<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1996
--------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1984
For the transition period from to
-------------------- ----------------------------
Commission file number 1-5492-1
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NASHUA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 02-0170100
- ------------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
44 Franklin Street
P.O. Box 2002
Nashua, New Hampshire 03061-2002
- ------------------------------ ---------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 880-2323
-------------------
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 1996
- ------------------------------ ----------------------------------------------
Common Stock, par value $1.00 6,598,990 shares (excluding 23,630 shares held
in treasury)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands)
<CAPTION>
March 29, 1996 December 31,
ASSETS: (Unaudited) 1995
- ------- -------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 11,064 $ 8,390
Accounts receivable 30,990 29,579
Inventories
Materials and supplies 6,300 10,318
Work in process 2,684 2,835
Finished goods 6,953 8,870
-------- --------
15,937 22,023
Other current assets 31,370 31,785
Net current assets of discontinued operations 7,020 7,415
-------- --------
Total current assets 96,381 99,192
-------- --------
Plant and equipment 128,271 127,658
Accumulated depreciation (60,133) (57,601)
-------- --------
68,138 70,057
Intangible assets 44,616 45,705
Accumulated amortization (9,183) (8,814)
-------- --------
35,433 36,891
Other assets 17,271 18,590
Net non-current assets of discontinued operations 5,227 6,642
-------- --------
Total assets $222,450 $231,372
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Current maturities of long-term debt $ 8,375 $ 500
Accounts payable 25,676 26,858
Accrued expenses 31,877 33,385
Income taxes payable 4,588 6,662
-------- --------
Total current liabilities 70,516 67,405
Long-term debt 60,475 68,350
Other long-term liabilities 19,352 20,742
Common stock and additional capital 18,681 18,681
Retained earnings 59,529 61,563
Cumulative translation adjustment (5,352) (4,618)
Treasury stock, at cost (751) (751)
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $222,450 $231,372
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 3
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
---------------------------------------------------------------------
(UNAUDITED)
-----------
<CAPTION>
(In thousands, except per share data) Three Months Ended
-------------------------------
March 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
Net sales $101,497 $109,570
Cost of products sold 75,297 82,725
Research, selling, distribution and
administrative expenses 28,764 25,464
Interest expense 1,539 1,451
Interest income (122) (221)
-------- --------
Income (loss) from continuing operations
before income taxes (3,981) 151
Income taxes (benefit) (1,741) 60
-------- --------
Income (loss) from continuing operations (2,240) 91
Income (loss) from discontinued operations 206 (21)
-------- --------
Net income (loss) (2,034) 70
Retained earnings, beginning of period 61,563 79,744
Dividends - (1,152)
-------- --------
Retained earnings, end of period $ 59,529 $ 78,662
======== ========
Earnings (loss) per common and common equivalent share:
Income (loss) from continuing operations $ (.35) $ .01
Income from discontinued operations .03 -
-------- --------
Net income (loss) $ (.32) $ .01
======== ========
Dividends per common share $ - $ .18
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 4
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
<CAPTION>
(In thousands)
Three Months Ended
--------------------------
March 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net income (loss) $(2,034) $ 70
Adjustments to reconcile net income (loss) to cash
provided by (used in) continuing operating activities:
Depreciation and amortization 4,283 3,957
(Income) loss from discontinued operations (206) 21
Net change in working capital and other assets 1,667 1,088
------- --------
Cash provided by continuing operating activities 3,710 5,136
------- --------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (2,263) (3,281)
Acquisition of business - (25,739)
------- --------
Cash used in investing activities of continuing operations (2,263) (29,020)
------- --------
Cash flows from financing activities of continuing operations:
Proceeds from borrowings - 32,200
Repayment of borrowings - (1,356)
Dividends paid - (1,152)
Proceeds and tax benefits from shares
issued under stock option plans - 14
Purchase and reissuance of treasury stock - 26
------- --------
Cash provided by financing activities of continuing operations - 29,732
------- --------
Cash provided by (applied to) activities of discontinued operations 1,257 (8,530)
Effect of exchange rate changes on cash (30) 88
------- --------
Increase (Decrease) in cash and cash equivalents 2,674 (2,594)
Cash and cash equivalents at beginning of period 8,390 10,219
------- --------
Cash and cash equivalents at end of period $11,064 $ 7,625
======= ========
Interest paid $ 1,269 $ 3,680
======= ========
Income taxes paid $ 37 $ 6,053
======= ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Indebtedness
- ------------
On March 27, 1996, the Company reached agreement with its lenders on the terms
of amendments to existing lending agreements which will supersede the terms and
conditions of the $75 million revolving credit facility and the Company's senior
note agreement. Under the provisions agreed to with the lenders, the revolving
credit facility will be replaced with a bank facility (the "Bank Facility").
Advances under the Bank Facility will be made pursuant to both a term loan
arrangement and a revolving credit facility with an initial aggregate credit
availability of up to $66 million. Interest on amounts outstanding under both
the term loan and revolving credit portion of the agreement will be payable at
the Agent Bank's Prime Rate plus .5 percent. The revised senior note will be at
a rate of 11.85 percent per annum.
The total balance outstanding under the old revolving credit facility on the
Bank Facility's closing date (April 5, 1996) was $53 million with $48 million
designated as outstanding under the term loan portion of the Bank Facility and
$5 million designated as outstanding under the revolving credit portion of the
Bank Facility.
The revolving credit portion of the Bank Facility will provide for initial
credit availability equal to the lesser of $18 million or the sum of defined
percentages of eligible accounts receivable and inventory. The Bank Facility
will also provide for up to $5 million of the revolving credit portion of the
facility to be available for the issuance of letters of credit. The revolving
credit portion of the Bank Facility will expire on December 31, 1997.
The terms of the Bank Facility and revised senior note will require certain
mandatory prepayments and, with respect to the Bank Facility, contain provisions
for certain facility commitment reductions, tied to the sale or issuance by the
Company of equity securities or the sale or disposition of assets. According to
the provisions of the term loan portion of the Bank Facility and the revised
senior note, one-half of the amounts outstanding on October 1, 1996, will become
due and payable in four equal quarterly installments commencing in January 1997.
All remaining amounts outstanding will be due on December 31, 1997. Prepayments
also will be required beginning in January 1997, based on Excess Cash Flows, as
defined in the agreements.
All or most of the proceeds to be generated from the sale of the Company's Tape
Products Division and the sale by the Company of certain equity shares in
Cerion Technologies will be used to prepay a portion of the Company's debt.
<TABLE>
As a result of the amendments, portions of the Bank Facility and revised
senior note were reclassified as current liabilities as of March 29, 1996. The
components of the current maturities of long-term debt and long-term debt as of
March 29, 1996 are as follows:
<CAPTION>
Current
Maturities of Long-term
Long-term Debt Debt
-------------- ---------
<S> <C> <C>
($000's)
Bank Facility - term portion $6,000 $42,000
Bank Facility - revolving credit portion - 5,000
Revised senior note 1,875 13,125
Other 500 350
------ -------
Total $8,375 $60,475
====== =======
</TABLE>
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<PAGE> 6
Earnings Per Common and Common Equivalent Share
- -----------------------------------------------
Earnings per common and common equivalent share is computed based on the total
of the weighted average number of common shares and, as applicable, the weighted
average number of common equivalent shares outstanding during the period.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
Common shares outstanding 6,558,947 6,372,953
Common share equivalents 7,862 434
</TABLE>
The increase in the common shares outstanding represents the restricted stock
issued under the 1993 Stock Incentive Plan.
Stock Options
- -------------
At March 29, 1996, options for 510,884 shares of common stock were outstanding.
Stock options for an additional 106,710 shares may be awarded under the
Company's 1987 Stock Option Plan and stock options for an additional 18,000
shares may be awarded under the Company's 1993 Stock Incentive Plan.
Dispositions
- ------------
On April 17, 1996, the Company signed an agreement to sell its Tape Products
Division. Additionally, on March 21, 1996, the Company announced that its
subsidiary, Cerion Technologies Inc. had filed a registration statement with
the Securities and Exchange Commission for a proposed initial public offering
of 3,840,000 shares of common stock. Of the total, 1,615,000 shares are being
offered by Cerion and 2,225,000 shares are being offered by Nashua as the
selling stockholder. The Bank Facility and revised senior note agreements
require that the proceeds to Nashua from these transactions be used to repay
the outstanding amounts under these debt agreements.
Other
- -----
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K as amended for the year ended December 31,
1995.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
adjustments and the classification of the Tape Products Division as a
discontinued operation) necessary to present fairly the financial position as
of March 29, 1996, the results of operations for the three month periods ended
March 29, 1996 and March 31, 1995, and cash flows for the three month periods
ended March 29, 1996 and March 31, 1995.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Net sales of $101.5 million for the first quarter of 1996 were down 7.4 percent
from the same period in 1995 (restated to reflect the classification of the
Tape Products Division as a discontinued operation). The sales decrease was
caused by lower revenues in the Commercial Products Group, partially offset by
a sales increase in Cerion Technologies. The Company recorded a net loss from
continuing operations of $2.2 million compared with net income of $91,000 in
the first quarter of 1995.
The Commercial Products Group's first quarter sales decreased 23 percent to
$52.7 million compared to the first quarter of 1995. The decrease was
primarily in the Imaging Supplies and Specialty Coated divisions. The Imaging
Supplies Division's sales decreased due to lower toner and paper volumes. The
toner volume decrease was caused primarily by lower order rates from large
distributors. The decrease in paper sales was the result of lower volumes
caused by an increase in the supply of paper in the marketplace. Specialty
Coated sales decreased across all product lines due to lower volumes which were
attributed to increased competition, lack of marketplace presence caused by the
Commercial Products Group's reorganizations and declining demand for certain
product lines. The Commercial Products Group's operating profit decreased from
$1.1 million for the first quarter of 1995 to an operating loss of $2.7 million
primarily due to the lower volumes.
The Photofinishing Group's sales for the first quarter of 1996 increased 1.7
percent to $37 million compared to the 1995 first quarter sales of $36.4
million. The increase was due to the inclusion of the European and Ireland
operations for the full quarter, while 1995 sales are from the purchase date of
January 13, 1995, and higher prices in the U.S. operation. The U.S. operation's
higher average sales price was partially offset by lower volumes. The increased
sales in Europe, Ireland and the U.S. were offset by lower sales in the U.K. and
Canadian operations due to lower volumes. The Photofinishing Group recorded an
operating loss of $1.1 million for the first quarter of 1996 versus an operating
profit of $.7 million for the same period in 1995. The operating loss was
primarily due to lower volumes in the U.K. operation and increased marketing
expenses in the U.S. and European operations. The increase in the U.S. marketing
expenses was due to increased use of prepaid postage and envelope and media
costs. The European marketing expenses increased due to higher deferred
marketing expense amortization resulting from an increased level of promotional
activites during December 1995 versus December 1994.
Cerion Technologies recorded net sales of $11.8 million for the first quarter of
1996 versus $4.9 million for the same period in 1995. The increased sales were
principally the result of higher disk volumes due to market demands and
increased capacity at Cerion. Cerion's operating income for the first quarter of
1996 was $3.2 million versus $.6 million for the same period of 1995.
Research, Selling, Distribution and Administrative expenses for the first
quarter of 1996 increased 13 percent or $3.3 million versus the same period of
1995. Administrative expenses increased $1.4 million with Selling and
Distribution expenses accounting for the remainder of the increase. The
administrative expenses increase was primarily the result of increased spending
by Cerion Technologies in anticipation of becoming a stand-alone entity,
non-recurring legal, professional and environmental expenses recorded in the
first quarter of 1996, and an increase in the performance incentives. Selling
and Distribution expenses increased $1.9 million due to the previously discussed
increase in the Photofinishing Group's U.S. and European marketing expenses.
Research expense for the first quarter 1996 was unchanged when compared to the
first quarter of 1995.
-7-
<PAGE> 8
Restructuring and other unusual charges of $16.2 million recorded in the third
and fourth quarters of 1995 related to the Commercial Products Group's business
unit and functional realignments, product and channel rationalizations,
inventory write-downs related to the remanufactured cartridge operation, cost
reduction initiatives and changes in the Company's executive management during
the year, including severance and other personnel-related costs. Details of the
charges related to continuing operations and the activity recorded during the
first quarter of 1996 are as follows:
<TABLE>
<CAPTION>
Balance Current Current Balance
Dec. 31, Period Period Mar. 29,
(In thousands) 1995 Provision Charges 1996
-------- --------- ------- --------
<S> <C> <C> <C> <C>
Provisions for severance related
to workforce reductions $2,600 $ - $550 $2,050
Provisions related to other
personnel costs 150 - 25 125
Other 2,050 - 200 1,850
------ -------- ---- ------
Total $4,800 $ - $775 $4,025
====== ======== ==== ======
</TABLE>
The provision for workforce reductions recorded in 1995 included amounts for
salary and benefit continuation for approximately 110 employees as part of the
Commercial Products reorganization and product rationalization. At March 29,
1996, approximately 70 employee terminations provided for had occurred, with
the remaining separations scheduled to be completed in 1996. All charges are
principally cash in nature and are expected to be funded from operations.
Management anticipates that all actions will be completed by the end of 1996
and estimates annualized savings in personnel and operating costs of
approximately $5 million.
The estimated annual effective income tax benefit of 43.7 percent for the first
quarter of 1996 is higher than the U.S. statutory rate primarily due to the
unfavorable impact of non-deductible goodwill and state income taxes.
Working capital decreased $5.9 million from December 31, 1995 primarily due to
$7.9 million of long-term debt which became current in the first quarter of
1996 and was reclassified to the current liabilities section of the balance
sheet. During the quarter, inventories were reduced by $6.1 million as the
result of management control initiative implemented during the quarter. The
decrease in working capital caused by the inventory decrease was partially
offset by a $2.7 million increase in cash and a $2.7 million decrease in
accounts payable and accrued liabilities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Reference is made to the Company's patent litigation with Ricoh Company, Ltd.
and Ricoh Corporation ("Ricoh") reported in the Company's Annual Report on Form
10-K as amended for the year ended December 31, 1995. The case was tried in the
United States District Court, District of New Hampshire, from April 23, 1996
through May 3, 1996. Trial briefs are due on June 3, 1996 and each party may
request oral argument. Ricoh is seeking injunctive relief and damages. The
Company believes it has substantial defenses but it cannot predict the outcome.
Ricoh alleged that its damages, if Ricoh were successful on the merits, would be
approximately $10 million as of the date of the trial, and Nashua alleged that
even if Ricoh were to prevail, such damages should be in the range of $120,000
to $400,000. Ricoh also is seeking treble damages and attorneys' fees for
wilful infringement, but the Company believes an award for such damages is
unlikely.
-8-
<PAGE> 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
4.06 Amended and Restated Note Agreement dated April 5, 1996. Exhibit to the
Company's Form 10-Q for the quarterly period ended March 29, 1996.
4.09 Amended and Restated Credit Agreement dated April 5, 1996. Exhibit to
the Company's Form 10-Q for the quarterly period ended March 29, 1996.
(b) Reports on Form 8-K
On April 18, 1996, the Company filed a report on Form 8-K regarding the sale
of the Tape Products Division.
-9-
<PAGE> 10
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASHUA CORPORATION
------------------------------------
(Registrant)
Date: May 13, 1996 By: /s/Daniel M. Junius
----------------- ------------------------------------
Daniel M. Junius
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly authorized officer)
-10-
<PAGE> 1
EXHIBIT 4.06
NASHUA CORPORATION
44 FRANKLIN STREET
NASHUA, NEW HAMPSHIRE 03061
--------------------
AMENDED AND RESTATED
NOTE AGREEMENT
--------------------
$15,000,000 11.85% SENIOR NOTES DUE DECEMBER 31, 1997
Dated as of April 5, 1996
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
FOUR GATEWAY CENTER
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
Ladies and Gentlemen:
Pursuant to a Note Agreement, dated as of September 13, 1991, as
amended by (i) Amendment No. 1, dated as of December 31, 1991, (ii) Amendment
No. 2, dated as of January 27, 1994, (iii) Amendment No. 3, dated as of May 12,
1994 and (iv) Amendment No. 4, dated as of December 31, 1994 (as so amended, the
"ORIGINAL NOTE AGREEMENT"), between you, as Purchaser, and the undersigned,
NASHUA CORPORATION, a Delaware corporation (together with its successors and
assigns, the "COMPANY"), you purchased at a closing on September 17, 1991 (the
"ORIGINAL CLOSING DATE") 100% of the $20,000,000 9.17% Senior Notes due March
20, 2001 issued under the Original Note Agreement, as amended by an allonge
dated December 31, 1994 (the "ORIGINAL SENIOR NOTES"). As of the date hereof,
you are the holder of 100% of such Original Senior Notes, the outstanding
principal balance of which is $15,000,000. Subject to the terms and conditions
hereof, the Company and you desire to amend and restate the Original Note
Agreement and the Original Senior Notes to reflect the understandings set forth
herein.
The Company hereby agrees with you as follows:
<PAGE> 2
2
1. THE AMENDED NOTES.
The Company will authorize the issue of its amended senior promissory
notes (the "SENIOR NOTES") in substitution for the Original Senior Notes in the
aggregate principal amount of Fifteen Million Dollars ($15,000,000), to be dated
the date of issue thereof, to mature on December 31, 1997, to bear interest on
the unpaid balance thereof from the date thereof until the principal thereof
shall have become due and payable at the rate of eleven and eighty-five
one-hundredths percent (11.85%) per annum and on overdue principal, premium and
interest at the rate specified therein, and to be substantially in the form of
Exhibit A-1 attached to this Agreement. The term "NOTES" as used in this
Agreement shall include (i) each Senior Note delivered pursuant to any provision
of this Agreement and each Senior Note delivered in substitution or exchange for
any such Note pursuant to any such provision and (ii) each YMA Note delivered
pursuant to any provision of this Agreement and each YMA Note delivered in
substitution or exchange for any such Note pursuant to any such provision.
2. DELIVERY OF AMENDED SENIOR NOTES.
Subject to the terms and conditions set forth in this Agreement, the
Company hereby agrees to deliver to you the Senior Notes against delivery by you
to the Company of the Original Senior Notes. The Senior Notes shall be in the
aggregate principal amount of Senior Notes set forth below your name in the
Purchaser Schedule (the "PURCHASER SCHEDULE") attached to this Agreement as
Annex 1, at one hundred percent (100%) of such aggregate principal amount. On
the date of closing, which shall be April 5, 1996, or such later date as the
Company, the Banks and you may agree to in writing (the "CLOSING DATE"), the
Company will deliver to you, at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, one or more Senior Notes registered
in your name, evidencing the aggregate principal amount of Senior Notes in the
denomination or denominations specified with respect to you in the Purchaser
Schedule, against delivery and cancellation of the Original Senior Notes.
3. CONDITIONS OF CLOSING.
Your obligation to deliver the Original Senior Notes to the Company
under this Agreement is subject to the satisfaction, on or before the Closing
Date, of the following conditions:
3A. OPINION OF PURCHASER'S SPECIAL COUNSEL. You shall have received
from King & Spalding, which is acting as special counsel for you in connection
with
<PAGE> 3
3
this transaction, a favorable opinion satisfactory to you and substantially in
the form of Exhibit B-1 to this Agreement.
3B. OPINIONS OF COMPANY'S COUNSEL. You shall have received from
Bingham, Dana & Gould, special counsel for the Company, and Paul Buffum,
Secretary and Counsel of the Company, favorable opinions satisfactory to you and
substantially in the form of Exhibits B-2 and B-3, respectively, to this
Agreement.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 of this Agreement and in the Security and
Financing Documents shall be true on and as of the Closing Date, except to the
extent of changes caused by the transactions provided for in this Agreement;
there shall exist on the Closing Date no Event of Default or Default; there
shall have occurred no material adverse change in the business, conditions or
operations (financial or otherwise) of the Company and its Subsidiaries taken as
a whole since December 31, 1995; and you shall have received a certificate dated
the Closing Date, in form and substance satisfactory to you, and signed by the
President or Chief Financial Officer of the Company, certifying to all such
effects and that the conditions specified in this paragraph 3 have been
fulfilled.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The delivery of the Senior
Notes in exchange for the Original Senior Notes on the Closing Date on the terms
and conditions provided in this Agreement shall not violate any applicable law
or governmental regulation (including, without limitation, Section 5 of the
Securities Act or Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and shall not subject you to any tax (excluding net income
taxes), penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and you shall have received such
certificates or other evidence as you may request to establish compliance with
this condition.
3E. PRIVATE PLACEMENT NUMBER. The Company shall have obtained a new
private placement number for the Senior Notes, if necessary, from the CUSIP
Service Bureau of Standard & Poor's Corporation.
3F. CLOSING EXPENSES. The Company shall have paid at the closing the
statement for the fees and disbursements of the special counsel to you
presented on the Closing Date.
3G. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident to this Agreement shall be satisfactory in substance and form to you,
and you
<PAGE> 4
4
shall have received all such counterpart originals or certified or other copies
of such documents as you may reasonably request.
3H. ADDITIONAL CONDITIONS OF CLOSING. The Company shall have
satisfied the additional conditions set forth below on or before the Closing
Date:
(i) You have shall received executed or certified copies of the
Credit Agreement, the Collateral Agency and Intercreditor Agreement and
the other Security and Financing Documents, in each case in form and
substance reasonably satisfactory to you.
(ii) All conditions precedent set forth in this Agreement and the
Security and Financing Documents shall have been satisfied or (if
acceptable to you) waived in accordance with the terms of each such
agreement.
(iii) You shall have received the results of a recent search by a
Person satisfactory to you, of the Uniform Commercial Code, judgement
and tax lien filings which may have been filed with respect to personal
property of the Company, and the results of such search shall be
satisfactory to you.
(iv) There shall have occurred no material adverse change in the
business, conditions or operations (financial or otherwise) of the
Company and its Subsidiaries taken as a whole since December 31, 1995.
(v) You shall have received officers' certificates from the
Company and each of its domestic Subsidiaries in form and substance
satisfactory to you attaching thereto a copy of the resolutions of the
Board of Directors of the Company and each of such Subsidiaries
authorizing the transactions contemplated by this Agreement and the
Security and Financing Documents together with certified copies of the
charters, by-laws and certificates of good standing dated as of a
recent date with respect to the Company and each of its domestic
Subsidiaries.
(vi) You shall have received any necessary consents from the Banks
that you require as a condition to consummation of the transactions
contemplated by this Agreement.
(vii) You shall have received at the closing an amendment fee in
an amount equal to 0.375% of the then outstanding principal balance of
the Senior Notes, paid to you in immediately available funds.
<PAGE> 5
5
(viii) You shall have received accrued and unpaid interest on the
Original Senior Notes to the date of issuance of the Senior Notes.
(ix) You shall have received the Senior Notes executed by a duly
authorized officer of the Company and a cross-receipt evidencing
delivery thereof.
(x) You shall have received a copy of the fiscal 1996 operating
budget and cash flow budget of the Company and its Subsidiaries,
accompanied by a certificate of a Responsible Officer to the effect
that such projections have been prepared on the basis of sound
financial planning practice and that such officer has no reason to
believe they are incorrect or misleading in any material respect.
(xi) You shall have received from Richards Layton & Finger,
special Delaware counsel to the Company, a favorable opinion
satisfactory to you concerning the Company's grants of security
interests under the Security and Financing Documents.
4. PREPAYMENTS. The entire outstanding principal amount of the
Senior Notes is due on December 31, 1997. The Senior Notes shall be subject to
required prepayment as set forth in paragraphs 4A, 4D and 4E of this Agreement
and shall be subject to prepayment, at the option of the Company, as set forth
in paragraph 4B of this Agreement.
