of Rights...........................................................................76
SECTION 10.5 Reinstatement..............................................................................76
SECTION 10.6 Remedies...................................................................................76
SECTION 10.7 Limitation of Guaranty.....................................................................76
ARTICLE XI DEFAULT AND REMEDIES.................................................................................77
SECTION 11.1 Events of Default..........................................................................77
SECTION 11.2 Remedies...................................................................................80
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc............................................81
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XII THE ADMINISTRATIVE AGENT............................................................................81
SECTION 12.1 Appointment................................................................................81
SECTION 12.2 Delegation of Duties.......................................................................82
SECTION 12.3 Exculpatory Provisions.....................................................................82
SECTION 12.4 Reliance by the Administrative Agent.......................................................82
SECTION 12.5 Notice of Default..........................................................................83
SECTION 12.6 Non-Reliance on the Administrative Agent and Other Lenders.................................83
SECTION 12.7 Indemnification............................................................................84
SECTION 12.8 The Administrative Agent in Its Individual Capacity........................................84
SECTION 12.9 Resignation of the Administrative Agent; Successor Administrative Agent...................84
SECTION 12.10 Co-Agents.................................................................................85
ARTICLE XIII MISCELLANEOUS......................................................................................85
SECTION 13.1 Notices....................................................................................85
SECTION 13.2 Expenses, Indemnity........................................................................86
SECTION 13.3 Set-off....................................................................................87
SECTION 13.4 Governing Law..............................................................................87
SECTION 13.5 Consent to Jurisdiction....................................................................87
SECTION 13.6 Waiver of Jury Trial.......................................................................88
SECTION 13.7 Reversal of Payments.......................................................................88
SECTION 13.8 Judgment Currency..........................................................................88
SECTION 13.9 Accounting Matters.........................................................................89
SECTION 13.10 Successors and Assigns; Participations; Confidentiality...................................89
SECTION 13.11 Amendments, Waivers and Consents..........................................................93
SECTION 13.12 Performance of Duties.....................................................................93
SECTION 13.13 All Powers Coupled with Interest..........................................................93
SECTION 13.14 Several Obligations of the Borrowers......................................................94
SECTION 13.15 Subordination of Company's Claims Against the Designated Borrowers........................94
SECTION 13.16 Survival of Indemnities...................................................................94
SECTION 13.17 Titles and Captions.......................................................................94
SECTION 13.18 Severability of Provisions................................................................94
SECTION 13.19 Counterparts..............................................................................94
SECTION 13.20 Term of Agreement.........................................................................95
SECTION 13.21 Inconsistencies with Other Documents; Independent Effect of Covenants.....................95
</TABLE>
iii
<PAGE> 5
CREDIT AGREEMENT dated as of April 16, 1999 among HERMAN MILLER, INC.,
a Michigan corporation (the "Company"), certain of the Company's Foreign
Subsidiaries from time to time party hereto (each a "Designated Borrower," and
together with the Company, the "Credit Parties," and each, a "Credit Party"),
the Lenders from time to time party hereto, NATIONSBANK, N.A., as Administrative
Agent, NBD BANK, as Syndication Agent and FIRST UNION NATIONAL BANK, THE
HUNTINGTON NATIONAL BANK and WACHOVIA BANK, N.A., as Co-Agents (all capitalized
terms used herein and defined in Section 1.1 are used herein as therein
defined).
STATEMENT OF PURPOSE
WHEREAS, the Credit Parties wish to establish with the Lenders credit
facilities providing for revolving loans and letters of credit of, initially, up
to $300,000,000 in the aggregate maximum principal amount at any time
outstanding, with the option to increase such facilities to up to $400,000,000
in the aggregate maximum principal amount at any time outstanding, and the
Lenders and the Administrative Agent are willing to establish such credit
facilities on the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS, ETC.
SECTION 1.1 DEFINITIONS.
The following terms when used in this Agreement shall have the meanings
assigned to them below:
"364 Day Facility" means the short term revolving credit facility
established pursuant to Section 2.1 hereof.
"364 Day Facility Commitment" means (a) as to any Lender, the
obligation of such Lender to make Revolving Credit Loans under the 364 Day
Facility for the accounts of the Borrowers in an aggregate principal Dollar
Equivalent amount at any time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1(a) hereto, as such amount may be
increased, reduced or modified at any time or from time to time pursuant to the
terms hereof and (b) as to all Lenders, the aggregate 364 Day Facility
Commitment of all Lenders to make Revolving Credit Loans under the 364 Day
Facility, as such amount may be increased, reduced or modified at any time or
from time to time pursuant to the terms hereof.
<PAGE> 6
The 364 Day Facility Commitment of all Lenders on the Closing Date shall be One
Hundred and Fifty Million Dollars ($150,000,000).
"364 Day Facility Commitment Percentage" means, as to any Lender at any
time, the ratio of (a) the amount of the 364 Day Facility Commitment of such
Lender to (b) the aggregate 364 Day Facility Commitment of all of the Lenders.
"364 Day Facility Fee" shall have the meaning assigned thereto in
Section 4.3(a).
"364 Day Facility Specified Maturity Date" means April 15, 2000 or such
later date as determined pursuant to Section 2.8(c).
"364 Day Facility Termination Date" means the earliest of the dates
referred to in Section 2.8(a).
"Administrative Agent" means NationsBank in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 12.9.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1(c).
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means the
possession, directly or indirectly, of any power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Aggregate Revolving Credit Commitment" means (a) as to any Lender, the
aggregate of such Lender's 364 Day Facility Commitment and Five Year Facility
Commitment, as such amount may be increased, reduced or modified at any time or
from time to time pursuant to the terms hereof and (b) as to all Lenders, the
aggregate 364 Day Facility Commitment and Five Year Facility Commitment of all
Lenders, as such amount may be increased, reduced or modified at any time or
from time to time pursuant to the terms hereof. The Aggregate Revolving Credit
Commitment of all Lenders on the Closing Date shall be Three Hundred Million
Dollars ($300,000,000).
"Aggregate Revolving Credit Commitment Percentage" means, as to any
Lender at any time, the ratio of (a) such Lender's Aggregate Revolving Credit
Commitment to (b) the Aggregate Revolving Credit Commitment of all of the
Lenders.
"Agreed Alternative Currency" shall have the meaning assigned thereto
in Section 2.9(e).
"Agreement" means this Credit Agreement, as amended, restated,
supplemented or otherwise modified.
2
<PAGE> 7
"Applicable Currency" means, as to any particular Revolving Credit
Loan, Competitive Bid Loan or payment, Dollars or the Offshore Currency in which
such Loan or payment is denominated or is payable.
"Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of Governmental Authorities and all orders
and decrees of all courts and arbitrators.
"Applicable Percentage" means, for purposes of calculating (a) the
interest rate applicable to Offshore Rate Loans for purposes of Section 4.1(a);
(b) the L/C Fee for purposes of Section 3.3(a); (c) the Facility Fees for
purposes of Section 4.3; or (d) the Utilization Fee for purposes of Section
4.1(f), the rate set forth below opposite the applicable Leverage Ratio then in
effect:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
Offshore
Rate
Offshore Loans All-In All-In
Rate under the Cost Cost
Loans Facility Five Year Facility Both Both
under the Fee for Facility Fee for Facilities Facilities
Pricing 364 Day 364 Day and L/C Five Year at < 50% Utilization at > 50%
Level Leverage Ratio Facility Facility Fee Facility Usage Fee Usage
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I < 0.25 to 1.0 0.300% 0.075% 0.250% 0.125% 0.375% 0.125% 0.500%
-
- - ----------------------------------------------------------------------------------------------------------------
II > 0.25 to 1.0 but 0.400% 0.100% 0.350% 0.150% 0.500% 0.125% 0.625%
< 1.00 to 1.0
-
- - ----------------------------------------------------------------------------------------------------------------
III > 1.00 to 1.0 but 0.500% 0.125% 0.450% 0.175% 0.625% 0.125% 0.750%
< 1.75 to 1.0
-
- - ----------------------------------------------------------------------------------------------------------------
IV > 1.75 to 1.0 but 0.600% 0.150% 0.550% 0.200% 0.750% 0.125% 0.875%
< 2.50 to 1.0
-
- - ----------------------------------------------------------------------------------------------------------------
V > 2.5 to 1.0 0.800% 0.200% 0.750% 0.250% 1.000% 0.125% 1.125%
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Percentage shall be determined and adjusted quarterly on the date
(each a "Rate Determination Date") five (5) Business Days after the date by
which the annual or quarterly compliance certificates, as applicable, and
related financial statements and information are required in accordance with the
provisions of Sections 7.1(a) and (b) and Section 7.2, as appropriate; provided
that:
(i) the initial Applicable Percentages shall be based on
Pricing Level II and shall remain in effect at such Pricing Level until
the first Rate Determination Date to occur after the Closing Date, and
(ii) in the event an annual or quarterly compliance
certificate and related financial statements and information are not
delivered timely to the Administrative Agent's Office by the date
required by Sections 7.1(a) and (b) and Section 7.2, as appropriate (a
"Non-Delivery Event"), the Applicable Percentages shall be based on the
applicable Pricing Level set forth below until such time as an
appropriate compliance certificate and related financial statements and
information are delivered, whereupon the
3
<PAGE> 8
applicable Pricing Level shall be adjusted (retroactive to the
immediately preceding Rate Determination Date) based on the information
contained in such compliance certificate and related financial
statements and information:
(A) for the period from the Rate Determination Date occurring
immediately following such Non-Delivery Event until the date that is
fifteen (15) days following such Non-Delivery Event, the Pricing Level
in effect immediately prior to such Rate Determination Date; and
(B) thereafter, Pricing Level V.
Each Applicable Percentage shall be effective from a Rate Determination Date
until the next such Rate Determination Date. The Administrative Agent shall
determine the appropriate Applicable Percentages in the pricing matrix promptly
upon receipt of the quarterly or annual compliance certificate and related
financial information and shall promptly notify the Company and the Lenders of
any change thereof. Such determinations by the Administrative Agent shall be
conclusive absent manifest error. Adjustments in the Applicable Percentages
shall be effective as to existing Extensions of Credit as well as any new
Extension of Credit made thereafter.
"Applicant Borrower" shall have the meaning assigned thereto in Section
2.10(a).
"Arranger" means NationsBanc Montgomery Securities LLC in its capacity
as Lead Arranger and Book Manager for the Credit Facility.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 13.10(b)(iii).
"Australian Dollars" means the unit of currency of Australia.
"Available EMU Currency" means Deutsche Marks, Dutch Guilders, French
Francs and Italian Lira.
"Bankruptcy Event" means any of the events set forth in Section
11.1(i), (j), (k) or (l), or any of those events which with the passage of time,
the giving of notice or any other condition, would constitute such an event, in
respect of any of the Credit Parties or any of their Material Subsidiaries.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b)
the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in the
Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan denominated in Dollars and bearing
interest at a rate based upon the Base Rate as provided in Section 4.1(a).
4
<PAGE> 9
"Borrower Joinder Agreement" means a Borrower Joinder Agreement
executed by an Applicant Borrower, the Company and the Administrative Agent in
substantially the form of Exhibit E, as amended, restated, supplemented or
otherwise modified.
"Borrowers" means, collectively, the Company and the Designated
Borrowers; "Borrower" means any one of them.
"Business Day" shall, with respect to dates for the payment or purchase
of any amount denominated in euro or National Currency Units (including without
limitation dates for determining LIBOR for such amount), be deemed to mean a
TARGET Business Day. The definition of "Business Day" shall, for all other
purposes, including without limitation the giving and receiving of notices
hereunder for Offshore Currency Loans denominated in euro or National Currency
Units, be deemed to mean a TARGET Business Day on which banks are generally open
for business in London, Frankfurt, Charlotte, North Carolina and/or in any other
principal financial center as the Administrative Agent shall from time to time
determine for this purpose.
"Canadian Dollars" means the unit of currency of Canada.
"Capital Lease" means, with respect to any Person, any lease of any
property that should, in accordance with GAAP, be classified and accounted for
as a capital lease on a Consolidated balance sheet of such Person and its
Consolidated Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in Section
11.1(h).
"Closing Date" means the date of this Agreement or such later Business
Day upon which each condition described in Section 5.1 and Section 5.2 shall be
satisfied or waived in all respects.
"Co-Agents" means First Union National Bank, The Huntington National
Bank and Wachovia Bank, N.A. in their capacities as Co-Agents hereunder.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended, supplemented or otherwise modified from
time to time.
"Commitment" means, as to any Lender at any time, such Lender's 364 Day
Facility Commitment, Five Year Facility Commitment or Aggregate Revolving Credit
Commitment, as the context requires.
"Commitment Percentage" means, as to any Lender at any time, such
Lender's 364 Day Facility Commitment Percentage, Five Year Facility Commitment
Percentage or Aggregate Revolving Credit Commitment Percentage, as the context
requires.
"Company" means Herman Miller, Inc., a Michigan corporation.
"Competitive Bid" means an offer by a Lender to make a Competitive Bid
Loan in accordance with Section 2.5.
5
<PAGE> 10
"Competitive Bid Loans" means any Loan made pursuant to Section 2.5 and
all such Loans collectively as the context requires.
"Competitive Bid Rate" means the rate of interest per annum expressed
in multiples of l/100th of one percent offered with respect to any Competitive
Bid Loan offered by the Lender making such Competitive Bid.
"Competitive Bid Request" means a request by a Borrower for Competitive
Bids in accordance with Section 2.5.
"Consolidated" means, when used with reference to financial statements
or financial statement items of a Person and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Consolidated EBITDA" means, for any period, as applied to the Company
and its Consolidated Subsidiaries without duplication, the sum of the amounts
for such period of: (i) net income, (ii) interest expense, (iii) income tax
expense, (iv) depreciation expense and (v) amortization expense, all of the
foregoing as determined and computed on a Consolidated basis in accordance with
GAAP.
"Consolidated Interest Expense" means, for any period, for the Company
and its Consolidated Subsidiaries, all interest expense (whether paid or
accrued), including without limitation (a) the amortization of debt discount and
premium, (b) the interest component under Capital Leases and synthetic leases
and (c) the implied interest component, discount or other similar fees or
charges in connection with any asset securitization program, in each case
determined on a Consolidated basis in accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, are consolidated with
those of the Company in its consolidated financial statements as of such date.
"Consolidated Total Assets" means, as of any date, the assets and
properties of the Company and its Consolidated Subsidiaries, determined on a
Consolidated basis in accordance with GAAP.
"Consolidated Total Debt" means, as of any date, all Debt of the
Company and its Consolidated Subsidiaries for borrowed money, including without
limitation (a) all obligations as lessee under Capital Leases and (b) any Debt
incurred in connection with an asset securitization program or otherwise as a
result of the sale of accounts receivable, in each case as determined on a
Consolidated basis in accordance with GAAP.
"Credit Facility" means the collective reference to the 364 Day
Facility, the Five Year Facility and the L/C Facility or any one of them, as the
context requires.
6
<PAGE> 11
"Credit Parties" means, collectively, the Company and any Designated
Borrowers; "Credit Party" means any one of them.
"Current SEC Reports" means the most recent report on Form 10-K, or any
successor form, and any amendments thereto filed by the Company with the
Securities and Exchange Commission (the "Commission") and any reports on Forms
10-Q and/or 8-K, or any successor forms, and any amendments thereto, filed by
the Company with the Commission after the date of such report on Form 10-K.
"Debt" of any Person means at any date, without duplication, the sum of
the following calculated in accordance with GAAP: (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, or upon which interest payments
are customarily made, (c) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of business), (d)
all obligations of such Person issued or assumed as the deferred purchase price
of Property or services purchased by such Person (other than trade debt incurred
in the ordinary course of business and due within six months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such Person,
(e) all obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (f) all Debt of others secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, provided that for purposes hereof the amount
of such Debt shall be limited to the greater of (i) the amount of such Debt as
to which there is recourse to such Person and (ii) the fair market value of the
property which is subject to the Lien, (g) all Support Obligations of such
Person, (h) the principal portion of all obligations of such Person under
Capital Leases, (i) all obligations of such Person in respect of Hedging
Agreements, (j) the maximum amount of all standby letters of credit issued or
bankers' acceptances facilities created for the account of such Person and,
without duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) all preferred stock issued by such Person and required by the terms thereof
to be redeemed, or for which mandatory sinking fund payments are due, by a fixed
date, (l) the outstanding attributed principal amount under any asset
securitization program and (m) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP. The
Debt of any Person shall include the Debt of any partnership or joint venture in
which such Person is a general partner or a joint venturer, but only to the
extent to which there is recourse to such Person for payment of such Debt.
"Default" means any of the events specified in Section 11.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
7
<PAGE> 12
"Designated Borrower" means any Applicant Borrower that becomes a
Borrower under this Agreement in accordance with the provisions of Section 2.10.
"Determination Date" shall have the meaning assigned thereto in Section
2.9(a).
"Deutsche Mark" means the former national currency of the Federal
Republic of Germany.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to any
amount denominated in an Offshore Currency, the equivalent amount in Dollars as
determined by the Administrative Agent at such time on the basis of the Spot
Rate for the purchase of Dollars with such Offshore Currency on the most recent
Determination Date provided for in Section 2.9(a).
"Dutch Guilders" means the former national currency of the Netherlands.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having combined capital and surplus in
excess of $500,000,000, (b) a commercial bank organized under the laws of any
other country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $l,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender) or an Affiliate of
a Lender hereunder, (e) the successor (whether by transfer of assets, merger or
otherwise) to all or substantially all of the commercial lending business of the
assigning Lender, or (f) any other Person that has been approved in writing as
an Eligible Assignee by the Administrative Agent and, provided no Default or
Event of Default has occurred and is continuing, the Company.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of a
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of a Borrower or any current or former
ERISA Affiliate.
"EMU" means Economic and Monetary Union as contemplated in the Treaty
on European Union.
"EMU Legislation" means legislative measures of the European Council
(including without limitation European Council regulations) for the introduction
of, changeover to or operation of the euro.
8
<PAGE> 13
"Environmental Laws" means any and all federal, state, local and
foreign laws, statutes, ordinances, rules, regulations, permits, licenses,
approvals, binding interpretations and orders of courts or Governmental
Authorities, relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation or remediation of
Hazardous Materials.
"Environmental Permits" shall have the meaning assigned thereto in
Section 6.1(h).
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended, supplemented or otherwise
modified from time to time.
"ERISA Affiliate" means any Person who together with a Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"euro" means the single currency of Participating Member States of the
European Community.
"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City and to which the
Administrative Agent or any Lender is then subject.
"European Community" means those European countries that are
signatories to the Treaty on European Union.
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Revolving Credit
Loans made by such Lender then outstanding, (b) such Lender's Five Year Facility
Commitment Percentage of the L/C Obligations then outstanding, (c) the aggregate
principal amount of all Competitive Bid Loans made by such Lender then
outstanding and (d) the aggregate principal amount of all Swingline Loans made
by such Lender then outstanding. "Extension of Credit" means, as to any Lender
(a) any component of such Lender's Extensions of Credit or (b) the making of, or
participation in, a Loan by such Lender or the issuance or extension of, or
participation in, a Letter of Credit by such Lender, as the context may require.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
9
<PAGE> 14
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" shall mean a daily rate
which is determined, in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.
"Fiscal Year" means the fiscal year of the Company and its Subsidiaries
ending on or about May 30.
"Five Year Facility" means the multi-year revolving credit facility
established pursuant to Section 2.1 hereof.
"Five Year Facility Commitment" means (a) as to any Lender, the
obligation of such Lender to make Revolving Credit Loans under the Five Year
Facility for the accounts of the Borrowers in an aggregate principal Dollar
Equivalent amount at any time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1(a) hereto as such amount may be
increased, reduced or modified at any time or from time to time pursuant to the
terms hereof and (b) as to all Lenders, the aggregate Five Year Facility
Commitment of all Lenders to make Revolving Credit Loans under the Five Year
Facility, as such amount may be increased, reduced or modified at any time or
from time to time pursuant to the terms hereof. The Five Year Facility
Commitment of all Lenders on the Closing Date shall be One Hundred and Fifty
Million Dollars ($150,000,000).
"Five Year Facility Commitment Percentage" means, as to any Lender at
any time, the ratio of (a) the amount of the Five Year Facility Commitment of
such Lender to (b) the aggregate Five Year Facility Commitment of all of the
Lenders.
"Five Year Facility Fee" shall have the meaning assigned thereto in
Section 4.3(b).
"Five Year Facility Specified Maturity Date" means April 16, 2004 or
such later date as determined pursuant to Section 2.8(d).
"Five Year Facility Termination Date" means the earliest of the dates
referred to in Section 2.8(b).
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Company is located. For purposes of
this definition, the United States of America, each state thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by a Borrower or any one or more
of its Subsidiaries primarily for the benefit
10
<PAGE> 15
of employees of such Borrower or such Subsidiaries residing outside the United
States of America, which plan, fund or other similar program provides, or
results in, retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment, and which plan
is not subject to ERISA or the Code.
"Foreign Subsidiary" means each Subsidiary of the Company that is not
incorporated under the laws of the United States or any State or territory
thereof.
"French Francs" means the former national currency of the Republic of
France.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis throughout the period indicated.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranteed Obligations" means, without duplication, all of the
obligations of the Designated Borrowers to the Lenders and the Administrative
Agent, whenever arising, under this Agreement, the Borrower Joinder Agreements
and the Notes (including, but not limited to, obligations with respect to
principal, interest and fees).
"Hazardous Materials" means any substances or materials (a) which are
or become regulated or defined as hazardous wastes, hazardous substances,
pollutants, contaminants, chemical substances or mixtures or toxic substances
under any Environmental Law, (b) which are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful
to human health or the environment and are or become regulated by any
Governmental Authority, (c) the presence of which require investigation or
remediation under any Environmental Law, (d) the discharge or emission or
release of which requires a permit or license under any Applicable Law or other
Governmental Approval, or (e) which contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or forward rate agreement, foreign currency
agreement or other agreement regarding the hedging of interest rate risk
exposure executed in connection with hedging the interest rate exposure of any
Person, and any confirming letter executed pursuant to such hedging agreement,
all as amended, restated or otherwise modified from time to time.
11
<PAGE> 16
"Interest Coverage Ratio" means, as of the last day of any fiscal
quarter, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest
Expense, in each case for the period of four (4) consecutive fiscal quarters
ending as of such day.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Irrevocable Conversion Rate" with respect to any Available EMU
Currency, means the rate adopted and irrevocably fixed by the European Council
(in accordance with Article 109l(4) of the Treaty on European Union) on December
31, 1998 as the official exchange rate at which National Currency Units of such
Available EMU Currency shall be converted into euro, and euro shall be converted
into National Currency Units of such Available EMU Currency.
"Issuing Lender" means NBD Bank in its capacity as issuer of any Letter
of Credit, and any other Lender mutually acceptable and on terms satisfactory to
the Company and the Administrative Agent.
"Italian Lira" means the former national currency of Italy.
"Japanese Yen" means the unit of currency of Japan.
"L/C Application" means an application, in the form specified by any
Issuing Lender from time to time, requesting such Issuing Lender to issue a
Letter of Credit.
"L/C Commitment" means Ten Million Dollars ($10,000,000).
"L/C Facility" means the letter of credit facility established pursuant
to Article III hereof.
"L/C Fee" shall have the meaning assigned thereto in Section 3.3(a).
"L/C Obligations" means at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders
having a Five Year Facility Commitment other than the applicable Issuing Lender.
"Lender" means each Person executing this Agreement as a Lender as set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 13.10(b), other than any
party hereto that ceases to be a party hereto pursuant to any Assignment and
Acceptance.
"Lender Default" means (a) the refusal (which has not been retracted)
or the failure of a Lender to make available its portion of any Mandatory
Borrowing or (b) a Lender having notified in writing the Borrowers and/or the
Administrative Agent that such Lender does not
12
<PAGE> 17
intend to comply with its obligations under Section 2.6(b), in the case of
either clause (a) or (b) as a result of any takeover or control of such Lender
by any Governmental Authority.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Aggregate Revolving Credit Commitment
Percentage of the Revolving Credit Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section
3.1.
"Leverage Ratio" means, as of the last day of any fiscal quarter, the
ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for
the period of four (4) consecutive fiscal quarters ending as of such day.
"LIBOR" means, for any Offshore Rate Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) appearing on Telerate Page 3740 or 3750, as applicable (or any
successor or equivalent page), as the London interbank offered rate for deposits
in the Applicable Currency and in the approximate amount of the Loan to be made
or continued as, or converted into, such Offshore Rate Loan at approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Telerate Page 3740 or 3750, as
applicable, the relevant rate shall be the arithmetic mean of all such rates. If
for any reason such rate is not available, the term "LIBOR" shall mean, for any
Offshore Rate Loan for any Interest Period therefor,
(a) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in the Applicable Currency
and in the approximate amount of the Loan to be made or continued as,
or converted into, such Offshore Rate Loan at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO
Page, the relevant rate shall be the arithmetic mean of all such rates,
or
(b) if no rate is available on the Reuters Screen LIBO page,
then the rate determined by the Administrative Agent at which the
Applicable Currency in the approximate amount of the Loan to be made or
continued as, or converted into, such Offshore Rate Loan is offered by
leading banks in the London interbank market at approximately 11:00
a.m. (London time) two Business Days prior to the first day of the
applicable Interest Period (rounded upwards, if necessary, to the
nearest 1/100th of 1%).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
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"Loan Documents" means, collectively, this Agreement, the Notes, the
L/C Applications, any Borrower Joinder Agreement and each other document,
instrument and agreement executed and delivered by any Credit Party, its
Subsidiaries or their counsel in connection with this Agreement or otherwise
referred to herein or contemplated hereby, all as may be amended, restated or
otherwise modified.
"Loans" means the collective reference to the Revolving Credit Loans,
the Competitive Bid Loans and the Swingline Loans; "Loan" means any one of such
Loans.