4A. REQUIRED PREPAYMENT. Until the Senior Notes shall be paid in full,
the Company shall be obligated to prepay an amount equal to one half of the
outstanding principal amount of the Senior Notes on October 1, 1996 in four
equal principal payments (the "MINIMUM PREPAYMENT AMOUNTS") on the following
dates: January 2, 1997, March 31, 1997, June 30, 1997 and September 30, 1997.
Each Minimum Prepayment Amount shall be applied to the payment of principal of
the Senior Notes, plus interest thereon to the prepayment date and the
Yield-Maintenance Amount (subject to deferral and subordination as provided in
paragraph 4J hereof), if any, with respect to such Senior Notes. Subject to
paragraph 4J hereof, the Minimum Prepayment Amounts shall become due and payable
on such prepayment dates. The remaining unpaid principal amount of the Senior
Notes, together with interest accrued thereon and the Yield Maintenance Amount,
if any, with respect to the Senior Notes, shall become due on the maturity date
of the Senior Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. Subject to
paragraph 4J hereof, the Notes shall be subject to prepayment, in whole at any
time
<PAGE> 6
6
or from time to time in part (in integral multiples of Five Hundred Thousand
Dollars ($500,000), at the option of the Company, at one hundred percent (100%)
of the principal amount so prepaid plus interest thereon to the prepayment date
and the Yield-Maintenance Amount, if any, with respect to each Senior Note.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder
of each Note irrevocable written notice of any prepayment to be made pursuant to
paragraph 4B of this Agreement not less than two (2) Business Days prior to the
prepayment date, specifying such prepayment date and the principal amount of the
Notes, and of the Notes held by such holder, to be prepaid on such date and
stating that such prepayment is to be made pursuant to paragraph 4B of this
Agreement. Notice of prepayment having been given as aforesaid, the principal
amount of the Notes specified in such notice, together with interest thereon to
the prepayment date and together with, in the case of any Senior Note, the
Yield-Maintenance Amount, if any, shall become due and payable on such
prepayment date. So long as you shall hold any Note, the Company shall, on or
before the day on which it gives written notice of any prepayment pursuant to
paragraph 4B of this Agreement, advise the investment professional designated by
you on Annex 1 hereto by telephone of the principal amount of the Notes to be
prepaid and the prepayment date.
4D. MANDATORY PREPAYMENTS. In the event that the Company receives any
of the proceeds listed in clauses (i) through (iv) of this Section 4D (the
"SHARED PROCEEDS"), such Shared Proceeds shall be paid and applied in accordance
with the last paragraph of this paragraph 4D. Subject to paragraph 4J hereof,
the Allocable Note Holder Portion of the following amounts shall be applied by
you to prepay principal of the Notes plus interest thereon to the prepayment
date and the Yield-Maintenance Amount (subject to deferral and subordination as
provided in paragraph 4J hereof), if any, on the Senior Notes:
(i) 100% of the Net Cash Proceeds from the issuance, sale or
incurrence by the Company of debt securities or instruments of the
Company or any of its Subsidiaries other than debt securities or
instruments issued or indebtedness permitted by paragraph 6B (i)
through (v) of this Agreement;
(ii) 100% (or 75% after $50,000,000 of mandatory prepayments of
principal (including amounts paid to the Collateral Agent as cash
collateral in respect of outstanding letters of credit) under the
Credit Agreement and the Notes less the Holdback Amount have been paid
by the Company to the Banks and Note Holders) of the Net Cash Proceeds
from (a) the issuance or sale of the common equity securities of the
Company or any of its Subsidiaries by the Company or any of its
Subsidiaries (other than the equity securities of
<PAGE> 7
7
Cerion Technologies, Inc. as set forth in the proviso set forth in this
clause (ii) and other than the issuance of equity to senior employees
after the Closing Date in an aggregate amount not in excess of
$1,000,000 in connection with management incentive programs) or (b)
payments of principal received by the Company or any of its
Subsidiaries on the Cerion Note; provided, however, that in the case of
any issuance or sale of equity securities of Cerion Technologies, Inc.
on terms and conditions satisfactory to the Required Holders, "Net Cash
Proceeds" for the purposes of this clause (ii) shall mean the Net Cash
Proceeds from the sale of such equity securities by Nashua Precision
Technologies, Inc. (and not the net proceeds from the issuance of
equity securities by Cerion Technologies, Inc.);
(iii) 100% (or 75% after $50,000,000 of mandatory prepayments of
principal (including amounts paid to the Collateral Agent as cash
collateral in respect of outstanding letters of credit) under the
Credit Agreement and the Notes less the Holdback Amount have been paid
by the Company to the Banks and the Note Holders) of the Net Cash
Proceeds received by the Company or any of its Subsidiaries from the
sale or other disposition of assets (other than sales of assets
permitted by paragraph 6F of this Agreement) which is in excess of
$500,000 on an individual asset basis or $1,000,000 on a cumulative
asset basis;
(iv) within 45 days of the end of fiscal year 1996, 100% (or 75%
after $50,000,000 of mandatory prepayments of principal (including
amounts paid to the Collateral Agent as cash collateral in respect of
outstanding letters of credit) under the Credit Agreement and the Notes
less the Holdback Amount have been paid by the Company to the Banks and
the Note Holders) of the Excess Cash Flow for such fiscal year.
Any and all monies received by the Company in respect of the Shared
Proceeds described in clauses (i) through (iv) above shall be paid to the
Collateral Agent for distribution in accordance with the priorities set forth
in, and subject to the terms and conditions of, the Collateral Agency and
Intercreditor Agreement. All amounts to be paid to the Note Holders pursuant to
the foregoing sentence constitute the "ALLOCABLE NOTE HOLDER PORTION" of Shared
Proceeds.
4E. SPECIAL MANDATORY PREPAYMENTS. In the event any amendment or
modification shall be made to the Credit Agreement after the date hereof the
effect of which shall be to accelerate the scheduled amortization of principal
installments with respect to Loans under the Credit Agreement, prepayments on
the Senior Notes shall be similarly accelerated and proportionally increased
such that at all times the
<PAGE> 8
8
outstanding principal of the Senior Notes maintains the same proportional
relationship to the sum of Aggregate Outstanding Extensions of Credit and the
outstanding principal of the Senior Notes as exists on the date of this
Agreement. Any such prepayment shall be with accrued interest to the prepayment
date and with payment, subject to paragraph 4J hereof, of the Yield-Maintenance
Amount, if any, which becomes payable as a result of such prepayment with
respect to such Senior Notes.
4F. NOTICE OF MANDATORY PREPAYMENT. The Company shall give the holder
of each Note irrevocable written notice of any prepayment to be made pursuant to
paragraphs 4D and 4E of this Agreement not less than two (2) Business Days prior
to the prepayment date, specifying such prepayment date, the principal amount of
the Notes, and the principal amount of Notes held by such holder to be prepaid
on such date and stating that such prepayment is to be made pursuant to
paragraph 4D or 4E of this Agreement, as the case may be. Notice of prepayment
having been given as aforesaid, the principal amount of the Notes specified in
such notice, together with interest thereon to the prepayment date and together,
in the case of the Senior Notes, with the Yield-Maintenance Amount, if any,
which becomes payable as a result of such prepayment shall become due and
payable on such prepayment date. So long as you shall hold any Note, the Company
shall, on or before the day on which it gives written notice of any prepayment
pursuant to paragraphs 4D or 4E of this Agreement, advise the investment
professional designated by you on Annex 1 hereto by telephone of the principal
amount of the Notes to be prepaid and the prepayment date.
4G. APPLICATION OF PREPAYMENTS; PARTIAL PAYMENTS PRO RATA.
(i) APPLICATION OF MANDATORY PREPAYMENTS. Any prepayment of Notes
pursuant to paragraphs 4B, 4D or 4E of this Agreement shall be applied
to the Notes in the inverse order of maturity thereof.
(ii) PREPAYMENTS ALLOCATED PRO RATA. Upon any partial prepayment
of Notes pursuant to paragraphs 4A, 4B, 4D or 4E, the principal amount
so prepaid shall be allocated to all Notes at the time outstanding in
proportion to the respective aggregate principal amounts of the Notes
then outstanding.
4H. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of the Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraphs 4A, 4B, 4D or 4E of this Agreement or upon acceleration of such
final maturity pursuant to paragraph 7A of this Agreement), or purchase, or
otherwise acquire, directly or indirectly, Notes held by any Person, unless:
<PAGE> 9
9
(i) the Company or such Subsidiary or Affiliate shall have offered
to acquire (regardless of whether such offer shall be accepted) the
same proportion of the aggregate principal amount of Notes held by each
other holder of Notes at the time outstanding upon the same terms,
conditions and consideration; and
(ii) such acquisition is not directly or indirectly conditioned
upon the holder of any Note or Notes giving consent to any amendment,
supplement or waiver to any provision of this Agreement or the Notes,
and no such consent is otherwise given, directly or indirectly, in
connection with any such acquisition.
Any Notes prepaid, retired, purchased or otherwise acquired by the Company or
any of the Subsidiaries or Affiliates shall not be deemed to be outstanding for
any purpose under this Agreement (including, without limitation, any
determination of the "REQUIRED HOLDERS").
4I. LIMITATIONS ON PAYMENTS AND PREPAYMENTS. Except as specifically
set forth in this Agreement and the Notes, the Notes shall not be subject to
prepayment.
4J. DEFERRAL OF YIELD-MAINTENANCE AMOUNT. In the event the Company
shall have an obligation to the Note Holders in respect of the Yield-Maintenance
Amount, the Note Holders hereby agree that the payment of such obligation shall
be deferred and subordinated as provided herein and in the Collateral Agency and
Intercreditor Agreement. Any Yield-Maintenance Amount accruing prior to the
earliest to occur of: (i) a Bankruptcy Event, (ii) an Acceleration Event, or
(iii) December 31, 1997 shall be deferred and be subordinate and junior in right
of payment to the other Secured Obligations. Upon any such permitted deferral,
the Company shall issue its promissory notes to the Note Holders, and each such
promissory note (each, a "YMA NOTE") shall: (i) be substantially in the form
attached hereto as Exhibit A-2, (ii) bear interest from the date of issue
thereof at a rate equal to 11.85% per annum, with such interest deferred and
payable on the maturity date thereof, (iii) have a principal amount equal to the
Yield-Maintenance Amount being deferred, (iv) have no required prepayments of
principal prior to its stated maturity date and (v) be stated to mature on the
earliest to occur of (a) the stated maturity date of the Senior Notes and (b)
the date on which all Secured Obligations have been paid in full, upon which
date the then outstanding principal amount of such YMA Note shall be due and
payable together with accrued and unpaid interest thereon; provided, however,
that such YMA Notes shall be subordinated in payment to the obligations owing to
the Banks under the Credit Agreement and to the Note Holders under the
<PAGE> 10
10
Senior Notes to the extent set forth in the Collateral Agency and Intercreditor
Agreement.
4K. FACILITY FEES.
(i) If the Company has not paid to the Banks and the Note Holders
mandatory prepayments of principal of Loans (including amounts paid to
the Collateral Agent as cash collateral in respect of outstanding
letters of credit) and principal of the Notes in an aggregate amount at
least equal to $20,000,000 less the Holdback Amount on or prior to June
30, 1996, then the Company shall pay to the Note Holders, ratably, on
July 1, 1996, a facility fee in an aggregate amount equal to 1% of the
average outstanding principal amount of the Senior Notes during the
period commencing on the Closing Date and ending on June 30, 1996.
(ii) If the Company has not paid to the Banks and the Note Holders
mandatory prepayments of principal of Loans (including amounts paid to
the Collateral Agent as cash collateral in respect of outstanding
letters of credit) and principal of the Notes in an aggregate amount at
least equal to $50,000,000 less the Holdback Amount on or prior to
September 30, 1996, then the Company shall pay to the Note Holders,
ratably, on October 1, 1996 a further facility fee in an aggregate
amount equal to 1% of the average outstanding principal amount of the
Senior Notes during the period commencing on the Closing Date and
ending on September 30, 1996.
5. AFFIRMATIVE COVENANTS.
Until all obligations under this Agreement, the Senior Notes, any YMA
Note and all Secured Obligations have been paid in full:
5A. FINANCIAL STATEMENTS AND OTHER MATTERS. The Company will deliver
to each Significant Holder in quadruplicate:
(i) as soon as available and in any event within twelve (12)
Business Days after the end of each calendar month (other than the last
quarterly period) in each fiscal year,
(a) consolidated statements of income of the Company and its
consolidated Subsidiaries and consolidating statements of income
by Major Line of Business of the Company and its consolidated
Subsidiaries for such calendar month and for the period from the
<PAGE> 11
11
beginning of the current fiscal year to the end of such calendar
month and consolidated balance sheets of the Company and its
consolidated Subsidiaries and consolidating balance sheets by
Major Line of Business of the Company and its consolidated
Subsidiaries as at the end of such calendar month and
(b) statements of income and schedules of capital
expenditures by operating unit of the Company and its
consolidated Subsidiaries for such calendar month and for the
period from the beginning of the current fiscal year to the end
of such calendar;
(ii) as soon as available and in any event within forty-five (45)
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year,
(a) consolidated statements of income and cash flows of the
Company and its consolidated Subsidiaries and consolidating
statements of income by Major Line of Business of the Company and
its consolidated Subsidiaries for such quarterly period and for
the period from the beginning of the current fiscal year to the
end of such quarterly period and consolidated and consolidating
balance sheets of the Company and its consolidated Subsidiaries
and consolidating balance sheets by Major Line of Business of the
Company and its consolidated Subsidiaries as at the end of such
quarterly period and
(b) statements of income and schedules of capital
expenditures by Major Line of Business of the Company and its
consolidated Subsidiaries for such quarterly period and for the
period from the beginning of the current fiscal year to the end
of such quarterly period;
setting forth in each case in comparative form figures for the
corresponding periods in the preceding fiscal year, all in reasonable
detail and certified by a Responsible Officer of the Company, subject
to changes resulting from year-end adjustments;
(iii) as soon as available and in any event within ninety (90)
days after the end of each fiscal year,
(a) consolidated statements of income and cash flows and
consolidating statements of income of the Company and its
<PAGE> 12
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consolidated Subsidiaries and consolidating statements of income
by Major Line of Business of the Company and its consolidated
Subsidiaries for such year and consolidated and consolidating
balance sheets of the Company and its consolidated Subsidiaries
and consolidating balance sheets by Major Line of Business of the
Company and its consolidated Subsidiaries as at the end of such
year and
(b) consolidating statements of income and schedules of
capital expenditures, depreciation and amortization by Major Line
of Business of the Company and its consolidated Subsidiaries for
such year,
setting forth in the case of such consolidated and consolidating
statements, in comparative form, corresponding consolidated figures
from the preceding annual audit, all in reasonable detail and
satisfactory in scope to the Required Holders and, as to the
consolidated statements, certified to the Company by independent public
accountants of recognized standing selected by the Company without
qualification or with qualifications other than qualifications relating
to going concern, scope of audit or limitations imposed by the Company
(collectively, "MATERIAL QUALIFICATIONS"; it being understood that any
certification of independent public accountants containing a Material
Qualification must be in scope and substance reasonably satisfactory to
the Required Holders), and setting forth in the case of such
consolidating statements, in comparative form, corresponding
consolidating figures from the preceding year, all in reasonable detail
and satisfactory in scope to the Required Holders and, as to the
consolidating statements, certified by a Responsible Officer of the
Company;
(iv) not later than the first day of each fiscal year of the
Company, a copy of the projections by the Company of the operating
budget and cash flow budget of the Company and its Subsidiaries for
such fiscal year, such projections to be accompanied by a certificate
of a Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that
such officer has no reason to believe they are incorrect or misleading
in any material respect;
(v) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it sends
to its public stockholders and copies of all registration statements
(without exhibits) and all reports that it files with the Securities
and Exchange Commission (or any
<PAGE> 13
13
governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(vi) promptly upon receipt thereof, a description of each other
report submitted to the board of directors of the Company or to the
audit or any other committee thereof by independent accountants in
connection with any annual, interim or special audit made by them of
the books of the Company or any Subsidiary;
(vii) promptly upon release thereof, a copy of each material press
release issued by or on behalf of the Company or any Subsidiary;
(viii) promptly upon the request of any holder of Notes, any
information required to be delivered (to the extent not already
delivered to such holder pursuant to the other requirements of this
paragraph 5A) to any transferee of Notes by Rule 144A (17 C.F.R.
[Section]230.144A) under the Securities Act (or any successor
provision) as a condition to the transfer of any Note pursuant to
such Rule;
(ix) immediately upon becoming aware of the occurrence of any
(a) material "REPORTABLE EVENT" (as such term is defined in
Section 4043 of ERISA), or
(b) "PROHIBITED TRANSACTIONS" (as such term is defined in
Section 406 or Section 4975 of the IRC);
in connection with any Pension Plan or any trust created thereunder, a
certificate of a Responsible Officer specifying the nature thereof,
what action the Company is taking or proposes to take with respect
thereto, and, when known, any action taken by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto;
(x) prompt written notice and a description of
(a) any failure to make a contribution to a Pension Plan if
such failure has given rise to a Lien pursuant to Section
302(f)(1) of ERISA, or
(b) any request pursuant to Section 303 of ERISA or Section
412 of the IRC for, or notice of the granting pursuant to said
<PAGE> 14
14
Section 303 or Section 412 of, a waiver in respect of all or part
of the minimum funding standing set forth in ERISA or the IRC, as
the case may be, of any Pension Plan, and, in connection with the
granting of any such waiver, the amount of any waived funding
deficiency (as such term is defined in said Section 303 or said
Section 412) and the terms of such waiver;
(xi) prompt written notice of and, where applicable, a
description of
(a) any notice from the PBGC in respect of the commencement
of any proceedings pursuant to Section 4042 of ERISA to terminate
any Pension Plan or for the appointment of a trustee to
administer any Pension Plan,
(b) any distress termination notice delivered to the PBGC
under Section 4041 of ERISA in respect of any Pension Plan, and
any determination of the PBGC in respect thereof,
(c) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA,
(d) any Multiemployer Plan becoming "INSOLVENT" (as such
term is defined in Section 4245 of ERISA under Title IV of
ERISA),
(e) the whole or partial withdrawal of the Company or any
ERISA Affiliate from any Multiemployer Plan and the withdrawal
liability incurred in connection therewith, and
(f) the withdrawal of the Company or any ERISA Affiliate
from any Pension Plan with respect to which it is a "SUBSTANTIAL
EMPLOYER" under, and as defined in, ERISA and the withdrawal
liability under ERISA incurred in connection therewith;
(xii) forthwith upon a Responsible Officer obtaining knowledge of
an Event of Default or Default, a certificate of a Responsible Officer
specifying the nature and period of existence thereof and what action
the Company proposes to take with respect thereto; and
(xiii) with reasonable promptness, such other financial data and
other information as such Significant Holder may reasonably request
<PAGE> 15
15
(including, without limitation, the reports described in the
descriptions delivered to the holders of the Notes pursuant to clause
(vi) of this paragraph 5A, any other reports of accountants for the
Company or any Subsidiary delivered to the board of directors of the
Company or any committee thereof and any information or reports
concerning the collateral securing the Notes).
Together with each delivery of financial statements required by clauses (i),
(ii) and (iii) above, the Company will deliver to each Significant Holder a
certificate of a Responsible Officer demonstrating (with computations in
reasonable detail) compliance by the Company and the Subsidiaries with the
provisions of paragraphs 6A, 6B, 6C, 6D(x), 6E, 6F and 6H(viii) and stating that
there exists no Event of Default or Default, or, if any Event of Default or
Default exists, specifying the nature and period of existence thereof and what
action the Company proposes to take with respect to this Agreement. The Company
shall also deliver concurrently with the delivery of the financial statements
referred to in clause (iii) of paragraph 5A, a certificate of the independent
certified public accountants reporting on such financial statements stating that
in making the examination necessary therefor no knowledge was obtained of an
Event of Default or Default under paragraphs 6A, 6O, 6Q and 6U hereof.
5B. INSPECTION OF PROPERTY. The Company will permit any Person
designated by any Significant Holder in writing, at such Significant Holder's
expense (unless an Event of Default shall be continuing, in which event, at the
Company's expense), to visit and inspect any of the Properties of the Company
and the Subsidiaries, to examine the corporate books and financial records of
the Company and the Subsidiaries and make copies thereof or extracts therefrom
and to discuss the affairs, finances and accounts of any of such corporations
with the principal officers of the Company and its independent public
accountants, all at such reasonable times and as often as such Significant
Holder may reasonably request.
5C. COVENANT TO SECURE SENIOR NOTES EQUALLY. If the Company or any
Subsidiary creates or assumes any Lien upon any of its Property, whether now
owned or hereafter acquired, other than Liens permitted by the provisions of
paragraph 6D of this Agreement (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 11C of this
Agreement), the Company will make or cause to be made pursuant to such
agreements and instruments as shall be approved by the Required Holders
effective provision whereby the Senior Notes will be secured by such Lien
equally and ratably with any and all other Debt thereby secured (other than (i)
Yield-Maintenance Amounts, which shall accrue, but shall be subject to deferral
and subordination as provided in paragraph 4J hereof and (ii) Debt
<PAGE> 16
16
under the Credit Agreement representing Loans in excess of $56,018,000, which
shall be secured as provided in the Security and Financing Documents).
5D. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause
each Subsidiary to, pay before they become delinquent
(i) all taxes, assessments and governmental charges or levies
imposed upon it or its Property and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons that, if unpaid, might
result in the creation of a Lien upon its property.
provided that items of the foregoing description need not be paid while being
contested in good faith and by appropriate proceedings as long as adequate book
reserves have been established and maintained and exist with respect thereto and
provided further that the contesting Person's title to, and its right to use,
its Property is not materially adversely affected thereby.
5E. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The Company
will, and will cause each Subsidiary to,
(i) PROPERTY -- maintain its Property in good condition and make
all necessary renewals, replacements, additions, betterments and
improvements thereto;
(ii) INSURANCE -- maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against
such casualties and contingencies, of such types (including, without
limitation, loss or damage, public liability, business interruption,
larceny, embezzlement or other criminal misappropriation) and in such
amounts as is customary in the case of corporations of established
reputations engaged in the same or a similar business and similarly
situated;
(iii) FINANCIAL RECORDS -- maintain sound accounting policies and
an adequate and effective system of accounts and internal accounting
control that will safeguard assets, properly record income, expenses
and liabilities, and assure the production of proper financial
statements in accordance with GAAP;
<PAGE> 17
17
(iv) CORPORATE EXISTENCE AND RIGHTS -- except for the liquidation
of any Subsidiary, do or cause to be done all things necessary
(a) to preserve and keep in full force and effect its
existence, rights and franchises and
(b) to maintain each Subsidiary as a Subsidiary, except as
otherwise permitted by paragraphs 6E, 6F and 6G of this
Agreement;
(v) COMPLIANCE WITH LAW -- comply with all laws, ordinances and
governmental rules and regulations to which it is subject (including,
without limitation, all Environmental Protection Laws) and obtain all
licenses, permits, franchises and other governmental authorizations
necessary to the ownership of its Properties or to the conduct of its
business, except for violations or failures to obtain that could not
result in any material adverse change in the business, condition or
operations of the Company and the Subsidiaries taken as a whole.
5F. ERISA COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times
(i) with respect to each Pension Plan, make timely payments of
contributions required to meet the minimum funding standard set forth
in ERISA or the IRC with respect thereto and, with respect to each
Multiemployer Plan, make timely payment of contributions required to be
paid thereto as provided by Section 515 of ERISA and
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as would
not have a material adverse effect on the business, prospects, profits,
Properties or financial condition of the Company and the Subsidiaries taken as a
whole.