"Mandatory Borrowing" shall have the meaning assigned thereto in
Section 2.6(b).
"Material Adverse Effect" means any of (a) a material adverse effect on
the business, assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or financial prospects of the Credit Parties and their
Subsidiaries taken as a whole, (b) a material adverse effect on the ability of
any such Credit Party to perform its obligations under the Loan Documents, in
each case to which it is a party, or (c) a material adverse effect on the rights
or remedies of the Lenders or the Administrative Agent hereunder or under any
other Loan Document.
"Material Subsidiary" means a Subsidiary which is material to the
business, assets, liabilities (actual or contingent), operations or financial
condition of a Person and its Subsidiaries taken as a whole, including, without
limitation, a Subsidiary whose principal assets are one or more Material
Subsidiaries.
"MLA Cost" means an addition to the interest rate on a Revolving Credit
Loan to compensate any Lender for the cost imputed to a Lender in respect of any
Revolving Credit Loan made in an Offshore Currency during the term of such Loan
resulting from the imposition from time to time under or pursuant to the Bank of
England Act 1998 (the "Act") and/or by the Bank of England and/or the Financial
Services Authority (the "FSA") (or other United Kingdom governmental authorities
or agencies) of a requirement to place non-interest-bearing cash ratio deposits
or Special Deposits (whether interest bearing or not) with the Bank of England
and/or pay fees to the FSA calculated by reference to liabilities used to fund
the Revolving Credit Loan made in such Offshore Currency, as determined in
accordance with Schedule 4.1(f).
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which a Borrower or any ERISA Affiliate is making, has
made, is accruing or has accrued an obligation to make, contributions within the
preceding six years.
"National Currency Unit" means a fraction or multiple of one euro
expressed in units of an Available EMU Currency. Offshore Currency Loans
requested to be denominated in National Currency Units shall be available only
in accordance with Section 1.5.
"NationsBank" means NationsBank, N.A., a national banking association,
and its successors.
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"NBD Bank" means NBD Bank, a Michigan banking corporation, and its
successors, together with any of its affiliates and branches.
"Notes" means the collective reference to the Revolving Credit Notes;
"Note" means any one of such Notes.
"Notice of Account Designation" shall have the meaning assigned thereto
in Section 2.2(b).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in
Section 2.3(c).
"Notice of Revolving Credit Borrowing" shall have the meaning assigned
thereto in Section 2.2(a).
"Notice of Swingline Borrowing" shall have the meaning assigned thereto
in Section 2.6(d).
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
all payment and other obligations owing by the Credit Parties to any Lender or
Affiliate of a Lender or the Administrative Agent under any Hedging Agreement
with any Lender or Affiliate of a Lender (which such Hedging Agreement is
permitted hereunder), and (c) all other fees and commissions (including
attorney's fees), charges, indebtedness, loans, liabilities, financial
accommodations, obligations, covenants and duties owing by the Credit Parties to
the Lenders or the Administrative Agent, of every kind, nature and description,
direct or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note,
in each case under or in respect of this Agreement, any Note, or any of the
other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 7.2.
"Offshore Currency" means (a) with respect to Revolving Credit Loans,
euro, any National Currency Unit, Sterling, Japanese Yen and any Agreed
Alternative Currency determined in accordance with Section 2.9(e) and (b) with
respect to Competitive Bid Loans, Canadian Dollars and Australian Dollars.
"Offshore Currency Loan" means any Offshore Rate Loan or Competitive
Bid Loan denominated in an Offshore Currency.
"Offshore Rate" means, for any Interest Period, with respect to an
Offshore Rate Loan, the rate of interest per annum (rounded upward to the next
1/100th of 1%) determined by the Administrative Agent as follows:
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<PAGE> 20
Offshore Rate = LIBOR
-----------------------------------
. 1.00- Eurodollar Reserve Percentage
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans
then outstanding as of the effective date of any change in the Eurodollar
Reserve Percentage.
"Offshore Rate Loan" means a Revolving Credit Loan or a Swingline Loan
bearing interest at a rate based upon the Offshore Rate as provided in Section
4.1(a) and, if a Revolving Credit Loan, may be an Offshore Currency Loan or a
Revolving Credit Loan denominated in Dollars.
"Operating Lease" shall mean, as to any Person, as determined in
accordance with GAAP, any lease of property (whether real, personal or mixed) by
such Person as lessee which is not a Capital Lease.
"Other Taxes" shall have the meaning assigned thereto in Section
4.11(b).
"Participating Member State" means each country so described in any EMU
Legislation.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and is maintained for the employees of a Borrower or any
of its ERISA Affiliates.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Prime Rate" means, at any time, the rate of interest per annum
established from time to time by NationsBank as its prime rate in effect at its
principal office in Charlotte, North Carolina. Each change in the Prime Rate
shall be effective as of the opening of business on the day such change in the
Prime Rate occurs. The parties hereto acknowledge that the rate established by
NationsBank as its Prime Rate is an index or base rate and shall not necessarily
be its lowest or best rate charged to its customers or other banks.
"Prior Bank Commitments" means the Company's committed credit
facilities with domestic lenders as of the Closing Date, which consist of those
certain revolving credit facilities made available to the Company on February
28, 1997 by (a) NationsBank, N.A. in the amount of $30,000,000, (b) Bank of
America Illinois in the amount of $35,000,000 and (c) NBD Bank in the amount of
$35,000,000.
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"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
leaseholds.
"Reimbursement Obligation" means the obligation of a Borrower to
reimburse each Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit issued at the request of such Borrower.
"Register" shall have the meaning assigned thereto in Section 13.10(d).
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Pension Plan that is subject to Title IV of ERISA other
than those events as to which the 30-day notice period is waived under
subsection .22, .23, .27 or .28 of PBGC Regulation Section 4043.
"Required Lenders" means, at any date, any combination of Lenders whose
Aggregate Revolving Credit Commitment Percentage equals at least fifty-one
percent (51%) of the Aggregate Revolving Credit Commitment or, if the Aggregate
Revolving Credit Commitment has been terminated, any combination of Lenders who
collectively hold at least fifty-one percent (51%) of the aggregate unpaid
principal amount of the Extensions of Credit (excluding the aggregate unpaid
principal amount of Competitive Bid Loans); provided that, for purposes of
declaring the Loans to be due and payable pursuant to Article XI, and for all
purposes after the Loans become due and payable pursuant to Article XI, the
outstanding Competitive Bid Loans of the Lenders shall be included in the
Lenders' respective Aggregate Revolving Credit Commitment Percentages in
determining the Required Lenders.
"Responsible Officer" means any of the following: the chairman,
president, chief executive officer, chief financial officer, treasurer or vice
president and corporate controller of a Borrower or any other officer of a
Borrower reasonably acceptable to the Administrative Agent.
"Revolving Credit Loans" means any revolving loan made to a Borrower
pursuant to Section 2.2 under the 364 Day Facility or the Five Year Facility,
and all such revolving loans collectively as the context requires.
"Revolving Credit Notes" means the collective reference to the
Revolving Credit Notes made by the Borrowers payable to the order of each Lender
with a Five Year Facility Commitment or a 364 Day Facility Commitment,
substantially in the form of Exhibit A hereto, and any amendments and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extensions thereof, in whole or in part; "Revolving
Credit Note" means any of such Revolving Credit Notes.
"SEC Reports" shall have the meaning assigned thereto in Section
6.1(x).
"Spot Rate" for a currency means the rate quoted by the Administrative
Agent as the spot rate for the purchase by the Administrative Agent of such
currency with another currency through its foreign exchange trading office at
approximately 8:00 a.m. (Charlotte time) on the date two Business Days prior to
the date as of which the foreign exchange computation is made.
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"Sterling" means the currency of the United Kingdom.
"Subordinated Debt" means the collective reference to Debt on Schedule
6.1(p) hereof designated as Subordinated Debt and any other Debt of the Credit
Parties or any Subsidiary thereof subordinated in right and time of payment to
the Obligations and otherwise permitted hereunder.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be Consolidated with those of the
parent in the parent's Consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than fifty percent (50%) of the equity or more than fifty percent (50%) of the
ordinary voting power or, in the case of a partnership, more than fifty percent
(50%) of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise controlled, by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent. Unless otherwise qualified, references to
"Subsidiary" or "Subsidiaries" herein shall refer to those of the Company.
"Support Obligation" means, with respect to any Person and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term Support Obligation
shall not include (i) endorsements for collection or deposit in the ordinary
course of business or (ii) a contractual commitment by one Person to invest in
another Person for so long as such investment is expected to constitute a
permitted investment under Section 9.3.
"Swingline Commitment" means the obligation of the Swingline Lender to
make Swingline Loans under the Five Year Facility for the accounts of the
Borrowers in an aggregate principal amount at any time outstanding not to exceed
Twenty Million Dollars ($20,000,000).
"Swingline Lender" means NBD Bank in its capacity as issuer of any
Swingline Loan.
"Swingline Loans" means any revolving loan made pursuant to Section 2.6
and all such loans collectively as the context requires.
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"Swingline Termination Date" means the earlier to occur of (a) the
resignation of NBD Bank as Swingline Lender and (b) the Five Year Facility
Termination Date.
"TARGET" means the Trans-European Automated Real-time Gross settlement
Express Transfer system.
"TARGET Business Day" means a day when TARGET is scheduled to be open
for business.
"Taxes" shall have the meaning assigned thereto in Section 4.11(a).
"Termination Date" means the 364 Day Facility Termination Date or the
Five Year Facility Termination Date, as the context requires.
"Termination Event" means any of the following that result in a
Material Adverse Effect: (a) a "Reportable Event" described in Section 4043 of
ERISA, or (b) the withdrawal of a Borrower or any ERISA Affiliate from a Pension
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the
filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA, or (d) the
institution of proceedings to terminate, or to seek the appointment of a trustee
with respect to, any Pension Plan by the PBGC, or (e) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer any Pension Plan,
or (f) the partial or complete withdrawal of a Borrower or any ERISA Affiliate
from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to Section
412 of the Code or Section 302 of ERISA, or (h) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA, (i) any event or condition which results in the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA or (j) the withdrawal or partial withdrawal of any Credit
Party or ERISA Affiliate from a Multiemployer Plan.
"Transition Period" means the period established by EMU Legislation,
beginning on January 1, 1999 and ending on the Transition Period Cutoff Date,
during which sums of money in the Participating Member States may be denominated
in either euro or National Currency Units.
"Transition Period Cutoff Date" shall mean December 31, 2001, or such
other date as may be established by EMU Legislation.
"Treaty on European Union" means the Treaty of Rome of March 25, 1957,
as amended by the Single European Act 1986 and the Maastricht Treaty (which was
signed at Maastricht on February 1, 1992 and came into force on November 1,
1993), as amended from time to time.
"UCC" means, with respect to any Letter of Credit, the Uniform
Commercial Code as in effect in the State in which the corporate headquarters of
the relevant Issuing Lender is located or
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such other jurisdiction as is acceptable to the relevant Issuing Lender, as
amended, restated or otherwise modified from time to time.
"Unfunded Current Liability" of any Pension Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Pension Plan as of the close of its most recent year, determined in
accordance with actuarial assumptions at such time consistent with Statement of
Financial Accounting Standards No 87, exceeds the sum of (a) the market value of
the assets allocable thereto and (b) $100,000.
"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.
"United States" means the United States of America.
"Utilization Fee" means a per annum rate equal to the Applicable
Percentage for Utilization Fee.
"Wholly-Owned" means, with respect to a Subsidiary, that all of the
shares of capital stock or other ownership interests of such Subsidiary are,
directly or indirectly, owned or controlled by any Credit Party and/or one or
more of its Wholly-Owned Subsidiaries.
"Year 2000 Problem" shall have the meaning assigned thereto in Section
5.2(h)(ii).
SECTION 1.2 GENERAL.
Unless otherwise specified, a reference in this Agreement to a
particular section, subsection, Schedule or Exhibit is a reference to that
section, subsection, Schedule or Exhibit of this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter. Any reference herein to "Charlotte time," "Chicago time" or "London
time" shall refer to the applicable time of day in Charlotte, North Carolina,
Chicago, Illinois or London, England, as applicable.
SECTION 1.3 OTHER DEFINITIONS AND PROVISIONS.
(a) Use of Capitalized Terms. Unless otherwise defined therein,
all capitalized terms defined in this Agreement shall have the defined meanings
provided herein when used in this Agreement, the Notes and the other Loan
Documents or any certificate, report or other document made or delivered
pursuant to this Agreement.
(b) Miscellaneous. The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
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SECTION 1.4 CURRENCY EQUIVALENTS GENERALLY.
For all purposes of this Agreement (but not for purposes of the
preparation of any financial statements delivered pursuant hereto), the
equivalent in any Offshore Currency or other currency of an amount in Dollars,
and the equivalent in Dollars of an amount in any Offshore Currency or other
currency, shall be determined at the Spot Rate.
SECTION 1.5 INTRODUCTION OF EURO; NATIONAL CURRENCY UNIT
ADVANCES; ETC.
(a) National Currency Unit Advances. Prior to the Transition
Period Cutoff Date, and upon request by a Borrower in accordance with Section
2.2(a), Revolving Credit Loans that are Offshore Currency Loans may be funded
and maintained in National Currency Units of the Available EMU Currency
designated by such Borrower in its Notice of Revolving Credit Borrowing.
Repayments of Offshore Currency Loans that were funded in National Currency
Units pursuant to this Section shall be made in such National Currency Units;
provided, however, that any Offshore Currency Loan that is (i) denominated in
National Currency Units and (ii) outstanding as of the Transition Period Cutoff
Date shall be automatically redenominated into euro as of the close of business
on such date at the applicable Irrevocable Conversion Rate; and provided further
that repayments of all such Offshore Currency Loans made after the Transition
Period Cutoff Date shall be denominated in euro. After the Transition Period
Cutoff Date, Offshore Currency Loans shall no longer be funded in National
Currency Units.
(b) Conversions to Euro. For the avoidance of doubt, the parties
hereto affirm and agree that neither the fixation of the conversion rate of an
Available EMU Currency against the euro as a single currency, in accordance with
the Treaty on European Union, nor the conversion of any Obligations under the
Loan Documents from an Available EMU Currency, or National Currency Units, into
euro, shall require the early termination of this Agreement or the prepayment of
any amount due under the Loan Documents or create any liability of one party to
another party for any direct or consequential loss arising from any of such
events.
(c) Currency Translations; Rounding. Any translation from one
currency or currency unit to another shall be at the rate specified herein or,
if not so specified, then at the official rate of exchange legally recognized by
the central bank of the country issuing such currency for the conversion of that
currency or currency unit into the other. Any such translation shall be rounded
up or down by the Administrative Agent acting in accordance with any Applicable
Law on rounding or, if there is no such law, acting reasonably in accordance
with its market practice.
(d) Changes in Currency. If a change in any currency of a country
occurs, this Agreement will be amended to the extent the Administrative Agent
(acting reasonably) specifies to be necessary to reflect the change in currency
and to put the parties hereto in the same position, as far as possible, that
they would have been in if no change in currency had occurred; provided that any
such amendments will not adversely affect the Lenders.
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ARTICLE II
CREDIT FACILITIES
SECTION 2.1 AMOUNT AND TERMS OF CREDIT.
(a) Description of Facilities. Upon the terms and subject to the
conditions set forth in this Agreement: (i) the Lenders hereby grant to the
Borrowers a short term revolving credit facility (the "364 Day Facility") and a
multi-year revolving credit facility (the "Five Year Facility") pursuant to
which each Lender severally agrees to make Revolving Credit Loans to the
respective Borrowers in Dollars and Offshore Currencies in accordance with
Section 2.2 and the Swingline Lender agrees to make Swingline Loans to the
respective Borrowers in Dollars in accordance with Section 2.6 and (ii) the
parties hereto agree that each Lender may, in its sole discretion, make bids to
make Competitive Bid Loans to the respective Borrowers in Dollars, Canadian
Dollars or Australian Dollars in accordance with Section 2.5; provided that (A)
the aggregate principal Dollar Equivalent amount of all outstanding Revolving
Credit Loans (after giving effect to any amount requested) made under the 364
Day Facility shall not exceed the 364 Day Facility Commitment less the aggregate
principal Dollar Equivalent amount of all outstanding Competitive Bid Loans made
under the 364 Day Facility; and the principal Dollar Equivalent amount of
outstanding Revolving Credit Loans made under the 364 Day Facility by any Lender
shall not at any time exceed such Lender's 364 Day Facility Commitment; and (B)
the aggregate principal Dollar Equivalent amount of all outstanding Revolving
Credit Loans (after giving effect to any amount requested) made under the Five
Year Facility plus the aggregate principal amount of all outstanding Swingline
Loans made under the Five Year Facility (after giving effect to the amount of
any Swingline Loans requested under the Five Year Facility and exclusive of
Swingline Loans made under the Five Year Facility which are repaid with the
proceeds of, and simultaneously with the incurrence of, Revolving Credit Loans
under the Five Year Facility) shall not exceed the Five Year Facility Commitment
less the sum of (x) all outstanding L/C Obligations plus (y) the aggregate
principal Dollar Equivalent amount of all outstanding Competitive Bid Loans made
under the Five Year Facility; and the principal Dollar Equivalent amount of
outstanding Revolving Credit Loans made under the Five Year Facility by any
Lender shall not at any time exceed such Lender's Five Year Facility Commitment.
Each Revolving Credit Loan made by a Lender under the 364 Day Facility or the
Five Year Facility shall be in a principal Dollar Equivalent amount equal to
such Lender's Commitment Percentage of the aggregate principal Dollar Equivalent
amount of Revolving Credit Loans requested under such facility on such occasion.
(b) Application of Facilities. The Credit Facility established
hereby shall be used by the Borrowers and their respective Subsidiaries to:
(i) refinance existing Debt of the Company and its
Subsidiaries, including without limitation, Debt outstanding under the
Prior Bank Commitments;
(ii) finance share repurchases and friendly acquisitions by
the Company; and
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(iii) finance the working capital, capital expenditures and
general corporate purposes of the Borrowers and their respective
Subsidiaries;
and, accordingly, the Borrowers shall apply all amounts raised by them hereunder
in or towards satisfaction of such purposes and neither the Administrative Agent
and the Lenders nor any of them shall be obliged to concern themselves with such
application.
SECTION 2.2 PROCEDURE FOR ADVANCES OF REVOLVING CREDIT LOANS.
(a) Requests for Revolving Credit Loans. A Borrower shall give the
Administrative Agent irrevocable prior written notice in the form attached
hereto as Exhibit B-1 (a "Notice of Revolving Credit Borrowing") not later than
11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate Loan,
(ii) at least three (3) Business Days before each Offshore Rate Loan denominated
in Dollars, and (iii) at least four (4) Business Days before each Offshore
Currency Loan, of its intention to borrow, specifying (A) the date of such
borrowing, which shall be a Business Day, (B) whether such Revolving Credit Loan
is to be made under the 364 Day Facility or the Five Year Facility, (C) the
amount of such borrowing, which shall be in an amount equal to the unused amount
of the 364 Day Facility Commitment or the Five Year Facility Commitment, as
applicable, or if less, (x) with respect to Base Rate Loans, in an aggregate
principal amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof, (y) with respect to Offshore Rate Loans denominated in Dollars, in an
aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in
excess thereof and (z) with respect to Offshore Rate Loans denominated in an
Offshore Currency, in an aggregate principal amount of a whole multiple of
1,000,000 units of such Offshore Currency in excess of an amount of such
Offshore Currency having a Dollar Equivalent of $5,000,000; (D) whether such
Revolving Credit Loan is to be an Offshore Rate Loan or Base Rate Loan and (E)
in the case of an Offshore Rate Loan, the duration of the Interest Period
applicable thereto and the Applicable Currency. Notices received after 11:00
a.m. (Charlotte time) shall be deemed received on the next Business Day. The
Administrative Agent shall promptly notify the Lenders of each Notice of
Revolving Credit Borrowing. The Dollar Equivalent amount of an Offshore Currency
Loan will be determined by the Administrative Agent for such Offshore Currency
Loan on the Determination Date therefor in accordance with Section 2.9(a).
(b) Disbursement of Revolving Credit Loans. Each Lender will make
available to the Administrative Agent, for the accounts of the respective
Borrowers, at the Administrative Agent's Office in funds immediately available
to the Administrative Agent, such Lender's Commitment Percentage of the
Revolving Credit Loans to be made on such borrowing date (i) in the case of a
Revolving Credit Loan denominated in Dollars, no later than 2:00 p.m. (Charlotte
time) on the proposed borrowing date and (ii) in the case of a Revolving Credit
Loan that is an Offshore Currency Loan, by such time as the Administrative Agent
may determine to be necessary for such funds to be credited on such date in
accordance with normal banking practices in the place of payment. Each Borrower
hereby irrevocably authorizes the Administrative Agent to disburse the proceeds
of each borrowing requested by such Borrower pursuant to this Section 2.2 in
immediately available funds by crediting or wiring such proceeds to the deposit
account of such Borrower identified in the most recent notice of account
designation, substantially in the form of Exhibit C hereto (a "Notice of Account
Designation"), delivered by such Borrower to the
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Administrative Agent or as may be otherwise agreed upon by such Borrower and the
Administrative Agent from time to time. Subject to Section 4.7 hereof, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Revolving Credit Loan requested pursuant to this Section 2.2 for
which any Lender is responsible to the extent that such Lender has not made
available to the Administrative Agent its Commitment Percentage of such
Revolving Credit Loan.
SECTION 2.3 REPAYMENT OF LOANS.
(a) Repayment on Termination Date. Each Borrower agrees to repay
the outstanding principal amount of all Loans made to it under the 364 Day
Facility in full on the 364 Day Facility Termination Date, with all accrued but
unpaid interest thereon. Each Borrower agrees to repay the outstanding principal
amount of all Loans made to it under, and its Reimbursement Obligation under,
the Five Year Facility in full on the Five Year Facility Termination Date, with
all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Loans.
(i) If at any time (A) the sum of the outstanding principal
Dollar Equivalent amount of all Loans made under the 364 Day Facility
exceeds the 364 Day Facility Commitment of all Lenders or (B) the sum
of the outstanding principal Dollar Equivalent amount of all Loans made
under the Five Year Facility and all outstanding L/C Obligations
exceeds the Five Year Facility Commitment of all Lenders, in each case
other than solely as a result of a change in applicable rates of
exchange between Dollars and Offshore Currencies, the Borrowers agree
to repay immediately upon notice from the Administrative Agent, by
payment to the Administrative Agent for the account of the Lenders,
Revolving Credit Loans, Swingline Loans, L/C Obligations or Competitive
Bid Loans and/or furnish cash collateral reasonably satisfactory to the
Administrative Agent, in an amount equal to such excess. Such cash
collateral shall be applied in accordance with Section 11.2(b).
(ii) If on any Determination Date, the Administrative Agent
shall have determined that the aggregate principal Dollar Equivalent
amount of all Loans and L/C Obligations then outstanding exceeds the
Aggregate Revolving Credit Commitment by more than $500,000 due to a
change in applicable rates of exchange between Dollars and Offshore
Currencies, then the Administrative Agent shall give notice to the
Borrowers that a prepayment is required under this Section 2.3(b)(ii)
and the Borrowers agree thereupon to make prepayments of Loans within
two (2) Business Days after receipt of such notice such that, after
giving effect to such prepayments, the aggregate Dollar Equivalent
amount of all Loans and L/C Obligations then outstanding does not
exceed the Aggregate Revolving Credit Commitment.
(iii) Notwithstanding anything to the contrary in Section
2.3(b)(ii), the mandatory repayment described in such Section of any
Offshore Rate Loans may be delayed until the last day of the Interest
Period applicable to such Offshore Rate Loans; provided, that if the
Borrowers so delay repayment of Offshore Rate Loans, the
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Borrowers shall deposit or cause to be deposited, on the day repayment
would have otherwise been required, in a cash collateral account opened
by the Administrative Agent, an amount equal to the aggregate principal
amount of such delayed mandatory repayment of Offshore Rate Loans and
any accrued but unpaid interest thereon. Any repayment of such Offshore
Rate Loans other than on the last day of the Interest Period applicable
thereto shall be accompanied by any amount required to be paid pursuant
to Section 4.9 hereof.
(c) Optional Repayments. Each Borrower may at any time and from
time to time repay the Revolving Credit Loans or Swingline Loans made to it, in
whole or in part, upon at least three (3) Business Days irrevocable notice to
the Administrative Agent with respect to Offshore Rate Loans and one (1)
Business Day irrevocable notice with respect to Base Rate Loans, in the form
attached hereto as Exhibit D (a "Notice of Prepayment") specifying the date and
amount of repayment; whether the repayment is of Revolving Credit Loans or
Swingline Loans and whether such loans were made under the 364 Day Facility or
the Five Year Facility, or a combination thereof, and, if a combination, the
amount allocable to each; and whether the repayment is of Offshore Rate Loans,
Base Rate Loans, or a combination thereof, and, if of a combination, the amount
allocable to each. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Lender. If any such notice is given, the amount specified
in such notice shall be due and payable on the date set forth in such notice.
Partial repayments shall be in an aggregate amount of $1,000,000 or a whole
multiple of $500,000 in excess thereof with respect to Base Rate Loans, $250,000
or a whole multiple of $100,000 in excess thereof with respect to Swingline
Loans and $5,000,000 or a whole multiple of $1,000,000 in excess thereof with
respect to Offshore Rate Loans.
(d) Limitation on Repayment of Offshore Rate Loans. The Borrowers
may not repay any Offshore Rate Loan on any day other than on the last day of
the Interest Period applicable thereto unless such repayment is accompanied by
any amount required to be paid pursuant to Section 4.9 hereof.
(e) Limitation on Repayment of Competitive Bid Loans. The
Borrowers may not repay any Competitive Bid Loan on any day other than on the
last day of the Interest Period applicable thereto except, and on such terms, as
agreed to by the Borrower to which the Competitive Bid Loan was made and the
Lender which made such Competitive Bid Loan.
SECTION 2.4 REVOLVING CREDIT NOTES.
Each Lender's Revolving Credit Loans and the obligation of each
Borrower to repay such Revolving Credit Loans shall be evidenced by separate
Revolving Credit Notes executed by each Borrower payable to the order of such
Lender. Each Revolving Credit Note shall be dated the date hereof and shall bear
interest on the unpaid principal amount thereof at the applicable interest rate
per annum specified in Section 4.1.
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SECTION 2.5 COMPETITIVE BID LOANS AND PROCEDURE.
(a) Subject to the terms and conditions set forth herein, from
time to time until the expiration or termination of the Aggregate Revolving
Credit Commitment, each Borrower may request Competitive Bids under the 364 Day
Facility or the Five Year Facility, and may (but shall not have any obligation
to) accept Competitive Bids and borrow Competitive Bid Loans, which shall be
denominated in Dollars, Canadian Dollars or Australian Dollars; provided that
(i) the sum of the aggregate principal Dollar Equivalent amount of outstanding
Revolving Credit Loans made under the 364 Day Facility plus the aggregate
principal Dollar Equivalent amount of outstanding Competitive Bid Loans made
thereunder at any time shall not exceed the 364 Day Facility Commitment and (ii)
the sum of the aggregate principal Dollar Equivalent amount of outstanding
Revolving Credit Loans and Swingline Loans made under the Five Year Facility
plus the aggregate principal Dollar Equivalent amount of outstanding Competitive
Bid Loans made thereunder at any time shall not exceed the Five Year Facility
Commitment less the sum of all outstanding L/C Obligations. To request
Competitive Bids, a Borrower shall notify the Administrative Agent of such
request by telephone, not later than 11:00 a.m. (Charlotte time) one (1)
Business Day before the date of the proposed borrowing; provided that a
Competitive Bid Request shall not be made within five (5) Business Days after
the date of any previous Competitive Bid Request. Each such telephonic
Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy
to the Administrative Agent of a written Competitive Bid Request in a form
approved by the Administrative Agent and signed by the Company. Each such
telephonic and written Competitive Bid Request shall specify the following
information:
(i) the aggregate amount of the requested borrowing, which shall
be a minimum of $5,000,000 (or the Dollar Equivalent thereof) and an
integral multiple of 1,000,000 units of the applicable currency in
excess thereof;
(ii) the date of such borrowing, which shall be a Business Day;
(iii) the Interest Period to be applicable to such borrowing,
which shall be a period contemplated by the definition of the term
"Interest Period";
(iv) whether the borrowing is to be made under the 364 Day
Facility or the Five Year Facility); and
(v) the location and number of the Borrower's account to which
funds are to be disbursed.
Promptly following receipt of a Competitive Bid Request in accordance
with this Section, the Administrative Agent shall notify the Lenders of the
details thereof by telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make
one or more Competitive Bids to a Borrower in response to a Competitive Bid
Request. Such Competitive Bids by a Lender may be for an amount greater than (or
less than) such Lender's respective Commitments. Each Competitive Bid by a
Lender must be in a form approved by the
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Administrative Agent and must be received by the Administrative Agent by
telecopy, not later than 9:30 a.m. (Charlotte time) on the proposed date of such
borrowing. Competitive Bids that do not conform substantially to the form
approved by the Administrative Agent may be rejected by the Administrative
Agent, and the Administrative Agent shall notify the applicable Lender as
promptly as practicable. Each Competitive Bid shall specify (i) the principal
amount (which shall be a minimum of $5,000,000 (or the Dollar Equivalent
thereof) and an integral multiple of 1,000,000 units of the applicable currency
in excess thereof and which may equal the entire principal amount of the
borrowing requested by the Borrower) of the Competitive Bid Loan or Loans that
the applicable Lender is willing to make, (ii) the Competitive Bid Rate or Rates
at which such Lender is prepared to make such Loan or Loans (expressed as a
percentage rate per annum in the form of a decimal to no more than four decimal
places) and (iii) the Interest Period applicable to each such Loan and the last
day thereof.
(c) The Administrative Agent shall promptly notify the Borrower
requesting Competitive Bids by telecopy of the Competitive Bid Rate and the
principal amount specified in each Competitive Bid and the identity of the
Lender that shall have made such Competitive Bid.
(d) Subject only to the provisions of this paragraph, the Borrower
requesting Competitive Bids may accept or reject any Competitive Bid. Such
Borrower shall notify the Administrative Agent by telephone, confirmed by
telecopy in a form approved by the Administrative Agent, whether and to what
extent it has decided to accept or reject each Competitive Bid, not later than
10:30 a.m. (Charlotte time) on the date of the proposed borrowing; provided that
(i) the failure of such Borrower to give such notice shall be deemed to be a
rejection of each Competitive Bid, (ii) such Borrower shall not accept a
Competitive Bid made at a particular Competitive Bid Rate if such Borrower
rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by such Borrower shall not
exceed the aggregate amount of the requested borrowing specified in the related
Competitive Bid Request, (iv) to the extent necessary to comply with clause
(iii) above, such Borrower may accept Competitive Bids at the same Competitive
Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at
such Competitive Bid Rate, shall be made pro rata in accordance with the amount
of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no
Competitive Bid shall be accepted for a Competitive Bid Loan unless such
Competitive Bid Loan is in a minimum principal amount of $5,000,000 (or the
Dollar Equivalent thereof) and an integral multiple of l,000,000 units of the
applicable currency in excess thereof; provided further that if a Competitive
Bid Loan must be in an amount less than $5,000,000 (or the Dollar Equivalent
thereof) because of the provisions of clause (iv) above, such Competitive Bid
Loan may be for a minimum of 1,000,000 units of the applicable currency or any
integral multiple thereof, and in calculating the pro rata allocation of
acceptances of portions of multiple Competitive Bids at a particular Competitive
Bid Rate pursuant to clause (iv) above the amounts shall be rounded to integral
multiples of 1,000,000 units of the applicable currency in a manner determined
by the Borrower. A notice given by a Borrower pursuant to this paragraph shall
be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding
Lender by telecopy whether or not its Competitive Bid has been accepted (and, if
so, the amount and Competitive Bid Rate so accepted), and each successful bidder
will thereupon become bound, subject to the
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terms and conditions hereof, to make the Competitive Bid Loan in respect of
which its Competitive Bid has been accepted.
(f) Not later than 2:00 p.m. (Charlotte time) on the proposed
borrowing date, each Lender whose Competitive Bid has been accepted will make
available to the Administrative Agent, for the account of the Borrower to whom
the Competitive Bid Loan is to be made, at the office of the Administrative
Agent in funds immediately available to the Administrative Agent, the amount of
the Competitive Bid Loan to be made on such borrowing date by such Lender. Each
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the
proceeds of each borrowing requested pursuant to this Section 2.5 in immediately
available funds by crediting or wiring such proceeds to the deposit account of
such Borrower identified in its most recent Notice of Account Designation or as
may be otherwise agreed upon by such Borrower and the Administrative Agent from
time to time. Subject to Section 4.7 hereof, the Administrative Agent shall not
be obligated to disburse the proceeds of any Competitive Bid Loan requested
pursuant to this Section 2.5 for which any Lender is responsible to the extent
that such Lender has not made available to the Administrative Agent the amount
of such Competitive Bid Loan.
(g) If the entity which is the Administrative Agent shall elect to
submit a Competitive Bid in its capacity as a Lender, it shall submit such
Competitive Bid directly to the Borrower requesting Competitive Bids at least
one quarter of an hour earlier than the time by which the other Lenders are
required to submit their Competitive Bids to the Administrative Agent pursuant
to paragraph (b) of this Section.
(h) While any Competitive Bid Loan made under the 364 Day Facility
is outstanding, the 364 Day Facility Commitment of each Lender shall be deemed
used for all purposes by an amount equal to its pro rata share (based on its
respective 364 Day Facility Commitment Percentage) of the principal Dollar
Equivalent amount of such Competitive Bid Loan.
(i) While any Competitive Bid Loan made under the Five Year
Facility is outstanding, the Five Year Facility Commitment of each Lender shall
be deemed used for all purposes by an amount equal to its pro rata share (based
on its respective Five Year Facility Commitment Percentage) of the principal
Dollar Equivalent amount of such Competitive Bid Loan.
(j) (i) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of each
Borrower to such Lender resulting from each Competitive Bid Loan made
by such Lender to such Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from
time to time hereunder.
(ii) The entries maintained in the accounts maintained pursuant
to paragraph (i) shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that
the failure of the Administrative Agent or any Lender to maintain such
accounts or any error therein shall not in any manner affect the
obligation of each Borrower to repay the Obligations in accordance with
their terms.
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(iii) The Competitive Bid Loans made by each Lender shall be
evidenced by such Lender's respective Revolving Credit Notes.
(k) Each Borrower shall repay the outstanding principal amount of
each Competitive Bid Loan made to it in full on the last day of the Interest
Period applicable thereto, with all accrued but unpaid interest thereon.
Competitive Bid Loans may not be repaid prior to the last day of the applicable
Interest Period except in accordance with Section 2.3(b) and (e).
SECTION 2.6 SWINGLINE LOANS AND PROCEDURE.
(a) Swingline Commitment. Subject to the terms and conditions set
forth herein, from time to time until the Swingline Termination Date, the
Swingline Lender agrees to make, under the Five Year Facility, a revolving loan
or revolving loans (each a "Swingline Loan" and, collectively, the "Swingline
Loans") to the respective Borrowers, which Swingline Loans (i) shall be
denominated in Dollars, (ii) may be repaid and reborrowed in accordance with the
provisions hereof, (iii) shall not exceed in aggregate principal amount at any
time outstanding, when combined with the sum of the aggregate principal Dollar
Equivalent amount of outstanding Revolving Credit Loans made under the Five Year
Facility plus the aggregate principal amount of Competitive Bid Loans made
thereunder at any time, the Five Year Facility Commitment less the sum of all
outstanding L/C Obligations, (iv) shall not exceed in aggregate principal amount
at any time outstanding the Swingline Commitment and (v) shall bear interest at
a rate mutually agreeable to the Swingline Lender and the applicable Borrower.
Notwithstanding anything to the contrary contained in this Section 2.6(a), (x)
the Swingline Lender shall not be obligated to make any Swingline Loans at a
time when a Lender Default exists unless the Swingline Lender has entered into
arrangements satisfactory to it and the Borrowers to eliminate the Swingline
Lender's risk with respect to the Defaulting Lender's or Lenders' participation
in such Swingline Loans, including by cash collateralizing such Defaulting
Lender's or Lenders' Commitment Percentage of the outstanding Swingline Loans
and (y) the Swingline Lender shall not make any Swingline Loan after it has
received written notice from any Borrower or the Required Lenders stating that a
Default or an Event of Default exists and is continuing until such time as the
Swingline Lender shall have received written notice (A) of rescission of all
such notices from the party or parties originally delivering such notice or (B)
of the waiver of such Default or Event of Default by the Required Lenders.
(b) Mandatory Borrowings.
(i) On any Business Day, the Swingline Lender may, in its sole
discretion, advise the Administrative Agent to give notice to the
Lenders that the Swingline Lender's outstanding Swingline Loans under
the Five Year Facility shall be funded with one or more borrowings of
Revolving Credit Loans denominated in Dollars (provided that such
notice shall be deemed to have been automatically given with respect to
outstanding Swingline Loans upon the occurrence of a Default or an
Event of Default under Section 11.1(i), (j), (k) or (l)), in which case
one or more borrowings of Revolving Credit Loans under the Five Year
Facility constituting Base Rate Loans (each such Borrowing, a
"Mandatory Borrowing") shall be made on the immediately succeeding
Business Day by all Lenders in accordance with each Lender's Commitment
Percentage and the proceeds
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thereof shall be applied directly by the Administrative Agent to repay
the Swingline Lender for such outstanding Swingline Loans. Each Lender
hereby irrevocably agrees to make Revolving Credit Loans upon one
Business Day's notice pursuant to each Mandatory Borrowing in the
amount and in the manner specified in the preceding sentence and on the
date specified in writing by the Administrative Agent notwithstanding
(A) the amount of the Mandatory Borrowing may not comply with the
minimum borrowing amount otherwise required hereunder, (B) whether any
conditions specified in Section 5.4 are then satisfied, (C) whether a
Default or an Event of Default then exists, (D) the date of such
Mandatory Borrowing and (E) the amount of the Five Year Facility
Commitment or the Aggregate Revolving Credit Commitment at such time.
In the event that any Mandatory Borrowing cannot for any reason be made
on the date otherwise required above (including, without limitation, as
a result of the occurrence of a Bankruptcy Event with respect to any
Credit Party), then each Lender hereby agrees that it shall forthwith
purchase (as of the date the Mandatory Borrowing would otherwise have
occurred, but adjusted for any payments received from the respective
Borrower on or after such date and prior to such purchase) from the
Swingline Lender such participations in the outstanding Swingline Loans
made under the Five Year Facility as shall be necessary to cause the
Lenders to share in such Swingline Loans ratably based upon their
respective Commitment Percentages, provided that (x) all interest
payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date as of which the respective
participation is required to be purchased and, to the extent
attributable to the purchased participation, shall be payable to the
participant from and after such date and (y) at the time any purchase
of participations pursuant to this sentence is actually made, the
purchasing Lender shall be required to pay the Swingline Lender
interest on the principal amount of participations purchased for each
day from and including the day upon which the Mandatory Borrowing would
otherwise have occurred to but excluding the date of payment for such
participation, at the overnight Federal Funds Rate for the first three
days and at the rate otherwise applicable to Base Rate Loans hereunder
for each day thereafter.
(ii) To the extent amounts received from the Lenders pursuant to
Section 2.6(b)(i) above are not sufficient to repay in full the
outstanding Swingline Loans requested or required to be repaid, the
Borrowers agree to pay to the Swingline Lender on demand the amount
required to repay such Swingline Loans in full. In addition, each
Borrower hereby authorizes the Administrative Agent to charge any
account maintained by such Borrower with the Swingline Lender (up to
the amount available therein) in order to immediately pay the Swingline
Lender the amount of such Swingline Loans to the extent amounts
received from the Lenders are not sufficient to repay in full the
outstanding Swingline Loans requested or required to be repaid. If any
portion of any such amount paid to the Swingline Lender shall be
recovered by or on behalf of a Borrower from the Swingline Lender in
bankruptcy or otherwise, the loss of the amount so recovered shall be
ratably shared among all the Lenders in accordance with their
respective Commitment Percentages.
(c) Amount of Each Swingline Borrowing. Each Swingline Loan
shall be made in an aggregate principal amount of $500,000 or a whole multiple
of $l00,000 in excess thereof.
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(d) Notice of Borrowing.
(i) A Borrower shall give the Swingline Lender irrevocable prior
written notice (a "Notice of Swingline Borrowing") substantially in the
form attached as Exhibit B-2 no later than 1:00 p.m. (Chicago time) (i)
on the same Business Day as each Base Rate Loan, (ii) at least three
(3) Business Days before each Offshore Rate Loan denominated in Dollars
or (iii) on such other Business Day as may be mutually agreeable to the
Swingline Lender and such Borrower, of its intention to borrow,
specifying (A) the date of such borrowing, which shall be a Business
Day, (B) the amount of such borrowing, which shall be in an amount
equal to the unused amount of the Swingline Commitment or less, (C)
whether such Swingline Loan is to be an Offshore Rate Loan denominated
in Dollars, a Base Rate Loan or a Swingline Loan bearing interest at an
alternative rate mutually agreeable to the Swingline Lender and the
applicable Borrower and (D) in the case of an Offshore Rate Loan, the
duration of the Interest Period applicable thereto. Notices received
after 1:00 p.m. (Chicago time) shall be deemed received on the next
Business Day.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section 2.6(b), with each Borrower irrevocably agreeing,
by its incurrence of any Swingline Loan, to the making of the Mandatory
Borrowings as set forth in Section 2.6(b).
(e) Disbursement of Funds. Not later than 2:00 p.m. (Chicago time)
on the proposed borrowing date, the Swingline Lender will make available to the
Administrative Agent, for the account of the Borrower to whom the Swingline Loan
is to be made, at the office of the Administrative Agent in funds immediately
available to the Administrative Agent, the amount of the Swingline Loan to be
made on such borrowing date. In the case of Mandatory Borrowings, no later than
2:00 p.m. (Charlotte time) on the date specified in Section 2.6(b), each Lender
will make available to the Administrative Agent, for the account of the
respective Borrower, at the office of the Administrative Agent in funds
immediately available to the Administrative Agent, such Lender's Commitment
Percentage of Mandatory Borrowings to be made on such borrowing date. Each
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the
proceeds of each borrowing requested pursuant to this Section 2.6 in immediately
available funds by crediting or wiring such proceeds to the deposit account of
such Borrower identified in the most recent Notice of Account Designation or as
may be otherwise agreed upon by such Borrower and the Administrative Agent from
time to time or, in the case of Mandatory Borrowings, in the manner specified in
Section 2.6(b)(i). Subject to Section 4.7 hereof, the Administrative Agent shall
not be obligated to disburse the proceeds of any Swingline Loan requested
pursuant to this Section 2.6 to the extent that the Swingline Lender has not
made available to the Administrative Agent the amount of such Swingline Loan.
(f) Notes. The Swingline Lender's Swingline Loans shall be
evidenced by such Lender's respective Revolving Credit Notes.
(g) Usage Under Five Year Facility Commitments. While any
Swingline Loan made under the Five Year Facility is outstanding, the Five Year
Facility Commitment of each Lender
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shall be deemed used for all purposes by an amount equal to its pro rata share
(based on its respective Five Year Facility Commitment Percentage) of the
principal amount of such Swingline Loan.
(h) Notice to the Administrative Agent. The Swingline Lender shall
promptly give notice to the Administrative Agent of all Swingline Loans made
hereunder, and all repayments of such Swingline Loans.
SECTION 2.7 COMMITMENT REDUCTIONS AND INCREASES.
(a) Voluntary Reduction. The Borrowers shall have the right at any
time and from time to time, upon at least four (4) Business Days' prior written
notice to the Administrative Agent, to permanently reduce (except as provided
below), without premium or penalty, (i) (A) the entire 364 Day Facility
Commitment at any time or (B) portions of the 364 Day Facility Commitment from
time to time in an aggregate principal Dollar Equivalent amount not less than
$5,000,000 or any whole multiple of $500,000 in excess thereof or (ii) (A) the
entire Five Year Facility Commitment at any time or (B) portions of the Five
Year Facility Commitment from time to time, in an aggregate principal Dollar
Equivalent amount not less than $5,000,000 or any whole multiple of $500,000 in
excess thereof.
(b) Payments Related to a Voluntary Reduction.
(i) Each permanent reduction of the 364 Day Facility Commitment
made pursuant to this Section 2.7 shall be accompanied, if necessary,
by a payment of principal sufficient to reduce the aggregate
outstanding Revolving Credit Loans made under the 364 Day Facility to
the amount of the new 364 Day Facility Commitment after such reduction
to the 364 Day Facility Commitment. Any reduction of the 364 Day
Facility Commitment to zero (including upon termination of the 364 Day
Facility on the 364 Day Facility Termination Date) shall be accompanied
by payment of all outstanding Revolving Credit Loans made under the 364
Day Facility and shall result in the termination of the 364 Day
Facility Commitment and the 364 Day Facility. If the reduction of the
364 Day Facility Commitment requires the repayment of any Offshore Rate
Loan, such repayment shall be accompanied by any amount required to be
paid pursuant to Section 4.9 hereof. Notwithstanding anything herein to
the contrary, the 364 Day Facility Commitment may not be permanently
reduced by such an amount so that after such reduction, the 364 Day
Facility Commitment is less than the aggregate amount of all unpaid
principal of and interest on outstanding Competitive Bid Loans made
under the 364 Day Facility.
(ii) Each permanent reduction of the Five Year Facility
Commitment made pursuant to this Section 2.7 shall be accompanied, if
necessary, by a payment of principal sufficient to reduce the aggregate
outstanding Revolving Credit Loans and Swingline Loans made under the
Five Year Facility and L/C Obligations, as applicable, to the amount of
the new Five Year Facility Commitment after such reduction to the Five
Year Facility Commitment and, if the Five Year Facility Commitment as
so reduced is less than the aggregate amount of all outstanding Letters
of Credit, the Borrower shall be
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required to deposit in a cash collateral account opened by the
Administrative Agent an amount equal to the amount by which the
aggregate then undrawn and unexpired amount of such Letters of Credit
exceeds the Five Year Facility Commitment as so reduced. Such cash
collateral shall be applied in accordance with Section 11.2(b). Any
reduction of the Five Year Facility Commitment to zero (including upon
termination of the Five Year Facility on the Five Year Facility
Termination Date) shall be accompanied by payment of all outstanding
Revolving Credit Loans and Swingline Loans made under the Five Year
Facility (and furnishing of cash collateral satisfactory to the
Administrative Agent for all L/C Obligations) and shall result in the
termination of the Five Year Facility Commitment and the Five Year
Facility. If the reduction of the Five Year Facility Commitment
requires the repayment of any Offshore Rate Loan, such repayment shall
be accompanied by any amount required to be paid pursuant to Section
4.9 hereof. Notwithstanding anything herein to the contrary, the Five
Year Facility Commitment may not be permanently reduced by such an
amount so that after such reduction, the Five Year Facility Commitment
is less than the aggregate amount of all unpaid principal of and
interest on outstanding Competitive Bid Loans made under the Five Year
Facility.
(c) Commitment Increases. Subject to the terms and conditions set forth
herein, upon 30 days' advance written notice to the Administrative Agent, the
Company shall have the right, at any time and from time to time from the Closing
Date until the termination of the Aggregate Revolving Credit Commitment (but no
more than once a year, with each year for purposes hereof being deemed to begin
at Closing or an anniversary thereof), to increase the Aggregate Revolving
Credit Commitment to up to $400,000,000; provided that (i) the 364 Day Facility
Commitment and the Five Year Facility Commitment shall be increased on a pro
rata basis, (ii) any such increase shall be in a minimum principal amount of
$15,000,000 and an integral multiple of $5,000,000 in excess thereof, (iii) if
any Revolving Credit Loans are outstanding under a Credit Facility at the time
of any such increase, the Company shall make such payments and adjustments on
such Revolving Credit Loans (including payment of any break-funding amount owing
under Section 4.9) as are necessary to give effect to the revised commitment
percentages and commitment amounts of the Lenders and (iv) the conditions to an
Extension of Credit in Sections 5.2 shall be satisfied after giving effect to
any such increase. An increase in the Credit Facility hereunder shall be subject
to satisfaction of the following: (A) the amount of such increase shall be
offered first to the existing Lenders, (B) each existing Lender shall have the
right, but not the obligation, to commit to all or a portion of the proposed
increase to the respective Credit Facilities on a pro rata basis (based on its
then existing Commitments), (C) in the event the additional commitments which
such existing Lenders are willing to take shall exceed the amount requested by
the Company, then additional commitments shall be allocated in proportion to the
commitments of such existing Lenders willing to take additional commitments and
(D) if the amount of the additional commitments requested by the Company shall
exceed the additional commitments which the existing Lenders under such facility
are willing to take, then the Company may invite other commercial banks and
financial institutions reasonably acceptable to the Administrative Agent to join
this Agreement as Lenders hereunder for the portion of commitments not taken by
such existing Lenders, provided that (i) the minimum commitment of each such
institution equals or exceeds the smallest Commitment of an existing Lender
prior to the increase to the Credit Facility and (ii) such institutions shall
enter into such joinder agreements to give effect thereto as the Administrative
Agent and/or the Company may
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reasonably request. In connection with any increase in, or new, Commitments
pursuant to this Section, Schedule 1.1(a) hereto shall be revised to reflect the
modified commitment percentages and commitments of the Lenders.
SECTION 2.8 TERMINATION; EXTENSION OPTIONS.
(a) Termination of 364 Day Facility. The 364 Day Facility shall
terminate on the earliest of (a) the 364 Day Facility Specified Maturity Date,
(b) the date of termination of the 364 Day Facility Commitment by the Company
pursuant to Section 2.7(a), and (c) the date of termination by the
Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a).
(b) Termination of Five Year Facility. The Five Year Facility
shall terminate on the earliest of (a) the Five Year Facility Specified Maturity
Date, (b) the date of termination of the Five Year Facility Commitment by the
Company pursuant to Section 2.7(a), and (c) the date of termination by the
Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a).
(c) 364 Day Facility Extension Option. Not earlier than the date
60 days prior to, nor later than the date 30 days prior to, the 364 Day Facility
Specified Maturity Date then in effect, the Company may deliver to the
Administrative Agent (which shall promptly transmit to each Lender) a notice
requesting that the 364 Day Facility Specified Maturity Date be extended for an
additional 364 day period. Within 15 days after its receipt of any such notice,
each Lender shall notify the Administrative Agent of its willingness or
unwillingness to so extend its 364 Day Facility Commitment. Any Lender that
shall fail to so notify the Administrative Agent within such period shall be
deemed to have declined to extend its 364 Day Facility Commitment. If Lenders
holding a majority in amount of the aggregate 364 Day Facility Commitment (as of
the date such 15-day notice period expires) agree to extend their 364 Day
Facility Commitments, the Administrative Agent shall so notify the Company and
each Lender that shall have consented to such request, whereupon (i) the
respective 364 Day Facility Commitments of such consenting Lenders shall without
further act be extended for an additional 364 day period, (ii) the term "364 Day
Facility Specified Maturity Date" shall thenceforth mean, as to the Loans of
such consenting Lenders under the 364 Day Facility, the last day of such
additional 364 day period and (iii) the 364 Day Facility Commitments of the
non-extending Lenders shall terminate on the 364 Day Facility Specified Maturity
Date in effect prior to such extension and the Loans and other amounts owed to
such Lenders shall become due and payable on such date. If Lenders holding a
majority (i.e., greater than 50%) in amount of the aggregate 364 Day Facility
Commitment (as of the date such 15-day notice period expires) shall not have
agreed to extend their 364 Day Facility Commitments, then none of the 364 Day
Facility Commitments shall be extended and the 364 Day Facility Specified
Maturity Date shall remain unchanged.