5G. ENVIRONMENTAL LAWS.
(i) Comply with, and ensure compliance by all tenants and
subtenants, if any, with, all applicable Environmental Protection Laws
and obtain and comply in all material respects with and maintain, and
ensure that all tenants and subtenants obtain and comply in all
material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable
Environmental Protection Laws except to the extent
<PAGE> 18
18
that failure to do so could not be reasonably expected to have a
material adverse effect on the business, conditions, or operations
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole;
(ii) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Protection Laws except to the extent that the same are
being contested in good faith by appropriate proceedings and the
pendency of such proceedings could not be reasonably expected to have a
material adverse effect on the business, conditions, or operations
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole;
5H. MODIFICATIONS TO SECURITY AND FINANCING DOCUMENTS.
(i) The Company agrees promptly to provide to you an executed copy
of any amendment, supplement or modification to the Credit Agreement or
the other Security and Financing Documents and to notify you in writing
prior to executing any such amendment, supplement or modification;
provided, that with respect to any material economic term (including,
without limitation, interest rates, fees, amortizations, prepayments
and reductions or increases in the lending commitments of the Banks not
provided for in the Credit Agreement on the date hereof) of the Credit
Agreement or the other Security and Financing Documents, no amendment,
supplement or modification thereof shall become effective without the
express written consent of the Required Holders. This paragraph 5H
shall not prohibit changes in the borrowing base definition (including
changes in definitions of component parts of the borrowing base and
changes in advance rates) or the operation or applicability of the
borrowing base limitations contained in the Credit Agreement.
(ii) If the Credit Agreement is hereafter amended such that any
material terms thereof (including without limitation, pricing,
affirmative covenants, negative covenants, amortizations, events of
default and mandatory prepayments) are more favorable to the Banks than
the terms hereof (giving due account to the terms existing on the date
hereof) are to you (as determined by you in your sole discretion), the
Company shall, simultaneously with such amendment to the Credit
Agreement, enter into an amendment of this Agreement in order to
incorporate herein such favorable terms, if you so request.
<PAGE> 19
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5I. NO INTEGRATION. The Company covenants that it has taken and will
take all necessary action so that the issuance of the Notes does not and will
not require registration under the Securities Act. The Company covenants that no
future offer and sale of debt securities of the Company of any class will be
made if there is a reasonable possibility that such offer and sale would, under
the doctrine of "integration", subject the issuance of the Notes to you to the
registration requirements of the Securities Act.
5J. FURTHER ASSURANCES. Upon your request, the Company agrees to
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other legal requirement which are necessary or
advisable to maintain in favor of you, Liens on the Collateral that are duly
perfected in accordance with all applicable legal requirements.
5K. NOTICES. The Company agrees to promptly give notice to you of:
(i) any (a) default or event of default under any material
contractual obligation of the Company or any of its Subsidiaries or (b)
litigation, investigation or proceeding which may exist at any time
between the Company or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
material adverse effect on the business, condition or operations
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole.
(ii) any litigation or proceeding affecting the Company or any of
its Subsidiaries in which the amount involved is $1,000,000 or more and
not covered by insurance or in which injunctive or similar relief is
sought;
(iii) any development or event which could reasonably be expected
to have a material adverse effect on the business, condition or
operations (financial or otherwise) of the Company and its Subsidiaries
taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
5L. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE. The Company will
punctually pay, or cause to be paid, the principal and interest (and subject to
<PAGE> 20
20
paragraph 4J hereof, premium, if any) to become due in respect of the Notes
according to the terms thereof and will maintain an office at the address of the
Company set forth in paragraph 11I of this Agreement where notices,
presentations and demands in respect of this Agreement or the Notes may be made
upon it. Such office will be maintained at such address until such time as the
Company will notify the holders of the Notes in writing of any change of
location of such office, which will in any event be located in the United States
of America.
5M. ADDITIONAL COLLATERAL. (i) With respect to any assets acquired
after the Closing Date by the Company or any of its domestic Subsidiaries that
are intended to be subject to the Lien created by any of the Security and
Financing Documents but which are not so subject (other than any assets
described in paragraph (ii), (iii) or (iv) of this subsection), the Company
agrees to promptly (and in any event within 30 days after the acquisition
thereof): (a) execute and deliver to the Collateral Agent such amendments to the
relevant Security and Financing Documents or such other documents as the
Collateral Agent or the Required Holders shall deem necessary or advisable to
grant to the Collateral Agent, for the benefit of the Banks and the Note
Holders, a Lien on such assets, (b) take all actions requested by the Collateral
Agent or the Required Holders to cause such Lien to be duly perfected in
accordance with all applicable legal requirements, including, without
limitation, the filing of financing statements in such jurisdictions as may be
requested by the Collateral Agent or the Required Holders, and (c) if requested
by the Collateral Agent or the Required Holders, deliver to the Collateral Agent
legal opinions relating to the matters described in clauses (a) and (b)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Collateral Agent or the Required
Holders.
(ii) At the Company's next annual shareholders' meeting, which shall
occur on or before August 1, 1996, the Company will use its best efforts to
obtain all necessary consents from its shareholders to amend its organizational
documents such that the Company is permitted to pledge or grant a security
interest to the Collateral Agent for the benefit of the Banks and the Note
Holders in all of its assets not subject to the Lien of the Security and
Financing Documents. Within ten (10) Business Days of obtaining such consents,
the Company will enter into such documents and execute such instruments in form
and substance reasonably satisfactory to the Collateral Agent and the Required
Holders for the purposes of pledging or granting a security interest in such
assets to the Collateral Agent.
(iii) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary (other than a foreign Subsidiary), the Company shall
promptly notify the Collateral Agent and the Significant Holders and promptly
upon the request
<PAGE> 21
21
of the Collateral Agent or the Required Holders: (a) execute and deliver to the
Collateral Agent, for the benefit of the Banks and the Note Holders, a new
pledge agreement or such amendments or supplements to the relevant Pledge
Agreement as the Agent or the Required Holders shall reasonably deem necessary
or advisable to grant to the Collateral Agent, for the benefit of the Banks and
the Note Holders, a Lien on the capital stock of such Subsidiary which is owned
by the Company or any of its Subsidiaries, (b) deliver to the Collateral Agent
the certificates representing such capital stock, together with undated stock
powers executed and delivered in blank by a duly authorized officer of the
Company or such Subsidiaries, as the case may be, (c) cause such new
Subsidiaries (I) to become a party to the Subsidiaries Guarantee, the
Subsidiaries Security Agreement and the Collateral Agency and Intercreditor
Agreement, in each case pursuant to documentation which is in form and substance
reasonably satisfactory to the Collateral Agent, and (II) to take all actions
necessary or advisable to cause the Lien created by the Subsidiaries Security
Agreement to be duly perfected in accordance with all applicable legal
requirements, including, without limitation, the filing of financing statements
in such jurisdictions as may be requested by the Collateral Agent and (d) if
requested by the Collateral Agent, deliver to the Collateral Agent legal
opinions relating to the matters described in clauses (a), (b) and (c)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Collateral Agent.
(iv) With respect to any Person that, subsequent to the Closing Date,
becomes a foreign Subsidiary, the Company shall promptly notify the Collateral
Agent and promptly upon the request of the Note Holders: (a) execute and deliver
to the Collateral Agent a new pledge agreement or such amendments or supplements
to the relevant Pledge Agreement as the Collateral Agent or the Required Holders
shall reasonably deem necessary or advisable to grant to the Collateral Agent,
for the benefit of the Banks and the Note Holders, a Lien on the capital stock
of such Subsidiary which is owned by the Company or any of its Subsidiaries
(provided that in no event shall more than 65% of the capital stock of any such
Subsidiary be so pledged if the Collateral Agent reasonably determines that
pledge of more than 65% would have adverse tax consequences), (b) deliver to the
Collateral Agent any certificates representing such capital stock, together with
undated stock powers executed and delivered in blank by a duly authorized
officer of the Company or such Subsidiary, as the case may be, and take or cause
to be taken all such other actions under the law of the jurisdiction of
organization of such foreign subsidiary as may be necessary or advisable to
perfect such Lien on such capital stock and (c) if requested by the Collateral
Agent or the Required Holders, deliver to the Collateral Agent legal opinions
relating to the matters described in clauses (a) and (b) immediately preceding,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Collateral Agent and the Required Holders.
<PAGE> 22
22
5N. AMENDMENT TO FINANCIAL COVENANTS. By January 1, 1997 (the
"AMENDMENT DATE"), the Company and the Required Holders shall commence
negotiations in good faith, based on the Company's business plan for 1997, in
order to enter into an amendment to this Agreement for the purpose of continuing
the financial covenants contained in paragraph 6A(i) of this Agreement through
the maturity date of the Notes. If after thirty days after the Amendment Date,
the Company and the Required Holders have not agreed on appropriate levels for
such financial covenants through such maturity date, the Required Holders in
their reasonable judgment shall set such levels and the Company and the Required
Holders shall execute an amendment to this Agreement on the 31st day after the
Amendment Date for the purposes of including the levels with respect to such
financial covenants set by the Required Holders as part of this Agreement for
the period through the maturity date of the Notes.
During the ten Business Day period after any mandatory prepayment in
excess of $15,000,000 is made pursuant to paragraph 4D of this Agreement, the
Company and the Required Holders shall negotiate in good faith in order to enter
into an amendment to this Agreement for the purpose of resetting the financial
covenants contained in paragraphs 6A and 6Q herein. If after ten Business Days
of such mandatory prepayment, the Company and the Required Holders have not
agreed on appropriate levels for such financial covenants, the Required Holders
in their reasonable judgment shall set such levels and the Company and the
Required Holders shall execute an amendment to this Agreement on the eleventh
Business Day after the Amendment Date for the purposes of including the levels
with respect to such financial covenants. The Company and the Required Holders
shall execute such amendment for the purposes of incorporating such levels, as
set by the Required Holders, into this Agreement.
6. NEGATIVE COVENANTS.
Until all obligation under this Agreement, the Senior Notes, any YMA
Notes and all Secured Obligations have been paid in full:
6A. FINANCIAL CONDITION COVENANTS.
(i) Maintenance of EBITDA. The Company will not permit EBITDA of
the Company and its Subsidiaries, measured on a cumulative basis for
any test period set forth below, as at the last day of such test
period, to be less than the amount set forth opposite such test period
below:
<PAGE> 23
23
<TABLE>
<CAPTION>
Quarter Amount
------- ------
<S> <C>
January 1, 1996 - March 31, 1996 $ 1,640,000
January 1, 1996 - June 30, 1996 $ 7,800,000
January 1, 1996 - September 30, 1996 $19,150,000
January 1, 1996 - December 31, 1996 $27,300,000
</TABLE>
<TABLE>
(ii) Maintenance of EBITDA Ratio. The Company will not permit, in
the aggregate for the Company and its Subsidiaries, the ratio of (i)
EBITDA plus Consolidated Lease Expense to (ii) Consolidated Fixed
Charges, measured on a cumulative basis for any test period set forth
below, as at the last day of such test period to be less than the ratio
set forth below opposite such test period:
<CAPTION>
Quarter Ratio
------- -----
<S> <C>
January 1, 1996 - March 31, 1996 .97:1
January 1, 1996 - June 30, 1996 1.89:1
January 1, 1996 - September 30, 1996 2.91:1
January 1, 1996 - December 31, 1996 3.09:1
and thereafter on a rolling four-quarter basis
</TABLE>
<TABLE>
(iii) Maintenance of Tangible Net Worth. The Company will not
permit Consolidated Tangible Net Worth at any time during any period
set forth below to be less than the amount set forth opposite such
period below:
<CAPTION>
Quarter Amount
------- ------
<S> <C>
Fourth Quarter 1995 $38,000,000
First Quarter 1996 $35,400,000
Second Quarter 1996 $36,000,000
Third Quarter 1996 $39,700,000
Fourth Quarter 1996 and thereafter $41,600,000
</TABLE>
6B. LIMITATION ON COVENANT DEBT. The Company will not, nor will it
permit any Subsidiary to, create, incur, assume or suffer to exist any
Covenant Debt, except:
(i) Covenant Debt of the Company under this Agreement;
<PAGE> 24
24
(ii) Covenant Debt of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary;
(iii) Covenant Debt of the Company and any of its Subsidiaries
incurred to finance the acquisition or construction of fixed or capital
assets (whether pursuant to a loan, a Capitalized Lease Obligation or
otherwise) in an aggregate principal amount not exceeding as to the
Company and its Subsidiaries $3,000,000 at any time outstanding;
(iv) Covenant Debt outstanding on the date hereof and listed on
Annex 2 hereof (and any extensions, renewals or refinancing of such
Covenant Debt without any increase in the principal amount thereof);
(v) Covenant Debt of a Person which becomes a Subsidiary after the
date hereof, provided that (a) such indebtedness existed at the time
such Person became a Subsidiary and was not created in anticipation
thereof and (b) immediately after giving effect to the acquisition of
such Person by the Company or a Subsidiary no Default or Event of
Default shall have occurred and be continuing;
(vi) the incurrence of any other Covenant Debt with the prior
written consent of the Required Holders, provided that the Net Cash
Proceeds thereof are applied to the mandatory prepayment of the Loans
in accordance with paragraph 4D hereof; and
(vii) Covenant Debt of any foreign Subsidiary to the Company or to
any domestic Subsidiary not otherwise permitted in the foregoing
clauses (i) through (vi) in an aggregate amount not in excess of
$2,000,000 at any time outstanding.
6C. LIMITATION ON GUARANTY OBLIGATIONS. The Company will not, nor
will it permit any Subsidiary to, create, incur, assume or suffer to exist any
Guaranty obligation except:
(i) Guaranty obligations in existence on the date hereof and
listed on Annex 2 to this Agreement;
(ii) the Subsidiaries Guarantee; and
<PAGE> 25
25
(iii) guarantees made in the ordinary course of business by the
Company or any of its Subsidiaries of Covenant Debt permitted by this
Agreement of the Company or any such Subsidiary, as the case may be.
6D. LIENS. The Company will not, nor will it permit any Subsidiary to,
create, assume or suffer to exist any Lien upon any of its Property, whether now
owned or hereafter acquired (whether or not provision is made for the equal and
ratable securing of the Notes in accordance with the provisions of paragraph 5C
of this Agreement), except:
(i) Liens in existence on the Closing Date and described on Annex
2 to this Agreement;
(ii) Liens for taxes, assessments or other governmental charges
not yet due or that are being actively contested in good faith by
appropriate proceedings;
(iii) Liens incurred or deposits made in the ordinary course of
business (other than Liens arising under any provision of ERISA),
(a) in connection with workers' compensation, unemployment
insurance, social security and other like laws,
(b) to secure the performance of letters of credit, bids,
tenders, sales contracts, surety and performance bonds (of a type
other than set forth in clause (iv) of this paragraph 6D) and
other similar obligations not incurred in connection with the
borrowing of money, the obtaining of loans or advances or the
payment of the deferred purchase price of Property, and
(c) in respect of leases, statutory obligations or claims or
demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons,
provided in each case that
(1) the obligations secured by such Liens shall not be
due and payable or, if due and payable, shall be actively
contested in good faith by appropriate proceedings,
<PAGE> 26
26
(2) such obligations shall not have arisen in connection
with the borrowing of money, the obtaining of loans or
advances or the payment of the deferred purchase price of
Property, and
(3) such Liens shall not in the aggregate materially
detract from the value of the Property encumbered thereby or
materially interfere with the use of such Property in the
ordinary conduct of the owning Person's business or with the
operation of such Person's business;
(iv) Liens, arising in connection with court proceedings,
(a) consisting of or relating to attachments, remedies and
judgments, provided that the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate
proceedings and provided further that the aggregate amount so
secured, together with the aggregate amount secured pursuant to
clause (iv)(b) of this paragraph 6D, shall not exceed Five
Hundred Thousand Dollars ($500,000), and
(b) securing appeal bonds and supersedeas bonds, and other
similar Liens arising in connection with court proceedings
(including, without limitation, surety bonds and letters of
credit) or any other instrument serving a similar purpose,
provided that the aggregate amount so secured, together with the
aggregate amount secured pursuant to clause (iv)(a) of this
paragraph 6D shall not at any time exceed Five Hundred Thousand
Dollars ($500,000);
(v) Liens on Property of a Subsidiary to secure obligations of
such Subsidiary to the Company or another Subsidiary;
(vi) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other similar
title exceptions or encumbrances affecting real property, provided they
do not in the aggregate materially detract from the value of said
Properties or materially interfere with their use in the ordinary
conduct of the owning Person's business or with the operation of such
Person's business;
<PAGE> 27
27
(vii) any Lien existing on any Property of any corporation at the
time it becomes a Subsidiary, or existing prior to the time of
acquisition upon any Property acquired by the Company or any Subsidiary
through purchase, merger or consolidation or otherwise, whether or not
assumed by the Company or such Subsidiary, or placed upon Property at
the time of acquisition or construction by the Company or any
Subsidiary to secure all or a portion of (or to secure Debt incurred to
pay all or a portion of) the purchase price or construction cost
thereof (including, without limitation, Liens created in connection
with Capitalized Lease Obligations), provided that
(a) such Property is not or shall not thereby become
encumbered in an amount in excess of the lesser of the cost
thereof or the Fair Market Value thereof at the time such
corporation becomes a Subsidiary or at the time of such
acquisition or the completion of such construction, as the case
may be (as determined in good faith by the Board of Directors of
the Company or of the acquiring or constructing Person),
(b) any such Lien shall not encumber any other Property of
the Company or any Person which is a Subsidiary (after such
Person shall become and so long as it shall remain a Subsidiary),
and
(c) no Event of Default or Default (including, without
limitation, any Event of Default arising out of a breach of
paragraph 6C of this Agreement) shall have occurred and be
continuing at the time such corporation becomes a Subsidiary or
at the time of such acquisition or the completion of such
construction, as the case may be;
(viii) any Lien permitted by either of clauses (i) or (vii) of
this paragraph 6D securing Debt that is being renewed or extended,
provided that
(a) the principal amount of such Debt is not increased in
excess of the amount thereof outstanding at the time of such
renewal or extension;
(b) the Weighted Average Life to Maturity of such Debt is
not reduced;
(c) such Lien is not extended to any other Property not
theretofore encumbered thereby; and
<PAGE> 28
28
(d) no Event of Default or Default shall have occurred and
be continuing at the time of such renewal or extension;
(ix) bankers' Liens or rights of setoff against deposits (but only
to the extent that such deposits are not prohibited by paragraph 6L of
this Agreement) held in banks or other financial institutions; or
(x) any Lien not otherwise permitted by this paragraph 6D securing
obligations not incurred in connection with the borrowing of money, the
obtaining of loans or advances or the payment of the deferred purchase
price of Property so long as (a) such Liens shall be discharged within
thirty (30) days after the incurrence thereof and (b) the aggregate
amount of the obligations so secured shall not at any time exceed 2% of
Consolidated Tangible Net Worth; or
(xi) any Lien granted to the Collateral Agent on behalf of the
Banks and the Note Holders pursuant to the Security and Financing
Documents.
6E. DISPOSITION OF DEBT AND STOCK OF SUBSIDIARIES. Except with respect
to the capital stock of Cerion, the Company will not, nor will it permit any
Subsidiary to, sell, assign, pledge or otherwise dispose of any Debt of, or any
shares of stock of or other equity interests in (or any warrants, rights or
options to acquire, or other Securities exchangeable for or convertible into,
such stock or equity interests) (such stock, equity interests, warrants, rights,
options and other Securities herein called "SUBSIDIARY STOCK"), any Subsidiary,
nor will it permit any Subsidiary to issue or sell its own Subsidiary Stock,
except:
(i) to the Company or any Subsidiary; and
(ii) for directors' qualifying shares.
6F. DISPOSITION OF ASSETS. The Company will not, nor will it permit
any Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any
Property (collectively, "TRANSFERS"), except:
(i) Transfers of inventory in the ordinary course of business;
(ii) Transfers relating to the collection of accounts receivables
in the ordinary course of business as conducted by the Company on the
date hereof;
<PAGE> 29
29
(iii) Transfers to the Company;
(iv) Transfers from a Subsidiary to another Subsidiary;
(v) Transfers that (a) constitute dispositions of cash or cash
equivalents not prohibited by this Agreement, (b) constitute
Investments that are Permitted Investments or (c) constitute the
liquidation of any Permitted Investment;
(vi) Transfers relating to the sale or other disposition of
obsolete or worn out or no longer useful property in the ordinary
course of business; provided that the Net Cash Proceeds of each such
transaction are used to acquire like replacement property within nine
(9) months;
(vii) Transfers relating to the sale or other disposition by the
Company or any of its Subsidiaries of any assets (except for the sale
of inventory or obsolete, worn out or not longer useful assets in the
ordinary course of business and except as otherwise permitted by this
Agreement) in an amount not to exceed $500,000 on an individual basis
and $1,000,000 on a cumulative basis over the term of the Notes and
(viii) the sale of any other assets or property with the prior
written consent of the Required Holders, provided that Net Cash
Proceeds are applied to the mandatory prepayment of the Notes in
accordance with paragraph 4D.
6G. MERGER/CONSOLIDATION. The Company will not, nor will it permit any
Subsidiary to, merge into or consolidate with any other Person or permit any
other Person to merge into or consolidate with it; provided that:
(i) a Subsidiary (other than Cerion) may be merged into or
consolidated with the Company if the Company shall be the continuing or
surviving corporation;
(ii) a Subsidiary (other than Cerion) may be merged into or
consolidated with any other Subsidiary; and
(iii) any other corporation may be merged into or consolidated
with the Company or any Subsidiary if the Company or such Subsidiary
shall be the continuing or surviving corporation (and, in the case of a
merger into or consolidation with the Subsidiary, such Subsidiary
shall, immediately after giving effect to such transaction, remain a
Subsidiary);
<PAGE> 30
30
if, in each case, immediately prior to, and immediately after the consummation
of the transaction, and after giving effect thereto, no Event of Default or
Default exists or would exist under any provision of this Agreement.
6H. RESTRICTED INVESTMENTS. Except for certain existing investments as
set forth on Annex 2 hereof, the Company will not, nor will it permit any
Subsidiary to, purchase or make investments in, purchase stock or Securities of,
or make loans or advances to, or make other investments in, any other Person
(including investments in or loans or advances to any corporation proposed to be
acquired in a stock transaction or created as a Subsidiary) (all of the
foregoing referred to as "INVESTMENTS", and all of the below-listed Investments
referred to as "PERMITTED INVESTMENTS") except:
(i) Investments in or to the Company or Subsidiaries and
Investments in or to companies that simultaneously with such
Investments become Subsidiaries;
(ii) Investments received by the Company or the Subsidiaries
(including any trade credit) from customers or others in settlement of
obligations created in the ordinary course of business;
(iii) Investments in
(a) commercial paper issued by any Person organized under
the laws of the United States or any state thereof and rated
"P-1" or higher by Moody's Investors Service, Inc. or "A-1" or
higher by Standard & Poor's Corporation;
(b) certificates of deposit issued by any bank (1) organized
under the laws of the United States or any state thereof, (2) the
deposits of which are insured by the Federal Deposit Insurance
Corporation and (3) having combined capital and surplus
aggregating in excess of Five Hundred Million Dollars
($500,000,000); and
(c) marketable direct obligations of, or obligations
unconditionally guaranteed by, the United States government or
any agency thereof;
provided, in each case, that such Investments are payable in the United
States in United States dollars and mature within one (1) year from the
date of issuance thereof;
<PAGE> 31
31
(iv) Investments by Foreign Subsidiaries in certificates of
deposit (a) issued by any bank (1) not organized under the laws of the
United States or any state thereof and (2) having combined capital and
surplus aggregating in excess of the equivalent of Five Hundred Million
United States Dollars (US$500,000,000) and (b) that mature within one
(1) year from the date of issuance thereof;
(v) Investments consisting of travel advances, employee relocation
loans, and other employee loans and advances for the payment of
expenses incurred in the ordinary course of business;
(vi) Investments in operating deposit accounts maintained in the
ordinary course of business for operating fund purposes and in any
account subject to a Lock-Box Agreement or Agency Agreement (as such
terms are defined in the Collateral Agency and Intercreditor
Agreement);
(vii) Investments under Hedge Agreements which are permitted under
paragraph 6X hereof; and
(viii) Investments not otherwise permitted by the provisions of
this paragraph 6H if, on the date of the making of any such Investment,
and after giving effect thereto,
(a) the aggregate cost of all Investments outstanding on
such date made pursuant to this paragraph 6H(viii), minus
(b) the net return of capital received by the Company and
the Subsidiaries on or prior to such date from all Investments
made pursuant to this paragraph 6H(viii) during the period
commencing on the Closing Date and ending on such date,
would not exceed 5% of Consolidated Tangible Net Worth determined as of
the end of the fiscal quarter of the Company most recently ended as of
such date.
6I. SUBSIDIARIES. The Company will not:
(i) have any consolidated subsidiaries that are not Subsidiaries;
or
(ii) permit any Subsidiary to enter into or be a party or
otherwise subject to any contract, agreement, charter document or other
corporate
<PAGE> 32
32
document that imposes any restriction on such Subsidiary's ability to
pay dividends.
6J. DISCOUNT OF RECEIVABLES. The Company will not, nor will it permit
any Subsidiary to, discount (except for de minimis, discounts for early payment
made in the ordinary course of business), pledge, sell with recourse or
otherwise sell for less than the face value thereof any of its notes receivable
or accounts receivable, except in the ordinary course of business consistent
with the Company's business practices on the date hereof in connection with the
collection thereof.
6K. LETTERS OF CREDIT, SURETY CONTRACTS, ETC. The Company will not, nor
will it permit any Subsidiary to, become or remain liable, directly or
indirectly, as account party, guarantor or other surety with respect to any
letter of credit, surety contract or like instrument, except:
(i) for purposes of acquiring inventory in the ordinary course of
business;
(ii) in connection with letters of credit issued for insurance
purposes pursuant to the Credit Agreement, provided that the aggregate
reimbursement obligations of the Company and the Subsidiaries in
respect thereof do not at any time exceed $5,000,000 less the stated
amount of any letters of credit issued under clause (iii) below; and
(iii) letters of credit in an aggregate stated amount not to
exceed $250,000 issued under the Credit Agreement for purposes other
than insurance.
provided, in each case, that such obligations are not incurred in connection
with the borrowing of money, the obtaining of loans or advances or the payment
of the deferred purchase price of Property.
6L. BANK INVESTMENTS AND DEPOSIT ACCOUNTS. The Company will not, nor
will it permit any Subsidiary to, or make any written or oral commitment,
directly or indirectly, to, make any Investment in, or maintain any deposit or
other accounts with, any bank or financial institution to which the Company or
any Subsidiary owes Debt unless such bank or financial institution is a party to
the Collateral Agency and Intercreditor Agreement; provided that the Company and
the Subsidiaries may maintain such deposit or other accounts with any such bank
or financial institution so long as the aggregate amount on deposit with all
such banks and financial institutions does not exceed One Million Dollars
($1,000,000) for any period or more than five
<PAGE> 33
33
(5) consecutive Business Days; provided, further, that this paragraph 6K shall
not apply to operating deposit accounts maintained in the ordinary course of
business for operating fund purposes.
6M. PRIVATE OFFERING. The Company will not, nor will it permit any
Person acting on its behalf to, offer the Notes or any part thereof or any
similar Securities for issue or sale to or solicit any offer to acquire any of
the same from, any Person so as to require registration of the Notes under
Section 5 of the Securities Act.
6N. GENERAL RELEASE. Each of the Company and its Subsidiaries, on
behalf of itself and its predecessors, successors and assigns, together with its
past, present and future officers, directors, agents, representatives, partners,
joint venturers, affiliates and the successors and assigns of any and all of
them, in connection with this Agreement, and for good and sufficient
consideration, the receipt and sufficiency of which are hereby acknowledged, do
hereby forever release and discharge the Note Holders and their officers,
directors, employees, agents, representatives, successors and assigns (the "NOTE
HOLDER RELEASEE"), from any and all actions, causes of action, suits, debts,
dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
admiralty, or equity, which against the Note Holder Releasee, or any of them, it
ever had, now has, or hereafter can, shall or may have for, upon, or by reason
of any matter, cause or thing whatsoever arising from or relating to the
Original Note Agreement (or related documents) or the transactions contemplated
thereby from the beginning of the world to the Closing Date, whether known or
unknown, asserted or unasserted (the "RELEASED OBLIGOR CLAIMS"), and hereby
further irrevocably agrees not to commence or join any suit, action or
proceeding, at law or equity, in respect of the Released Obligor Claims
6O. LIMITATION ON LEASES. The Company will not, and will not permit
any Subsidiary to, allow Consolidated Lease Expense for any fiscal year of the
Company to exceed $3,000,000.
6P. LIMITATION ON DIVIDENDS. The Company will not, and will not permit
any Subsidiary to, declare or pay any dividend (other than dividends payable
solely in common stock of the Company) on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of capital stock of the Company or any warrants or options to purchase any
such stock, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Company
<PAGE> 34
34
or any Subsidiary, except (i) any Subsidiary of the Company may pay cash
dividends to the Company and any Subsidiary of the Company may be paid cash
dividends by any of its Subsidiaries and (ii) repurchase of stock from employees
or former employees in an aggregate amount not to exceed $50,000 per year.
<TABLE>
6Q. LIMITATION ON CAPITAL EXPENDITURES. The Company will not, and will
not permit any Subsidiary to, make any expenditure in respect of the purchase or
other acquisition of fixed or capital assets (excluding any such asset acquired
in connection with normal replacement and maintenance programs properly charged
to current operations) except for expenditures in the ordinary course of
business not exceeding, in the aggregate for the Company and its Subsidiaries
during any of the fiscal years of the Company set forth below, the amount set
forth opposite such fiscal year below:
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1995 $17,200,000
1996 $17,000,000
1997 $17,000,000
</TABLE>
provided, that up to 100% of any such amount if not so expended in the fiscal
year for which it is permitted above, may be carried over for expenditure in the
next following fiscal year.
6R. LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. The Company will not, and will not permit any Subsidiary to (a)
make any optional payment or prepayment on or redemption or purchase of any Debt
(other than the Notes and other than any Revolving Credit Loans under the Credit
Agreement and Debt with a principal amount outstanding not in excess of
$3,000,000) or (b) amend, modify or change, or consent or agree to any material
amendment, modification or change to any of the terms of any instrument relating
to or evidencing any such Debt (other than the Loans) in excess of $3,000,000.
6S. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not,
and will not permit any Subsidiary to enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate unless such transaction is (a)
otherwise permitted under this Agreement, (b) in the ordinary course of the
Company's or such Subsidiary's business and (c) upon fair and reasonable terms
no less favorable to the Company or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person which is not
an Affiliate; provided, however, the foregoing
<PAGE> 35
35
shall not prohibit (i) transactions between the Company and its Subsidiaries or
among the Company's Subsidiaries, (ii) Permitted Investments and payments
permitted by paragraph 6P, (iii) employment agreements, severance arrangements,
employee incentive arrangements and stock incentive arrangements entered into in
the ordinary course of business and (iv) intercompany arrangements approved by
the Required Holders between the Company and Cerion described in the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on March 21, 1996 and summarized on Annex 2 hereto, for the
registration of common stock of Cerion.
6T. LIMITATION ON SALES AND LEASEBACKS. The Company will not, and will
not permit any Subsidiary to enter into any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Company or such Subsidiary.
6U. LIMITATION ON CHANGES IN FISCAL YEAR. The Company will not permit
the fiscal year of the Company to end on a day other than December 31.
6V. LIMITATION ON NEGATIVE PLEDGE CLAUSES. The Company will not, and
will not permit any Subsidiary to, enter into with any Person any agreement,
other than (a) this Agreement, (b) the organizational documents of the Company
and its Subsidiaries, (c) the Credit Agreement, (d) any industrial revenue
bonds, purchase money debt instruments or Capitalized Lease Obligations
permitted by this Agreement (in which cases, any prohibition or limitation shall
only be effective against the assets financed thereby), and (e) the overdraft
facility of Nashua Photo Limited with Midland Bank not in excess of 2,000,000
pounds sterling, or any refinancing or replacement thereof not in excess of such
amount, provided that any prohibition or limitation shall be effective only
against the assets of Nashua Photo Limited, which prohibits or limits the
ability of the Company or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
6W. LIMITATION ON LINES OF BUSINESS. The Company will not, and will not
permit any Subsidiary to, enter into any business, either directly or through
any Subsidiary, except for those businesses in which the Company and its
Subsidiaries are engaged on the date of this Agreement and any business
substantially related thereto.
6X. HEDGE AGREEMENTS. The Company will not, and will not permit any
Subsidiary to, enter into any Hedge Agreement other than spot and forward
foreign
<PAGE> 36
36
exchange contracts (not to exceed six months in duration) in an aggregate
notional principal amount for all such contracts (including contracts existing
on the date hereof) not to exceed $4,000,000 and only in the following
currencies: Belgian Francs, Canadian Dollars, British Pounds and Dutch Gilders.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
premium on any Note when the same shall become due, either by the terms
thereof or otherwise as provided in this Agreement; or
(ii) the Company defaults in the payment of any interest on any
Note for more than five (5) Business Days after the date due;
(iii) any representation or warranty made by the Company in this
Agreement, the Security and Financing Documents or in any writing
furnished in connection with or pursuant to this Agreement or the
Security and Financing Documents, shall have been false in any material
respect as of the date made; or
(iv) the Company fails to perform or observe any agreement
contained in paragraph 5A(xiii), paragraph 5C or paragraph 6 of this
Agreement, Section 5 of the Pledge Agreements, Section 5 of the
Borrower Security Agreement or Section 4 of the Subsidiaries Security
Agreement; or
(v) (a) the Company fails to perform or observe any other
agreement, term or condition contained in this Agreement or the
Collateral Agency and Intercreditor Agreement or (b) the Collateral
Agent or any of the Banks fail to perform or observe any agreement,
term or condition in any material respect contained in the Collateral
Agency and Intercreditor Agreement, and such failure shall not be
remedied within thirty (30) days after any officer of the Company
obtains actual knowledge or notice thereof; or
(vi) the Company or any Subsidiary defaults in any payment of
principal of or interest on any other obligation for money borrowed (or
any
<PAGE> 37
37
Capitalized Lease Obligation, any obligation under a conditional sale
or other title retention agreement, any obligation issued or assumed as
full or partial payment for Property whether or not secured by a
purchase money mortgage or any obligation under notes payable or drafts
accepted representing extensions of credit) beyond any period of grace
provided with respect thereto, the Company or any Subsidiary defaults
in the payment of any Guaranty beyond any period of grace with respect
thereto, or the Company or any Subsidiary fails to perform or observe
any other agreement, term or condition contained in any agreement under
which any such obligation is created (or if any other event thereunder
or under any such agreement shall occur and be continuing) and the
effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause, such obligation to become due prior to any
originally stated maturity, or to be repurchased by the Company or any
Subsidiary; provided, however, that the aggregate principal amount of
all obligations as to which such a payment default, or as to which such
a failure or other event causing or permitting acceleration or
repurchase, shall occur and be continuing exceeds $250,000; or
(vii) the Company or any Significant Subsidiary makes an
assignment for the benefit of creditors or is generally not paying its
debts as such debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Significant Subsidiary is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law, whether now or
hereafter in effect (the "BANKRUPTCY LAW"), of any jurisdiction; or
(ix) the Company or any Significant Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment of, or the
taking of possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any Significant Subsidiary, or of
any Substantial Part of the Property of the company or any Significant
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for
voluntary liquidation and dissolution of a Subsidiary) relating to the
Company or any Significant Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any petition or application referred to in subparagraph (ix)
of this paragraph 7A is filed, or any such proceedings are commenced,
against
<PAGE> 38
38
the Company or any Significant Subsidiary and the Company or such
Significant Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in any such
proceedings, and such order, judgment or decree remains unstayed and in
effect for more than sixty (60) days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the
Company or such Subsidiary that requires the divestiture of assets
representing a Substantial Part, or the divestiture of the stock of a
Subsidiary whose assets represent a Substantial Part, of the
consolidated assets of the Company and the Subsidiaries (determined in
accordance with GAAP) or that requires the divestiture of assets, or
stock of a Subsidiary, that shall have contributed a Substantial Part
of Consolidated Net Income for any of the three (3) fiscal years then
most recently ended, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(xiii) a final judgment in an amount in excess of Five Hundred
Thousand Dollars ($500,000) is rendered against the Company or any
Subsidiary and, within sixty (60) days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal,
or within sixty (60) days after the expiration of any such stay, such
judgment is not discharged;
(xiv) (a) any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Pension Plan, (b) any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Pension Plan or any Lien in favor of the PBGC
or a Pension Plan shall arise on the assets of the Company or any
commonly controlled entity, (c) a reportable event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
single employer plan, which reportable event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion
of the Required Holders, likely to result in the termination of such
Pension Plan for purposes of Title IV of ERISA, (d) any single
<PAGE> 39
39
employer plan shall terminate for purposes of Title IV of ERISA, (e)
the Company or any commonly controlled entity shall, or in the
reasonable opinion of the Required Holders is likely to, incur any
liability in connection with a withdrawal from, or the insolvency or
reorganization of, a Multiemployer Plan or (f) any other event or
condition shall occur or exist with respect to a Pension Plan; and in
each case in clauses (a) through (f) above, such event or condition,
together with all other such events or conditions, if any, could
reasonably be expected to have a material adverse effect on the
business, condition or operations (financial or otherwise) of the
Company and its Subsidiaries; or
(xv) any of the Security and Financing Documents shall cease, for
any reason, to be in full force and effect, or the Company or any other
party to any of the Security and Financing Documents shall so assert or
(ii) the Lien created by any of the Security and Financing Documents
shall cease to be enforceable and of the same effect and priority
purported to be created thereby; or
(xvi) any Person or "group" (within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended) (A) shall
have acquired beneficial ownership of 25% or more of any outstanding
class of capital stock having ordinary voting power in the election of
directors of the Company or (B) shall obtain the power (whether or not
exercised) to elect a majority of the Company's directors or (ii) the
Board of Directors of the Company shall not consist of a majority of
Continuing Directors; "CONTINUING DIRECTORS" shall mean the directors
of the Company on the Closing Date and each other director, if such
other director's nomination for election to the Board of Directors of
the Company is recommended by a majority of the then Continuing
Directors;
then:
(a) if such event is an Event of Default specified in clause
(viii), (ix) or (x) of this paragraph 7A with respect to the
Company, all of the Notes at the time outstanding shall
automatically become immediately due and payable at par together
with interest accrued thereon; and
(b) if such event is any other Event of Default, the
Required Holders may at its or their option, by notice in writing
to the Company,
<PAGE> 40
40
declare all of the Notes to be, and all of such Notes shall thereupon
be and become, immediately due and payable together with interest
accrued thereon;
and, with respect to clauses (a) and (b), together with the Yield-Maintenance
Amount, if any, with respect to each Senior Note, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
7A, the Required Holders of such Notes may, by notice in writing to the Company,
rescind and annul such declaration and its consequences as to all Notes if:
(i) the Company shall have paid all overdue interest on the Notes,
the principal of, and Yield-Maintenance Amount, if any, payable with
respect to any Senior Notes which have become due otherwise than by
reason of such declaration, and interest on such overdue interest and
overdue principal and Yield-Maintenance Amount, in the case of Senior
Notes, at the rate specified in the Notes,
(ii) the Company shall not have paid any amounts which have become
due solely by reason of such declaration,
(iii) all Events of Default and Defaults, other than non-payment
of amounts which have become due solely by reason of such declaration,
shall have been cured or waived, and
(iv) no judgment or decree shall have been entered for the payment
of any amounts due pursuant to the Notes or this Agreement.
No such rescission or annulment shall extend to or affect any subsequent Event
of Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A, or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to
<PAGE> 41
41
such holder in respect thereof under applicable law, either by suit in equity or
by action at law, or both, whether for specific performance of any covenant or
other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. In the event an Event of Default shall have
occurred and be continuing, the holder or holders of Notes shall have the right
to engage an independent financial consultant selected by such holder or
holders, at the Company's expense, to assist in the analysis regarding the
performance and operations of the Company and its Subsidiaries. No remedy
conferred in this Agreement upon the holder of any Note is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
The Company represents, covenants and warrants as follows:
8A. ORGANIZATION, ETC. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, each
Subsidiary is duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated, and each of the Company and the
Subsidiaries has the corporate power to own its respective Property and to carry
on its respective business as now being conducted. There are no subsidiaries of
the Company that are not Subsidiaries. The Company has the corporate power to
authorize, execute, deliver and perform its obligations under this Agreement and
the Notes and to deliver the Notes on the terms and conditions set forth herein.
No consent or authorization of, filing with (other than U.C. filings and United
States Patent and Trademark Office filings and United States Copyright Office
filings required under the Security and Financing Documents), notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required for the validity or enforceability of this Agreement other than those
of which have already been obtained or made and are in full force and effect.
This Agreement has been duly executed and delivered on behalf of the Company.
This Agreement constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
<PAGE> 42
42
8B. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer of
the Company, a consolidated balance sheet of the Company and the Subsidiaries as
at December 31 in each of the years 1994 to 1995, inclusive, and consolidated
statements of income and cash flows of the Company and the Subsidiaries for each
such year all certified by Price Waterhouse. Such financial statements
(including any related schedules and notes) are true and correct in all material
respects and have been prepared in accordance with GAAP consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and the Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
the Subsidiaries as at the dates thereof, and the statements of income and cash
flows fairly present the results of the operations of the Company and the
Subsidiaries for the periods indicated. During the period from December 31, 1995
to and including the Closing Date, there has been no material adverse change in
the business, condition or operations (financial or otherwise) of the Company
and the Subsidiaries taken as a whole. Since December 31, 1995 there has been no
development or event which has had or could reasonably be expected to have a
material adverse effect on the business, condition or operations (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, and during the
period from December 31, 1995 to and including the date hereof no dividends or
other distributions have been declared, paid or made upon the capital stock of
the Company nor has any of the capital stock of the Company in a material amount
been redeemed, retired, purchased or otherwise acquired for value by the Company
or any of its Subsidiaries.
8C. NO LEGAL BAR. The execution, delivery and performance of this
Agreement, the borrowings hereunder and the use of the proceeds thereof will not
violate any material contractual obligation of the Company or of any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of its or their respective properties or revenues pursuant to
any such material contractual obligation (other than pursuant to the Security
and Financing Documents).
8D. NO DEFAULT. Neither the Company nor any of its Subsidiaries is in
default under or with respect to any of its material contractual obligations in
any respect which could reasonably be expected to have a material adverse effect
on the business, conditions or operations (financial or otherwise) of the
Company and its Subsidiaries taken as a whole. No Default or Event of Default
has occurred and is continuing.
8E. ACTIONS PENDING. Except as may be set forth in Annex 2 to this
Agreement, there is no action, suit, investigation or proceeding pending or, to
the
<PAGE> 43
43
knowledge of the Company, threatened against the Company or any of the
Subsidiaries, or any Properties or rights of the Company or any of the
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body that might result in any material adverse change in the
business, condition or operations of the Company and the Subsidiaries taken as a
whole.
8F. OUTSTANDING DEBT. Neither the Company nor any of the Subsidiaries
has outstanding any Debt except as permitted by paragraphs 6B or 6C of this
Agreement.
8G. TITLE TO PROPERTIES; PATENTS AND COPYRIGHTS.
(i) TITLE TO PROPERTIES. Except as may be set forth on Annex 2 of
this Agreement, each of the Company and each of the Subsidiaries has
good and indefeasible title to its respective real Properties (other
than Properties that it leases) and good title to all of its other
respective Properties, including the Properties reflected in the
balance sheet as at December 31, 1995 referred to in paragraph B of
this Agreement (other than Properties disposed of in the ordinary
course of business), subject to no Lien of any kind except Liens
permitted by paragraph 6D of this Agreement. All leases necessary in
any material respect for the conduct of the respective businesses of
the Company and the Subsidiaries are valid and subsisting and are in
full force and effect.
(ii) PATENTS AND COPYRIGHTS. Except as may be set forth on Annex 2
of this Agreement, each of the Company and the Subsidiaries owns or
possesses all of the patents, trademarks, service marks, trade names,
copyrights, licenses, and rights with respect thereto necessary for the
present and presently planned future conduct of its business, without
any known conflict with the rights of others, except where such
conflicts, in the aggregate, would not have a material adverse effect
on the business, prospects, Properties or condition (financial or
otherwise) of the Company and the Subsidiaries taken as a whole, or on
the ability of the Company to perform its obligations set forth in this
Agreement and the Notes.
8H. TAXES. Except as may be set forth in Annex 2 to this Agreement,
each of the Company and the Subsidiaries has filed all federal, state and other
income tax returns that, to the best knowledge of the officers of the Company,
are required to be filed, and each has paid all taxes as shown on such returns
and on all assessments received by it to the extent that such taxes have become
due, except such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP; no tax Lien has been filed, and, to
<PAGE> 44
44
the knowledge of the Company and its Subsidiaries, no claim is being asserted,
with respect to any such tax, fee or other charge.
8I. CONFLICTING AGREEMENTS AND OTHER MATTERS.
(i) RESTRICTIVE AGREEMENTS. Neither the Company nor any of the
Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction that materially and adversely
affects its business, Property or financial condition.
(ii) CONFLICTING AGREEMENTS. Neither the execution nor delivery of
this Agreement or the Notes, nor the issuance and exchange of the
Notes, nor fulfillment of nor compliance with the terms and provisions
of this Agreement and of the Notes will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or except as contemplated
by the Security and Financing Documents, result in the creation of any
Lien upon any of the Properties of the Company or any of the
Subsidiaries pursuant to, the charter or bylaws of the Company or any
of the Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company
or any of the Subsidiaries is a party or to which any of their
respective Properties is subject.
(iii) LIMITATIONS ON DEBT. Neither the Company nor any of the
Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing indebtedness of the Company or
such Subsidiary, any agreement relating to this Agreement or any other
contract or agreement (including its charter) that limits the amount
of, or otherwise imposes restrictions on the incurring of, Debt of the
Company of the type to be evidenced by the Notes and the Credit
Agreement except as may be set forth in the agreements listed in Annex
2 attached to this Agreement.
8J. OFFERING OF NOTES. The Company has not, directly or indirectly,
offered the Notes or any similar Security of the Company for sale to, or
solicited any offers to buy the Notes or any similar Security of the Company
from, or otherwise approached or negotiated with respect to this Agreement with,
any Person other than you, and the Company has not taken and will not take any
action that would subject the issuance and exchange of the Notes to the
provisions of Section 5 of the Securities Act or to the registration or
qualification provisions of any securities or "blue sky" law of any applicable
jurisdiction. The Company has not, directly or indirectly,
<PAGE> 45
45
employed or retained any Person (other than officers and employees of the
Company in the course of their employment) as its agent or representative or
otherwise on its behalf in connection with the offering or solicitation of
offers to purchase the Notes or any similar security of the Company. The Company
hereby represents and warrants to you that, within the preceding twelve months,
neither the Company nor any other Person acting on behalf of the Company has
offered or sold to any Person (other than accredited investors) any Notes, or
any securities of the same or a similar class as the Notes, or any other
substantially similar securities of the Company.