(d) Five Year Facility Extension Option. Not earlier than the date
60 days prior to, nor later than the date 30 days prior to, the Five Year
Facility Specified Maturity Date then in effect, the Company may deliver to the
Administrative Agent (which shall promptly transmit to each Lender) a notice
requesting that the Five Year Facility Specified Maturity Date be extended for
an additional 364 day period. Within 15 days after its receipt of any such
notice, each Lender shall notify the Administrative Agent of its willingness or
unwillingness to so extend its Five Year Facility Commitment. Any Lender that
shall fail to so notify the Administrative Agent
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within such period shall be deemed to have declined to extend its Five Year
Facility Commitment. If Lenders holding a majority in amount of the aggregate
Five Year Facility Commitment (as of the date such 15-day notice period expires)
agree to extend their Five Year Facility Commitments, the Administrative Agent
shall so notify the Company and each Lender that shall have consented to such
request, whereupon (i) the respective Five Year Facility Commitments of such
consenting Lenders shall without further act be extended for an additional 364
day period, (ii) the term "Five Year Facility Specified Maturity Date" shall
thenceforth mean, as to the Loans of such consenting Lenders under the Five Year
Facility, the last day of such additional 364 day period and (iii) the Five Year
Facility Commitments of the non-extending Lenders shall terminate on the Five
Year Facility Specified Maturity Date in effect prior to such extension and the
Loans and other amounts owed to such Lenders shall become due and payable on
such date. If Lenders holding a majority (i.e., greater than 50%) in amount of
the aggregate Five Year Facility Commitment (as of the date such 15-day notice
period expires) shall not have agreed to extend their Five Year Facility
Commitments, then none of the Five Year Facility Commitments shall be extended
and the Five Year Facility Specified Maturity Date shall remain unchanged.
SECTION 2.9 UTILIZATION OF REVOLVING COMMITMENTS IN OFFSHORE
CURRENCIES.
(a) The Administrative Agent will determine the Dollar Equivalent
amount with respect to any (i) Revolving Credit Loan or Competitive Bid Loan
that is an Offshore Currency Loan as of the requested borrowing date and as of
any requested continuation date and (ii) outstanding Offshore Currency Loans as
of the last Business Day of each month, and, during the occurrence and
continuation of an Event of Default, such other dates as may be requested by the
Required Lenders (but in no event more frequently than once a week) (each such
date under clause (i) and (ii), a "Determination Date").
(b) The Lenders shall be under no obligation to make Revolving
Credit Loans in a requested Offshore Currency if the Administrative Agent has
received notice from the Required Lenders by 12:30 p.m. (Charlotte time) three
Business Days prior to the date of a requested borrowing of an Offshore Currency
Loan that deposits in the relevant Offshore Currency (in the applicable amounts)
are not being offered to such Lenders in the interbank eurocurrency market for
such Interest Period in which event the Administrative Agent will give notice to
the Borrower requesting such Offshore Currency Loan no later than 1:30 p.m.
(Charlotte time) on the third Business Day prior to the requested date of such
borrowing that the borrowing in the requested Offshore Currency is not then
available, and notice thereof will also be given promptly by the Administrative
Agent to the Lenders. If the Administrative Agent shall have notified the
Borrower that any requested Offshore Currency Loan is not then available, the
Notice of Revolving Credit Borrowing relating to such requested Offshore
Currency Loan shall be deemed to be withdrawn, the borrowing requested therein
shall not occur and the Administrative Agent will promptly so notify each
Lender.
(c) In the case of a proposed continuation of an Offshore Currency
Loan for an additional Interest Period pursuant to Section 4.2, the Lenders
shall be under no obligation to continue such Offshore Currency Loan if the
Administrative Agent has received notice from the Required Lenders by 12:30 p.m.
(Charlotte time) two Business Days prior to the requested date
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of such continuation that deposits in the relevant Offshore Currency (in the
applicable amounts) are not being offered to such Lenders in the interbank
eurocurrency market for such Interest Period in which event the Administrative
Agent will give notice to the Borrower requesting such continuation no later
than 1:30 p.m. (Charlotte time) on the second Business Day prior to the
requested date of such continuation that the continuation of such Offshore
Currency Loan is not then available, and notice thereof will also be given
promptly by the Administrative Agent to the Lenders. If the Administrative Agent
shall have notified the Borrower requesting continuation of an Offshore Currency
Loan that the requested continuation is not then available, the Notice of
Continuation with respect thereto shall be deemed to be withdrawn and such
Offshore Currency Loan shall be repaid on the last day of the Interest Period
with respect thereto.
(d) Notwithstanding anything herein to the contrary, during the
existence of a payment Default or an Event of Default, and at the request of the
Required Lenders (or, in the case of a Competitive Bid Loan made in an Offshore
Currency, the Lender that has made such Loan), all or any part of outstanding
Offshore Currency Loans shall be redenominated and converted into their Dollar
Equivalent of Base Rate Loans in Dollars on the last day of the Interest Period
applicable to any such Offshore Currency Loans. The Administrative Agent will
promptly notify the Company and the Lenders of any such redenomination and
conversion request.
(e) The Company shall be entitled to request that Revolving Credit
Loans hereunder also be permitted to be made to a Borrower in any other lawful
currency (other than Dollars), in addition to the currencies specified in the
definition of "Offshore Currency" in Section 1.1, that in the opinion of the
Administrative Agent and all of the Lenders is at such time freely traded in the
offshore interbank foreign exchange markets, freely transferable and freely
convertible into Dollars and readily utilized for the settlement of private
international debt transactions (an "Agreed Alternative Currency"). The Company
shall deliver in writing to the Administrative Agent any request for designation
of an Agreed Alternative Currency in accordance with Section 13.1, to be
received by the Administrative Agent not later than 11:00 a.m. (Charlotte time)
at least 10 Business Days in advance of the date of any borrowing hereunder
proposed to be made in such Agreed Alternative Currency. Upon receipt of any
such request the Administrative Agent will promptly notify the Lenders thereof,
and each Lender will use its commercially reasonable efforts to respond to such
request within five (5) Business Days of receipt thereof. Each Lender may grant
or accept such request in its sole discretion. The Administrative Agent will
promptly notify the Company of the acceptance or rejection of any such request.
SECTION 2.10 DESIGNATED BORROWERS.
(a) Addition of Designated Borrower. The Company may request
designation of any of its Foreign Subsidiaries (an "Applicant Borrower") as a
Designated Borrower hereunder by delivery of such a request to the
Administrative Agent together with an executed copy of a Borrower Joinder
Agreement in substantially the form attached hereto as Exhibit E. The
Administrative Agent will promptly notify the Lenders of any such request
together with a copy of the Borrower Joinder Agreement executed by the Applicant
Borrower. The joinder of each Applicant Borrower as a designated Borrower will
be subject to delivery of executed promissory notes, if any, required in
connection therewith, and supporting resolutions, articles of
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incorporation, incumbency certificates, opinions of counsel and such other items
as the Administrative Agent and/or the Required Lenders may reasonably request.
Any such addition of a Designated Borrower shall be effective five Business Days
after receipt by the Administrative Agent of the items required by the
Administrative Agent and/or the Required Lenders in connection therewith. Such
Designated Borrower shall thereupon become a party hereto and a Designated
Borrower hereunder and shall be (i) entitled to all rights and benefits of a
Borrower hereunder and under each instrument executed pursuant hereto and (ii)
subject to all obligations of a Borrower hereunder and thereunder.
(b) Removal of a Designated Borrower. The Company may request that
any of its Foreign Subsidiaries that is a Designated Borrower hereunder cease to
be a Designated Borrower by delivering to the Administrative Agent (which shall
promptly deliver copies thereof to each Lender) a written notice to such effect.
Such Designated Borrower shall cease to be a Borrower hereunder on the later to
occur of (i) the date the Administrative Agent receives such request and (ii)
the date such Borrower has paid all of its Loans and all accrued and unpaid
interest, fees and other obligations hereunder or in connection herewith.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C COMMITMENT.
Subject to the terms and conditions hereof, each Issuing Lender, in
reliance on the agreements of the other Lenders set forth in Section 3.4(a),
agrees to issue standby and/or trade letters of credit ("Letters of Credit") for
the respective accounts of the Borrowers on any Business Day from the Closing
Date through but not including the Five Year Facility Termination Date in such
form as may be approved from time to time by such Issuing Lender; provided, that
no Issuing Lender shall have any obligation to issue any Letter of Credit if,
after giving effect to such issuance, (a) the L/C Obligations would exceed the
L/C Commitment or (b) the sum of (i) the aggregate principal Dollar Equivalent
amount of outstanding Revolving Credit Loans made under the Five Year Facility,
(ii) the aggregate principal amount of outstanding Swingline Loans made under
the Five Year Facility, (iii) the aggregate principal amount of L/C Obligations
and (iv) the aggregate principal amount of Competitive Bid Loans made under the
Five Year Facility, would exceed the Five Year Facility Commitment. Each Letter
of Credit shall (A) be denominated in Dollars, (B) be a letter of credit issued
to support obligations of a Borrower or any of its Subsidiaries, contingent or
otherwise, incurred in the ordinary course of business, (C) expire on a date no
later than one year from the date of issuance thereof and no later than the Five
Year Facility Termination Date and (D) be subject to the Uniform Customs and, to
the extent not inconsistent therewith, the laws of the State in which the
corporate headquarters of the relevant Issuing Lender is located or such other
jurisdiction as is acceptable to the relevant Issuing Lender. No Issuing Lender
shall at any time be obligated to issue any Letter of Credit hereunder if such
issuance would conflict with, or cause such Issuing Lender or any L/C
Participant to exceed any limits imposed by, any Applicable Law. References
herein
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to "issue" and derivations thereof with respect to Letters of Credit shall also
include extensions or modifications of any existing Letters of Credit, unless
the context otherwise requires.
SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT.
Any Borrower may from time to time request that any Issuing Lender
issue a Letter of Credit (or amend, extend or renew an outstanding Letter of
Credit) by delivering to such Issuing Lender at any Issuing Lender's office at
any address mutually acceptable to such Borrower and such Issuing Lender an L/C
Application therefor, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as such
Issuing Lender may reasonably request. The L/C Application will contain a
representation and warranty that the conditions specified in Section 5.3 hereof
have been satisfied or waived in writing by the Administrative Agent as of the
date of the L/C Application. Upon receipt of any L/C Application, such Issuing
Lender shall process such L/C Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall, subject to Section 3.1, this
Section 3.2 and Article V hereof, promptly issue the Letter of Credit (or amend,
extend or renew the outstanding Letter of Credit) requested thereby (but in no
event shall any Issuing Lender be required to issue any Letter of Credit (or
amend, extend or renew an outstanding Letter of Credit) earlier than three (3)
Business Days after its receipt of the L/C Application therefor and all such
other certificates, documents and other papers and information relating thereto)
by issuing the original of such Letter of Credit to the beneficiary thereof or
as otherwise may be agreed by such Issuing Lender and the Borrower submitting
the L/C Application. Within fifteen (15) Business Days after the end of each
calendar quarter, each Issuing Lender shall report to each Lender all Letters of
Credit issued by it during the previous calendar quarter and the average daily
undrawn and unexpired amounts for all Letters of Credit for each day in such
calendar quarter.
SECTION 3.3 FEES AND OTHER CHARGES.
(a) The Borrowers agree to pay to each Issuing Lender, for the
account of such Issuing Lender and the L/C Participants, a letter of credit fee
(the "L/C Fee") with respect to each Letter of Credit issued by such Issuing
Lender in an amount equal to the Applicable Percentage for L/C Fee times the
average daily undrawn amount of such issued Letters of Credit as reported by
such Issuing Lender pursuant to Section 3.2. Such fee shall be payable quarterly
in arrears on the last Business Day of each calendar quarter, commencing on the
first of such dates to occur after the Closing, and on the Five Year Facility
Termination Date.
(b) Each Issuing Lender shall, promptly following its receipt
thereof, distribute to the L/C Participants the L/C Fees received by such
Issuing Lender in accordance with their respective Five Year Facility Commitment
Percentages.
(c) In addition to the L/C Fees, each Borrower agrees to pay to
the relevant Issuing Lender that has issued a Letter of Credit at the request of
such Borrower, for such Issuing Lender's own account without sharing by the
other Lenders, (i) such fronting and negotiation fees as may be mutually agreed
upon by such Issuing Lender and the Company from time to time and (ii) customary
charges of such Issuing Lender with respect to the issuance, amendment,
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transfer, administration, cancellation and conversion of, and drawings under,
such Letters of Credit.
SECTION 3.4 L/C PARTICIPATIONS.
(a) Each Issuing Lender irrevocably agrees to grant and hereby
grants to each L/C Participant, and, to induce such Issuing Lender to issue
Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from such Issuing Lender, on the
terms and conditions hereinafter stated, for such L/C Participant's own account
and risk, an undivided interest equal to such L/C Participant's Five Year
Facility Commitment Percentage in such Issuing Lender's obligations and rights
under each Letter of Credit issued hereunder and the amount of each draft paid
by such Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with each Issuing Lender that, if a draft is paid under any
Letter of Credit for which such Issuing Lender is not reimbursed in full by the
Borrowers in accordance with the terms of this Agreement, such L/C Participant
shall pay to such Issuing Lender upon demand at such Issuing Lender's address
for notices specified herein an amount equal to such L/C Participant's Five Year
Facility Commitment Percentage of the amount of such draft, or any part thereof,
which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any
L/C Participant to any Issuing Lender pursuant to Section 3.4(a) in respect of
any unreimbursed portion of any payment made by such Issuing Lender under any
Letter of Credit, the Administrative Agent shall notify each L/C Participant of
the amount and due date of such required payment and such L/C Participant shall
pay to such Issuing Lender the amount specified on the applicable due date. If
any such amount is paid to such Issuing Lender after the date such payment is
due, such L/C Participant shall pay to such Issuing Lender on demand, in
addition to such amount, the product of (i) such amount, times (ii) the daily
average Federal Funds Rate as determined by the Administrative Agent during the
period from and including the date such payment is due to the date on which such
payment is immediately available to such Issuing Lender, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. A certificate of any Issuing Lender with
respect to any amounts owing under this Section 3.4(b) shall be conclusive in
the absence of manifest error. With respect to payment to any Issuing Lender of
the unreimbursed amounts described in this Section 3.4(b), if the L/C
Participants receive notice that any such payment is due (A) prior to 1:00 p.m.
(Charlotte time) on any Business Day, such payment shall be due that Business
Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment
shall be due on the following Business Day.
(c) Whenever, at any time after any Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
Five Year Facility Commitment Percentage of such payment in accordance with this
Section 3.4, such Issuing Lender receives any payment related to such Letter of
Credit (whether directly from a Borrower or otherwise, or any payment of
interest on account thereof), such Issuing Lender will distribute to such L/C
Participant its pro rata share thereof in accordance with such L/C Participant's
Five Year Facility Commitment Percentage; provided, that in the event that any
such payment received by such Issuing Lender shall be required to be returned by
such Issuing Lender, such L/C Participant
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shall return to such Issuing Lender the portion thereof previously distributed
by such Issuing Lender to it.
SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWERS.
Each Borrower agrees to reimburse each Issuing Lender on each date such
Issuing Lender notifies such Borrower of the date and amount of a draft paid
under any Letter of Credit requested by such Borrower for the amount of (i) such
draft so paid and (ii) any taxes, fees, charges or other costs or expenses
incurred by any Issuing Lender in connection with such payment. Each such
payment shall be made to any Issuing Lender at its address for notices specified
herein in lawful money of the United States and in immediately available funds.
Interest shall be payable on any and all amounts remaining unpaid by any
Borrower under this Article III from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding Base Rate Loans which were
then overdue. If any Borrower fails to timely reimburse such Issuing Lender on
the date such Borrower receives the notice referred to in this Section 3.5, such
Borrower shall be deemed to have timely given a Notice of Revolving Credit
Borrowing pursuant to Section 2.2 hereunder to the Administrative Agent
requesting the Lenders to make a Base Rate Loan under the Five Year Facility on
such date in an amount equal to the amount of such draft paid, together with any
taxes, fees, charges or other costs or expenses incurred by any Issuing Lender
and to be reimbursed pursuant to this Section 3.5 and, regardless of whether or
not the conditions precedent specified in Article VI have been satisfied, the
Lenders shall make Base Rate Loans in such amount, the proceeds of which shall
be applied to reimburse such Issuing Lender for the amount of the related
drawing and costs and expenses. Notwithstanding the foregoing, nothing in this
Section 3.5 shall obligate the Lenders to make such Base Rate Loans if the
making of such Base Rate Loans would violate the automatic stay under federal
bankruptcy laws.
SECTION 3.6 OBLIGATIONS ABSOLUTE.
Each Borrower's obligations under this Article III (including without
limitation the Reimbursement Obligation) shall be absolute and unconditional
under any and all circumstances and irrespective of any set-off, counterclaim or
defense to payment which such Borrower may have or have had against any Issuing
Lender or any beneficiary of a Letter of Credit. Each Borrower also agrees with
each Issuing Lender that no Issuing Lender shall be responsible for, and such
Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among such Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of such Borrower against
any beneficiary of such Letter of Credit or any such transferee. No Issuing
Lender shall be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by such Issuing Lender's gross negligence or willful
misconduct. Each Borrower agrees that any action taken or omitted by any Issuing
Lender under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of
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gross negligence or willful misconduct and in accordance with the standards of
care specified in the Uniform Customs and, to the extent not inconsistent
therewith, the UCC shall be binding on such Borrower and shall not result in any
liability of any Issuing Lender to such Borrower. The responsibility of each
Issuing Lender to any Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
SECTION 3.7 EFFECT OF L/C APPLICATION.
To the extent that any provision of any L/C Application related to any
Letter of Credit is inconsistent with the provisions of this Article III, the
provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 INTEREST.
(a) Interest Rate Options. Subject to the provisions of this
Section 4.1, at the election of a Borrower, the aggregate principal balance of
any Revolving Credit Loans and Swingline Loans (if the Swingline Lender consents
to such election) shall bear interest at (i) the Base Rate or (ii) the Offshore
Rate plus the Applicable Percentage for Offshore Rate Loans under the 364 Day
Facility or the Five Year Facility, as applicable; provided that such interest
rate shall be increased by any amount required pursuant to Section 4.1(f). Such
Borrower shall select the rate of interest, Interest Period, if any, and
Applicable Currency, in the case of an Offshore Currency Loan, applicable to any
Revolving Credit Loan or Swingline Loan at the time a Notice of Revolving Credit
Borrowing is given pursuant to Section 2.2, or at the time a Notice of Swingline
Borrowing is given pursuant to Section 2.6(d) or at the time a Notice of
Conversion/Continuation is given pursuant to Section 4.2. Each Revolving Credit
Loan, Swingline Loan, or portion thereof bearing interest based on the Base Rate
shall be a "Base Rate Loan," and each Revolving Credit Loan, Swingline Loan, or
portion thereof bearing interest based on the Offshore Rate shall be an
"Offshore Rate Loan." Any Revolving Credit Loan or Swingline Loan or any portion
thereof as to which the Borrower requesting such Revolving Credit Loan or
Swingline Loan has not duly specified an interest rate as provided herein shall
be deemed a Base Rate Loan. A Competitive Bid Loan will bear interest at the
Competitive Bid Rate specified in the Competitive Bid accepted by the Borrower
with respect to such Competitive Bid Loan.
(b) Interest Periods. In connection with each Offshore Rate Loan
and each Competitive Bid Loan, a Borrower, by giving notice at the times
described in Section 4.1(a), shall elect an interest period (each, an "Interest
Period") to be applicable to such Revolving Credit Loan or such Competitive Bid
Loan, which Interest Period shall, unless otherwise agreed by the Administrative
Agent and the Lenders, be a period of one (1), two (2), three (3), or, if
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available to all Lenders for the requested Available Currency, six (6) months
with respect to each Offshore Rate Loan and a period of seven (7) days to 183
days with respect to each Competitive Bid Loan; provided that:
(i) the Interest Period shall commence on the date of advance of
or conversion to any Offshore Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall
commence on the date on which the next preceding Interest Period
expires;
(ii) if any Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period with
respect to an Offshore Rate Loan would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day;
(iii) any Interest Period with respect to an Offshore Rate Loan
that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month at the end of such Interest
Period;
(iv) no Interest Period shall extend beyond the Termination Date
of the facility under which the Offshore Rate Loan or Competitive Bid
Loan with respect to which such Interest Period relates was made; and
(v) there shall be no more than six (6) Offshore Rate Loans
outstanding hereunder at any time (it being understood that, for
purposes hereof, Offshore Rate Loans with different Interest Periods
shall be considered as separate Offshore Rate Loans, even if they begin
on the same date, although borrowings, extensions and conversions may,
in accordance with the provisions hereof, be combined by a Borrower at
the end of existing Interest Periods to constitute a new Offshore Rate
Loan with a single Interest Period).
(c) Default Rate, etc. Subject to Section 11.3, at the discretion
of the Administrative Agent and the Required Lenders, upon the occurrence and
during the continuance of an Event of Default, (i) the Borrowers shall no longer
have the option to request Offshore Rate Loans, (ii) all outstanding Offshore
Rate Loans shall bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to such Offshore Rate Loans until the end of
the applicable Interest Period and thereafter at a rate equal to two percent
(2%) in excess of the rate then applicable to Base Rate Loans, (iii) all
outstanding Base Rate Loans shall bear interest at a rate per annum equal to two
percent (2%) in excess of the rate then applicable to Base Rate Loans and (iv)
each outstanding Competitive Bid Loan shall bear interest at a rate per annum
equal to two percent (2%) in excess of the rate then applicable to such
Competitive Bid Loan. Interest shall continue to accrue on the amount of Loans
outstanding after the filing by or against a Borrower of any petition seeking
any relief in bankruptcy or under any act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign.
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(d) Interest Payment and Computation. Interest on each Base Rate
Loan shall be payable in arrears on the last Business Day of each calendar
quarter commencing on the first of such dates to occur after the Closing Date,
and interest on each Offshore Rate Loan and each Competitive Bid Loan shall be
payable on the last day of each Interest Period applicable thereto, and if such
Interest Period exceeds three (3) months, at the end of each three (3) month
interval during such Interest Period. Interest on all Loans and all fees payable
hereunder shall be computed on the basis of a 360-day year (or, with respect to
Offshore Currency Loans, such alternative basis as the Administrative Agent
reasonably determines to be consistent with market practice) and assessed for
the actual number of days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option (i) promptly refund to the Borrowers any interest received by
Lenders in excess of the maximum lawful rate or (ii) shall apply such excess to
the principal balance of the Obligations. It is the intent hereof that the
Borrowers not pay or contract to pay, and that neither the Administrative Agent
nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrowers
under Applicable Law.
(f) Additional Interest on Loans.
(i) Utilization Fee. In the case of all Loans, on each day that
the aggregate principal amount of all outstanding Loans exceeds 50% of
the Aggregate Revolving Credit Commitment, the otherwise applicable
interest rate determined pursuant to Section 4.1(a) shall be increased
by the Utilization Fee.
(ii) Mandatory Costs. In the case of a Revolving Credit Loan
that is an Offshore Currency Loan, the otherwise applicable interest
rate determined pursuant to Section 4.1(a) shall be increased by (A)
the MLA Cost associated with such Loan, computed in the manner set
forth in Schedule 4.1(f) attached hereto and/or (B) any other
applicable regulatory or central banking requirement relating to any
Loan made through a branch in the jurisdiction of the currency of that
Loan.
SECTION 4.2 CONVERSION AND CONTINUATION OF REVOLVING CREDIT
LOANS.
Provided that no Event of Default has occurred and is then continuing,
and subject to the terms of this Agreement, any Borrower shall have the option
(a) to convert all or any portion of its outstanding Base Rate Loans in a
principal amount equal to $5,000,000 or any whole multiple of $1,000,000 in
excess thereof into one or more Offshore Rate Loans denominated in Dollars or an
Offshore Currency and (b)(i) to convert all or any part of its outstanding
Offshore Rate Loans in a principal amount equal to $1,000,000 or a whole
multiple of $500,000 in excess thereof into
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Base Rate Loans denominated in Dollars or (ii) to continue Offshore Rate Loans,
whether denominated in Dollars or Offshore Currency Loans, as Offshore Rate
Loans in the same currency for an additional Interest Period; provided that if
any conversion or continuation is made prior to the expiration of any Interest
Period, such Borrower shall pay any amount required to be paid pursuant to
Section 4.9 hereof. Whenever a Borrower desires to convert or continue Revolving
Credit Loans or Swingline Loans as provided above, such Borrower shall give the
Administrative Agent irrevocable prior written notice in the form attached as
Exhibit F (a "Notice of Conversion/Continuation") not later than 11:00 a.m.
(Charlotte time) three (3) Business Days before the day on which a proposed
conversion or continuation of such Revolving Credit Loan or Swingline Loan is to
be effective (except in the case of a conversion of an Offshore Rate Loan
denominated in Dollars to a Base Rate Loan, in which case same day notice not
later than 11:00 a.m. (Charlotte time) by the Borrower shall be sufficient)
specifying (A) the Revolving Credit Loans or Swingline Loans to be converted or
continued, the facility under which such Loans were made and, in the case of any
Offshore Rate Loan to be converted or continued, the last day of the Interest
Period therefor, (B) the effective date of such conversion or continuation
(which shall be a Business Day), (C) the principal Dollar Equivalent amount of
such Revolving Credit Loans to be converted or continued, (D) the Interest
Period to be applicable to such converted or continued Offshore Rate Loan and
(E) in the case of any continued Offshore Rate Loan which is an Offshore
Currency Loan, the Applicable Currency. The Administrative Agent shall promptly
notify the Lenders of such Notice of Conversion/Continuation.