8K. REGULATION G, ETC. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 C.F.R. Part 207) of the Board of Governors of the Federal
Reserve System ("MARGIN STOCK"). The proceeds of sale of the Original Senior
Notes were used for general corporate purposes. None of such proceeds will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock or for the purpose of
maintaining, reducing or retiring any indebtedness that was originally incurred
to purchase or carry any stock that is currently a Margin Stock or for any other
purpose that might constitute this transaction a "purpose credit" within the
meaning of such Regulation G. Neither the Company nor any agent acting on its
behalf has taken or will take any action that might cause this Agreement or the
Notes to violate Regulation G, Regulation T or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, as amended, in each case as in effect now or as the same may
hereafter be in effect.
8L. ERISA. No accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the IRC), whether or not waived, exists with respect
to any Pension Plan. No liability to the PBGC has been or is expected by the
Company to be incurred with respect to any Pension Plan by the Company or any of
the Subsidiaries that is or would be materially adverse to the Company and the
Subsidiaries taken as a whole. Neither the Company nor any of the Subsidiaries
has incurred or presently expects to incur any withdrawal liability under Title
IV of ERISA with respect to any Multiemployer Plan that is or would be
materially adverse to the Company and the Subsidiaries taken as a whole. The
execution and delivery of this Agreement and the issuance and delivery of the
Notes will not involve any transaction that is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be imposed pursuant
to Section 4975 of the IRC. The representation by the Company in the next
preceding sentence is made in reliance upon and subject to the accuracy of your
representation in paragraph 9 of this Agreement as to the source of the funds
used to pay the purchase price of the Original Senior Notes purchased by you.
<PAGE> 46
46
8M. ENVIRONMENTAL COMPLIANCE.
(i) COMPLIANCE. Each of the Company and the Subsidiaries has been,
since its incorporation, complying with, and, on the Closing Date will
be in compliance with, all Environmental Protection Laws in effect in
each jurisdiction where it is presently doing business except any
violations of any such Environmental Protection Law which would not
have a material adverse effect on the business, profits, Properties or
condition (financial or otherwise) of the Company and the Subsidiaries
taken as a whole, or on the ability of the Company to perform its
obligations under this Agreement and the Notes.
(ii) LIABILITY. Neither the Company nor any of the Subsidiaries is
subject to any liability under any Environmental Protection Laws that,
in the aggregate, would have a material adverse effect on the business,
profits, Properties or condition (financial or otherwise) of the
Company and the Subsidiaries taken as a whole, or on the ability of the
Company to perform its obligations under this Agreement and the Notes.
(iii) Neither the Company nor any of its Subsidiaries has received
any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance
with Environmental Protection Laws with regard to any of the Properties
or its business, nor does the Company have knowledge or reason to
believe that any such notice will be received or is being threatened
except insofar as such notice or threatened notice, or any aggregation
thereof, does not involve a matter or matters that is or are reasonably
likely to have a materially adverse effect on the business, profits,
Properties or conditions (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
(iv) Hazardous Substances have not been transported or disposed of
from the Properties in violation of, or in a manner or to a location
which could reasonably be expected to give rise to liability under, any
Environmental Protection Law, nor disposed of at, on or under any of
the Properties in violation of, or in a manner that could reasonably be
expected to give rise to liability under, any applicable Environmental
Protection Law except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, is not
reasonably likely to have a materially adverse effect on the business,
profits, Properties or conditions (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
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(v) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Company, threatened,
under any Environmental Protection Law to which the Company or any
Subsidiary is or will be named as a party with respect to the
Properties or its business, 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 Protection Law with respect to the Properties or its
business except insofar as such proceeding, action, decree, order or
other requirement, or any aggregation thereof, is not reasonably likely
to have a materially adverse effect on the business, profits,
Properties or conditions (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
(vi) There has been no release or threat of release of Hazardous
Substances at or from the Properties, or arising from or related to the
operations of the Company or any Subsidiary in connection with the
Properties or otherwise in connection with its business, in violation
of or in amounts or in a manner that could reasonably give rise to
liability under Environmental Protection Laws except insofar as any
such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to have a materially
adverse effect on the business, profits, Properties or conditions
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole.
8N. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the issuance, delivery or exchange of the Notes
is such as to require any authorization, consent, approval, exemption or other
action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the Closing Date with the
Securities and Exchange Commission and state "blue sky" authorities) in
connection with the execution and delivery of this Agreement, the issuance,
delivery or exchange of the Notes or fulfillment of or compliance with the terms
and provisions of this Agreement or of the Notes.
8O. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to you by or on behalf of the Company in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
this Agreement and such documents, certificates and statements not misleading.
There is no fact peculiar to the Company or any of the Subsidiaries that
materially adversely affects or in the future
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48
may (so far as the Company can now foresee) materially adversely affect the
business, Property or financial condition of the Company and the Subsidiaries,
taken as a whole, and that has not been set forth in this Agreement or in the
other documents, certificates, reports and statements furnished to you by or on
behalf of the Company prior to the date of this Agreement in connection with the
transactions contemplated hereby.
8P. CERTAIN LAWS.
(i) INVESTMENT COMPANY ACT. The Company is not, and is not
directly or indirectly controlled by, or acting on behalf of any Person
which is, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(ii) ABSENCE OF FOREIGN OR ENEMY STATUS. The Company is not an
"enemy" or an "ally of the enemy" within the meaning of Section 2 of
the Trading with the Enemy Act, as amended. The Company is not in
violation of, and neither the issue, delivery and exchange of the Notes
by the Company as contemplated by this Agreement will violate, the
Trading with the Enemy Act, as amended or any executive orders,
proclamations or regulations issued or promulgated pursuant thereto,
including, without limitation, regulations administered by the Office
of Foreign Asset Control of the Department of the Treasury (31 C.F.R.
Chapter V).
(iii) HOLDING COMPANY STATUS. The Company is not a "holding
company" or an "affiliate" of a "holding company", or a "subsidiary
company" of a "holding company", or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
9. REPRESENTATIONS OF THE PURCHASER.
You represent, and in making the delivery of the Senior Notes and any
YMA Notes to you it is specifically understood and agreed, that you are not
acquiring such Notes under this Agreement with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act; provided that the disposition of your Property shall at all times be and
remain within your control. You also represent that no part of the funds that
were used by you to pay the purchase price of the Original Senior Notes
purchased by you on the Original Closing Date constitutes assets allocated to
any separate account maintained by you. For the
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49
purpose of this paragraph 9, the term "separate account" has the meaning
specified in Section 3 of ERISA.
10. DEFINITIONS.
The following terms shall have the meanings specified with respect to
this Agreement below:
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Senior Note,
the principal of such Note that is to be prepaid pursuant to paragraphs
4A, 4B, 4D or 4E of this Agreement (any partial prepayment for purposes
of calculating Yield-Maintenance Amount being applied to all Senior
Notes at the time outstanding in proportion to the respective aggregate
principal amounts of the Senior Notes then outstanding and being
applied ratably in satisfaction of each of the Original Scheduled
Payments) or is declared to be immediately due and payable pursuant to
paragraph 7A of this Agreement, as the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called
Principal of any Senior Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal from
their respective scheduled due dates (assuming scheduled due dates for
the Original Scheduled Payments) to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on a semiannual basis) equal to the
Reinvestment Yield with respect to such Called Principal.
"ORIGINAL MATURITY DATE" shall mean March 20, 2001.
"ORIGINAL SCHEDULED PAYMENTS" shall mean the original scheduled
principal payments required under the Original Note Agreement
(including the Original Maturity Date).
"REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Senior Note, the yield to maturity implied by either
(i) the yields reported, as of 10:00 A.M. (New York City time) on the
Business Day next preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 678" on the
Telerate Service (or such other
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display as may replace Page 678 on the Telerate Service) for actively
traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date, or if such yields shall not be reported as of such time or the
yields reported as of such time shall not be ascertainable, then (ii)
the Treasury Constant Maturity Series yields reported, for the latest
day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15(519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, plus 0.50% in
either case. Such implied yield shall be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent yields
in accordance with accepted financial practice and (b) interpolating
linearly between reported yields.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Senior Note, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by multiplying
(a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by
(b) the number of years (calculated to the nearest
one-twelfth (1/12) year) that will elapse between the
Settlement Date with respect to such Called Principal and
the Remaining Scheduled Payments.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Senior Note, all payments of such Called
Principal and interest thereon that would be due on or after the
Settlement Date with respect to such Called Principal assuming (i) no
payment of such Called Principal were made prior to its scheduled due
date (ii) such scheduled due dates were based on the Original Scheduled
Payments, and (iii) such interest was calculated at a notional rate per
annum of 9.67%.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal
of any Senior Note, the date on which such Called Principal is to be
prepaid
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pursuant to paragraphs 4A, 4B, 4D or 4E of this Agreement or is
declared to be immediately due and payable pursuant to paragraph 7A of
this Agreement, as the context requires.
"YIELD MAINTENANCE AMOUNT" shall mean, with respect to any Senior
Note or payment of the principal thereof hereunder, an additional
amount equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over the sum of
(i) such Called Principal plus
(ii) interest accrued thereon subsequent to the most recent
scheduled interest payment date to and including the Settlement
Date with respect to such Called Principal.
The Yield-Maintenance Amount shall in no event be less than zero (0).
10B. OTHER TERMS.
"ACCELERATION EVENT" has the meaning assigned to such term in the
Collateral Agency and Intercreditor Agreement.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise; without limiting
the foregoing, a Person shall be deemed to have such power with respect to
another Person if such Person beneficially owns or holds ten percent (10%) or
more of any class of the voting securities of such other Person or if ten
percent (10%) or more of the voting securities (or in the case of a Person that
is not a corporation, ten percent (10%) or more of the equity interest) of such
Person is beneficially owned or held by such other Person.
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT" has the meaning assigned
to such term in the Credit Agreement.
"AGENT" means Chemical Bank, as agent under the Credit Agreement.
"ALLOCABLE NOTE HOLDER PORTION" has the meaning assigned to such term
in the last sentence of paragraph 4D of this Agreement.
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52
"ANNUAL DISPOSITION MEASUREMENT PERIOD" has the meaning assigned to
such term in paragraph 6F of this Agreement.
"ASSET DISPOSITION DATE" has the meaning assigned to such term in
paragraph 6F of this Agreement.
"AVAILABLE COMMITMENTS" has the meaning assigned to such term in the
Credit Agreement.
"BANKRUPTCY EVENT" has the meaning assigned to such term in the
Collateral Agency and Intercreditor Agreement.
"BANKRUPTCY LAW" has the meaning specified in clause (viii) of
paragraph 7A of this Agreement.
"BANKS" means the banks party to the Credit Agreement.
"BOARD OF DIRECTORS" means, at any time, the board of directors of the
Company or a Subsidiary, as the case may be, or any committee of such board of
directors that, in the instance, shall have the lawful power to exercise the
power and authority of such board of directors.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"CAPITALIZED LEASE OBLIGATIONS" means all rental obligations that,
under GAAP, are or will be required to be capitalized on the books of the
Company or any Subsidiary, in each case taken at the amount thereof accounted
for as indebtedness (net of interest expense) in accordance with GAAP.
"CERION" means Cerion Technologies, Inc.
"CERION NOTE" means the $10,000,000 promissory note dated March 1, 1996
issued by Cerion and payable to the Company, as the same may be amended,
supplemented or otherwise modified from time to time.
"CLOSING DATE" has the meaning assigned to such term in paragraph 2 of
this Agreement.
"COLLATERAL AGENT" means Chemical Bank, as collateral agent under the
Collateral Agency and Intercreditor Agreement.
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53
"COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT" means the Collateral
Agency and Intercreditor Agreement, dated as of April 5, 1996, by and among
Chemical Bank, as Collateral Agent, The Prudential Insurance Company of America,
as Note Holder, the Banks party thereto and the Company and its Subsidiaries
attached hereto as Exhibit C.
"COMPANY" has the meaning assigned to such term in the introductory
sentence of this Agreement.
"CONSOLIDATED CURRENT ASSETS" means, at any date, all amounts which
would, in conformity with GAAP, be included under current assets on a
consolidated balance sheet of the Company and its Subsidiaries at such date.
"CONSOLIDATED CURRENT LIABILITIES" means, at a particular date, all
amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of the Company and its Subsidiaries
as at such date.
"CONSOLIDATED FIXED CHARGES" means, for any period the sum, without
duplication, of: (i) Consolidated Interest Expense; (ii) required scheduled
amortization of Covenant Debt (excluding any mandatory prepayments), determined
on a consolidated basis in accordance with GAAP, for the period involved and
discount or premium (other than Yield-Maintenance Amount) payable during such
period relating to any such Covenant Debt for any period involved, whether
expensed or capitalized; and (iii) Consolidated Lease Expense, in each case of
the Company and its Subsidiaries.
"CONSOLIDATED INTANGIBLES" means, at a particular date, all assets of
the Borrower and its Subsidiaries, determined on a consolidated basis at such
date, that would be classified as intangible assets in accordance with GAAP, but
in any event including, without limitation, unamortized debt discount and
expense, unamortized organization and reorganization expense, patents, trade or
service marks, franchises, trade names, goodwill.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the amount
which, in conformity with GAAP, would be set forth opposite the caption
"interest expense" or any like caption on the consolidated income statement of
the Company and its Subsidiaries for such period.
"CONSOLIDATED LEASE EXPENSE" means for any period, the aggregate
amount of fixed and contingent rentals payable by the Company and its
Subsidiaries,
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determined on a consolidated basis in accordance with GAAP, for such period with
respect to operating leases of real and personal property.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income of the Company and its Subsidiaries for such period determined in
accordance with GAAP.
"CONSOLIDATED NET WORTH" means, at a particular date, all items which
in conformity with GAAP would be included under shareholders' equity on a
consolidated balance sheet of the Company and its Subsidiaries at such date
(computed without regard to cumulative translation adjustments relating to
foreign currencies after December 31, 1995).
"CONSOLIDATED OPERATING WORKING CAPITAL" means, as of the date of
determination, Consolidated Current Assets of the Company and its Subsidiaries
at such date, determined on a consolidated basis in conformity with GAAP (other
than cash and cash equivalents and current tax assets), minus Consolidated
Current Liabilities of the Company and its Subsidiaries at such date, determined
on a consolidated basis in conformity with GAAP (other than Covenant Debt and
income taxes payable).
"CONSOLIDATED TANGIBLE NET WORTH" means, at a particular date, the
excess, if any, of Consolidated Net Worth over Consolidated Intangibles as at
such date.
"COVENANT DEBT" means, of any Person at any date, Debt of such Person
excluding (i) Guaranties of such Person and (ii) all reimbursement obligations
of such Person in respect of letters of credit.
"CREDIT AGREEMENT" means the Amended and Restated Credit Agreement,
dated as of April 5, 1996, among the Company, certain banks party thereto and
Chemical Bank, as agent for such banks, as the same may be amended, supplemented
or otherwise modified from time to time as permitted herein and therein.
"DEBT" means, of any Person at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Capitalized Lease
Obligations, (d) all obligations of such Person in respect of acceptances issued
or created for the account of such Person, (e) all liabilities secured by any
Lien on any property owned by such Person even though
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55
such Person has not assumed or otherwise become liable for the payment thereof
(for the purposes of this clause (e), the amount of any such Debt shall be equal
to the lower of the amount of liability in respect thereof or the fair market
value of the property subject to the Lien in respect thereof), (f) all
Guaranties of such Person, and (g) all reimbursement obligations in respect of
letters of credit.
"EBITDA" of any Person, for any period, the Consolidated Net Income of
such Person for such period adjusted to exclude the following items of income or
expense to the extent that such items are included in the calculation of such
Consolidated Net Income: (a) Consolidated Interest Expense, (b) any non-cash
expenses and charges, (c) total income tax expense, (d) depreciation expense,
(e) the expense associated with amortization of intangible and other assets, (f)
non-cash provisions for reserves for discontinued operations or restructuring of
operations, (g) any extraordinary, unusual or non-recurring gains or credits,
(h) any gain or loss associated with the sale of assets, (i) any income or loss
accounted for by the equity method of accounting (except in the case of income
to the extent of the amount of cash dividends or cash distributions paid to the
Borrower or any Subsidiary by the entity accounted for by the equity method of
accounting); and (j) expenses in connection with the Company's restructuring on
or prior to the date hereof of its material Covenant Debt.
"ENVIRONMENTAL PROTECTION LAW" means any federal, foreign, state,
provincial, county, regional or local law, statute, or regulation (including,
without limitation, CERCLA, RCRA and SARA) enacted in connection with or
relating to the protection or regulation of the environment, including, without
limitation, those laws, statutes, and regulations regulating the disposal,
removal, production, storing, refining, handling, transferring, processing, or
transporting of Hazardous Substances, and any regulations, issued or promulgated
in connection with such statutes by any Governmental Authority and any orders,
decrees or judgments issued by any court of competent jurisdiction in connection
with any of the foregoing.
As used in this definition:
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(by SARA or otherwise), and all rules and regulations promulgated in
connection therewith;
"GOVERNMENTAL AUTHORITY" means the government of the United States
of America or any foreign government, any state, province or other
political subdivision thereof and any entity exercising executive,
legislative,
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judicial, regulatory or administrative functions of or pertaining to
any such government;
"HAZARDOUS SUBSTANCES" has the meaning assigned to such term in 42
U.S.C. Section 9601(14), as amended from time to time;
"RCRA" means the Resource Conservation and Recovery Act of 1976,
as amended, and any rules and regulations issued in connection
therewith; and
"SARA" means the Superfund Amendments and Reauthorization Act of
1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any corporation or trade or business that
(i) is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the IRC) as the Company or
(ii) is under common control (within the meaning of Section 414(c)
of the IRC) with the Company.
"EVENT OF DEFAULT" means any of the events specified in paragraph 7A of
this Agreement, provided, that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" means any of
such events, whether or not any such requirement has been satisfied.
"EXCESS CASH FLOW" of the Company and its Subsidiaries for any fiscal
period, means an amount equal to the excess of (a) the sum of (i) Consolidated
Net Income for such fiscal period, (ii) depreciation and amortization expense,
and all other non-cash charges which were deducted in determining Consolidated
Net Income, (iii) any decrease in Consolidated Operating Working Capital during
such period (computed by comparing Consolidated Operating Working Capital on the
first day of such period with Consolidated Operating Working Capital on the last
day of such period), (iv) any losses during such fiscal period in respect of the
sale or other disposition of any asset which were subtracted in determining
Consolidated Net Income, (v) all income taxes deducted in determining
Consolidated Net Income
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during such period over (b) the sum of (i) capital expenditures during such
fiscal period, but only to the extent permitted pursuant to paragraph 6Q of this
Agreement, (ii) any gains during such fiscal period in respect of the sale or
other disposition of any asset which were added in determining Consolidated Net
Income, (iii) all income taxes actually paid in cash during such fiscal period,
plus (iv) all other non-cash credits which were added in determining
Consolidated Net Income, plus (v) all scheduled mandatory payments of principal
of the Term Loans pursuant to subsection 2.5(b) of the Credit Agreement during
such fiscal period, all optional prepayments of principal of the Term Loans
during such fiscal period, all optional prepayments of principal of the
Revolving Credit Loans (as such term is defined in the Credit Agreement)
pursuant to subsection 2.7 of the Credit Agreement during such fiscal period
(provided that there is a corresponding simultaneous permanent reduction of the
Revolving Credit Commitments) (as such term is defined in the Credit Agreement)
and all scheduled mandatory or optional payments of principal and premium on the
Notes during such fiscal period, plus (vi) all payments of principal of other
Debt (other than in respect of the Loans and the Notes) during such period,
provided there is a simultaneous permanent reduction of the lending commitment,
if any, in respect of such Debt, plus (vii) any increase in Consolidated
Operating Working Capital during such period (computed by comparing Consolidated
Operating Working Capital on the first day of such period with Consolidated
Working Capital on the last day of such period), in each case of the Company and
its Subsidiaries. Excess Cash Flow shall exclude in any event any income or loss
accounted for by the equity method of accounting (except in the case of income
to the extent of the amount of cash dividends or cash distributions paid to the
Company or any Subsidiary by the entity accounted for by the equity method of
accounting).
"FAIR MARKET VALUE" means, at any time, with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer, and an informed and willing
seller, under no compulsion to buy or sell, respectively.
"FOREIGN SUBSIDIARY" means any Subsidiary that is not incorporated or
organized in the United States of America or any state thereof.
"GAAP" means, at any time with respect to the determination of the
character or amount of any asset or liability or item of income or expense, or
any consolidation or other accounting computation, generally accepted accounting
principles as in effect in the United States of America on the date of, or at
the end of the period covered by, the financial statements from which such
asset, liability, item of income, or item of expenses, is derived, or, in the
case of any such computation, as in effect on the date when such computation is
required to be determined.
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"GUARANTY" means, with respect to any Person,
(i) any contract by such Person providing for the making of loans,
advances or capital contributions to any Specially Restricted Person,
or for the purchase of any Property from any Specially Restricted
Person, in each case in order to enable such Specially Restricted
Person to maintain working capital, net worth or any other balance
sheet condition or to pay debts, dividends or expenses;
(ii) any contract by such Person for the purchase of materials,
supplies or other Property or services from any Specially Restricted
Person if such contract (or any related document or agreement) requires
that payment for such materials, supplies or other Property or services
shall be made regardless of whether or not delivery of such materials,
supplies or other Property or services is ever made or tendered;
(iii) any contract by such Person to rent or lease (as lessee) any
Property from any Specially Restricted Person if such contract (or any
related document or agreement) provides that the obligation to make
payments thereunder is absolute and unconditional under conditions not
customarily found in commercial leases then in general use or requires
that the lessee purchase or otherwise acquire securities or obligations
of any Specially Restricted Person;
(iv) any contract by such Person for the sale or use of materials,
supplies or other Property, or the rendering of services, to or by any
Specially Restricted Person if such contract (or any related document
or agreement) requires that payment by such Specially Restricted Person
for such materials, supplies or other Property, or the use thereof, or
payment by such Specially Restricted Person for such services, shall be
subordinated to any indebtedness of the purchaser or user of such
materials, supplies or other Property or the Person entitled to the
benefit of such services;
(v) Contingent Severance Pay Obligations of such Person; or
(vi) any guarantee (or other contract that, in economic effect, is
substantially equivalent to a guarantee) or endorsement (other than
endorsements of negotiable instruments for collection in the ordinary
course of business) by such Person, whether direct or indirect, of or
in connection with the Debt, other obligations (other than performance
obligations unrelated to indebtedness), stock or dividends of any other
Person;
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in each case, regardless of whether the indebtedness or other obligations that
are the subject of any such guaranty or other contract are required, under GAAP,
to be shown on a balance sheet of such Person as a liability. For purposes of
computing the amount of any obligation specified in the foregoing clauses (i)
through (vi), inclusive, it shall be assumed that the indebtedness or other
obligations that are the subject of any such guarantee or other contract are
direct obligations of the obligor on such guarantee or other contract (but not
in an amount in excess of the maximum liability of such obligor) and, therefore,
are of the nature and type of, and bear interest at the rate applicable to, such
indebtedness or other obligations. Notwithstanding anything else in this
definition to the contrary, "GUARANTIES" shall not at any time include
Contingent Severance Pay Obligations except to the extent, if any, that the
aggregate amount of Contingent Severance Pay Obligations of the Company and the
Subsidiaries at such time, determined on a consolidated basis, exceeds the
lesser of (A) Twenty Million Dollars ($20,000,000) or (B) fifteen percent (15%)
of Consolidated Tangible Net Worth. As used in this definition:
"SPECIALLY RESTRICTED PERSON" means (i) NCPC at any time at which
it is not a Wholly-Owned Subsidiary and (ii) any Affiliate; and
"CONTINGENT SEVERANCE PAY OBLIGATIONS" means, with respect to any
Person, obligations of such Person to employees of such Person, payable
by such Person upon or in connection with the termination of the
employment arrangements with such employees (but not including (i) any
such obligations to the extent that funds designated for the payment
thereof have been irrevocably deposited in trust or (ii) any pension
obligations).