SECTION 4.3 FACILITY FEES.
(a) 364 Day Facility. The Borrowers agree to pay to the
Administrative Agent, for the account of the Lenders, a non-refundable facility
fee (the "364 Day Facility Fee") at a rate per annum equal to the Applicable
Percentage for Facility Fee for the 364 Day Facility on the average daily amount
of the aggregate 364 Day Facility Commitment during the applicable period,
regardless of usage. The 364 Day Facility Fee shall apply to the period
commencing on the Closing Date and ending on the termination of the 364 Day
Facility Commitment and shall be payable in arrears on the last Business Day of
each calendar quarter for the immediately preceding calendar quarter (or portion
thereof), beginning with the first such date to occur after the Closing Date.
Such 364 Day Facility Fee shall be distributed by the Administrative Agent to
the Lenders pro rata in accordance with the Lenders' respective 364 Day Facility
Commitment Percentages.
(b) Five Year Facility. The Borrowers agree to pay to the
Administrative Agent, for the account of the Lenders, a non-refundable facility
fee (the "Five Year Facility Fee") at a rate per annum equal to the Applicable
Percentage for Facility Fee for the Five Year Facility on the average daily
amount of the aggregate Five Year Facility Commitment during the applicable
period, regardless of usage. The Five Year Facility Fee shall apply to the
period commencing on the Closing Date and ending on the termination of the Five
Year Facility Commitment and shall be payable in arrears on the last Business
Day of each calendar quarter for the immediately preceding calendar quarter (or
portion thereof), beginning with the first such date to occur after the Closing
Date. Such Five Year Facility Fee shall be distributed by the Administrative
Agent to the Lenders pro rata in accordance with the Lenders' respective Five
Year Facility Commitment Percentages.
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SECTION 4.4 MANNER OF PAYMENT.
Each payment by a Credit Party on account of the principal of or
interest on the Loans or of any fee, commission or other amounts (including the
Reimbursement Obligation) payable to the Lenders under this Agreement or any
Note shall be made on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lenders (other than as set forth below), in Dollars (other than as set forth
below), in immediately available funds and shall be made without any set-off,
counterclaim or deduction whatsoever. Payment of principal of, interest on or
any other amount relating to any Offshore Currency Loan shall be made in the
Offshore Currency in which such Loan is denominated or payable. Such payments,
if denominated in Dollars, shall be made no later than 2:00 p.m. (Charlotte
time) on the relevant date and, if denominated in an Offshore Currency, by such
time as the Administrative Agent may determine to be necessary for such funds to
be credited on such date in accordance with normal banking practices in the
place of payment. Any payment denominated in Dollars received after 1:00 p.m.
(Charlotte time) but before 2:00 p.m. (Charlotte time) on a due date shall be
deemed a payment on such date for the purposes of Section 11.1, but for all
other purposes shall be deemed to have been made on the next succeeding Business
Day. Any payment denominated in Dollars received after 2:00 p.m. (Charlotte
time), or any payment denominated in an Offshore Currency received after the
relevant time determined by the Administrative Agent, shall be deemed to have
been made on the next succeeding Business Day for all purposes. Each payment to
the Administrative Agent of the L/C Fees shall be made in like manner, but for
the account of the Issuing Lenders and the L/C Participants. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any Lender
under Section 2.5, 2.6, 4.8, 4.9, 4.10, 4.11 or 13.2 shall be paid to the
Administrative Agent for the account of the applicable Lender. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Lender to such Lender promptly following receipt thereof
and shall wire advice of the amount of such credit to such Lender. Subject to
Section 4.l(b)(ii), if any payment under this Agreement or any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time shall
in such case be included in computing any interest if payable along with such
payment.
SECTION 4.5 CREDITING OF PAYMENTS AND PROCEEDS.
In the event that any Credit Party shall fail to pay any of the
Obligations when due and the Obligations have been accelerated pursuant to
Section 11.2, all payments received by the Lenders upon the Notes and the other
Obligations and all net proceeds from the enforcement of the Obligations shall
be applied first to all expenses then due and payable by the Credit Parties
hereunder, then to all indemnity obligations then due and payable by the Credit
Parties hereunder, then to all Administrative Agent's fees then due and payable,
then to all commitment and other fees and commissions then due and payable, then
to accrued and unpaid interest on the Notes, the Reimbursement Obligations and
any termination payments due in respect of a Hedging Agreement with any Lender
or Affiliate of a Lender (which Hedging Agreement is permitted hereunder) (pro
rata in accordance with all such amounts due), then to the principal
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amount of the Notes and Reimbursement Obligations (pro rata in accordance with
all such amounts due) and then to the cash collateral account described in
Section 11.2(b) hereof to the extent of any L/C Obligations then outstanding, in
that order.
SECTION 4.6 ADJUSTMENTS.
If any Lender (a "Benefited Lender") shall at any time receive any
payment of all or part of the Obligations owing to it, or interest thereon, or
if any Lender shall at any time receive any collateral in respect to the
Obligations owing to it (whether voluntarily or involuntarily, by set- off or
otherwise) in a greater proportion than any such payment to and collateral
received by any other Lender, if any, in respect of the Obligations owing to
such other Lender, or interest thereon, such Benefited Lender shall purchase for
cash from the other Lenders such portion of each such other Lender's Extensions
of Credit, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, that if all or any portion
of such excess payment or benefits is thereafter recovered from such Benefited
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned to the extent of such recovery, but without interest. Each Borrower
agrees that each Lender so purchasing a portion of another Lender's Extensions
of Credit may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
SECTION 4.7 NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS
OF CREDIT; ASSUMPTION BY THE ADMINISTRATIVE AGENT.
The obligations of the Lenders under this Agreement to make the Loans
and issue or participate in Letters of Credit are several and are not joint or
joint and several. Unless the Administrative Agent shall have received notice
from a Lender prior to a proposed borrowing date that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of the
Revolving Credit Loans to be borrowed, the amount of Competitive Bid Loans to be
made by such Lender or, if such Lender is the Swingline Lender, subject to
Section 2.6(a), the amount of Swingline Loans to be made, on such date (which
notice shall not release such Lender of its obligations hereunder), the
Administrative Agent may assume that such Lender has made such portion or amount
available to the Administrative Agent on the proposed borrowing date in
accordance with Sections 2.2(b), 2.5(f) and 2.6(e), and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower requesting
such borrowing on such date a corresponding amount. If such amount is made
available to the Administrative Agent on a date after such borrowing date, such
Lender shall pay to the Administrative Agent on demand an amount, until paid,
equal to the product of (a) the amount not made available by such Lender in
accordance with the terms hereof, times (b) the daily average Federal Funds Rate
during such period as determined by the Administrative Agent, times (c) a
fraction the numerator of which is the number of days that elapse from and
including such borrowing date to the date on which such amount not made
available by such Lender in accordance with the terms hereof shall have become
immediately available to the Administrative Agent and the denominator of which
is 360. A certificate of the Administrative Agent with respect to any amounts
owing under this Section 4.7 shall be conclusive, absent manifest error. If such
Lender's Commitment Percentage of such
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Revolving Credit Loans, the amount of Competitive Bid Loans made by such Lender,
or, if such Lender is the Swingline Lender, the amount of such Swingline Loans,
is not made available to the Administrative Agent by such Lender within three
(3) Business Days of such borrowing date, the Administrative Agent shall be
entitled to recover such amount made available by the Administrative Agent with
interest thereon at the rate per annum applicable to such borrowing, on demand,
from the Borrower which received such borrowing. The failure of any Lender to
make available its Commitment Percentage of any Revolving Credit Loan, the
amount of a Competitive Bid Loan or the amount of a Swingline Loan requested by
any Borrower shall not relieve it or any other Lender of its obligation
hereunder to make its Commitment Percentage of such Revolving Credit Loan, the
amount of the Competitive Bid Loan or the amount of the Swingline Loan,
respectively, available on the borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Revolving Credit Loan, the amount of such Competitive Bid
Loan or the amount of such Swingline Loan, available on the borrowing date.
SECTION 4.8 CHANGED CIRCUMSTANCES.
(a) Circumstances Affecting Offshore Rate Availability. If with
respect to any Interest Period: (i) the Administrative Agent or any Lender
(after consultation with the Administrative Agent) shall determine that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan or (ii) the Required Lenders reasonably determine (which determination
shall be conclusive) and notify the Administrative Agent that the LIBOR Rate
will not adequately and fairly reflect the cost to the Required Lenders of
funding Offshore Rate Loans for such Interest Period, then the Administrative
Agent shall forthwith give notice thereof to the Borrowers. Thereafter, until
the Administrative Agent notifies the Borrowers that such circumstances no
longer exist, the obligation of the Lenders to make Offshore Rate Loans and the
right of the Borrowers to convert any Revolving Credit Loan to or continue any
Revolving Credit Loan as an Offshore Rate Loan shall be suspended, and the
Borrowers shall repay in full (or cause to be repaid in full) the then
outstanding principal amount of each such Offshore Rate Loan together with
accrued interest thereon, on the last day of the then current Interest Period
applicable to such Offshore Rate Loan or convert the then outstanding principal
amount of each such Offshore Rate Loan to a Base Rate Loan as of the last day of
such Interest Period (Offshore Currency Loans which are not repaid shall be
redenominated and converted into their Dollar Equivalent of Base Rate Loans in
Dollars).
(b) Laws Affecting Offshore Rate Availability. If, after the date
hereof, the introduction of, or any change in, any Applicable Law or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any of their respective
Lending Offices) with any request or directive (whether or not having the force
of law) issued after the date hereof of any such Governmental Authority, central
bank or comparable agency, shall make it unlawful or impossible for any of the
Lenders (or any of their respective Lending Offices) to honor its obligations
hereunder to make or maintain any Offshore Rate Loan, such Lender shall promptly
give notice thereof to the Administrative Agent and the Administrative Agent
shall promptly give notice to the Borrowers and the other Lenders.
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Thereafter, until the Administrative Agent notifies the Borrowers that such
circumstances no longer exist, (i) the obligations of the affected Lenders to
make Offshore Rate Loans and the right of the Borrowers to convert any Revolving
Credit Loan of the affected Lenders or continue any Revolving Credit Loan of the
affected Lenders as an Offshore Rate Loan shall be suspended and thereafter the
Borrowers may select only Base Rate Loans hereunder, (ii) if any of the Lenders
may not lawfully continue to maintain an Offshore Rate Loan to the end of the
then current Interest Period applicable thereto as an Offshore Rate Loan, the
applicable Offshore Rate Loan of the affected Lenders shall immediately be
converted to a Base Rate Loan for the remainder of such Interest Period
(Offshore Currency Loans shall be redenominated and converted into their Dollar
Equivalent of Base Rate Loans in Dollars) and the Borrowers shall pay any amount
required to be paid pursuant to Section 4.9 in connection therewith and (iii) if
any of the Lenders may not lawfully continue to maintain a Competitive Bid Loan
which bears interest at a rate based on the Offshore Rate to the end of the then
current Interest Period applicable thereto at such rate of interest, such
Competitive Bid Loan of the affected Lender shall immediately be converted to a
Base Rate Loan for the remainder of such Interest Period. The Borrowers shall
repay the outstanding principal amount of any Competitive Bid Loans converted
into Base Rate Loans in accordance with clause (iii) of this Section 4.8(b),
together with all accrued but unpaid interest thereon and any amount required to
be paid pursuant to Section 4.9 hereof, on the last day of the Interest Period
applicable to such Competitive Bid Loans.
(c) Increased Costs. If, after the date hereof, the introduction
of, or any change in, any Applicable Law, or in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any of the Lenders (or any of their respective Lending Offices) with any
request or directive (whether or not having the force of law) issued after the
date hereof of such Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their respective
Lending Offices) to any tax, duty or other charge with respect to any
Note, Letter of Credit or L/C Application or shall change the basis of
taxation of payments to any of the Lenders (or any of their respective
Lending Offices) of the principal of or interest on any Note, Letter of
Credit or L/C Application or any other amounts due under this Agreement
in respect thereof (except for changes in the rate of tax on the
overall net income of any of the Lenders or any of their respective
Lending Offices imposed by the jurisdiction in which such Lender is
organized or is or should be qualified to do business or such Lending
Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System, other than those used to calculate the
LIBOR Rate), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any of the Lenders (or any of their respective
Lending Offices) or shall impose on any of the Lenders (or any of their
respective Lending Offices) or the foreign exchange and interbank
markets any other condition affecting any Note;
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and the result of any event of the kind described in the foregoing
clause (i) or this clause (ii), is to increase the costs to any of the
Lenders of maintaining any Offshore Rate Loan, Competitive Bid Loan or
issuing or participating in Letters of Credit or to reduce the yield or
amount of any sum received or receivable by any of the Lenders under
this Agreement or under the Notes or any Letter of Credit or L/C
Application, then such Lender may promptly notify the Administrative
Agent, and the Administrative Agent shall promptly notify the
respective Borrower of such fact and demand compensation therefor and,
within fifteen (15) days after such notice by the Administrative Agent,
such Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender or Lenders for such increased
cost or reduction. The Administrative Agent and the applicable Lender
will promptly notify the respective Borrower of any event of which it
has knowledge which will entitle such Lender to compensation pursuant
to this Section 4.8(c); provided that the Administrative Agent shall
incur no liability whatsoever to the Lenders or the Borrowers in the
event it fails to do so. The amount of such compensation shall be
determined, in the applicable Lender's reasonable discretion, based
upon the assumption that such Lender funded its Aggregate Revolving
Credit Commitment Percentage of the Offshore Rate Loans, or the amount
of any Competitive Bid Loans made by such Lender, in the London
interbank market and using any reasonable attribution or averaging
methods which such Lender deems appropriate and practical; provided
that no compensation shall be payable pursuant to the above if the
applicable Lender fails to demand compensation for such increased costs
within one-hundred eighty (180) days following the date on which such
Lender has actual knowledge of the event resulting in such increase. A
certificate of such Lender setting forth in reasonable detail the basis
for determining such amount or amounts necessary to compensate such
Lender shall be forwarded to the respective Borrower through the
Administrative Agent and shall be conclusively presumed to be correct
save for manifest error.
(d) Mitigation Obligations; Replacement of Lenders.
(i) Each Lender represents that, as of the Closing Date, it has
no knowledge of the likely occurrence of any event which will entitle
such Lender to compensation pursuant to this Section 4.8. If any Lender
requests compensation under this Section 4.8, or if the Borrowers are
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Sections 4.10 or
4.11, then such Lender shall use reasonable efforts to designate a
different lending office for funding or booking its Loans hereunder or
to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender,
such designation or assignment (A) would eliminate or reduce amounts
payable pursuant to this Section 4.8 or Sections 4.10 or 4.11, as the
case may be, in the future and (B) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous
to such Lender. The Borrowers agree to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation
or assignment.
(ii) If any Lender requests compensation under this Section 4.8,
or if the Borrowers are required to pay any additional amount to any
Lender or any Governmental
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Authority for the account of any Lender pursuant to Sections 4.10 or
4.11, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrowers may, at their sole expense and effort,
upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 13.10), all its
interests, rights and obligations under this Agreement to an Eligible
Assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided that (A)
the Borrowers shall have received the prior written consent of the
Administrative Agent (and, if an L/C Commitment is being assigned, the
Issuing Lender), which consent shall not unreasonably be withheld, (B)
such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in Letters of
Credit, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers
(in the case of all other amounts) and (C) in the case of any such
assignment resulting from a claim for compensation under this Section
4.8, such assignment will result in a material reduction in such
compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the
Borrowers to require such assignment and delegation cease to apply. If
a Lender defaults, the Borrowers do not waive any of their rights
against such Lender if a Borrower causes the defaulting Lender to
assign its position.
SECTION 4.9 INDEMNITY.
Each Borrower hereby indemnifies each of the Lenders against any loss
or expense which may arise or be attributable to each Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan (a) as a consequence of any failure by such Borrower to make
any payment when due of any amount due hereunder in connection with an Offshore
Rate Loan, (b) due to any failure of such Borrower to borrow on a date specified
therefor in a Notice of Revolving Credit Borrowing, Notice of Swingline
Borrowing, Competitive Bid Request or Notice of Continuation/Conversion or (c)
due to any payment, prepayment or conversion of any Offshore Rate Loan on a date
other than the last day of the Interest Period therefor. The amount of such loss
or expense shall be determined, in the applicable Lender's reasonable
discretion, based upon the assumption that such Lender funded its Commitment
Percentage of the Offshore Rate Loans in the London interbank market and using
any reasonable attribution or averaging methods which such Lender deems
appropriate and practical; provided that no compensation shall be payable
pursuant to the above if the applicable Lender fails to demand compensation for
such increased costs within one-hundred eighty (180) days following the date on
which such Lender has actual knowledge of the event resulting in such increase.
A certificate of such Lender setting forth in reasonable detail the basis for
determining such amount or amounts necessary to compensate such Lender shall be
forwarded to the respective Borrower through the Administrative Agent and shall
be conclusively presumed to be correct save for manifest error.
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SECTION 4.10 CAPITAL REQUIREMENTS.
If either (a) the introduction of, or any change in, or in the
interpretation of, any Applicable Law or (b) compliance with any guideline or
request issued after the date hereof from any central bank or comparable agency
or other Governmental Authority (whether or not having the force of law), has or
would have the effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, any
Lender or any corporation controlling such Lender as a consequence of, or with
reference to any Lender's 364 Day Facility Commitment or Five Year Facility
Commitment or with reference to the Swingline Lender's Swingline Commitment and
other commitments of this type, below the rate which the Lender or such other
corporation could have achieved but for such introduction, change or compliance,
then within five (5) Business Days after written demand by any such Lender, the
Borrowers shall pay to such Lender from time to time as specified by such Lender
additional amounts sufficient to compensate such Lender or other corporation for
such reduction; provided that no compensation shall be payable pursuant to the
above if the applicable Lender fails to demand compensation for such increased
costs within one-hundred eighty (180) days following the date on which such
Lender has actual knowledge of the event resulting in such increase. A
certificate of such Lender setting forth in reasonable detail the basis for
determining such amounts necessary to compensate such Lender shall be forwarded
to the Borrowers through the Administrative Agent and shall be conclusively
presumed to be correct save for manifest error. Each Lender represents that, as
of the Closing Date, it has no knowledge of the likely occurrence of any event
which will entitle such Lender to compensation pursuant to this Section 4.10.
SECTION 4.11 TAXES.
(a) Payments Free and Clear. Any and all payments by any Borrower
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholding, and all liabilities with respect
thereto excluding, (i) in the case of each Lender and the Administrative Agent,
income and franchise taxes imposed on (or measured by) its net income by the
United States of America or by the jurisdiction under the laws of which such
Lender or the Administrative Agent (as the case may be) is organized or its
principal office is located or is or should be qualified to do business or any
political subdivision thereof, or in the case of any Lender, in which its
applicable Lending Office is located (provided, however, that no Lender shall be
deemed to be located in any jurisdiction solely as a result of taking any action
related to this Agreement, the Notes or Letters of Credit) and (ii) any branch
profits tax imposed by the United States of America or any similar tax imposed
by any other jurisdiction described in clause (i) above (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note or Letter of Credit to any Lender or the Administrative Agent, (A) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.11) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the amount such party would have received had no
such deductions been made, (B) such Borrower shall make such deductions, (C)
such Borrower
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shall pay the full amount deducted to the relevant taxing authority or other
authority in accordance with applicable law, and (D) such Borrower shall deliver
to the Administrative Agent evidence of such payment to the relevant taxing
authority or other authority in the manner provided in Section 4.11(d). No
Borrower shall, however, be required to pay any amounts pursuant to clause (A)
of the preceding sentence to any Foreign Lender or the Administrative Agent not
organized under the laws of the United States of America or a state thereof (or
the District of Columbia) if such Foreign Lender or the Administrative Agent
fails to comply with the requirements of paragraph (e) of this Section 4.11 or
Section 4.8(d), as the case may be.
(b) Stamp and Other Taxes. In addition, the Borrowers shall pay
any present or future stamp, registration, recordation or documentary taxes or
any other similar fees or charges or excise or property taxes, levies of the
United States or any state or political subdivision thereof or any applicable
foreign jurisdiction which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Loans, the Letters of Credit, the other Loan Documents, or the
perfection of any rights or security interest in respect thereto (hereinafter
referred to as "Other Taxes").
(c) Indemnity. Each Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted. A
certificate as to the amount of such payment or liability prepared by a Lender
or the Administrative Agent, absent manifest error, shall be conclusive,
provided that if the Borrowers reasonably believe that such Taxes or Other Taxes
were not correctly or legally asserted, such Lender or the Administrative Agent
(as the case may be) shall use reasonable efforts to cooperate with the
Borrowers, at the Borrowers' expense, to obtain a refund of such Taxes or Other
Taxes. Such indemnification shall be made within thirty (30) days from the date
such Lender or the Administrative Agent (as the case may be) makes written
demand therefor. If a Lender or the Administrative Agent shall become aware that
it is entitled to receive a refund in respect of Taxes or Other Taxes, it
promptly shall notify the respective Borrower of the availability of such refund
and shall, within sixty (60) days after receipt of a request by such Borrower
pursue or timely claim such refund at such Borrower's expense. If any Lender or
the Administrative Agent receives a refund in respect of any Taxes or Other
Taxes for which such Lender or the Administrative Agent has received payment
from any Borrower hereunder, it promptly shall repay such refund (plus interest
received, if any) to such Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by such Borrower under this Section 4.11 with
respect to Taxes or Other Taxes giving rise to such refund), provided that such
Borrower, upon the request of such Lender or the Administrative Agent, agrees to
return such refund (plus any penalties, interest or other charges required to be
paid) to such Lender or the Administrative Agent in the event such Lender or the
Administrative Agent is required to repay such refund to the relevant taxing
authority.
(d) Evidence of Payment. Within thirty (30) days after the date of
any payment of Taxes or Other Taxes, the respective Borrower shall furnish to
the Administrative Agent, at its
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address referred to in Section 13.1, the original or a certified copy of a
receipt evidencing payment thereof or other evidence of payment satisfactory to
the Administrative Agent.
(e) Delivery of Tax Forms. Each Foreign Lender shall deliver to
the Borrowers, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Foreign Lender is entitled to a complete exemption from
withholding or deduction for or on account of any United States federal income
taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding taxes. Each Foreign Lender further agrees to deliver
to the Borrowers, with a copy to the Administrative Agent, a Form 1001 or 4224
and Form W-8 or W-9, or successor applicable forms or manner of certification,
as the case may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrowers, certifying in the case
of a Form 1001 or 4224 that such Foreign Lender is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes (unless in any such case an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders such
forms inapplicable or the exemption to which such forms relate unavailable and
such Foreign Lender notifies the Borrowers and the Administrative Agent that it
is not entitled to receive payments without deduction or withholding of United
States federal income taxes) and, in the case of a Form W-8 or W-9, establishing
an exemption from United States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrowers contained in this Section 4.11 shall survive the payment in full of
the Obligations and the termination of the 364 Day Facility Commitment and the
Five Year Facility Commitment, but shall be limited in duration to the
applicable statute of limitations for Taxes or Other Taxes for which
indemnification is sought.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 CLOSING.
The parties hereto shall execute and deliver this Agreement (the
"Closing") as of 9:00 a.m. (Charlotte time) on April 16, 1999 or on such other
date and at such other time as the parties hereto shall mutually agree (the
"Closing Date").
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SECTION 5.2 CONDITIONS TO CLOSING.
The obligations of the Lenders to close this Agreement are subject to
the satisfaction or waiver of each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Revolving Credit
Notes and all other applicable Loan Documents shall have been duly authorized,
executed and delivered to the Administrative Agent by the parties thereto, shall
be in full force and effect and no default (including without limitation a
Default) shall exist thereunder, and the Credit Parties shall have delivered
original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officers' Certificates. The Administrative Agent shall have
received a certificate from a Responsible Officer on behalf of each
Credit Party, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that all representations and
warranties of such Credit Party contained in this Agreement and the
other Loan Documents are true, correct and complete in all material
respects; that such Credit Party is not in violation of any of the
covenants contained in this Agreement and the other Loan Documents;
that, after giving effect to the transactions contemplated by this
Agreement, no Default or Event of Default has occurred and is
continuing; and that each of the closing conditions has been satisfied
or waived (assuming satisfaction of the Administrative Agent where not
advised otherwise).
(ii) General Certificates. The Administrative Agent shall have
received a certificate of the secretary, assistant secretary or general
counsel of each Credit Party certifying as to the incumbency and
genuineness of the signature of each officer of such Credit Party
executing Loan Documents to which it is a party and certifying that
attached thereto is a true, correct and complete copy of (A) the
articles of incorporation of such Credit Party and all amendments
thereto, certified as of a recent date by the appropriate Governmental
Authority in its jurisdiction of incorporation, (B) the bylaws of such
Credit Party as in effect on the date of such certifications, (C)
resolutions duly adopted by the Board of Directors of such Credit Party
authorizing, as applicable, the borrowings contemplated hereunder and
the execution, delivery and performance of this Agreement and the other
Loan Documents to which it is a party, and (D) each certificate
required to be delivered pursuant to Section 5.2(b)(iii).
(iii) Certificates of Good Standing. The Administrative Agent
shall have received long-form certificates as of a recent date of the
good standing of the Credit Parties and their Material Subsidiaries
under the laws of their respective jurisdictions of organization and
short-form certificates as of a recent date of the good standing of
each Borrower under the laws of each other jurisdiction where such
Borrower is qualified to do business and where a failure to be so
qualified could reasonably be expected to have a Material Adverse
Effect.