"HEDGE AGREEMENT(S)" has the meaning assigned to such term in the
Collateral Agency and Intercreditor Agreement.
"HOLDBACK AMOUNT" means, with respect to any mandatory prepayment
relating to any asset sale or equity issuance or other sale described in
paragraph 4D hereof with Net Cash Proceeds in excess of $15,000,000 and at any
time before the Revolving Credit Commitments (as such term is defined in the
Credit Agreement) of all lenders under the Credit Agreement have been
permanently reduced to an amount less than or equal to $10,000,000, an amount
equal to the excess, if any, of (i) $3,000,000 over (ii) the aggregate amount of
Revolving Credit Loans (as such term is defined in the Credit Agreement) of all
lenders under the Credit Agreement outstanding on the date of such mandatory
prepayment in excess of $5,000,000.
"INVESTMENT" has the meaning assigned to such term in paragraph 6H of
this Agreement.
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"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations promulgated thereunder.
"LIEN" means any mortgage, pledge, hypothecation, collateral
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge
or other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any Capitalized Lease Obligation having substantially the same
economic effect as any of the foregoing).
"LOANS" has the meaning assigned to such term in the Credit Agreement.
"MAJORITY LENDERS" has the meaning assigned to such term in the Credit
Agreement.
"MAJOR LINE OF BUSINESS" means each of the photofinishing, commercial
products group, and precision technologies businesses of the Company and the
Subsidiaries and any other line of business of similar importance to the
consolidated financial condition and results of operations of the Company and
the Subsidiaries in which the Company or any Subsidiary may be engaged at any
time after the date hereof.
"MARGIN STOCK" has the meaning assigned to such term in paragraph 8I of
this Agreement.
"MATERIAL QUALIFICATION" has the meaning assigned to such term in
paragraph 5A(ii) of this Agreement.
"MULTIEMPLOYER PLAN" means any "multiemployer plan" (as such term is
defined in ERISA) in respect of which the Company or any ERISA Affiliate is an
"employer" (as such term is defined in ERISA).
"NET CASH PROCEEDS" means, in connection with:
(a) any asset sale, the proceeds thereof in the form of cash
and cash equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but
only as and when received), net of attorneys' fees, accountants' fees,
investment banking fees, amounts required to be applied to the
repayment of Debt secured by a Lien permitted hereunder on any asset
which is the subject of such asset sale (other than any
<PAGE> 61
61
Lien in favor of the Collateral Agent) and other fees and expenses
actually incurred in connection therewith and net of taxes paid or
reasonably estimated to be payable as a result thereof (after taking
into account any available tax credits or deductions and any tax
sharing arrangements); and
(b) any issuance or sale of equity securities or debt
securities or instruments or the incurrence of loans, the cash proceeds
received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to
be payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements).
"NOTE HOLDERS" means any holder or beneficial owner of Notes entitled
to the benefits of this Agreement.
"NOTES" has the meaning assigned to such term in the introductory
sentence of this Agreement.
"OPERATING PROFIT" means, for any period, Consolidated Net Income for
such period plus the net amount deducted in the determination thereof for (i)
federal, state and local income taxes, (ii) depreciation, (iii) amortization and
(iv) interest expense.
"OPERATING PROFIT CONTRIBUTION" means, as determined on any Asset
Disposition Date in respect of any Property being Transferred, the greatest
amount (expressed as a percentage, as provided below) of Operating Profit fairly
attributed to such Property during any one (1) of the three (3) fiscal years of
the Company immediately preceding such Asset Disposition Date, expressed as a
percentage of total Operating Profit during such fiscal year.
"ORIGINAL CLOSING DATE" has the meaning assigned to such term in the
introductory sentence of this Agreement.
"ORIGINAL SENIOR NOTES" has the meaning assigned to such term in the
introductory sentence of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, and its
successors and assigns.
<PAGE> 62
62
"PENSION PLAN" means any "employee pension benefit plan" (as such term
is defined in ERISA) maintained by the Company or any ERISA Affiliate for
employees of the Company or such ERISA Affiliate, excluding any Multiemployer
Plan, but including, without limitation, any Multiple Employer Pension Plan.
As used in this definition:
"MULTIPLE EMPLOYER PENSION PLAN" means any employee benefit
plan within the meaning of Section 3(3) of ERISA (other than a
Multiemployer Plan), subject to Title IV of ERISA, to which the Company
or any ERISA Affiliate and an employer (as such term is defined in
Section 3 of ERISA) other than an ERISA Affiliate or the Company,
contribute.
"PERMITTED INVESTMENT" has the meaning assigned to such term in
paragraph 6H of this Agreement.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an estate, an unincorporated
organization, or a government or political subdivision or agency or
instrumentality thereof.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible. Any reference in
this Agreement to "asset" shall be construed as a reference to "PROPERTY", as
defined in this definition.
"PURCHASER SCHEDULE" has the meaning assigned to such term in paragraph
2 of this Agreement.
"REQUIRED HOLDERS" means, at any time, the holder or holders of greater
than fifty percent (50%) of the aggregate principal amount of the Notes
outstanding at such time.
"RESPONSIBLE OFFICER" means each of the Chairman of the Board of
Directors, the President, any Vice President and the Treasurer of the Company.
"REVOLVING CREDIT LOANS" has the meaning assigned to such term in the
Credit Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" has the meaning specified in Section 2(1) of the Securities
Act.
<PAGE> 63
63
"SECURED OBLIGATIONS" has the meaning assigned to such term in the
Collateral Agency and Intercreditor Agreement.
"SECURITY AND FINANCING DOCUMENTS" means:
(i) the Collateral Agency and Intercreditor Agreement;
(ii) the Credit Agreement,
(iii) the Borrower Security Agreement, dated as of April 5,
1996, made by the Company in favor of the Collateral
Agent for the benefit of the Banks and the Note
Holders;
(iv) the Subsidiaries Security Agreement, dated as of
April 5, 1996, made by each of the domestic
Subsidiaries of the Company in favor of the
Collateral Agent for the benefit of the Banks and the
Note Holders;
(v) the Subsidiaries Guarantee, dated as of April 5,
1996, made by each of the domestic Subsidiaries of
the Company and certain foreign Subsidiaries of the
Company in favor of the Collateral Agent for the
benefit of the Banks and the Note Holders;
(vi) the Subsidiaries Pledge Agreements, each dated as of
April 5, 1996, made by Nashua Photo Inc., Cerion
Holdings Inc., Nashua Photo European Investments,
Inc. and Nashua Photo International Investments, Inc.
in favor of the Collateral Agent;
(vii) the Foreign Pledge Agreements, each dated as of April
5, 1996, made by certain of the foreign Subsidiaries
of the Company in favor of the Collateral Agent;
(viii) the Lockbox Agreements, each dated as of April 5,
1996, among the Company, the Subsidiaries of the
Company identified in such agreement, the lockbox
banks specified therein, and the Collateral Agent;
and
(ix) the Agency Agreements, each dated as of April 5, 1996
among the Company, the Subsidiaries named therein,
the
<PAGE> 64
64
depository banks party thereto and Chemical Bank, as
Collateral Agent.
"SHARED PROCEEDS" has the meaning assigned to such term in paragraph 4D
of this Agreement.
"SIGNIFICANT HOLDER" means
(i) you, so long as you shall hold any Note, or
(ii) any other holder of at least five percent (5%) of the
aggregate principal amount of the Notes from time to time outstanding.
"SIGNIFICANT SUBSIDIARY" means, at any time, collectively, Subsidiaries
owning tangible assets having an aggregate value equal to or greater than one
percent (1%) of Consolidated Tangible Net Worth.
"SUBSIDIARY" means any corporation one hundred percent (100%) of the
capital stock of every class of which (other than directors' qualifying shares)
shall, at the time as of which any determination is being made, be owned by the
Company either directly or through other Subsidiaries.
"SUBSIDIARY STOCK" has the meaning assigned to such term in paragraph
6E of this Agreement.
"SUBSTANTIAL PART" means, when used with respect to assets at any time,
more than ten percent (10%) of consolidated assets of the Company and the
Subsidiaries at such time, and, when used with respect to Consolidated Net
Income in respect of any period, more than ten percent (10%) of Consolidated Net
Income for such period.
"TERM LOAN" has the meaning assigned to such term in the Credit
Agreement.
"TRANSFER" has the meaning assigned to such term in paragraph 6F of
this Agreement.
"TRANSFEREE" means any direct or indirect transferee of all or any part
of any Note purchased by you under this Agreement.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, at any time, with respect to
the principal amount of any indebtedness, the number of years obtained by
dividing the then Remaining Dollar-Years of such principal amount of
indebtedness by the then
<PAGE> 65
65
outstanding principal amount of such indebtedness. "REMAINING DOLLAR-YEARS"
means, at any time, with respect to the principal amount of any indebtedness,
the result obtained by
(i) multiplying
(a) an amount equal to each of the then remaining required
principal payments (including repayment of principal at final
maturity) payable in respect of such principal amount of
indebtedness, unpaid immediately prior to such time, by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such time and the date each
such required principal payment is due, and
(ii) calculating the sum of each of the products obtained in the
preceding subclause (i).
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary described in clause (i) of
the definition of Subsidiary.
"YMA NOTE" has the meaning assigned to such term in paragraph 4J of
this Agreement.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as you shall hold
any Note, it will make payments of principal thereof and premium, if any, and
interest thereon, by wire transfer of immediately available funds for credit to
your account or accounts as specified in the Purchaser Schedule attached to this
Agreement, or such other account or accounts in the United States as you may
designate in writing, notwithstanding any contrary provision in this Agreement
or in any Note with respect to the place of payment. You agree that, before
disposing of any Note, you will make a notation thereon (or on a schedule
attached to this Agreement) of all principal payments previously made thereon
and of the date to which interest thereon has been paid. The Company agrees to
afford the benefits of this paragraph 11A to any Transferee that shall have made
the same agreement as you have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated on the Closing Date, to pay, and save
you
<PAGE> 66
66
and any Transferee harmless against liability for the payment of, all out-of-
pocket expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees
and expenses of any special counsel engaged by you or any Transferee in
connection with this Agreement, the transactions contemplated hereby
and any subsequent proposed modification of, amendment of, or proposed
consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted,
(ii) all costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the
other Security and Financing Documents, including, without limitation,
the fees and disbursements of counsel (including the allocated fees and
expenses of in-house counsel) to the Note Holders,
(iii) to pay, indemnify, and hold each Note Holder harmless from,
any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, exercise and
other taxes, if any, which may be payable or determined to be payable
in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement, and
(iv) the costs and expenses, including attorneys' fees, incurred
by you or any Transferee in enforcing any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process
issued in connection with this Agreement or the transactions
contemplated hereby or by reason of your or any Transferee's having
acquired any Note, including without limitation costs and expenses
incurred in any bankruptcy case.
The obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by you or any
Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action prohibited in this Agreement, or omit to perform any
act required in this Agreement to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holders except that, without the written consent of the holder or
holders of all Notes at the time outstanding, no amendment to this Agreement
shall change the maturity
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67
of any Note, or change the principal of, or the rate or time of payment of
interest of any premium payable with respect to any Note, or affect the time,
amount or allocation of any required prepayments, or reduce the proportion of
the principal amount of the Notes required with respect to any consent. Each
holder of any Note at the time or thereafter outstanding shall be bound by any
consent authorized by this paragraph 11C, whether or not such Note shall have
been marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used in this Agreement and in the Notes, the term "THIS AGREEMENT" and
references to this Agreement mean this Agreement as it may from time to time be
amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
(i) FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES. The Notes are
issuable as registered notes without coupons in denominations of at least One
Million Dollars ($1,000,000), except as may be necessary to reflect any
principal amount not evenly divisible by One Million Dollars ($1,000,000). The
Company shall keep at its principal office a register in which the Company shall
provide for the registration of Notes and of transfers of Notes. Upon surrender
for registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes of
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes that the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue that were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange.
(ii) LOST NOTES. Upon receipt of written notice from the holder of any
Note of the loss, theft, destruction or mutilation of such Note and, in the case
of any such loss, theft or destruction, upon receipt of such holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of
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68
such Note, the Company will make and deliver a new Note, of like tenor, in lieu
of the lost, stolen, destroyed or mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and premium, if any, and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue, and the Company shall not be affected by notice to the contrary.
Subject to the preceding sentence, the holder of any Note may from time to time
grant participations in all or any part of such Note to any Person on such terms
and conditions as may be determined by such holder in its sole and absolute
discretion.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Company in connection herewith shall survive the execution
and delivery of this Agreement and the Notes, the transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter of this Agreement.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties to this Agreement
shall bind and inure to the benefit of the respective successors and assigns of
the parties to this Agreement (including, without limitation, any Transferee)
whether so expressed or not.
11H. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that the
holder of any Note may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any Subsidiary in connection
with or pursuant to this Agreement to:
(i) such holder's directors, officers, employees, agents and
professional consultants,
(ii) any other holder of any Note,
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69
(iii) any Person to which such holder offers to sell such Note or
any part thereof so long as such Person shall agree to be bound by the
provisions of this paragraph 11H,
(iv) any Person to which such holder sells or offers to sell a
participation in all or any part of such Note so long as such Person
shall agree to be bound by the provisions of this paragraph 11H,
(v) any federal or state regulatory authority having jurisdiction
over such holder,
(vi) the National Association of Insurance Commissioners or any
similar organization, or
(vii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(a) in compliance with any law, rule, regulation or order
applicable to such holder,
(b) in response to any subpoena or other legal process,
(c) in connection with any litigation to which such holder
is a party, or
(d) in order to protect such holder's investment in such
Note.
11I. NOTICES. All written communications provided for under this
Agreement shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and
(i) if to you, addressed to you at the address specified for such
communications in the Purchaser Schedule attached to this Agreement, or
at such other address as you shall have specified to the Company in
writing,
(ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so
specified an address to the Company, then addressed to such other
holder in care of the
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70
last holder of such Note that shall have so specified an address to the
Company, and
(iii) if to the Company, addressed to it at 44 Franklin Street,
Nashua, New Hampshire 03061, Attention: Chief Financial Officer, or at
such other address as the Company shall have specified to the holder of
each Note in writing; provided, that any such communication to the
Company may also, at the option of the holder of any Note, be delivered
by any other means either to the Company at its address specified above
or to any officer of the Company.
Any notice hereunder shall be deemed to have been given on the third (3rd) day
after having been deposited in the mail (postage prepaid), on the next Business
Day if sent by nationwide overnight delivery service, and when delivered to the
addressee if delivered by any other means.
11J. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holders, the determination
of such satisfaction shall be made by you or the Required Holders, as the case
may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
11L. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
11M. INDEMNIFICATION. The Company shall indemnify, pay and hold
harmless each holder of Notes and their respective directors, offices, employees
and agents, against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgements, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the Security and Financing
Documents; provided, that the Company shall have no obligation hereunder to any
Note Holder with respect to indemnified liabilities arising from the gross
negligence or willful
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71
misconduct of such Note Holder. The agreements in this paragraph shall survive
repayment of all obligations under this Agreement and all other amounts payable
hereunder.
11N. NO NOVATION. The parties hereto have entered into this Agreement
and the Security and Financing Documents solely to amend, restate and
restructure the terms of, and obligations owing under and in connection with,
the Original Note Agreement. The parties do not intend this Agreement or the
Security and Financing Documents nor the transactions contemplated hereby or
thereby to be, and this Agreement and the Security and Financing Documents and
the transactions contemplated hereby or thereby shall not be, construed to be a
novation of any of the obligations owing by the Company under or in connection
with the Original Senior Notes.
11O. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
[Remainder of page intentionally blank. Next page is signature page.]
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72
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
NASHUA CORPORATION
By /s/ Daniel M. Junius
-----------------------------------
Name: Daniel M. Junius
Title: Chief Financial Officer
The foregoing Agreement is hereby
accepted as of the date first above
written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ Richard T. Greenwood
--------------------------------
Name: Richard T. Greenwood
Title: Vice President
<PAGE> 1
EXHIBIT 4.09
================================================================================
$66,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
among
NASHUA CORPORATION,
THE BANKS PARTIES HERETO
and
CHEMICAL BANK,
as Agent
Dated as of April 5, 1996
================================================================================
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS.................................................................. 1
1.1 Defined Terms.............................................................. 1
1.1 Other Definitional Provisions.............................................. 22
SECTION 2. AMOUNT AND TERMS OF LOANS.................................................... 22
2.1 Revolving Credit Commitments............................................... 22
2.2 Procedure for Revolving Credit Borrowing................................... 23
2.3 Commitment Fee............................................................. 23
2.4 Termination or Reduction of Commitments.................................... 23
2.5 Term Loans................................................................. 23
2.6 Repayment of Loans; Evidence of Debt....................................... 24
2.7 Optional Prepayments....................................................... 25
2.8 Mandatory Prepayments and Commitment Reductions............................ 25
2.9 Interest Rates and Payment Dates........................................... 27
2.10 Amendment Fee; Facility Fee; Collateral Monitoring Fee..................... 27
2.11 Computation of Interest and Fees........................................... 28
2.12 Pro Rata Treatment and Payments............................................ 28
2.13 Requirements of Law........................................................ 29
2.14 Taxes...................................................................... 30
SECTION 3. LETTERS OF CREDIT............................................................ 31
3.1 L/C Commitment............................................................. 31
3.2 Procedure for Issuance of Letters of Credit................................ 32
3.3 Fees, Commissions and Other Charges........................................ 32
3.4 L/C Participations......................................................... 33
3.5 Reimbursement Obligation of the Borrower................................... 34
3.6 Obligations Absolute....................................................... 34
3.7 Letter of Credit Payments.................................................. 34
3.8 Application................................................................ 35
SECTION 4. REPRESENTATIONS AND WARRANTIES............................................... 35
4.1 Financial Condition....................................................... 35
4.2 No Change................................................................. 35
4.3 Corporate Existence; Compliance with Law.................................. 36
4.4 Corporate Power; Authorization; Enforceable Obligations................... 36
4.5 No Legal Bar.............................................................. 36
4.6 No Material Litigation.................................................... 37
4.7 No Default................................................................ 37
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4.8 Ownership of Property; Liens.............................................. 37
4.9 Intellectual Property..................................................... 37
4.10 No Burdensome Restrictions................................................ 37
4.11 Taxes..................................................................... 37
4.12 Federal Regulations....................................................... 37
4.13 ERISA..................................................................... 38
4.14 Investment Company Act; Other Regulations................................. 38
4.15 Subsidiaries.............................................................. 38
4.16 Purpose of Loans.......................................................... 38
4.17 Environmental Matters..................................................... 38
SECTION 5. CONDITIONS PRECEDENT......................................................... 40
5.1 Conditions to Extension of Credit.......................................... 40
5.2 Conditions to Each Loan.................................................... 43
SECTION 6. AFFIRMATIVE COVENANTS........................................................ 43
6.1 Financial Statements...................................................... 44
6.2 Certificates; Other Information........................................... 44
6.3 Payment of Obligations.................................................... 45
6.4 Conduct of Business and Maintenance of Existence.......................... 46
6.5 Maintenance of Property; Insurance........................................ 46
6.6 Inspection of Property; Books and Records; Discussions.................... 46
6.7 Notices................................................................... 46
6.8 Environmental Laws........................................................ 47
6.9 Modifications to Indebtedness Under the Senior Notes...................... 47
6.10 Further Assurances........................................................ 48
6.11 Additional Collateral..................................................... 48
6.12 Annual Collateral Audit................................................... 49
6.13 1997 Financial Covenants.................................................. 49
SECTION 7. NEGATIVE COVENANTS........................................................... 50
7.1 Financial Condition Covenants............................................. 50
7.2 Limitation on Indebtedness................................................ 51
7.3 Limitation on Liens....................................................... 52
7.4 Limitation on Guarantee Obligations....................................... 53
7.5 Limitation on Fundamental Changes......................................... 53
7.6 Limitation on Sale of Assets.............................................. 54
7.7 Limitation on Leases...................................................... 54
7.8 Limitation on Dividends................................................... 54
7.9 Limitation on Capital Expenditures........................................ 55
7.10 Limitation on Investments, Loans and Advances............................. 55
7.11 Limitation on Optional Payments and Modifications of Debt Instruments..... 56
7.12 Limitation on Transactions with Affiliates................................ 56
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7.13 Limitation on Sales and Leasebacks........................................ 56
7.14 Limitation on Changes in Fiscal Year...................................... 56
7.15 Limitation on Negative Pledge Clauses..................................... 56
7.16 Limitation on Lines of Business........................................... 57
7.17 Hedge Agreements.......................................................... 57
SECTION 8. EVENTS OF DEFAULT............................................................ 57
SECTION 9. THE AGENT.................................................................... 60
9.1 Appointment................................................................ 60
9.2 Delegation of Duties....................................................... 61
9.3 Exculpatory Provisions..................................................... 61
9.4 Reliance by Agent.......................................................... 61
9.5 Notice of Default.......................................................... 62
9.6 Non-Reliance on Agent and Other Lenders.................................... 62
9.7 Indemnification............................................................ 62
9.8 Agent in Its Individual Capacity........................................... 63
9.9 Successor Agent............................................................ 63
SECTION 10. MISCELLANEOUS............................................................... 63
10.1 Amendments and Waivers................................................... 63
10.2 Notices.................................................................. 64
10.3 No Waiver; Cumulative Remedies........................................... 64
10.4 Survival of Representations and Warranties............................... 65
10.5 Payment of Expenses and Taxes............................................ 65
10.6 Successors and Assigns; Participations and Assignments................... 65
10.7 Adjustments; Set-off..................................................... 68
10.8 General Release.......................................................... 68
10.9 Confidentiality.......................................................... 69
10.10 Counterparts............................................................. 69
10.11 Severability............................................................. 69
10.12 Integration.............................................................. 69
10.13 GOVERNING LAW............................................................ 70
10.14 Submission To Jurisdiction; Waivers...................................... 70
10.15 Acknowledgements......................................................... 70
10.16 WAIVERS OF JURY TRIAL.................................................... 72
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SCHEDULES
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1.1(a) Revolving Credit Commitments
1.1(b) Term Loans
1.1(c) Existing Letters of Credit
4.6 Material Litigation
4.9 Intellectual Property Claims
4.11 Taxes
4.15 Subsidiaries
4.17 Environmental Matters
6.2(c) Borrowing Base Reports
7.2 Outstanding Indebtedness
7.3 Existing Liens
7.4 Guarantee Obligations
7.10(c) Loans to Officers
7.10(g) Existing Investments
7.12 Description of Intercompany Arrangements with Cerion
<CAPTION>
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Term Note
B Form of Collateral Agency and Intercreditor Agreement
C-1 Form of Borrower Security Agreement
C-2 Form of Subsidiaries Security Agreement
D Form of Subsidiaries Guarantee
E-1 Form of Subsidiaries Pledge Agreement
E-2 Form of NPT Pledge Agreement
E-3 Form of NPII Pledge Agreement
E-4 Form of NPEI Pledge Agreement
F-1 Form of Borrowing Certificate
F-2 Form of Borrowing Base Certificate
G-1 Form of Opinion of Bingham Dana & Gold
G-2 Form of Opinion of Borrower's In-house Counsel
G-3 Form of Opinion of Richards, Layton & Finger
H-1 Form of Lock-Box Agreement
H-2 Form of Agency Agreement
I Form of Assignment and Acceptance
</TABLE>
-iv-
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 5,
1996, among NASHUA CORPORATION, a Delaware corporation (the "BORROWER"), the
several banks and other financial institutions from time to time parties to this
Agreement (the "LENDERS") and Chemical Bank, a New York banking corporation, as
agent for the Lenders hereunder (in such capacity, the "Agent").
WHEREAS, the parties hereto are also parties to the Credit
Agreement dated as of January 5, 1995 (as amended, supplemented or modified, the
"EXISTING CREDIT AGREEMENT") among the Borrower, the banks from time to time
parties thereto and Chemical Bank;
WHEREAS, an Event of Default has occurred and is continuing
under the Existing Credit Agreement;
WHEREAS, the Lenders are willing to waive the existing Event
of Default, restructure the obligations of the Borrower under the Existing
Credit Agreement and make additional extensions of credit hereunder, but only on
the terms and subject to the conditions of this Agreement and the other Loan
Documents.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereby agree that the Existing
Credit Agreement shall be amended and restated in its entirety as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "PRIME RATE" shall mean
the rate of interest per annum publicly announced from time to time by
the Agent as its prime rate in effect at its principal office in New
York City (the Prime Rate not being intended to be the lowest rate of
interest charged by Chemical Bank in connection with extensions of
credit to debtors); "BASE CD RATE" shall mean the sum of (a) the
product of (i) the Three-Month Secondary CD Rate and (ii) a fraction,
the numerator of which is one and the denominator of which is one minus
the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the
next preceding Business Day) by the Board of Governors of the Federal
Reserve System (or any successor) (the "BOARD") through the public
information telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be
<PAGE> 7
2
so reported on such day or such next preceding Business Day, the
average of the secondary market quotations for three-month certificates
of deposit of major money center banks in New York City received at
approximately 10:00 A.M., New York City time, on such day (or, if such
day shall not be a Business Day, on the next preceding Business Day) by
the Agent from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it; and "FEDERAL FUNDS
EFFECTIVE RATE" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ACCOUNTS": as defined in the definition of "Eligible
Accounts Receivables".
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary or the parent corporation of such Person) which, directly or
indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control"
of a Person means the power, directly or indirectly, either to (a) vote
10% or more of the securities having ordinary voting power for the
election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise.
"AGENT": Chemical Bank, as agent for the Lenders under this
Agreement and the other Loan Documents, or any successor Agent
appointed pursuant to Section 9 of this Agreement.
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT": as to any Lender
at any time, an amount equal to the sum of (a) the Aggregate
Outstanding Revolving Extensions of Credit of such Lender and (b) the
aggregate principal amount of all Term Loans made by such Lender then
outstanding.
"AGGREGATE OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": 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 and (b) such Lender's Revolving Credit Commitment
Percentage of the L/C Obligations then outstanding.
"AGREEMENT": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"APPLICABLE MARGIN": .50%.
<PAGE> 8
3
"APPLICATION": an application, in such form as the Issuing
Bank may specify from time to time, requesting the Issuing Bank to open
a Letter of Credit.
"ASSET SALE": any sale, transfer or other disposition by the
Borrower or any of its Subsidiaries of its respective assets (including
any sale and leaseback of assets).
"ASSIGNEE": as defined in subsection 10.6
"AVAILABLE COMMITMENT": as to any Lender, at any time, an
amount equal to the excess, if any, of (a) the lesser of (i) such
Lender's Revolving Credit Commitment and (ii) such Lender's Revolving
Credit Commitment Percentage of the Borrowing Base then in effect minus
(b) such Lender's Aggregate Outstanding Revolving Extensions of Credit.
"BASE CD RATE": as defined in the definition of the term "ABR"
in this subsection 1.1.
"BORROWER SECURITY AGREEMENT": the Security Agreement to be
executed and delivered by the Borrower, substantially in the form of
Exhibit C-1, as the same may be amended, supplemented or otherwise
modified from time to time.
"BORROWING BASE": an amount, calculated (without duplication)
on a monthly basis, equal to the sum of (i) 50% of the aggregate
Eligible Finished Goods Inventory, (ii) 40% of the aggregate Eligible
Raw Materials Inventory, (iii) 35% of the aggregate Eligible Work in
Process Inventory and (iv) 75% of the aggregate Eligible Accounts
Receivable MINUS (x) $10,000,000 so long as the principal amount of
Term Loans outstanding hereunder is equal to or greater than
$10,000,000, or, if the principal amount of Term Loans outstanding
hereunder is less than $10,000,000 on any Borrowing Date, such lesser
amount. All calculations of the Borrowing Base shall be made initially
by the Borrower and certified to the Agent by a Responsible Officer
PROVIDED, HOWEVER, that the Agent shall have the final right to review
and adjust, in its reasonable judgment, any such determination to more
accurately reflect the Borrowing Base.
"BORROWING BASE CERTIFICATE": as defined in subsection 6.2.
"BORROWING DATE": any Business Day specified in a notice
pursuant to subsection 2.2 as a date on which the Borrower requests the
Lenders to make Loans hereunder.
"BUSINESS": as defined in subsection 4.17.
"BUSINESS DAY": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
<PAGE> 9
4
"CAPITAL EXPENDITURES": with respect to any Person for any
period, the sum of the aggregate of all expenditures (whether paid in
cash, capitalized as an asset or accrued as a liability) by such Person
and its consolidated Subsidiaries during such period which, in
accordance with GAAP, are or should be included in "capital
expenditures" or similar items reflected in the consolidated statement
of cash flows of such Person.
"CAPITALIZATION DOCUMENTS": all Certificates of Incorporation,
Articles of Incorporation and By-laws for the Borrower and each of its
Subsidiaries.
"CAPITAL STOCK": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"CASH EQUIVALENTS": (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of not more than
twelve months from the date of acquisition, (ii) time deposits and
certificates of deposit having maturities of not more than twelve
months from the date of acquisition of any Lender or of any domestic
commercial bank having capital and surplus in excess of $500,000,000
which has, or the holding company of which has, a commercial paper
rating meeting the requirements specified in clause (iv) below, (iii)
repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (i) and (ii)
entered into with any bank meeting the qualifications specified in
clause (ii) above, (iv) commercial paper rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within six months from the date of acquisition, (v)
auction rate preferred stock rated at least A3 or the equivalent
thereof by Standard & Poor's Corporation or A- or the equivalent
thereof by Moody's Investors Service, Inc., and (vi) floating rate tax
exempt bonds rated at least MIG1 or the equivalent thereof by Standard
& Poor's Corporation or SP1+ or the equivalent thereof by Moody's
Investors Service, Inc.
"C/D ASSESSMENT RATE": for any day as applied to any Loan, the
annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment
risk classification) within the meaning of 12 C.F.R.
[Section]327.3(d) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's
(or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any Loan,
that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board, for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
<PAGE> 10
5
"CERION": Cerion Technologies, Inc.
"CERION NOTE": the $10,000,000 promissory note dated March 1,
1996 issued by Cerion and payable to the Borrower, as the same may be
amended, supplemented or otherwise modified from time to time.
"CHEMICAL": Chemical Bank.
"CLOSING DATE": the date on which the conditions precedent set
forth in subsection 5.1 shall be satisfied in full or waived by the
Agent and the Lenders.
"CODE": the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by
any Security Document.
"COLLATERAL AGENT": Chemical Bank in its capacity as
Collateral Agent under the Collateral Agency and Intercreditor
Agreement and any successor thereto.
"COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT": the
Collateral Agency and Intercreditor Agreement, substantially in the
form of Exhibit B to this Agreement, among the Borrower, the Senior
Noteholders, the Lenders and the Agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"COMMITMENT PERIOD": the period from and including the Closing
Date to but not including the Termination Date or such earlier date on
which the Revolving Credit Commitments shall terminate as provided
herein.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.
"CONSOLIDATED CURRENT ASSETS": at any date, all amounts which
would, in conformity with GAAP, be included under current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries at such
date.
"CONSOLIDATED CURRENT LIABILITIES": at a particular date, all
amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of the Borrower and its
Subsidiaries as at such date.
"CONSOLIDATED FIXED CHARGES": for any period the sum, without
duplication, of: (i) Consolidated Interest Expense; (ii) required
scheduled amortization of Indebtedness (excluding any mandatory
prepayments), determined on a consolidated basis in accordance with
GAAP, for the period involved and discount or premium (other than
deferred Yield Maintenance Premium under the Note Agreement) payable
during such
<PAGE> 11
6
period relating to any such Indebtedness for any period involved,
whether expensed or capitalized; and (iii) Consolidated Lease Expense,
in each case of the Borrower and its Subsidiaries.
"CONSOLIDATED INTANGIBLES": at a particular date, all assets
of the Borrower and its Subsidiaries, determined on a consolidated
basis at such date, that would be classified as intangible assets in
accordance with GAAP, but in any event including, without limitation,
unamortized debt discount and expense, unamortized organization and
reorganization expense, patents, trade or service marks, franchises,
trade names, goodwill.
"CONSOLIDATED INTEREST EXPENSE": for any period, the amount
which, in conformity with GAAP, would be set forth opposite the caption
"interest expense" or any like caption on the consolidated income
statement of the Borrower and its Subsidiaries for such period.
"CONSOLIDATED LEASE EXPENSE": for any period, the aggregate
amount of fixed and contingent rentals payable by the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with
GAAP, for such period with respect to operating leases of real and
personal property.
"CONSOLIDATED NET INCOME": for any period, the consolidated
net income of the Borrower and its Subsidiaries for such period
determined in accordance with GAAP.
"CONSOLIDATED NET WORTH": at a particular date, all items
which in conformity with GAAP would be included under shareholders'
equity on a consolidated balance sheet of the Borrower and its
Subsidiaries at such date (computed without regard to cumulative
translation adjustments relating to foreign currencies after 12/31/95).
"CONSOLIDATED TANGIBLE NET WORTH": at a particular date, the
excess, if any, of Consolidated Net Worth over Consolidated Intangibles
as at such date.
"CONSOLIDATED OPERATING WORKING CAPITAL": as of the date of
determination, Consolidated Current Assets of the Borrower and its
Subsidiaries at such date, determined on a consolidated basis in
conformity with GAAP (other than cash and Cash Equivalents and current
tax assets), minus Consolidated Current Liabilities of the Borrower and
its Subsidiaries at such date, determined on a consolidated basis in
conformity with GAAP (other than Indebtedness and income taxes
payable).
"CONTRACTUAL OBLIGATION": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"DEFAULT": any of the events specified in Section 8, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
<PAGE> 12
7
"DEFAULTED ACCOUNTS": as defined in the definition of
"Eligible Accounts Receivable."
"DOLLARS" and "$": dollars in lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States.
"EBITDA": of any Person, for any period, the Consolidated Net
Income of such Person for such period adjusted to exclude the following
items of income or expense to the extent that such items are included
in the calculation of such Consolidated Net Income: (a) Consolidated
Interest Expense, (b) any non-cash expenses and charges, (c) total
income tax expense, (d) depreciation expense, (e) the expense
associated with amortization of intangible and other assets, (f)
non-cash provisions for reserves for discontinued operations or
restructuring of operations, (g) any extraordinary, unusual or
non-recurring gains or credits, (h) any gain or loss associated with
the sale of assets; (i) any income or loss accounted for by the equity
method of accounting (except in the case of income to the extent of the
amount of cash dividends or cash distributions paid to the Borrower or
any Subsidiary by the entity accounted for by the equity method of
accounting); and (j) expenses incurred in connection with the
Borrower's restructuring on or prior to the date hereof of its material
Indebtedness.
"ELIGIBLE ACCOUNTS RECEIVABLES": the gross outstanding
balance, determined in accordance with GAAP and stated on a basis
consistent with the historical practices of the Borrower and its
Subsidiaries as of the date hereof, of accounts receivable of the
Borrower or any of its Subsidiaries arising out of sales of goods or
services made by the Borrower or any of its Subsidiaries in the
ordinary course of business ("ACCOUNTS"), less all finance charges,
late fees and other fees that are unearned, and less (i) the value of
any accrual which has been recorded by the Borrower or any of its
Subsidiaries with respect to downward price adjustments and (ii) such
other reserves as the Agent, in its reasonable judgment after
consultation with the Borrower, shall deem appropriate (without
duplication of items expressly excluded below). Without in any way
limiting the discretion of the Agent to deem an Account eligible or
ineligible, an Account is not eligible if:
(a) the Borrower and its Subsidiaries have not
complied with all material Requirements of Law, including,
without limitation, all laws, rules, regulations and orders of
any governmental or judicial authority relating to truth in
lending, billing practices, fair credit reporting, equal
credit opportunity, debt collection practices and consumer
debtor protection, applicable to such Account (or any related
contracts) or affecting the collectibility of such Account;
(b) such Account is not collaterally assignable or a
first priority security interest in such Account in favor of
the Collateral Agent for the
<PAGE> 13
8
benefit of the Lenders and the Senior Noteholders has not
been obtained and fully perfected;
(c) such Account is subject to any Lien whatsoever,
other than Liens in favor of the Collateral Agent for the
benefit of the Lenders and the Senior Noteholders and other
Liens permitted by this Agreement;
(d) the Borrower or the relevant Subsidiary, as the
case may be, in order to be entitled to collect such Account,
is required to perform any additional service for, or perform
or incur any additional obligation to, the Account debtor;
(e) such Account does not constitute a legal, valid
and binding irrevocable payment obligation of the Account
debtor to pay the balance thereof in accordance with its terms
or is subject to any defense, set-off, recoupment or
counterclaim (and such Account shall be ineligible to the
extent of the asserted amount of or value of such defense,
set-off, recoupment or counterclaim);
(f) the Account debtor is the Borrower or an
Affiliate, Subsidiary, division or employee of the Borrower or
any of its Subsidiaries (other than any Account that is
otherwise an Eligible Account Receivable arising from a
transaction entered into in the ordinary course of business on
an arms'-length basis with any affiliate, upon fair and
reasonable terms no less favorable to the Borrower or such
Subsidiary than would be obtained in a comparable transaction
with a Person not an Affiliate);
(g) such Account is an account of the United States
government, the government of any state of the United States
or any political subdivision thereof, or any agency or
instrumentality of any of the foregoing, unless, in the case
of accounts of the United States government, agency or
instrumentality the Federal Assignment of Claims Act is
complied with, and in the case of any state government, agency
or instrumentality any such applicable similar law is complied
with;
(h) an estimated or actual loss has been recognized
in respect of such Account, as determined in accordance with
the Borrower's usual business practice (each such Account, a
"DEFAULTED ACCOUNT");
(i) such Account is from an Account debtor or an
Affiliate of an Account Debtor for which 15% of the Accounts
owing from such Persons are Defaulted Accounts;
<PAGE> 14
9
(j) any representation or warranty contained in this
Agreement or in any other Loan Documents applicable to such
Account has been breached in any material respect;
(k) 25% or more of the outstanding amount of all
Accounts from the Account debtor in respect of such Account
have become, or have been determined by the Agent to be,
ineligible;
(l) the Account debtor has filed a petition for
relief under the United States Bankruptcy Code (or similar
action under any successor law or under any comparable law),
made a general assignment for the benefit of creditors, had
filed against it any petition or other application for relief
under the United States Bankruptcy Code (or similar action
under any successor law or under any comparable law), failed,
suspended business operations, become insolvent, called a
meeting of substantially all of its material creditors for the
purpose of obtaining any financial concession or
accommodation, or had or suffered a receiver or a trustee to
be appointed for all or a significant portion of its assets or
affairs;
(m) any portion of such Account has remained unpaid
for a period exceeding 60 days from the due date (but only to
the extent of such overdue portion) or the Borrower or any of
its Subsidiaries has reason to believe such Account is
uncollectible;
(n) the sale represented by such Account is to an
Account debtor located outside one of the states of the United
States, unless a letter of credit deemed acceptable by the
Agent is held against such Account;
(o) the Account debtor is a supplier or creditor of
the Borrower or any of its Subsidiaries (but only to the
extent of the lesser of (i) the amount owing from such Account
debtor to the Borrower or the relevant Subsidiary, as the case
may be, pursuant to Accounts that are otherwise eligible and
(ii) the amount owing to such Account debtor by the Borrower
or the relevant Subsidiary, as the case may be);
(p) such Account is not denominated in Dollars
(unless a currency swap or similar hedge has been entered into
with respect to such Account, the effect of which is to cause
payments in respect of such Account to be denominated in
Dollars) or is payable outside the United States;
(q) the sale represented by such Account is on a
bill-and-hold, undelivered sale, guaranteed sale,
sale-or-return, consignment, or
<PAGE> 15
10
sale on approval basis or is subject to any right of return,
set-off or charge-back, except customary product warranties;
(r) the Agent reasonably believes (after consultation
with the Borrower), that the collection of such Account is
insecure or that such Account will not be paid;
(s) the Borrower or the relevant Subsidiary, as the
case may be, or any other party to such Account, is in default
in the performance or observance of any of the terms thereof
in any material respect;
(t) the Borrower or the relevant Subsidiary, as the
case may be, does not have good title to such Account as sole
owner of such Account;
(u) such Account does not arise from the sale and
delivery of goods or rendition of services in the ordinary
course of business to the Account debtor;
(v) such Account is on terms other than those normal
or customary in the business of the Borrower or the relevant
Subsidiary, as the case may be;
(w) such Account has payment terms exceeding 60 days
from invoice date;
(x) if such Account were to constitute an Eligible
Account Receivable, more than 10% of all Eligible Accounts
Receivables would be owing from the Account debtor in respect
of such Account or any of its Affiliates (but only that
portion of any such Account which would exceed such 10%
limitation shall be deemed ineligible);
(y) any amounts payable under or in connection with
such Account are evidenced by chattel paper, promissory notes
or other instruments, unless such chattel paper, promissory
notes or instruments have been endorsed and delivered to the
Agent;
(z) such Account has been paid by a check which has
been returned for insufficient funds if such check is in an
amount of at least $10,000, provided that, in addition to the
foregoing, a reserve in connection with Accounts which have
been paid by checks which have been returned for insufficient
funds shall be subtracted for purposes of calculating the
Borrowing Base, which reserve shall equal $10,000 or such
other amount as the Agent, in its sole discretion, shall
determine; or
<PAGE> 16
11
(aa) such Account has been placed with an attorney or
other third party for collection; or
(bb) such Account is an Account which the Agent in
its credit judgment shall reasonably deem not to be an
Eligible Account, based on such credit and collateral
considerations as the Agent may reasonably deem appropriate.
"ELIGIBLE INVENTORY": all inventory of the Borrower or any of
its Subsidiaries ("INVENTORY"), valued at the lower of (i) cost
determined in accordance with GAAP and stated on a basis consistent
with the historical practices of the Borrower and its Subsidiaries as
of the date hereof or (ii) market value, reduced (or, in the case of
any positive adjustment pursuant to clause (x) below, increased) by (x)
an adjustment, positive or negative, equivalent to the sum of the
previous two months' standard cost variances that result when standard
costs and actual costs differ, (y) the value of reserves which have
been recorded by the Borrower or any of its Subsidiaries with respect
to obsolete, slow-moving or excess Inventory or shrinkage and (z) such
other reserves as the Agent, in its reasonable judgment after
consultation with the Borrower, shall deem appropriate (without
duplication of items expressly excluded below). Without in any way
limiting the discretion of the Agent to deem an item of Inventory
eligible or ineligible, any item of Inventory shall not be eligible if:
(a) such item of Inventory is not collaterally
assignable or a first priority security interest in such item
of Inventory in favor of the Collateral Agent for the benefit
of the Lenders and the Senior Noteholders has not been
obtained and fully perfected by filing Uniform Commercial Code
financing statements against the Borrower or the relevant
Subsidiary;
(b) such item of Inventory is subject to any Lien
whatsoever, other than Liens in favor of the Collateral Agent
for the benefit of the Lenders and the Senior Noteholders, and
other Liens permitted hereby;
(c) such item of Inventory (i) is damaged or not in
good condition (to the extent not provided for by reserves or
valuation methodology as described above) or (ii) does not
meet all material standards imposed by any Governmental
Authority having regulatory authority over such item of
Inventory, its use or its sale;
(d) such item of Inventory is not currently either
readily usable or salable, at prices approximating at least
the cost thereof, in the normal course of the business of the
Borrower or the relevant Subsidiary, as the case may be (to
the extent not provided for by reserves as described above);
(e) any event shall have occurred or any condition
shall exist with respect to such item of Inventory which would
substantially impede the ability
<PAGE> 17
12
of the Borrower or the relevant Subsidiary, as the case may
be, to continue to use or sell such item of Inventory in the
normal course of business;
(f) any claim disputing the title of the Borrower or
the relevant Subsidiary, as the case may be, to, or right to
possession of or dominion over, such item of Inventory shall
have been asserted;
(g) any representation or warranty contained in this
Agreement or in any other Loan Document applicable to
Inventory has been breached in any material respect with
respect to such item of Inventory;
(h) the Borrower or the relevant Subsidiary, as the
case may be, does not have good title as sole owner of such
item of Inventory;
(i) such item of Inventory is owned by the Borrower
or any of its Subsidiaries, and has been consigned to other
Persons, or is located at, or in the possession of, a vendor
of the Borrower or such Subsidiary, or is in transit to or
from, or held or stored by, third parties;
(j) in the case of any determination of the Borrowing
Base made after the date which is three months after the
Closing Date, such item of Inventory is located on a leasehold
in a state in which a landlord's lien is provided by statute
or common law as to which the lessor has not entered into a
landlord's waiver and consent, satisfactory in form and
substance to the Agent, providing a waiver of any applicable
Lien and providing the Agent with the right to receive notice
of default, the right to repossess such item of Inventory at
any time upon the occurrence or during the continuance of a
Default or Event of Default and such other rights as may be
acceptable to the Agent; PROVIDED that the Agent in its
reasonable discretion may include such item of Inventory in
the Borrowing Base after deducting a reserve in respect
thereof in an amount the Agent reasonably deems appropriate
against any claim that any such landlord may have against such
item of Inventory;
(k) such item of Inventory is located outside of the
United States;
(l) such item of Inventory is evidenced by an
Account;
(m) such item of Inventory is subject to any
licensing, patent, royalty, trademark, trade name or copyright
agreements with any third party from whom the Borrower or any
of its Subsidiaries has received notice of a dispute in
respect of any such agreement;
(n) such item of Inventory consists of packing,
packaging and/or shipping supplies or shipping materials; or
<PAGE> 18
13
(o) such item of Inventory has been otherwise
determined by the Agent (after consultation with the Borrower)
to be unacceptable because the Agent reasonably believes that
such item of Inventory is not readily salable under the
customary terms on which it is usually sold;
(p) such item of Inventory constitutes a Material of
Environmental Concern; or
(q) such item of Inventory is an item of Inventory
which the Agent in its credit judgment shall reasonably deem
not to be Eligible Inventory, based on such credit and
collateral considerations as the Agent may reasonably deem
appropriate.