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(iv) Opinions of Counsel. The Administrative Agent shall have
received opinions in form and substance reasonably satisfactory to the
Administrative Agent of counsel to the Company and each of the
Designated Borrowers, addressed to the Administrative Agent and the
Lenders with respect to the Credit Parties, the Loan Documents and such
other matters as the Administrative Agent shall reasonably request.
(c) Consents; Defaults.
(i) Governmental and Third Party Approvals. The Borrowers shall
have obtained all approvals, authorizations and consents of any Person
and of all Governmental Authorities and courts having jurisdiction
necessary in order to enter into this Agreement and the other Loan
Documents as of the Closing Date. Additionally, there shall not exist
any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or
notified prohibiting or imposing materially adverse conditions upon the
transactions contemplated by this Agreement and the other Loan
Documents or otherwise referred to herein or therein.
(ii) No Event of Default. No Default or Event of Default shall
have occurred and be continuing.
(d) No Material Adverse Effect. Since May 30, 1998 nothing shall
have occurred (and neither the Administrative Agent nor the Lenders shall have
become aware of any facts or conditions not previously known) which has had, or
could reasonably be expected to have, a Material Adverse Effect.
(e) Financial Matters.
(i) Financial Statements. The Administrative Agent shall have
received the audited Consolidated financial statements of the Company
and its Subsidiaries for the fiscal year ended as of May 30, 1998 and
the unaudited Consolidated financial statements of the Company and its
Subsidiaries for the fiscal quarter ended as of November 28, 1998. Such
financial statements shall be in form and substance reasonably
satisfactory to the Administrative Agent.
(ii) Payment at Closing. The Borrowers shall have paid any
accrued and unpaid fees or commissions due hereunder (including,
without limitation, reasonable legal fees and expenses) to the
Administrative Agent and Lenders, and to any other Person such amount
as may be due thereto in connection with the transactions contemplated
hereby, including all taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of any of
the Loan Documents.
(f) Litigation. Except as set forth in the Current SEC Reports, as
of the Closing Date, there shall be no actions, suits or proceedings pending or,
to the best knowledge of any Borrower, threatened (i) with respect to this
Agreement or any other Loan Document or (ii) which the Administrative Agent or
the Required Lenders shall reasonably determine could reasonably be expected to
have a Material Adverse Effect.
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(g) Termination of Prior Bank Commitments. All Prior Bank
Commitments shall have been (or will be upon the initial borrowing hereunder and
the application of the proceeds thereof) (i) paid in full, (ii) the commitments,
other obligations and rights of the Company and the lenders thereunder
terminated and (iii) either (A) all outstanding promissory notes issued by the
Company with respect thereto canceled and the originally executed copies thereof
returned to the Administrative Agent (who shall promptly forward such notes to
the Company) or (B) the Administrative Agent otherwise shall have received
evidence satisfactory to it that such Prior Bank Commitments have been
terminated; provided that arrangements may be made so that any outstanding
letter of credit issued under such committed facilities may remain outstanding
as necessary.
(h) Miscellaneous.
(i) Proceedings and Documents. All Loan Documents, opinions,
certificates and other instruments and all proceedings in connection
with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative
Agent.
(ii) Year 2000. The Administrative Agent shall have received and
reviewed information in form and substance reasonably satisfactory to
it confirming that (A) the Company and its Subsidiaries are taking all
necessary and appropriate steps to ascertain the extent of, and to
quantify and successfully address, business and financial risks facing
the Company and its Subsidiaries as a result of what is commonly
referred to as the "Year 2000 Problem" (i.e., the inability of certain
computer applications to recognize and perform date sensitive functions
involving certain dates prior to and after December 31, 1999),
including risks resulting from the failure of key vendors and customers
of the Borrower and its Subsidiaries to successfully address the Year
2000 Problem, and (B) the Company's and its Subsidiaries' material
computer applications and those of its key vendors and customers will,
on a timely basis, adequately address the Year 2000 Problem in each
case sufficient to avoid a Material Adverse Effect.
(iii) Accuracy and Completeness of Information. All information
taken as an entirety made available to the Administrative Agent or the
Lenders by the Credit Parties or any of their representatives in
connection with the transactions contemplated hereby ("Information") is
and will be complete and correct in all material respects as of the
date made available to the Administrative Agent and does not and will
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein not
misleading.
SECTION 5.3 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the relevant borrowing
or issue date, as applicable:
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(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and correct
in all material respects on and as of such borrowing or issuance date with the
same effect as if made on and as of such date, except for any representation and
warranty made as of an earlier date, which representation and warranty shall
remain true and correct in all material respects as of such earlier date.
(b) No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder (i) on the borrowing date with respect to
such Loan or after giving effect to the Loans to be made on such date or (ii) on
the issue date with respect to such Letter of Credit or after giving effect to
such Letters of Credit on such date.
(c) Notice of Revolving Credit Borrowing. The Administrative Agent
shall have received a Notice of Revolving Credit Borrowing from the relevant
Borrower in accordance with Section 2.2(a) or a Competitive Bid Request in
accordance with Section 2.5(a) and a Notice of Account Designation specifying
the account or accounts to which the proceeds of any Loans made after the
Closing Date are to be disbursed.
The occurrence of the Closing Date and the acceptance by any Borrower
of the benefits of each Extension of Credit hereunder shall constitute a
representation and warranty by such Borrower to the Administrative Agent and
each of the Lenders that all the conditions specified in Sections 5.2 and 5.3
and applicable to such borrowing have been satisfied as of that time. All of the
Notes, certificates, legal opinions and other documents and papers referred to
in Sections 5.2 and 5.3, unless otherwise specified, shall be delivered to the
Administrative Agent for the account of each of the Lenders and, except for the
Notes, in sufficient counterparts or copies for each of the Lenders and shall be
in form and substance reasonably satisfactory to the Administrative Agent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES.
To induce the Administrative Agent and Lenders to enter into this
Agreement and to induce the Lenders to make Extensions of Credit, each Credit
Party hereby represents and warrants to the Administrative Agent and Lenders
that:
(a) Organization; Power; Qualification. Each of the Credit Parties
and their Material Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation,
has the power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted and is duly qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification and
authorization, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
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(b) Ownership. Each Subsidiary of each of the Credit Parties as of
the Closing Date is listed on Schedule 6.l(b). As of the Closing Date, all
outstanding shares of each such Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. As of the Closing Date, there are
no outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of capital stock of the Credit Parties or their Subsidiaries, except as
described on Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each
of the Credit Parties and, if applicable, their Subsidiaries has the right,
power and authority and has taken all necessary corporate and other action to
authorize the execution, delivery and performance of each of the Loan Documents
to which it is a party in accordance with its respective terms. Each of the Loan
Documents has been duly executed and delivered by the duly authorized officers
of the Credit Parties and each of their Subsidiaries party thereto, as
applicable, and each such document constitutes the legal, valid and binding
obligation of the Credit Parties and, if applicable, each of their Subsidiaries
party thereto, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar state or federal debtor relief laws from time to time in effect which
affect the enforcement of creditors' rights in general and the availability of
equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with
Laws, Etc. The execution, delivery and performance by the Credit Parties and
their Subsidiaries of the Loan Documents to which each such Person is a party,
in accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any of the Credit Parties or any
of their Subsidiaries to obtain any Governmental Approval not otherwise already
obtained or violate any Applicable Law relating to the Credit Parties or any of
their Subsidiaries, (ii) conflict with, result in a breach of or constitute a
default under the articles of incorporation, bylaws or other organizational
documents of the Credit Parties or any of their Subsidiaries or any indenture or
other material agreement or instrument to which such Person is a party or by
which any of its properties may be bound or any Governmental Approval relating
to such Person except as could not reasonably be expected to have a Material
Adverse Effect, or (iii) result in or require the creation or imposition of any
material Lien upon or with respect to any property now owned or hereafter
acquired by such Person.
(e) Compliance with Law; Governmental Approvals. Other than with
respect to environmental matters, which are treated exclusively in Section
6.1(h) hereof, each of the Credit Parties and their respective Subsidiaries (i)
has all Governmental Approvals required by any Applicable Law for it to conduct
its business, each of which is in full force and effect, is final and not
subject to review on appeal and is not the subject of any pending or, to the
best of the Credit Parties' knowledge, threatened attack by direct or collateral
proceeding, and (ii) is in compliance with each Governmental Approval applicable
to it and in compliance with all other Applicable Laws relating to it or any of
its respective properties; in each case, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
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(f) Tax Returns and Payments. Each of the Credit Parties and their
respective Subsidiaries has timely filed or caused to be filed all federal and
state, local and other tax returns required by Applicable Law to be filed, and
has paid, or made adequate provision for the payment of, all federal and state,
local and other taxes, assessments and governmental charges or levies upon it
and its property, income, profits and assets which are due and payable, except
taxes (i) that are being contested in good faith by appropriate proceedings and
for which such Credit Party or Subsidiary, as applicable, has set aside on its
books adequate reserves or (ii) to the extent the failure to do so could not
reasonably be expected to have a Material Adverse Effect. No Governmental
Authority has asserted any material Lien or other claim against the Credit
Parties or any Subsidiary thereof with respect to unpaid taxes which has not
been discharged or resolved. The charges, accruals and reserves on the books of
each of the Credit Parties and any of their respective Subsidiaries in respect
of federal and all material state, local and other taxes for all Fiscal Years
and portions thereof since the organization of each of the Credit Parties and
any of their Subsidiaries are, in the judgment of the Credit Parties, adequate,
and the Credit Parties do not anticipate any material additional taxes or
assessments for any of such years.
(g) Intellectual Property Matters. Each of the Credit Parties and
its Subsidiaries owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are required to
conduct its business except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect. No event has occurred which, to the
knowledge of the Credit Parties, permits, or after notice or lapse of time or
both would permit, the revocation or termination of any such rights, and, to the
knowledge of the Credit Parties, neither the Credit Parties nor any Subsidiary
thereof is liable to any Person for infringement under Applicable Law with
respect to any such rights as a result of its business operations, except as
could not reasonably be expected to have a Material Adverse Effect.
(h) Environmental Matters. Except as set forth in the Current SEC
Reports or as otherwise could not reasonably be expected to have a Material
Adverse Effect:
(i) The properties of the Credit Parties and their Subsidiaries
(including soils, surface waters, groundwaters on, at or under such
properties) do not contain and are not otherwise affected by, and to
the Credit Parties' knowledge have not previously contained or been
affected by, any Hazardous Materials in amounts or concentrations which
(A) constitute or constituted a violation of applicable Environmental
Laws or (B) could give rise to liability or obligation under applicable
Environmental Laws;
(ii) The properties of the Credit Parties and their Subsidiaries
and all operations conducted in connection therewith are in compliance,
and have been in compliance, with all applicable Environmental Laws,
and there are no Hazardous Materials at, under or about such properties
or such operations which could reasonably be expected to interfere with
the continued operation of such properties;
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(iii) The Credit Parties and their Subsidiaries have obtained,
are in compliance with, and have made all appropriate filings for
issuance or renewal of, all permits, licenses, and other governmental
consents required by applicable Environmental Laws ("Environmental
Permits"), and all such Environmental Permits are in full force and
effect;
(iv) Neither any of the Credit Parties nor any Subsidiary
thereof has received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws, nor do the
Credit Parties have knowledge or reason to believe that any such notice
will be received or is being threatened;
(v) To the knowledge of the Credit Parties, Hazardous Materials
have not been transported or disposed of from the properties of the
Credit Parties or any of their Subsidiaries in violation of, or in a
manner or to a location which could reasonably be expected to give rise
to liability under, Environmental Laws, nor, to the knowledge of the
Credit Parties, have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of such properties in
violation of, or in a manner which could reasonably be expected to give
rise to liability under, any Environmental Laws;
(vi) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Credit Parties,
threatened, under any Environmental Law to which any of the Credit
Parties or any Subsidiary thereof has been or will be named as a party,
nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to the properties or operations of the Credit Parties and their
Subsidiaries; and
(vii) To the knowledge of the Credit Parties, there has been no
release, or threat of release, of Hazardous Materials at or from the
properties of the Credit Parties or any of their Subsidiaries, in
violation of or in amounts or in a manner that could reasonably be
expected to give rise to liability under Environmental Laws.
(i) ERISA.
(i) Each of the Credit Parties and each ERISA Affiliate is in
compliance with all applicable provisions of ERISA and the regulations
and published interpretations thereunder with respect to all Employee
Benefit Plans except where any such noncompliance could not reasonably
be expected to have a Material Adverse Effect. Except for any failure
that would not reasonably be expected to have a Material Adverse
Effect, each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to such plan
has been determined to be exempt under Section 501(a) of the Code. No
liability that could reasonably be expected to have a Material Adverse
Effect has been incurred by the Credit Parties or any ERISA Affiliate
which remains
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unsatisfied for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan;
(ii) No accumulated funding deficiency (as defined in Section
412 of the Code) has been incurred (without regard to any waiver
granted under Section 412 of the Code), nor has any funding waiver from
the Internal Revenue Service been received or requested with respect to
any Pension Plan except for any accumulated funding deficiency that
could not reasonably be expected to have a Material Adverse Effect;
(iii) Neither the Credit Parties nor any ERISA Affiliate has:
(A) engaged in a nonexempt prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code, (B) incurred any liability to
the PBGC which remains outstanding other than the payment of premiums
and there are no premium payments which are due and unpaid, (C) failed
to make a required contribution or payment to a Multiemployer Plan, or
(D) failed to make a required installment or other required payment
under Section 412 of the Code except where any of the foregoing
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect;
(iv) No Termination Event that could reasonably be expected to
result in a Material Adverse Effect has occurred or is reasonably
expected to occur; and
(v) No proceeding, claim, lawsuit and/or investigation is
existing or, to the knowledge of the Credit Parties, threatened
concerning or involving any Employee Benefit Plan that could reasonably
be expected to result in a Material Adverse Effect.
(j) Margin Stock. Neither the Credit Parties nor any Subsidiary
thereof is engaged principally or as one of its activities in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" (as each such term is defined or used in Regulation U of the Board of
Governors of the Federal Reserve System). No part of the proceeds of any of the
Loans or Letters of Credit will be used for purchasing or carrying margin stock,
unless the Credit Parties shall have given the Administrative Agent and Lenders
prior notice of such event and such other information as is reasonably necessary
to permit the Administrative Agent and Lenders to comply, in a timely fashion,
with all reporting obligations required by Applicable Law, or for any purpose
which violates, or which would be inconsistent with, the provisions of
Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Credit Parties nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an
"investment company" (as each such term is defined or used in the Investment
Company Act of 1940, as amended) and neither the Credit Parties nor any
Subsidiary thereof is, or after giving effect to any Extension of Credit will
be, subject to regulation under the Public Utility Holding Company Act of 1935
or the Interstate Commerce Act, each as amended.
(l) Burdensome Provisions. Neither the Credit Parties nor any
Subsidiary thereof is a party to any indenture, agreement, lease or other
instrument, or subject to any corporate or partnership restriction, Governmental
Approval or Applicable Law which is so unusual or
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burdensome as in the foreseeable future could be reasonably expected to have a
Material Adverse Affect. The Credit Parties and their Subsidiaries do not
presently anticipate that future expenditures needed to meet the provisions of
any statutes, orders, rules or regulations of a Governmental Authority will be
so burdensome as to have a Material Adverse Effect.
(m) Financial Statements; Financial Condition: Etc.
(i) The (A) audited Consolidated balance sheets of the Credit
Parties and their Subsidiaries as of May 30, 1998; and the related
statements of income, stockholders' equity and cash flows for the
Fiscal Year then ended and (B) unaudited Consolidated balance sheet of
the Credit Parties and their Subsidiaries as of November 28, 1998, and
related unaudited interim statements of income, stockholders' equity
and cash flows, copies of which have been furnished to the
Administrative Agent and each Lender, are complete in all material
respects and fairly present in all material respects the assets,
liabilities and financial position of the Credit Parties and their
Subsidiaries as at such dates, and the results of the operations and
changes of financial position for the periods then ended, subject to
normal year end adjustments. All such financial statements, including
the related notes thereto, have been prepared in accordance with GAAP.
(ii) As of the Closing Date, (a) the sum of the assets, at a
fair valuation, of each Credit Party on a stand-alone basis and of the
Credit Parties and their Subsidiaries taken as a whole will exceed its
or their debts, respectively; (b) each Credit Party on a stand-alone
basis and the Credit Parties and their Subsidiaries taken as a whole
has not incurred and does not intend to incur, and does not believe
that it will incur, debts beyond its or their ability to pay such debts
as such debts mature, respectively; and (c) each Credit Party on a
stand-alone basis and the Credit Parties and their Subsidiaries taken
as a whole will have sufficient capital with which to conduct its or
their business, respectively. For purposes of this Section, "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. The amount of contingent liabilities
at any time shall be computed as the amount that, in the light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
(n) No Material Adverse Change. Since May 30, 1998, there has been
no Material Adverse Effect.
(o) Liens. None of the properties and assets of the Credit
Parties or any Subsidiary thereof is subject to any Lien, except Liens
permitted pursuant to Section 9.3.
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(p) Debt and Support Obligations. Schedule 6.1(p) is a complete
and correct listing of all Debt and Support Obligations of the Credit Parties
and their Subsidiaries as of the Closing Date in excess of $10,000,000.
(q) Litigation. Except for matters existing on the Closing Date
and set forth in the Current SEC Reports, there are no actions, suits or
proceedings pending nor, to the knowledge of the Credit Parties, threatened
against or affecting the Credit Parties or any Subsidiary thereof or any of
their respective properties in any court or before any arbitrator of any kind or
before or by any Governmental Authority, which could reasonably be expected to
have a Material Adverse Effect.
(r) Absence of Defaults. Since November 28, 1998, to the knowledge
of the Borrowers, no event has occurred and is continuing which constitutes a
Default or an Event of Default.
(s) Absence of Bankruptcy Events. Since November 28, 1998, no
event has occurred or is continuing which constitutes a Bankruptcy Event.
(t) Accuracy and Completeness of Information. As of the Closing
Date, the Credit Parties have disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which they or any of their
Subsidiaries are subject, and all other matters known to them, other than
general market, economic and industry conditions, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. The
written information, taken as a whole, furnished by or on behalf of the Credit
Parties to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) does not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to any projected financial
information, the Credit Parties represent only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.
(u) Year 2000 Compliance. The Credit Parties have (i) initiated a
review and assessment of all areas within their and each of their Subsidiaries'
material business and operations that could reasonably be expected to be
adversely affected by the Year 2000 Problem, (ii) developed a plan, strategy or
other approach for addressing the Year 2000 Problem on a timely basis, and (iii)
implemented that plan, strategy or other approach. Based on the foregoing and
upon the Credit Parties' reliance on (i) any Year 2000 consulting services,
study, report or any other information performed or provided by any Person other
than the Credit Parties or any of their Subsidiaries and (ii) any certification
or assurance of Year 2000 compliance provided by any vendor, supplier, servicer,
manufacturer, customer or other provider of any hardware or software product or
other computer applications installed at the Credit Parties or any of their
Subsidiaries, the Credit Parties believe, as of the Closing Date, that all
computer applications (including, limited to the Credit Parties' inquiries,
those disclosed by their suppliers, vendors and customers) that are material to
their or any of their Subsidiaries' business and operations are reasonably
expected on a timely basis to be able to perform properly date-sensitive
functions for
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all dates before and after December 31, 1999 (that is, be "Year 2000
compliant"), except to the extent that a failure to do so could not reasonably
be expected to have a Material Adverse Effect.
(v) Property. The Credit Parties and their Subsidiaries have good
and marketable title to all material properties owned by them and valid
leasehold interests in all material properties leased by them, including all
property reflected in the Current SEC Reports and in the balance sheets referred
to in Section 6.l(m)(i) (except as sold or otherwise disposed of since the date
of such balance sheet in the ordinary course of business or as permitted by the
terms of this Agreement), free and clear of all Liens, except Liens permitted
pursuant to Section 9.3.
(w) Labor Practices. Neither the Credit Parties nor any of their
Subsidiaries is engaged in any unfair labor practices that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against any Credit Party or any of their Subsidiaries
or, to the knowledge of the Credit Parties, threatened against the Credit
Parties or any of their Subsidiaries, 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 Credit Parties or any
of their Subsidiaries or, to the knowledge of the Credit Parties, threatened
against the Credit Parties or any of their Subsidiaries, (ii) no strike, labor
dispute, slowdown or stoppage pending against the Credit Parties or any of their
Subsidiaries or, to the knowledge of the Credit Parties, threatened against the
Credit Parties or any of their Subsidiaries and (iii) no union representation
question exists with respect to the employees of the Credit Parties or any of
their 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.
(x) SEC Reports. During the preceding three (3) Fiscal Years, the
Company and its Subsidiaries have filed all forms, reports, statements
(including proxy statements) and other documents (such filings by the Credit
Parties and their Subsidiaries are collectively referred to as the "SEC
Reports"), required to be filed by it with the Securities and Exchange
Commission. The SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, as the case may be, and the
rules and regulations of the Securities Exchange Commission thereunder
applicable to such SEC Reports at the time of filing thereof and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, which untrue statement or omission was not corrected
in a subsequent SEC Report.
SECTION 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate related hereto, or
any of the Loan Documents (including but not limited to any such representation
or warranty made in or in connection with any amendment thereto) shall
constitute representations and warranties made under this Agreement. All
representations and warranties made under this Agreement shall be made or deemed
to be made at and as of the Closing Date, shall survive the Closing Date and
shall not be waived by the
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execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations (other than Obligations under Hedging
Agreements) have been paid and satisfied in full and the later of the 364 Day
Facility Termination Date or the Five Year Facility Termination Date, unless
consent has been obtained in the manner set forth in Section 13.11 hereof, the
Credit Parties will furnish or cause to be furnished to the Administrative Agent
and to the Lenders at their respective addresses as set forth on Schedule 13.1,
or such other office as may be designated by the Administrative Agent and
Lenders from time to time:
SECTION 7.1 FINANCIAL STATEMENTS.
(a) Quarterly Financial Statements. As soon as practicable and in
any event within forty-five (45) days after the end of each of the first three
fiscal quarters of each Fiscal Year, either (i) a copy of a report on Form 10-Q,
or any successor form, and any amendments thereto, filed by the Company with the
Securities and Exchange Commission with respect to the immediately preceding
fiscal quarter or (ii) an unaudited Consolidated balance sheet of the Company
and its Subsidiaries as of the close of such fiscal quarter and unaudited
Consolidated statements of income, stockholders' equity and cash flows for the
fiscal quarter then ended and that portion of the Fiscal Year then ended,
including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
preceding Fiscal Year and prepared by the Company in accordance with GAAP and,
if applicable, containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting principles
and practices during the period, and certified by a Responsible Officer of the
Company to present fairly in all material respects the financial condition of
the Company and its Subsidiaries as of their respective dates and the results of
operations of the Company and its Subsidiaries for the respective periods then
ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any
event within ninety (90) days after the end of each Fiscal Year, either (i) a
copy of a report on Form 10-K, or any successor form, and any amendments
thereto, filed by the Company with the Securities and Exchange Commission with
respect to the immediately preceding Fiscal Year or (ii) an audited Consolidated
balance sheet of the Company and its Subsidiaries as of the close of such Fiscal
Year and audited Consolidated statements of income, stockholders' equity and
cash flows for the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by a nationally recognized
independent certified public accounting firm acceptable to the Administrative
Agent in accordance with GAAP and, if applicable, containing disclosure of the
effect on the financial position or results of operation of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such
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certified public accountants that is not qualified with respect to scope
limitations imposed by the Company or any of its Subsidiaries or with respect to
accounting principles followed by the Company or any of its Subsidiaries not in
accordance with GAAP.
SECTION 7.2 OFFICER'S COMPLIANCE CERTIFICATE.
At each time financial statements are delivered pursuant to Section
7.1(a) or (b) a certificate of a Responsible Officer of the Company in the form
of Exhibit G attached hereto (an "Officer's Compliance Certificate") including
the calculations prepared by such Responsible Officer required to establish
whether or not the Credit Parties and their Subsidiaries are in compliance with
the financial covenants set forth in Section 9.1 hereof as at the end of each
respective period.
SECTION 7.3 ACCOUNTANTS' CERTIFICATE.
At each time financial statements are delivered pursuant to Section
7.1(b), a certificate of the independent public accountants certifying such
financial statements addressed to the Administrative Agent for the benefit of
the Lenders stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence.
SECTION 7.4 OTHER REPORTS.
(a) Promptly after the filing thereof, a copy of (i) each report
or other filing made by any of the Credit Parties or any or their Subsidiaries
with the Securities and Exchange Commission and required by the Securities and
Exchange Commission to be delivered to the shareholders of the Credit Parties or
any or their Subsidiaries, (ii) each report made by the Credit Parties or any of
their Subsidiaries to the Securities and Exchange Commission on Form 8-K and
(iii) each final registration statement of the Credit Parties or any of their
Subsidiaries filed with the Securities and Exchange Commission, except in
connection with pension plans and other employee benefit plans; and
(b) Such other information regarding the operations, business
affairs and financial condition of the Credit Parties or any of their
Subsidiaries as the Administrative Agent or any Lender may reasonably request.
SECTION 7.5 NOTICE OF LITIGATION AND OTHER MATTERS.
Prompt (but in no event later than ten (10) Business Days after an
executive officer of any of the Credit Parties obtains knowledge thereof)
telephonic (confirmed in writing) or written notice of:
(a) the commencement of all proceedings and investigations by or
before any Governmental Authority and all actions and proceedings in any court
or before any arbitrator against or involving any of the Credit Parties or any
Subsidiary thereof or any of their respective
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properties, assets or businesses (i) which in the reasonable judgment of the
Credit Parties could reasonably be expected to have a Material Adverse Effect,
(ii) with respect to any material Debt of the Credit Parties or any of their
Subsidiaries or (iii) with respect to any Loan Document;
(b) any notice of any violation received by any of the Credit
Parties or any Subsidiary thereof from any Governmental Authority including,
without limitation, any notice of violation of Environmental Laws, which in the
reasonable judgment of the Credit Parties in any such case could reasonably be
expected to have a Material Adverse Effect;
(c) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code (along with a copy thereof) which could reasonably be
expected to have a Material Adverse Effect, (ii) all notices received by any of
the Credit Parties or any ERISA Affiliate of the PBGC's intent to terminate any
Pension Plan or to have a trustee appointed to administer any Pension Plan,
(iii) all notices received by any of the Credit Parties or any ERISA Affiliate
from a Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA which could reasonably be
expected to have a Material Adverse Effect, (iv) the Credit Parties obtaining
knowledge or reason to know that the Credit Parties or any ERISA Affiliate has
filed or intends to file a notice of intent to terminate any Pension Plan under
a distress termination within the meaning of Section 4041(c) of ERISA and (v)
the occurrence of a Reportable Event;
(d) the occurrence of any event which constitutes, or which could
reasonably be expected to result in, a Default or an Event of Default; and
(e) the occurrence of any event which constitutes, or which could
reasonably be expected to result in, a Material Adverse Effect.
SECTION 7.6 ACCURACY OF INFORMATION.
All written information, reports, statements and other papers and data
furnished by or on behalf of the Credit Parties to the Administrative Agent or
any Lender (other than financial forecasts) whether pursuant to this Article VII
or any other provision of this Agreement, shall be, at the time the same is so
furnished, true and complete in all material respects.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations (other than any Obligations under any
Hedging Agreement) have been paid and satisfied in full and the 364 Day Facility
Commitment and the Five Year Facility Commitment have expired or been
terminated, unless consent has been obtained in the manner provided for in
Section 13.l1, the Credit Parties will, and will cause each of their respective
Subsidiaries to:
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SECTION 8.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED
MATTERS.
Except as permitted by Section 9.5, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction where the
nature and scope of its activities require it to so qualify under Applicable
Law, except where the failure to so preserve and maintain its existence and
rights or to so qualify would not have a Material Adverse Effect.
SECTION 8.2 MAINTENANCE OF PROPERTY.
Protect and preserve all properties useful in and material to its
business, including copyrights, patents, trade names and trademarks; maintain in
good working order and condition all buildings, equipment and other tangible
real and personal property material to the conduct of its business, ordinary
wear and tear excepted; and from time to time make or cause to be made all
renewals, replacements and additions to such property necessary for the conduct
of its business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, except, in each case, where
the failure to do so would not have a Material Adverse Effect.
SECTION 8.3 INSURANCE.
Maintain insurance with financially sound and reputable insurance
companies against such risks and in such amounts as are consistent with past
practices and prudent business practice (and in any event consistent with normal
industry practice), and as may be required by Applicable Law.
SECTION 8.4 ACCOUNTING METHODS AND FINANCIAL RECORDS.
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete in all material respects) as may be
required or as may be necessary to permit the preparation of financial
statements in accordance with GAAP and in compliance with the regulations of any
Governmental Authority having jurisdiction over it or any of its properties.
SECTION 8.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS.
(a) Pay and perform all Obligations under this Agreement and the
other Loan Documents.
(b) Pay and discharge (i) all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and (ii) all other material indebtedness, obligations and liabilities
in accordance with customary trade practices; provided that the Credit Parties
or such Subsidiary may contest any item described in clause (i) or (ii) of this
Section 8.5(b) in good faith and by proper proceedings so long as adequate
reserves are maintained with respect thereto to the extent required by GAAP.
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(c) Perform all of its obligations under the terms of each mortgage,
indenture, security agreement, loan agreement or credit agreement and each other
agreement, contract or instrument by which it is bound, except where such
non-performances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 8.6 COMPLIANCE WITH LAWS AND APPROVALS.
Observe and remain in compliance with all Applicable Laws and maintain
in full force and effect all Governmental Approvals, in each case applicable to
the conduct of its business, except where the failure to observe or comply could
not reasonably be expected to have a Material Adverse Effect.
SECTION 8.7 ENVIRONMENTAL LAWS.
In addition to and without limiting the generality of Section 8.6, (a)
comply with, and use best efforts to ensure such compliance by all tenants and
subtenants with all applicable Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, except where the failure to
comply could not reasonably be expected to have a Material Adverse Effect, (b)
conduct and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions required under Environmental Laws, and
promptly comply with all lawful orders and directives of any Governmental
Authority regarding Environmental Laws, except (i) where the failure to do so
could not reasonably be expected to have a Material Adverse Effect or (ii) to
the extent the Credit Parties or any of their Subsidiaries are contesting, in
good faith, any such requirement, order or directive before the appropriate
Governmental Authority so long as adequate reserves are maintained with respect
thereto to the extent required by GAAP, and (c) defend, indemnify and hold
harmless the Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of, noncompliance with or liability under any Environmental Laws applicable to
the operations or properties of the Credit Parties or such Subsidiaries, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing directly result from
the gross negligence or willful misconduct of the party seeking indemnification
therefor.
SECTION 8.8 COMPLIANCE WITH ERISA.
In addition to and without limiting the generality of Section 8.6, (a)
comply with all applicable provisions of ERISA and the Code and the regulations
and published interpretations thereunder with respect to all Employee Benefit
Plans, except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect, (b) not take any action or
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fail to take action the result of which would result in a liability to the PBGC
or to a Multiemployer Plan in an amount that could reasonably be expected to
have a Material Adverse Effect, and (c) furnish to the Administrative Agent upon
the Administrative Agent's request such additional information about any
Employee Benefit Plan concerning compliance with this covenant as may be
reasonably requested by the Administrative Agent.
SECTION 8.9 CONDUCT OF BUSINESS.
Maintain substantially all of its businesses in substantially the same
fields as the businesses conducted on the Closing Date and in lines of business
reasonably related thereto or as otherwise permitted pursuant to the terms of
this Agreement.
SECTION 8.10 VISITS AND INSPECTIONS.
Permit representatives of the Administrative Agent or any Lender, from
time to time upon reasonable prior notice and during ordinary business hours, to
visit and inspect its properties; inspect and make extracts from its books,
records and files, including, but not limited to, management letters prepared by
independent accountants; and discuss with its principal officers, and its
independent accountants, its business, assets, liabilities, financial condition,
results of operations and business prospects.
SECTION 8.11 USE OF PROCEEDS.
Use the proceeds of the Extensions of Credit for the purposes set forth
in Section 2.1(b).
SECTION 8.12 YEAR 2000 COMPATIBILITY.
Take all actions reasonably necessary to assure that the Credit
Parties' computer based systems (which if not functional would have a Material
Adverse Effect) are able to operate and effectively process data in a manner
that is Year 2000 compliant (as defined in Section 6.1(u)). At the request of
the Administrative Agent or any Lender, the Credit Parties shall provide
information to the Administrative Agent concerning the Credit Parties' Year 2000
compliance.
ARTICLE IX
NEGATIVE COVENANTS
Until all of the Obligations (other than any Obligations under any
Hedging Agreement) have been paid and satisfied in full and the 364 Day Facility
Commitment and the Five Year Facility Commitment have expired or been terminated
unless consent has been obtained in the manner set forth in Section 13.11:
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SECTION 9.1 FINANCIAL COVENANTS.
(a) Maximum Leverage Ratio. As of the end of each fiscal quarter,
commencing with the end of the first fiscal quarter ending after the Closing
Date, the Credit Parties will not permit the Leverage Ratio to be greater than
2.75 to 1.00.
(b) Minimum Interest Coverage Ratio. As of the end of each fiscal
quarter, commencing with the end of the first fiscal quarter ending after the
Closing Date, the Company will not permit the Interest Coverage Ratio to be less
than 4.00 to 1.00.
SECTION 9.2 LIMITATIONS ON LIENS.
The Credit Parties will not, and will not permit any of their
Subsidiaries to, create, incur, assume or suffer to exist any Lien on, or with
respect to, any of their assets or properties (including without limitation
shares of capital stock or other ownership interests), real or personal, whether
now owned or hereafter acquired, except:
(a) Liens existing on the Closing Date and securing amounts
not in excess of $l0,000,000 in aggregate principal amount;
(b) Liens for taxes, assessments and other governmental charges or
levies not yet due or as to which the period of grace, if any, related thereto
has not expired or which are being contested in good faith and by appropriate
proceedings if adequate reserves are maintained to the extent required by GAAP;
(c) The claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings if adequate reserves are maintained to the extent
required by GAAP;
(d) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation or
obligations under customer service contracts;
(e) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case, detract from the value of any material parcel of real property or
impair the use thereof in the ordinary conduct of business;
(f) Liens in favor of the Administrative Agent for the benefit of
the Administrative Agent and the Lenders;
(g) Liens on the property or assets of any Subsidiary existing at
the time such Subsidiary becomes a Subsidiary of a Credit Party and not incurred
in contemplation thereof, as
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long as the outstanding principal amount of the Debt secured thereby is not
voluntarily increased by such Subsidiary after the date such Subsidiary becomes
a Subsidiary of such Credit Party;
(h) Liens on the property or assets of the Credit Parties or any
Subsidiary securing Debt which is incurred to finance the acquisition of such
property or assets, provided that (i) each such Lien shall be created
substantially simultaneously with the acquisition of the related property or
assets; (ii) each such Lien does not at any time encumber any property other
than the related property or assets financed by such Debt; (iii) the principal
amount of Debt secured by each such Lien is not increased; and (iv) the
principal amount of Debt secured by each such Lien shall at no time exceed 100%
of the original purchase price of such related property or assets at the time
acquired; and
(i) Liens not otherwise permitted by this Section 9.2 securing Debt
not in excess of five percent (5%) of Consolidated Total Assets in the aggregate
at any time outstanding.
SECTION 9.3 LIMITATIONS ON MERGERS AND LIQUIDATION.
None of the Credit Parties will, or will permit any of its Subsidiaries
to, merge, consolidate or enter into any similar combination with any other
Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), except:
(a) Any Credit Party or a Subsidiary may merge with another
Person, provided that (i) such Person is organized under the law of the United
States or one of its states, (ii) such Credit Party or the Subsidiary, as the
case may be, is the corporation surviving such merger, (iii) immediately prior
to and after giving effect to such merger, no Default or Event of Default exists
or would exist and (iv) the Board of Directors of such Person has approved such
merger;
(b) Any Wholly-Owned Subsidiary of a Credit Party may merge
into a Credit Party or any other Wholly-Owned Subsidiary of a Credit Party; and
(c) Any Wholly-Owned Subsidiary of a Credit Party may liquidate,
wind-up or dissolve itself into a Credit Party or any other Wholly-Owned
Subsidiary of a Credit Party.
SECTION 9.4 LIMITATIONS ON SALE OR TRANSFER OF ASSETS.
The Credit Parties will not, and will not permit any of their
Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of:
(a) All or substantially all of the property, business or assets of
the Company and its Subsidiaries on a Consolidated basis;
(b) Any of their property, business or assets if such transaction
would reasonably be expected to have a Material Adverse Effect; or
(c) Any of their property, business or assets if immediately prior
to or after giving effect to such transaction a Default or an Event of Default
exists or would exist.
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SECTION 9.5 PROHIBITIONS ON LIMITATIONS ON DIVIDENDS AND
DISTRIBUTIONS.
The Credit Parties will not permit any Subsidiary to agree to, incur,
assume or suffer to exist any restriction, limitation or other encumbrance (by
covenant or otherwise) on the ability of such Subsidiary to make any payment to
a Credit Party or any of its Subsidiaries (in the form of dividends,
intercompany advances or otherwise), except:
(a) Restrictions and limitations existing on the Closing Date and
described on Schedule 9.5;
(b) Restrictions and limitations applicable to a Subsidiary
existing at the time such Subsidiary becomes a Subsidiary of a Credit Party and
not incurred in contemplation thereof, as long as no such restriction or
limitation is made more restrictive after the date such Subsidiary becomes a
Subsidiary of such Credit Party; and
(c) Other restrictions and limitations that are not material either
individually or in the aggregate.
SECTION 9.6 TRANSACTIONS WITH AFFILIATES.
The Credit Parties will not, and will not permit any of their
Subsidiaries to, directly or indirectly (a) make any loan or advance to, or
purchase or assume any note or other obligation to or from, any of its officers,
directors, shareholders or Affiliates, or to or from any member of the immediate
family of any of its officers, directors, shareholders or Affiliates, other than
(i) loans or advances to customers of the Credit Parties and their Subsidiaries
in the ordinary course of business which are arm's length, and (ii) any other
loan or advance or assumption that would not cause the aggregate amount of all
such loans and advances and assumed notes and advances to exceed $5,000,000, (b)
enter into, or be a party to, any subcontract of any operations or other
transaction with any of its Affiliates, except pursuant to the reasonable
requirements of its business and upon fair and reasonable terms that are no less
favorable to it than it would obtain in a comparable arm's length transaction
with a Person not its Affiliate and except for transactions which are not
material either individually or in the aggregate. Nothing contained in this
Section 9.6 shall prohibit the Credit Parties or any of their Subsidiaries that
have obtained an ownership interest in a customer in connection with a loan or
credit workout to provide non-standard payment or other terms to such customer
or otherwise to do business with such customer in the ordinary course of
business.
SECTION 9.7 CERTAIN ACCOUNTING CHANGES.
The Credit Parties will not (a) change their Fiscal Year ends in order
to avoid a Default or an Event of Default or if a Material Adverse Effect would
result therefrom or (b) make any material change in their accounting treatment
and reporting practices except as required by GAAP.
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SECTION 9.8 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED
DEBT.
At any time after the occurrence of a Default or an Event of Default
and during the continuance thereof, the Credit Parties will not, and will not
permit any of their Subsidiaries to, amend or modify (or permit the modification
or amendment of) any of the terms or provisions of any Subordinated Debt, or
cancel or forgive, make any voluntary or optional payment or prepayment on, or
redeem or acquire for value (including without limitation by way of depositing
with any trustee with respect thereto money or securities before due for the
purpose of payment when due) any Subordinated Debt.
SECTION 9.9 SALE LEASEBACK TRANSACTIONS.
The Credit Parties will not, and will not permit any of their
Subsidiaries to, sell or transfer any material property or assets to anyone
(other than the Company or a Wholly-Owned Subsidiary of the Company) with the
intention of taking back a lease of such property or assets or any similar
property or assets, except in connection with a lease for a temporary period
during or at the end of which it is intended that the use by such Credit Party
or its Subsidiary of such property or assets will be discontinued.
ARTICLE X
GUARANTY OF THE COMPANY
SECTION 10.1 GUARANTY OF PAYMENT.
Subject to Section 10.7 below, the Company hereby unconditionally
guarantees to each Lender and the Administrative Agent the prompt payment of the
Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise). This guaranty is a guaranty
of payment and not solely of collection and is a continuing guaranty and shall
apply to all Guaranteed Obligations whenever arising.
SECTION 10.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Company hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of this Agreement, or any other agreement or instrument referred
to herein, to the fullest extent permitted by Applicable Law, irrespective of
any other circumstance whatsoever which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor. The Company agrees that
this guaranty may be enforced by the Lenders without the necessity at any time
of resorting to or exhausting any security or collateral and without the
necessity at any time of having recourse to the Notes, this Agreement or any
other Loan Document or any collateral, if any, hereafter securing the Guaranteed
Obligations or otherwise and the Company hereby waives the right to require the
Lenders to proceed against a Designated Borrower or any other Person (including
a co-guarantor) or to require the Lenders to pursue any other remedy or enforce
any other right. The Company
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further agrees that it shall have no right of subrogation, indemnity,
reimbursement or contribution against a Designated Borrower or any other
guarantor of the Guaranteed Obligations for amounts paid under this guaranty
until such time as the Lenders have been paid in full, all commitments under
this Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under this Agreement. The Company
further agrees that nothing contained herein shall prevent the Lenders from
suing on the Notes, this Agreement or any other Loan Document or foreclosing its
security interest in or Lien on any collateral, if any, securing the Guaranteed
Obligations or from exercising any other rights available to it under this
Agreement, the Notes, or any other instrument of security, if any, and the
exercise of any of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge of any of the Company's obligations
hereunder; it being the purpose and intent of the Company that its obligations
hereunder shall be absolute, independent and unconditional under any and all
circumstances. Neither the Company's obligations under this guaranty nor any
remedy for the enforcement thereof shall be impaired, modified, changed or
released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of a Designated Borrower or by reason of
the bankruptcy or insolvency of such Borrower. The Company waives any and all
notice of the creation, renewal, extension or accrual of any of the Guaranteed
Obligations and notice of or proof of reliance of by the Administrative Agent or
any Lender upon this guaranty or acceptance of this guaranty. The Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this guaranty. All dealings between the Designated Borrowers and the
Company, on the one hand, and the Administrative Agent and the Lenders, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this guaranty.
SECTION 10.3 MODIFICATIONS.
The Company agrees that (a) all or any part of the security which
hereafter may be held for the Guaranteed Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have any
obligation to protect, perfect, secure or insure any such security interests,
liens or encumbrances which hereafter may be held, if any, for the Guaranteed
Obligations or the properties subject thereto; (c) the time or place of payment
of the Guaranteed Obligations may be changed or extended, in whole or in part,
to a time certain or otherwise, and may be renewed or accelerated, in whole or
in part; (d) a Designated Borrower and any other party liable for payment under
this Agreement may be granted indulgences generally; (e) any of the provisions
of the Notes, this Agreement or any other Loan Document may be modified, amended
or waived; (f) any party (including any co-guarantor) liable for the payment
thereof may be granted indulgences or be released; and (g) any deposit balance
for the credit of a Designated Borrower or any other party liable for the
payment of the Guaranteed Obligations or liable upon any security therefor may
be released, in whole or in part, at, before or after the stated, extended or
accelerated maturity of the Guaranteed Obligations, all without notice to or
further assent by the Company, which shall remain bound thereon, notwithstanding
any such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
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SECTION 10.4 WAIVER OF RIGHTS.
The Company expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this guaranty by the Lenders and of
all Extensions of Credit to a Designated Borrower by the Lenders; (b)
presentment and demand for payment or performance of any of the Guaranteed
Obligations; (c) protest and notice of dishonor or of default (except as
specifically required in this Agreement) with respect to the Guaranteed
Obligations or with respect to any security therefor; (d) notice of the Lenders
obtaining, amending, substituting for, releasing, waiving or modifying any Lien,
if any, hereafter securing the Guaranteed Obligations, or the Lenders'
subordinating, compromising, discharging or releasing such Liens, if any; (e)
all other notices to which the Company might otherwise be entitled in connection
with the guaranty evidenced by this Article X; and (f) demand for payment under
this guaranty.
SECTION 10.5 REINSTATEMENT.
The obligations of the Company under this Article X shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Company agrees that it will indemnify the
Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees and expenses of
counsel) incurred by the Administrative Agent or such Lender in connection with
such rescission or restoration, including any such costs and expenses incurred
in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
SECTION 10.6 REMEDIES.
The Company agrees that, as between the Company, on the one hand, and
the Administrative Agent and the Lenders, on the other hand, the Guaranteed
Obligations may be declared to be forthwith due and payable as provided in
Section 11.2 (and shall be deemed to have become automatically due and payable
in the circumstances provided in Section 11.2) notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing such
Guaranteed Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or such Guaranteed
Obligations being deemed to have become automatically due and payable), such
Guaranteed Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Company.
SECTION 10.7 LIMITATION OF GUARANTY.
Notwithstanding any provision to the contrary contained herein, to the
extent the obligations of the Company shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or transfers)
then the obligations of the Company hereunder shall be limited to the maximum
amount that is permissible under Applicable Law (whether federal or
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state and including, without limitation, the Federal Bankruptcy Code (as now or
hereinafter in effect)).
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement
Obligation. Any Borrower shall default in any payment of principal of any Loan,
Note or Reimbursement Obligation when and as due (whether at maturity, by reason
of acceleration or otherwise).
(b) Other Payment Default. Any Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
any interest, fees or other amounts owing on any Loan, Note or Reimbursement
Obligation or the payment of any other Obligation (other than any Obligation
under any Hedging Agreement), and such default shall continue unremedied for
three (3) Business Days.
(c) Misrepresentation. Any representation, warranty or statement made
or deemed to be made by any Credit Party or any of its Subsidiaries, if
applicable, under this Agreement, any Loan Document or any amendment hereto or
thereto or in any certificate delivered to the Administrative Agent or to any
Lender pursuant hereto and thereto, shall at any time prove to have been
incorrect or misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. Any of the Credit
Parties shall default in the performance or observance of any covenant or
agreement contained in Sections 9.1, 9.2, 9.3 or 9.4 of this Agreement. Any of
the Credit Parties shall default in the performance or observance of any
covenant or agreement contained in Article IX, other than those contained in
Sections 9.1, 9.2, 9.3 or 9.4, and such default shall continue for a period of
fifteen (15) days after the earlier of a Responsible Officer of a Credit Party
becoming aware of such default or written notice thereof has been given to the
Borrowers by the Administrative Agent.
(e) Default in Performance of Other Covenants and Conditions. Any of
the Credit Parties or any Subsidiary thereof, if applicable, shall default in
the performance or observance of any term, covenant, condition or agreement
contained in this Agreement (other than as specifically provided for otherwise
in this Section 11.1) or any other Loan Document and such default shall continue
for a period of thirty (30) days after the earlier of a Responsible Officer of a
Credit Party becoming aware of such default or written notice thereof has been
given to the Borrowers by the Administrative Agent.
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(f) Hedging Agreement. Any termination payments in an amount greater
than $5,000,000 shall be due by any Credit Party under any Hedging Agreement and
such amount is not paid within thirty (30) Business Days of the due date
thereof.
(g) Debt Cross-Default. Any of the Credit Parties or any of their
Subsidiaries shall (i) default in the payment of any Debt (other than Debt under
this Agreement, the Notes or any Reimbursement Obligation) the aggregate
outstanding amount of which Debt is in excess of $10,000,000, beyond the period
of grace if any, provided in the instrument or agreement under which such Debt
was created, or (ii) default in the observance or performance of any other
agreement or condition relating to any Debt (other than Debt under this
Agreement, the Notes or any Reimbursement Obligation), the aggregate outstanding
amount of which Debt is in excess of $10,000,000 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 Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any such notice having been given and any applicable grace period having
expired).
(h) Change in Control. An event described in clause (i), (ii) or (iii)
below shall have occurred: (i) the membership of the Company's Board of
Directors changes by more than 50% during any 12-month period, or the number of
members on the Company's Board of Directors either increases or decreases by
more than 50% during any 12-month period, (ii) any person or group of persons
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) shall obtain ownership or control in one or more series of transactions
of more than 33% of the common stock or 33% of the voting power of the Company
entitled to vote in the election of members of the board of directors of the
Company or (iii) there shall have occurred under any indenture or other
instrument evidencing any debt in excess of $10,000,000 any "change in control"
(as defined in such indenture or other evidence of debt) obligating the Company
to repurchase, redeem or repay all or any part of the debt or capital stock
provided for therein (any such event, a "Change in Control").
(i) Voluntary Bankruptcy Proceeding. Any Credit Party or any Material
Subsidiary thereof shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to
take advantage of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of a substantial part of
its property, domestic or foreign, (v) admit in writing its inability to pay its
debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of authorizing any
of the foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against any Credit Party or any Material Subsidiary thereof in any
court of
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competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or composition
for adjustment of debts, or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like for any Credit Party or any Material
Subsidiary thereof or for all or any substantial part of their respective
assets, domestic or foreign, and such case or proceeding shall continue without
dismissal or stay for a period of sixty (60) consecutive days, or an order
granting the relief requested in such case or proceeding (including, but not
limited to, an order for relief under such federal bankruptcy laws) shall be
entered.
(k) Enforcement. A creditor or an encumbrance attaches or takes
possession of, or a distress, execution, sequestration or other process is
levied or enforced upon or sued out against, any of the undertakings and assets
of any Credit Party or any Material Subsidiary thereof and (if capable of
discharge) such possession is not terminated or such attachment or process is
not satisfied, removed or discharge within seven (7) days
(l) Similar Events. Any event occurs or any proceeding is taken with
respect to any Credit Party or any Material Subsidiary in any jurisdiction to
which it is subject which has an effect equivalent or similar to any of the
events set forth in Sections 11.1(i), (j) or (k).
(m) Judgment. A judgment or order for the payment of money which causes
the aggregate amount of all such judgments to exceed $5,000,000 in any Fiscal
Year shall be entered against any Credit Party or any Subsidiary thereof by any
court and such judgment or order shall continue without discharge or stay for a
period of thirty (30) days.
(n) Guaranty. At any time after the execution and delivery thereof, the
guaranty given by the Company hereunder or any provision thereof shall cease to
be in full force or effect as to the Company, or the Company or any Person
acting by or on behalf of the Company shall deny or disaffirm the Company's
obligations under such guaranty or the Company shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to such guaranty.
(o) ERISA. An event described in each clause (i), (ii) and (iii) below
shall have occurred: (i) any Pension Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Pension
Plan subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62 , .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Pension Plan within the following thirty (30) days, any
Pension Plan which is subject to Title IV of ERISA shall have had or is likely
to have a trustee appointed to administer such Pension Plan, any Pension Plan
which is subject to Title IV of ERISA is, shall have been or is likely to be
terminated or to be the subject of termination proceedings under ERISA, any
Pension Plan shall have an Unfunded Current Liability, a contribution required
to be made with respect to a Pension Plan or a Foreign Pension Plan has not been
timely made, the
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Credit Parties or any of their Subsidiaries or any ERISA Affiliate has incurred
or is likely to incur any liability to or on account of a Pension Plan under
Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) under Section 4980B of the Code, or the Credit Parties or any of their
Subsidiaries 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) that
provide benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or Pension Plans or Foreign Pension Plans;
(ii) 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 such a
lien being imposed, such security interest being granted or such liability being
incurred, and (iii) such lien, security interest or liability, individually,
and/or in the aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect.