"ELIGIBLE FINISHED GOODS INVENTORY": all Eligible Inventory
that is finished and ready for sale in the ordinary course of business
of the Borrower or any of its Subsidiaries.
"ELIGIBLE RAW MATERIALS INVENTORY": all Eligible Inventory
that consists of raw materials that have not been used in any way in
the processing, manufacturing or construction of any goods, or the
rendering of any services, by the Borrower or any Subsidiary of the
Borrower and is readily saleable as a raw material for use by any other
Person in such Person's business.
"ELIGIBLE WORK IN PROCESS INVENTORY": all Eligible Inventory
(other than Eligible Raw Material Inventory and Eligible Finished Goods
Inventory) that constitutes work in process (not otherwise obsolete) in
the ordinary course of business of the Borrower or any of its
Subsidiaries.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EVENT OF DEFAULT": any of the events specified in Section 8,
PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXCESS CASH FLOW": of the Borrower and its Subsidiaries for
any fiscal period, an amount equal to the excess of (a) the sum of (i)
Consolidated Net Income for such fiscal period, (ii) depreciation and
amortization expense, and all other non-cash charges which were
deducted in determining Consolidated Net Income, (iii) any
<PAGE> 19
14
decrease in Consolidated Operating Working Capital during such period
(computed by comparing Consolidated Operating Working Capital on the
first day of such period with Consolidated Operating Working Capital on
the last day of such period), (iv) any losses during such fiscal period
in respect of the sale or other disposition of any asset which were
subtracted in determining Consolidated Net Income, (v) all income taxes
deducted in determining Consolidated Net Income during such period over
(b) the sum of (i) Capital Expenditures during such fiscal period, but
only to the extent permitted pursuant to subsection 7.9, plus (ii) any
gains during such fiscal period in respect of the sale or other
disposition of any asset which were added in determining Consolidated
Net Income, plus (iii) all income taxes actually paid in cash during
such fiscal period, plus (iv) all other non-cash credits which were
added in determining Consolidated Net Income, plus (v) all scheduled
mandatory payments of principal of the Term Loans pursuant to
subsection 2.5(b) during such fiscal period, all optional prepayments
of principal of the Term Loans during such fiscal period, all optional
prepayments of principal of the Revolving Credit Loans pursuant to
subsection 2.7 during such fiscal period (provided that there is a
corresponding simultaneous permanent reduction of the Revolving Credit
Commitments) and all scheduled mandatory or optional payments of
principal and premium on the Senior Notes during such fiscal period,
plus (vi) all payments of principal of other Indebtedness (other than
in respect of the Loans and the Senior Notes) during such period
provided there is a simultaneous permanent reduction of the lending
commitment, if any, in respect of such Indebtedness, plus (vii) any
increase in Consolidated Operating Working Capital during such period
(computed by comparing Consolidated Operating Working Capital on the
first day of such period with Consolidated Operating Working Capital on
the last day of such period), in each case of the Borrower and its
Subsidiaries. Excess Cash Flow shall exclude in any event any income or
loss accounted for by the equity method of accounting (except in the
case of income to the extent of the amount of cash dividends or cash
distributions paid to the Borrower or any Subsidiary by the entity
accounted for by the equity method of accounting).
"EXISTING CREDIT AGREEMENT": as defined in the recitals
hereto.
"EXISTING LOANS": the Loans outstanding under (and as defined
in) the Existing Credit Agreement on the Closing Date.
"FEDERAL FUNDS EFFECTIVE RATE": as defined in the definition
of the term "ABR" in this subsection 1.1.
"FINANCING LEASE": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"FOREIGN PLEDGE AGREEMENTS": the Pledge Agreement,
substantially in the form of Exhibit E-2, to be executed and delivered
by Nashua Photo Inc., as the same may be amended, supplemented or
otherwise modified from time to time.
<PAGE> 20
15
"FOREIGN SUBSIDIARY": any Subsidiary of the Borrower organized
under the laws of any jurisdiction outside the United States of
America.
"FUNDED DEBT": shall mean (a) any loan, advance of funds,
overdraft, or other borrowing, (b) any obligation under leases,
conditional sale or other title retention agreements that, in
accordance with GAAP, is required to be capitalized, (c) any
reimbursement obligation not satisfied substantially contemporaneously
with a drawing under any letter of credit, (d) any other financial
obligation evidenced by a promissory note or similar instrument.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counter-indemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "PRIMARY OBLIGATIONS") of
any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term Guarantee Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.
"GUARANTOR": any Person delivering a Guarantee pursuant to
this Agreement.
<PAGE> 21
16
"HEDGE AGREEMENTS": as to any Person, all interest rate or
currency swaps, caps or collar agreements, forward foreign exchange
contracts or similar arrangements entered into by such Person providing
for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"HOLDBACK AMOUNT": as defined in subsection 2.8(i).
"INDEBTEDNESS": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or
created for the account of such Person and (e) all liabilities secured
by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment
thereof (for the purposes of this clause (e), the amount of any such
Indebtedness shall be equal to the lower of the amount of liability in
respect thereof or the fair market value of the property subject to the
Lien in respect thereof).
"INSOLVENCY": with respect to any Multi-employer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": as to any Loan, the last day of each
March, June, September and December to occur while such Loan is
outstanding.
"ISSUING BANK": Chemical Bank, in its capacity as issuer of
any Letter of Credit.
"L/C COMMITMENT": $5,000,000.
"L/C FEE PAYMENT DATE": the last day of each March, June,
September and December.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of
(a) the aggregate then 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
subsection 3.5(a).
"L/C PARTICIPANTS": the collective reference to all of the
Lenders other than the Issuing Bank who purchased participating
interests in the Letters of Credit, as set forth on Schedule 1.1(c).
<PAGE> 22
17
"L/C PARTICIPATING INTEREST": as to any L/C Participant and as
to the Issuing Bank with respect to the undivided interest in the
Letters of Credit which the Issuing Bank has retained, the amount of
such L/C Participant's or the Issuing Bank's undivided participating
interest in the Letters of Credit, as set forth opposite such L/C
Participant's or the Issuing Bank's name on Schedule 1.1(c) under the
heading "L/C Participating Interests."
"LENDERS": shall have the meaning set forth in the preamble to
this Agreement.
"LETTERS OF CREDIT": as defined in subsection 3.1.
"LIEN": any mortgage, pledge, hypothecation, collateral
assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority
or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement and any Financing Lease having
substantially the same economic effect as any of the foregoing).
"LOAN": any loan made by any Lender pursuant to this
Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes and the
Applications, the Subsidiaries Guarantee, the Security Documents, the
Collateral Agency and Intercreditor Agreement and the Pledge
Agreements.
"LOAN PARTIES": the Borrower and each Subsidiary of the
Borrower which is a party to a Loan Document.
"LOAN PERCENTAGE": as to any Lender at any time, the
percentage which the sum of the aggregate principal amount of such
Lender's Loans and L/C Participating Interest then constitutes of the
aggregate principal amount of the Loans and L/C Participating Interests
then outstanding.
"LOCK-BOX AGREEMENT": as defined in subsection 5.1(d).
"MAJORITY LENDERS": at any time, Lenders the Loan Percentages
of which aggregate more than 50%.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
of the Borrower and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this or any of the other Loan Documents
or the rights or remedies of the Agent or the Lenders hereunder or
thereunder.
"MATERIAL ENVIRONMENTAL AMOUNT": an amount payable by the
Borrower and/or its Subsidiaries in excess of $1,000,000 for remedial
costs, compliance costs, compensatory damages, punitive damages, fines,
penalties or any combination thereof.
<PAGE> 23
18
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"MULTI-EMPLOYER PLAN": a Plan which is a multi-employer plan
as defined in Section 4001(a)(3) of ERISA.
"NET CASH PROCEEDS": in connection with:
(a) any Asset Sale, the proceeds thereof in the form of cash
and Cash Equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but
only as and when received), net of attorneys' fees, accountants' fees,
investment banking fees, amounts required to be applied to the
repayment of Indebtedness secured by a Lien permitted hereunder on any
asset which is the subject of such Asset Sale (other than any Lien in
favor of the Collateral Agent) and other fees and expenses actually
incurred in connection therewith and net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing
arrangements); and
(b) any issuance or sale of equity securities or debt
securities or instruments or the incurrence of loans, the cash proceeds
received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable
as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements).
"NON-EXCLUDED TAXES": as defined in subsection 2.14.
"NOTE AGREEMENT": the Amended and Restated Note Agreement,
dated as of even date herewith, among the Borrower and the Senior
Noteholders, as the same may be amended, supplemented or otherwise
modified from time to time.
"NOTES": the collective reference to the Revolving Credit
Notes and the Term Notes.
"NPT PLEDGE AGREEMENT": the Pledge Agreement to be executed
and delivered by Cerion Holdings Inc. in favor of the Agent,
substantially in the form of Exhibit E-3, as the same may be amended,
supplemented or otherwise modified from time to time.
"PARTICIPANT": as defined in subsection 10.6.
<PAGE> 24
19
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENTS": the collective reference to the
Subsidiaries Pledge Agreement, the Foreign Pledge Agreements and the
NPT Pledge Agreement.
"PRIME RATE": as defined in the definition of the term "ABR"
in this subsection 1.1.
"PROPERTIES": as defined in subsection 4.17.
"REGISTER": as defined in subsection 10.6.
"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 3.5(a) for amounts
drawn under Letters of Credit.
"REORGANIZATION": with respect to any Multi-employer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. [Section]2615.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"RESPONSIBLE OFFICER": the chief executive officer or the
president of the Borrower or, with respect to financial matters, the
chief financial officer of the Borrower.
<PAGE> 25
20
"REVOLVING CREDIT COMMITMENT": as to any Lender, the
obligation of such Lender to make Revolving Credit Loans to and/or
issue or participate in Letters of Credit issued on behalf of the
Borrower hereunder in an aggregate principal and/or face amount at any
one time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1(a), as it may be permanently reduced from
time to time in accordance with the terms of this Agreement. The
aggregate Revolving Credit Commitments shall at no time exceed
$18,000,000 of which $5,000,000 shall be available exclusively for
Letters of Credit issued for the account of the Borrower and for
Revolving Credit Loans the proceeds of which shall be used exclusively
to reimburse draws under such Letters of Credit.
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender at
any time, the percentage which such Lender's Revolving Credit
Commitment then constitutes of the aggregate Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans then
outstanding constitutes of the aggregate principal amount of the
Revolving Credit Loans then outstanding).
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 2.6.
"SECURITIES": any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities"
or any certificates of interest, shares or participations in temporary
or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITY AGREEMENTS": the collective reference to the
Borrower Security Agreement and the Subsidiaries Security Agreement.
"SECURITY DOCUMENTS": the collective reference to Subsidiaries
Guarantee, the Security Agreements, the Pledge Agreements, the Lock-box
Agreements and all other security documents hereafter delivered to the
Collateral Agent granting a Lien on any asset or assets of any Person
to secure the obligations and liabilities of the Borrower hereunder and
under any of the other Loan Documents or to secure any guarantee of any
such obligations and liabilities.
"SENIOR NOTES": the Borrower's Senior Notes, due December 31,
1997, issued pursuant to the Note Agreement.
"SENIOR NOTEHOLDERS": the holders of the Senior Notes.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV
of ERISA, but which is not a Multi-employer Plan.
<PAGE> 26
21
"SUBSIDIARIES GUARANTEE": the Guarantee to be executed and
delivered by each Domestic Subsidiary, Nashua Photo B.V. (Netherlands),
Nashua Photo Limited (Canada), and Nashua Photo S.N.C. (France),
substantially in the form of Exhibit D, as the same may be amended,
supplemented or otherwise modified from time to time.
"SUBSIDIARIES PLEDGE AGREEMENT": the collective reference to
the Pledge Agreements to be executed and delivered by Nashua Photo
Inc., Cerion Holdings Inc., Nashua Photo European Investments, Inc.,
Nashua Photo International Investments, Inc. and certain of the Foreign
Subsidiaries in favor of the Collateral Agent, substantially in the
form of Exhibits E-1, E-2, E-3 and E-4, as the same may be amended,
supplemented or otherwise modified from time to time.
"SUBSIDIARIES SECURITY AGREEMENT": the Security Agreement to
be executed and delivered by each Domestic Subsidiary in favor of the
Collateral Agent, substantially in the form of Exhibit C-2, as the same
may be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARIES SECURITY DOCUMENTS": the collective reference to
the Subsidiaries Pledge Agreement, the NPT Pledge Agreement, the
Subsidiaries Security Agreement, and the Subsidiaries Guarantee.
"SUBSIDIARY": as to any Person, (i) a corporation,
association, trust or other business entity of which shares of stock
having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person and (ii) any partnership of which such Person or any
Subsidiary is a general partner or any partnership more than 50% of the
equity interests of which are owned, directly or indirectly, by such
Person or by one or more other Subsidiaries, or by such Person and one
or more other Subsidiaries; PROVIDED that Cerion shall not be
considered a Subsidiary of the Borrower after the initial public
offering of its Capital Stock (on terms and conditions satisfactory to
the Majority Lenders) is completed so long as the Borrower does not
own, directly or indirectly more than 50% of the Capital Stock of
Cerion. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"TERM LOAN": as defined in subsection 2.5.
"TERM NOTE": as defined in subsection 2.6.
"TERMINATION DATE": December 31, 1997 or such other date on
which the Revolving Credit Commitments shall terminate in accordance
with the provisions of this Agreement.
<PAGE> 27
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"THREE MONTH SECONDARY CD RATE": as defined in the definition
of the term "ABR" in this subsection 1.1.
"TRANSFEREE": as defined in subsection 10.6.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
1.1 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the
defined meanings when used in any Notes or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) 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, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("REVOLVING CREDIT LOANS") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Revolving Credit Commitment Percentage of the
then outstanding L/C Obligations, does not exceed the lesser of (x) the amount
of such Lender's Revolving Credit Commitment and (y) such Lender's Revolving
Credit Commitment Percentage of the Borrowing Base then in effect. A portion of
the Existing Loans outstanding on the Closing Date equal to $5,000,000 shall be
converted into and deemed to be Revolving Credit Loans made hereunder and
subject to the terms and conditions hereof and each Lender shall be deemed to
have made a Revolving Credit Loan to the Borrower hereunder on the Closing Date
in an amount equal such Lender's Revolving Credit Commitment Percentage of
$5,000,000. The foregoing conversion is a continuation, rearrangement and
extension of, and not a novation, release or satisfaction of the Existing Loans.
During the Commitment Period the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof;
PROVIDED that $5,000,000 of the Revolving Credit Commitments shall be available
exclusively for the issuance of
<PAGE> 28
23
Letters of Credit for the account of the Borrower and for Revolving Credit Loans
the proceeds of which shall be used exclusively to reimburse draws under such
Letters of Credit.
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. Subject to the
terms and conditions of this Agreement, the Borrower may borrow
Revolving Credit Loans during the Commitment Period on any Business Day
PROVIDED, HOWEVER, that the Borrower shall give the Agent irrevocable notice
thereof (which notice must be received by the Agent prior to 11:00 A.M., New
York City time, on the requested Borrowing Date). On the day of receipt of any
such notice from the Borrower, the Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its share of each borrowing
available to the Agent for the account of the Borrower at the office of the
Agent set forth in subsection on 10.2 or before 1:00 p.m. New York City time, on
the Borrowing Date requested by the Borrower in funds immediately
available to the Agent as the Agent may direct. The proceeds of all such
Revolving Credit Loans will then be made available to the Borrower by the Agent
at the office of the Agent specified in subsection 10.2 by crediting the account
of the Borrower on the books of such office of the Agent with the aggregate
amount made available to the Agent by the Lenders and in like funds as received
by the Agent.
2.3 COMMITMENT FEE. The Borrower agrees to pay to the Agent
for the account of each Lender a commitment fee for the period from and
including the first day of the Commitment Period to the Termination Date,
computed at the rate of .50% per annum on the average daily amount of the
Available Commitment of such Lender during the period for which payment is made,
payable quarterly in arrears on the last day of each March, June, September and
December and on the Termination Date or such earlier date as the Revolving
Credit Commitments shall terminate as provided herein, commencing on the first
of such dates to occur after the date hereof. Simultaneously with any permanent
reduction of the Revolving Credit Commitments, the Borrower shall pay the
accrued commitment fee on the unused portion thereof being permanently reduced.
2.4 TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower
shall have the right, upon not less than five Business Days' notice to the
Agent, to terminate the Revolving Credit Commitments or, from time to time, to
reduce the amount of the Revolving Credit Commitments PROVIDED that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Credit Loans then
outstanding, when added to the then outstanding L/C Obligations, would exceed
the Revolving Credit Commitments then in effect. Any such reduction shall be in
an amount equal to $100,000 or a whole multiple thereof and shall reduce
permanently the Revolving Credit Commitments then in effect and shall reduce the
Lender's Revolving Credit Commitments pro rata in accordance with their
respective Revolving Credit Commitment Percentages.
2.5 TERM LOANS. (a) A portion of the Existing Loans
outstanding on the Closing Date equal to $48,000,000 shall be converted into and
deemed to be term loans made hereunder and subject to the provisions hereof
(each a "TERM LOAN" and collectively the "TERM LOANS") to the Borrower on the
Closing Date by the Lenders. Each Lender shall be
<PAGE> 29
24
deemed to have made a Term Loan to the Borrower in a principal amount equal to
such Lender's Term Loan Percentage (as set forth opposite such Lender's name on
Schedule 1.1(b)) of $48,000,000. The foregoing conversion is a continuation,
rearrangement and extension of, and not a novation, release or satisfaction of
the Existing Loans.
<TABLE>
(b) The Term Loan of each Lender shall be payable in five
quarterly installments, due on the dates set forth below, in an amount equal to
the percentage set forth below (opposite each such date) of the aggregate amount
of the Term Loan of such Lender outstanding on October 1, 1996:
<CAPTION>
<S> <C>
January 2, 1997 12.5%
March 31, 1997 12.5%
June 30, 1997 12.5%
September 30, 1997 12.5%
December 31, 1997 50.0%
</TABLE>
2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower
hereby unconditionally promises to pay to the Agent for the account of each
Lender (i) the then unpaid principal amount of each Revolving Credit Loan of
such Lender on the Termination Date (or such earlier date on which the Revolving
Credit Loans become due and payable pursuant to Section 8), and (ii) the
principal amount of the Term Loan of such Lender, in accordance with the
amortization schedule in subsection 2.5 of this Agreement (or the then unpaid
principal amount of such Term Loan, on the date that the Term Loans become due
and payable pursuant to Section 8). The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in subsection 2.9.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Agent shall maintain the Register pursuant to
subsection 10.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan and Term Loan made
hereunder, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender hereunder and (iii) both
the amount of any sum received by the Agent hereunder from the Borrower and each
Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.6(b) shall, to the extent permitted
by applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Agent to maintain the Register or any such account,
or any error therein, shall not in any manner affect the
<PAGE> 30
25
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Agent by
any Lender, the Borrower will execute and deliver to such Lender (i) a
promissory note of the Borrower evidencing the Revolving Credit Loans of such
Lender, substantially in the form of Exhibit A-1 with appropriate insertions as
to date and principal amount (a "REVOLVING CREDIT NOTE"), and/or (ii) a
promissory note of the Borrower evidencing the Term Loan of such Lender,
substantially in the form of Exhibit A-2 with appropriate insertions as to date
and principal amount (a "TERM NOTE").
2.7 OPTIONAL PREPAYMENTS. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon at least one Business Day's irrevocable notice to the Agent,
specifying the date and amount of prepayment. Upon receipt of any such notice
the Agent shall promptly notify each Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
specified therein, and, in the case of prepayments of the Term Loans only,
accrued interest to such date on the amount prepaid. Partial prepayments of the
Term Loans shall be applied to the installments of principal thereof in the
inverse order of their scheduled maturities. Amounts prepaid on account of the
Term Loans may not be reborrowed. Partial prepayments shall be in an aggregate
principal amount of $500,000 or a whole multiple thereof.
2.8 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS. (a) If
any class of debt Securities of the Borrower or any of its Subsidiaries shall be
issued or sold by the Borrower or any of its Subsidiaries or the Borrower or its
Subsidiaries shall incur any Indebtedness (other than any debt Securities issued
or Indebtedness incurred as permitted by subsection 7.2(a) through (e)) an
amount equal to 100% of the Net Cash Proceeds from such issuance, sale or
incurrence shall be paid to the Collateral Agent on the date of receipt thereof
to be distributed by the Collateral Agent in accordance with the provisions of
paragraph (f) of this subsection 2.8.
(b) If any class of common equity Securities of the Borrower
or any of its Subsidiaries (other than the equity Securities of Cerion as
provided for in subsection 2.8(d) and other than the issuance of equity to
senior employees after the date hereof in an aggregate amount not in excess of
$1,000,000 in connection with management incentive programs) shall be issued or
sold, or if the Borrower or any of its Subsidiaries shall receive payments of
principal of the Cerion Note, an amount of the Net Cash Proceeds received by the
Borrower or its Subsidiaries from such issuance or sale or the amount of such
principal payments equal to 100% (or, provided no Event of Default shall have
occurred and is continuing, 75% after mandatory prepayments of principal of the
Loans (including amounts paid to the Collateral Agent as cash collateral in
respect of outstanding Letters of Credit) and principal of Senior Notes have
been paid to the Lenders and the Senior Noteholders in an aggregate amount equal
to $50,000,000 less the Holdback Amount) of such Net Cash Proceeds or of such
principal payments shall be paid to the Collateral Agent on the date of receipt
of any such Net Cash Proceeds from such issuance or sale or of any such
principal payments to be
<PAGE> 31
26
distributed by the Collateral Agent in accordance with the provisions of
paragraph (f) of this subsection 2.8.
(c) The Net Cash Proceeds received by the Borrower and its
Subsidiaries from any Asset Sale (other than sales of assets permitted by
subsection 7.6(a) through (e)), in an amount equal to 100% (or, provided no
Event of Default shall have occurred and is continuing, 75% after mandatory
prepayments of principal of the Loans (including amounts paid to the Collateral
Agent as cash collateral in respect of outstanding Letters of Credit) and
principal of Senior Notes have been paid to the Lenders and the Senior
Noteholders in an aggregate amount equal to $50,000,000 less the Holdback
Amount) of such Net Cash Proceeds shall be paid to the Collateral Agent on the
date of receipt of any such Net Cash Proceeds from such sale or disposition to
be distributed by the Collateral Agent in accordance with the provisions of
paragraph (f) of this subsection 2.8.
(d) In the case of any issuance or sale of equity Securities
of Cerion on terms and conditions satisfactory to the Majority Lenders, the Net
Cash Proceeds from the sale of such equity Securities by the Borrower (and not
the net proceeds from the issuance of equity Securities by Cerion) in an amount
equal to 100% (or, provided no Event of Default shall have occurred and is
continuing, 75% after mandatory prepayments of principal of the Loans (including
amounts paid to the Collateral Agent as cash collateral in respect of
outstanding Letters of Credit) and principal of Senior Notes have been paid to
the Lenders and the Senior Noteholders in an aggregate amount equal to
$50,000,000 less the Holdback Amount) of such Net Cash Proceeds of such sale or
issuance received by the Borrower or any of its Subsidiaries shall be paid to
the Collateral Agent on the date of such issuance or sale to be distributed by
the Collateral Agent in accordance with the provisions of paragraph (f) of this
subsection 2.8.
(e) Within 45 days of the end of fiscal year 1996, the
Borrower shall pay to the Collateral Agent 100% (or, provided no Event of
Default shall have occurred and is continuing, 75% after mandatory prepayments
of principal of the