SECTION 11.2 REMEDIES.
Upon the occurrence of an Event of Default, with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Credit
Parties:
(a) Acceleration: Termination of Facilities. Declare the principal of
and interest on the Loans, the Notes and the Reimbursement Obligations at the
time outstanding, and all other amounts owed to the Lenders and to the
Administrative Agent under this Agreement or any of the other Loan Documents
(other than any Hedging Agreement) (including, without limitation, all L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and all other
Obligations (other than Obligations owing under any Hedging Agreement), to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all of
which are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding, and terminate the Credit Facility and
any right of the Borrowers to request borrowings or Letters of Credit
thereunder; provided, that upon the occurrence of an Event of Default specified
in Section 11.1(i), (j), (k) or (1) with respect to the Credit Parties, the
Credit Facility shall be automatically terminated and all Obligations (other
than obligations owing under any Hedging Agreement) shall automatically become
due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrowers at such
time to deposit or cause to be deposited in a cash collateral account opened by
the Administrative Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay the other Obligations. After all such Letters of
Credit shall have expired or been fully drawn upon, the Reimbursement
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Obligation shall have been satisfied and all other Obligations shall have been
paid in full, the balance, if any, in such cash collateral account shall be
promptly returned to the Borrowers.
(c) Rights of Collection. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Obligations.
SECTION 11.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC.
The enumeration of the rights and remedies of the Administrative Agent
and the Lenders set forth in this Agreement is not intended to be exhaustive and
the exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Credit Parties, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 APPOINTMENT.
Each of the Lenders hereby irrevocably designates and appoints
NationsBank as Administrative Agent of such Lender under this Agreement and the
other Loan Documents for the term hereof and each such Lender irrevocably
authorizes NationsBank as Administrative Agent for such Lender, 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 such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Administrative Agent. Any reference to the Administrative Agent in
this Article XII shall be deemed to refer to the Administrative Agent solely in
its capacity as Administrative Agent and not in its capacity as a Lender.
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SECTION 12.2 DELEGATION OF DUTIES.
The Administrative Agent may execute any of its respective duties under
this Agreement and the other Loan Documents 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 the Administrative Agent with reasonable care.
SECTION 12.3 EXCULPATORY PROVISIONS.
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a)
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 actions occasioned solely by its or such Person's own gross negligence or
willful misconduct), or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by any Credit Party
or any of its Subsidiaries or any officer thereof contained in this Agreement or
the 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 the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of any Credit
Party or any of its Subsidiaries 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 to inspect the
properties, books or records of any Credit Party or any of its Subsidiaries.
SECTION 12.4 RELIANCE BY THE 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, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Credit Parties), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may deem
and treat the payee of any Note as the owner thereof for all purposes unless
such Note shall have been transferred in accordance with Section 13.10 hereof.
The Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement and the other Loan Documents unless it shall
first receive such advice or concurrence of the Required Lenders (or, when
expressly required hereby or by the relevant other Loan Document, all the
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
except for its own gross negligence or willful misconduct. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes in accordance with a request of the
Required Lenders (or, when expressly required hereby,
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all the Lenders), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Notes.
SECTION 12.5 NOTICE OF DEFAULT.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless it
has received notice from a Lender or the Credit Parties referring to this
Agreement, describing such 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, it shall promptly give notice thereof to the Lenders.
The Administrative Agent shall take such action with respect to such 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 Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders, except to the extent that other provisions of this Agreement expressly
require that any such action be taken or not be taken only with the consent and
authorization or the request of the Lenders or Required Lenders, as applicable.
SECTION 12.6 NON-RELIANCE ON THE 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, Subsidiaries or Affiliates has 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 Credit Parties or any of their
respective 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, operations, property, financial and other
condition and creditworthiness of the Credit Parties and their respective
Subsidiaries and made its own decision to make its Loans and issue or
participate in Letters of Credit 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 the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Credit Parties and
their respective Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or by the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of any Credit Party or any of its Subsidiaries
which may come into the possession of the Administrative Agent or any of its
respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates.
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SECTION 12.7 INDEMNIFICATION.
The Lenders agree to indemnify the Administrative Agent in its capacity
as such and (to the extent not reimbursed by the Credit Parties and without
limiting the obligation of the Credit Parties to do so), ratably according to
the respective amounts of their Aggregate Revolving Credit Commitment
Percentages from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent they result from the
Administrative Agent's bad faith, gross negligence or willful misconduct. The
agreements in this Section 12.7 shall survive the payment of the Notes, any
Reimbursement Obligation and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 12.8 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and its respective Subsidiaries and Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Credit Parties as though the Administrative Agent were not an
Administrative Agent hereunder. With respect to any Loans made or renewed by it
and any Note issued to it and with respect to any Letter of Credit issued by it
or participated in by it, the Administrative Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Administrative Agent, and the
terms "Lender" and "Lenders" shall include the Administrative Agent in its
individual capacity.
SECTION 12.9 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR
ADMINISTRATIVE AGENT.
Subject to the appointment and acceptance of a successor as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Credit Parties. Upon any such resignation, the Required
Lenders shall have the right, subject to the approval of the Credit Parties (so
long as no Default or Event of Default has occurred and is continuing), to
appoint a successor Administrative Agent, which successor shall have minimum
capital and surplus of at least $500,000,000. If no successor Administrative
Agent shall have been so appointed by the Required Lenders, been approved (so
long as no Default or Event of Default has occurred and is continuing) by the
Credit Parties or have accepted such appointment within thirty (30) days after
the Administrative Agent's giving of notice of resignation, then the
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent reasonably acceptable to the Credit Parties (so long as no
Default or Event of Default has occurred and is continuing), which successor
shall have minimum capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a
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successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Section 12.9 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
SECTION 12.10 CO-AGENTS.
No Co-Agent, in its capacity as a co-agent hereunder, shall have any
duty or responsibility under this Agreement or any other Loan Document.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 NOTICES.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Company or any Designated Borrower:
Herman Miller, Inc.
MS 0110
855 East Main Avenue
P.O. Box 302
Zeeland, MI 49464-0302
Attention: Robert F. Dentzman Jr.
Telephone No.: (616) 654-5044
Telecopy No.: (616) 654-7221
If to NationsBank as Administrative Agent:
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NationsBank, N.A.,
as Administrative Agent
101 North Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone No.: (704) 386-1316
Telecopy No.: (704) 386-9923
with a copy to:
Bank of America
Business Services Group
100 North Tryon Street
Bank of America Center, 17th Floor
Charlotte, North Carolina 28255
Attention: Jack Williams
Telephone No.: (704) 388-3234
Telecopy No.: (704) 388-0960
If to any Lender:
To the Address set forth on Schedule 13.1 hereto
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Company and the Lenders, as the Administrative Agent's Office referred to
herein, to which payments due are to be made and at which Loans will be
disbursed.
SECTION 13.2 EXPENSES, INDEMNITY.
The Borrowers agree to (a) pay all reasonable out-of-pocket expenses of
the Administrative Agent in connection with (i) the preparation, execution and
delivery of this Agreement and each other Loan Document, whenever the same shall
be executed and delivered, including without limitation the reasonable
out-of-pocket syndication and due diligence expenses and reasonable fees and
disbursements of counsel for the Administrative Agent and (ii) the preparation,
execution and delivery of any waiver, amendment or consent by the Administrative
Agent, the Arranger or the Lenders relating to this Agreement or any other Loan
Document, including without limitation reasonable fees and disbursements of
counsel for the Administrative Agent, (b) pay all reasonable out-of-pocket
expenses of the Administrative Agent actually incurred in connection with the
administration of the Credit Facility, (c) pay all reasonable out-of-pocket
expenses of the Administrative Agent, the Arranger and each Lender actually
incurred in connection with the enforcement of any rights and remedies of the
Administrative Agent, the Arranger and the Lenders under the Credit Facility,
including, to the extent reasonable under the
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circumstances, consulting with accountants, attorneys and other Persons
concerning the nature, scope or value of any right or remedy of the
Administrative Agent, the Arranger or any Lender hereunder or under any other
Loan Document or any factual matters in connection therewith, which expenses
shall include without limitation the reasonable fees and disbursements of such
Persons, and (d) defend, indemnify and hold harmless the Administrative Agent,
the Arranger and the Lenders, and their respective parents, Subsidiaries,
Affiliates, employees, agents, officers and directors, from and against any
losses, penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered by any such Person in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative Agent, the
Arranger or any Lender is a party thereto) and the prosecution and defense
thereof, arising out of or in any way connected with this Agreement, the Credit
Facility, any other Loan Document, the Loans or the Notes or as a result of the
breach of any of the Credit Parties' obligations hereunder, including without
limitation reasonable attorney's fees (including the allocated cost of internal
counsel), consultant's fees and settlement costs (but excluding any losses,
penalties, fines liabilities, settlements, damages, costs and expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified (as finally determined by a court of competent
jurisdiction)).
SECTION 13.3 SET-OFF.
In addition to any rights now or hereafter granted under Applicable Law
and not by way of limitation of any such rights, upon and after the occurrence
of any Event of Default and during the continuance thereof, the Lenders and any
assignee or participant of a Lender in accordance with Section 13.10 are hereby
authorized by the Credit Parties at any time or from time to time, without
notice to the Credit Parties or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply (including,
without limitation, the right to combine currencies) any and all deposits
(general or special, time or demand, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness at any time held or owing by the Lenders, or any such
assignee or participant to or for the credit or the accounts of the respective
Borrowers against and on account of the Obligations irrespective of whether or
not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.
SECTION 13.4 GOVERNING LAW.
This Agreement, the Notes and the other Loan Documents, unless
otherwise expressly set forth therein, shall be governed by, construed and
enforced in accordance with the laws of the State of Michigan, without giving
effect to the conflict of law principles thereof.
SECTION 13.5 CONSENT TO JURISDICTION.
Each of the parties hereto hereby irrevocably consents to the personal
jurisdiction of the state and federal courts located in Michigan, in any action,
claim or other proceeding arising out of any dispute in connection with this
Agreement, the Notes and the other Loan Documents, any
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rights or obligations hereunder or thereunder, or the performance of such rights
and obligations. Each of the parties hereto hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by any other party hereto in connection with this Agreement,
the Notes or the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 13.1. Each Designated
Borrower hereby appoints the Company as its agent in the United States for
service of process. Nothing in this Section 13.5 shall affect the right of any
of the parties hereto to serve legal process in any other manner permitted by
Applicable Law or affect the right of any of the parties hereto to bring any
action or proceeding against any other party hereto or its properties in the
courts of any other jurisdictions.
SECTION 13.6 WAIVER OF JURY TRIAL.
THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH CREDIT PARTY HEREBY
WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 13.7 REVERSAL OF PAYMENTS.
To the extent any Credit Party makes a payment or payments to the
Administrative Agent for the ratable benefit of the Lenders or the
Administrative Agent receives any payment or proceeds of the collateral which
payments or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
proceeds repaid, the Obligations or part thereof intended to be satisfied shall
be revived and continued in full force and effect as if such payment or proceeds
had not been received by the Administrative Agent.
SECTION 13.8 JUDGMENT CURRENCY.
If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or under any other Loan Document in one
currency into another currency, the rate of exchange used shall be that at which
in accordance with normal banking procedures the Administrative Agent could
purchase the first currency with such other currency on the Business Day
preceding that on which final judgment is given. The obligation of any Credit
Party in respect of any such sum due from it to the Administrative Agent or any
Lender hereunder or under the other Loan Documents shall, notwithstanding any
judgment in a currency (the "Judgment Currency") other than that in which such
sum is denominated in accordance with the applicable provisions of this
Agreement (the "Agreement Currency"), be discharged only to the extent that on
the Business Day following receipt by the Administrative Agent or such Lender of
any sum adjudged to be so due in the Judgment Currency, the Administrative Agent
or such
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Lender may in accordance with normal banking procedures purchase the Agreement
Currency with the Judgment Currency. If the amount of the Agreement Currency so
purchased is less than the sum originally due to the Administrative Agent or
such Lender in the Agreement Currency, the Borrowers, as a separate obligation
and notwithstanding any such judgment, to indemnify the Administrative Agent or
such Lender or the Person to whom such obligation was owing against such loss.
If the amount of the Agreement Currency so purchased is greater than the sum
originally due to the Administrative Agent or such Lender in such currency, the
Administrative Agent or such Lender agrees to return the amount of any excess to
the Borrowers (or to any other Person who may be entitled thereto under
applicable law).
SECTION 13.9 ACCOUNTING MATTERS.
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time, provided that, if the Credit Parties notify the
Administrative Agent that the Credit Parties request an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Administrative Agent notifies the Credit Parties that the Required
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application there of, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance therewith.
SECTION 13.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS;
CONFIDENTIALITY.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Credit Parties, the Administrative Agent, the
Arranger and the Lenders, all future holders of the Notes, and their respective
successors and permitted assigns, except that the Credit Parties shall not
assign or transfer any of their rights or obligations under this Agreement
without the prior written consent of each Lender other than pursuant to Section
9.3.
(b) Assignment by Lenders. Each Lender may, with the consent of the
Borrowers (so long as no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
without the consent of the Borrowers) and the consent of the Administrative
Agent, which consents shall not be unreasonably withheld, assign to one or more
Eligible Assignees all or a portion of its interests, rights and obligations
under this Agreement (including, without limitation, all or a portion of the
Extensions of Credit at the time owing to it and the Notes held by it) provided
that:
(i) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Lender's Aggregate Revolving Credit
Commitment and all other rights and obligations under this Agreement;
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(ii) if less than all of the assigning Lender's Aggregate
Revolving Credit Commitment or Loans is to be assigned, the Aggregate
Revolving Credit Commitment or Loans so assigned shall not be less than
$10,000,000;
(iii) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of Exhibit H
attached hereto (an "Assignment and Acceptance");
(iv) such assignment shall not, without the consent of the Company,
on behalf of itself and the other Credit Parties, require any Borrower,
or any Credit Party, to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or
the Notes under the blue sky laws of any state;
(v) the assigning Lender shall pay to the Administrative Agent an
assignment fee of $3,500 upon the execution by such Lender of the
Assignment and Acceptance (including, but not limited to, an assignment
by a Lender to another Lender); provided that no such fee shall be
payable upon any assignment by a Lender to an Affiliate thereof; and
(vi) no consents will be required for assignments where the
Eligible Assignee is an Affiliate of the assigning Lender.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least ten (10) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned in such Assignment and Acceptance, have the rights and obligations of a
Lender hereby and (B) the Lender thereunder shall, to the extent of the interest
assigned in such assignment, be released from its obligations under this
Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrowers, the Administrative Agent, the Arranger and the Lenders may treat each
person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or Lenders at any reasonable time and from time to time upon
reasonable prior notice.
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(e) Issuance of New Notes, Etc. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee, together
with any Note or Notes of such assigning Lender if such Lender is assigning all
of its interests hereunder, and any required written consent to such assignment,
the Administrative Agent shall, if such Assignment and Acceptance has been
completed and is substantially in the form of Exhibit H:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the
Borrowers, on behalf of itself and the other Credit Parties; and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrower.
Within ten (10) Business Days after receipt of notice, each Borrower shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes (if required pursuant to this Section), a new Note to the order of
such Eligible Assignee (if it is not already a Lender). Such new Note or Notes
shall be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the original Note or Notes delivered
to the assigning Lender. Each surrendered Note or Notes shall be canceled and
returned to the Borrower which made such Note.
(f) Participations. Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and/or obligations
under this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); provided that:
(i) each such participation shall be in an amount not less
than $10,000,000;
(ii) such Lender's obligations under this Agreement (including,
without limitation, its Aggregate Revolving Credit Commitment) shall remain
unchanged;
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iv) the Credit Parties, the Administrative Agent, the Arranger
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement;
(v) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this Agreement or any
other Loan Document other than waivers, amendments or modifications which would
reduce the principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the Aggregate Revolving
Credit Commitment, reduce the
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amount of any fees to which such participant is entitled, extend any scheduled
payment date for principal, interest or fees of any Loan, or release the Company
from its guaranty hereunder, except as expressly contemplated hereby or thereby;
and
(vi) any such disposition shall not, without the consent of the
Company, on behalf of itself and the other Credit Parties, require the Borrowers
or any other Credit Party, to (A) file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Revolving Credit
Loans or the Revolving Credit Notes under the blue sky law of any state or (B)
have additional compensation requirements pursuant to Sections 4.8, 4.10 or
4.11.
(g) Disclosure of Information; Confidentiality. Each of the
Administrative Agent, the Issuing Lender and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its Affiliates, directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Agreement, (g) with the prior written consent of the Credit Parties,
(h) to the extent such Information (A) becomes publicly available other than as
a result of a breach of this Section by the disclosing party or (B) becomes
available to the Administrative Agent, the Issuing Lender or any Lender on a
nonconfidential basis from a source other than the Credit Parties or (i) to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other information (customarily found in such publications) upon
the Credit Parties' prior review and approval, which shall not be unreasonably
withheld or delayed. For the purposes of this Section, "Information" means all
information received from the Credit Parties or any of their Subsidiaries
relating to the Credit Parties or their business, other than any such
information that is available to the Administrative Agent, the Issuing Lender or
any Lender on a nonconfidential basis prior to disclosure by the Credit Parties;
provided that, in the case of information received from the Credit Parties after
the Closing Date (other than certificates or other information specifically
required by the terms of this Agreement), such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
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SECTION 13.11 AMENDMENTS, WAIVERS AND CONSENTS.
Except as set forth below, any term, covenant, agreement or condition
of this Agreement or any of the other Loan Documents may be amended or waived by
the Lenders and any consent may be given by the Lenders, if, but only if, such
amendment, waiver or consent is in writing signed by the Required Lenders (or by
the Administrative Agent with the consent of the Required Lenders) and delivered
to the Administrative Agent and, in the case of an amendment, signed by the
Credit Parties; provided, that no amendment, waiver or consent shall, without
the consent of each Lender affected thereby, (a) increase the amount or extend
the time of the obligation of the Lenders to make Loans or issue or participate
in Letters of Credit (except as expressly contemplated by Section 2.7 or Section
2.8), (b) extend the originally scheduled time or times of payment of the
principal of any Loan or Reimbursement Obligation or the time or times of
payment of interest or fees on any Loan or Reimbursement Obligation, (c) reduce
the rate of interest or fees payable on any Loan or Reimbursement Obligation,
(d) reduce the principal amount of any Loan or Reimbursement Obligation, (e)
permit any subordination of the principal or interest on any Loan or
Reimbursement Obligation, (f) permit any assignment (other than as specifically
permitted or contemplated in this Agreement) of any of the Credit Parties'
rights and obligations hereunder, (g) release the Company from its guaranty
hereunder or (h) amend the provisions of this Section 13.11 or the definition of
Required Lenders. In addition, no amendment, waiver or consent to the provisions
of (i) Article XII shall be made without the written consent of the
Administrative Agent and (ii) Article III shall be made without the written
consent of each Issuing Lender.
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender is
entitled to vote as such Lender sees fit on any bankruptcy reorganization plan
that affects the Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Federal Bankruptcy Code (as now or hereafter in effect)
supersedes the unanimous consent provisions set forth herein and (y) the
Required Lenders may consent to allow a Credit Party to use cash collateral in
the context of a bankruptcy or insolvency proceeding.
SECTION 13.12 PERFORMANCE OF DUTIES.
The Credit Parties' obligations under this Agreement and each of the
Loan Documents shall be performed by the Credit Parties at their sole cost and
expense.
SECTION 13.13 ALL POWERS COUPLED WITH INTEREST.
All powers of attorney and other authorizations granted to the Lenders,
the Administrative Agent and any Persons designated by the Administrative Agent
or any Lender pursuant to any provisions of this Agreement or any of the other
Loan Documents shall be deemed coupled with an interest and shall be irrevocable
so long as any of the Obligations remain unpaid or unsatisfied or the Credit
Facility has not been terminated.
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SECTION 13.14 SEVERAL OBLIGATIONS OF THE BORROWERS.
The obligations of the Borrowers, as Borrowers, are several and not
joint obligations of each of the Borrowers.
SECTION 13.15 SUBORDINATION OF COMPANY'S CLAIMS AGAINST THE
DESIGNATED BORROWERS.
The Credit Parties hereby agree that any claims of the Company against
a Designated Borrower or any rights the Company has to be indemnified by a
Designated Borrower shall be subordinate in right of payment to the payment and
satisfaction in full of the Obligations to the Administrative Agent and the
Lenders under this Agreement and the other Loan Documents.
SECTION 13.16 SURVIVAL OF INDEMNITIES.
Notwithstanding any termination of this Agreement, the indemnities to
which the Administrative Agent, the Arranger and the Lenders are entitled under
the provisions of this Article XIII and any other provision of this Agreement
and the Loan Documents shall continue in full force and effect and shall protect
the Administrative Agent, the Arranger and the Lenders against events arising
after such termination as well as before, including after the Borrowers'
acceptance of the Lenders' commitments for the Credit Facility, notwithstanding
any failure of such facility to close.
SECTION 13.17 TITLES AND CAPTIONS.
Titles and captions of Articles, Sections and subsections in this
Agreement are for convenience only, and neither limit nor amplify the provisions
of this Agreement.
SECTION 13.18 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement or any other Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining provisions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 13.19 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all
parties, their successors and assigns, and all of which taken together shall
constitute one and the same agreement. Delivery of any executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.
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SECTION 13.20 TERM OF AGREEMENT.
This Agreement shall remain in effect from the Closing Date through and
including the date upon which all Obligations (other than obligations owing by
any Credit Party to any Lender or Affiliate of a Lender or the Administrative
Agent under any Hedging Agreement) shall have been indefeasibly and irrevocably
paid and satisfied in full. No termination of this Agreement shall affect the
rights and obligations of the parties hereto arising prior to such termination.
SECTION 13.21 INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT
EFFECT OF COVENANTS.
(a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control, provided, that in the event there is a conflict or inconsistency
between this Agreement and the letter agreements between the Administrative
Agent and the Company dated as of March 10, 1999 (the "Letter Agreements"),
which conflict or inconsistency relates solely to a matter affecting (i) the
Administrative Agent and/or its Affiliates on one hand and (ii) the Company
and/or the Borrowers on the other, the Letter Agreements shall control.
(b) The Borrowers expressly acknowledge and agree that each covenant
contained in Article VIII and Article IX hereof shall be given independent
effect.
[Signature pages to follow]
95
<PAGE> 1
EXHIBIT 21
HERMAN MILLER, INC., SUBSIDIARIES
Subsidiaries
The Company's principal subsidiaries are as follows:
<TABLE>
<CAPTION>
Jurisdiction
Name Ownership of Incorporation
- - ---- --------- ----------------
<S> <C> <C>
Coro Acquisition Corporation 100% Company California
Coro Services, Inc. 100% Company Michigan
Corporate Vision Interiors, Inc. 100% Company Illinois
G. West Brooks, Inc. 100% Company California
Herman Miller (Australia) Pty., Ltd. 100% Company Australia
Herman Miller B.V. (Netherlands) 100% Company Netherlands
Herman Miller Canada, Inc. 100% Company Canada
Herman Miller Ltd. Niederlassung Deutschland, Inc. 100% Company Germany
Herman Miller Et Cie 100% Company France
Herman Miller Italia S.p.A. 100% Company Italy
Herman Miller Japan, Ltd. 100% Company Japan
Herman Miller Limited 100% Company England, U.K.
Herman Miller Mexico S.A. de C.V. 100% Company Mexico
Herman Miller Transportation Company 100% Company Michigan
HMI Liquidating Company 100% Company Michigan
Integrated Metal Technology, Inc. 100% Company Michigan
Meridian Incorporated 100% Company Michigan
Milcare, Inc. 100% Company Michigan
Milsure Insurance Limited 100% Company Barbados
Miller SQA, Inc. 100% Company Michigan
National Systems, Inc. 100% Company Georgia
O'Brien, Inc. 100% Company New York
Office Pavilion South Florida, Inc. 100% Company Florida
OP Corporate Furnishings, Inc. 100% Company Texas
OP Ventures, Inc. 100% Company Colorado
OP Ventures of Texas, Inc. 100% Company Texas
Powder Coat Technology, Inc. 100% Company Michigan
The Resource Alliance, Inc. 100% Company Canada
Workstyles, Inc. 100% Company Ohio
Workplace Resource, Inc. 100% Company Missouri
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Herman Miller, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
report dated June 25, 1999, included in this Form 10-K, into the Company's
previously filed Form S-8 Registration Statement File Numbers 33-5810, 33-43234,
33-45812, 2-84202, 33-04369, 333-04367, and 333-04365.
/s/ Arthur Andersen LLP
-----------------------
Grand Rapids, Michigan
August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-START> MAY-31-1998
<PERIOD-END> MAY-29-1999
<CASH> 79,952
<SECURITIES> 0
<RECEIVABLES> 206,518
<ALLOWANCES> 14,144
<INVENTORY> 32,615
<CURRENT-ASSETS> 350,102
<PP&E> 646,663
<DEPRECIATION> 329,944
<TOTAL-ASSETS> 761,506
<CURRENT-LIABILITIES> 351,349
<BONDS> 0
0
0
<COMMON> 15,913
<OTHER-SE> 193,162
<TOTAL-LIABILITY-AND-EQUITY> 761,506
<SALES> 1,766,239
<TOTAL-REVENUES> 1,766,239
<CGS> 1,096,534
<TOTAL-COSTS> 1,096,534
<OTHER-EXPENSES> 428,065
<LOSS-PROVISION> 4,433
<INTEREST-EXPENSE> 7,295
<INCOME-PRETAX> 229,912
<INCOME-TAX> 88,100
<INCOME-CONTINUING> 141,812
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,812
<EPS-BASIC> 1.69
<EPS-DILUTED> 1.67
</TABLE>
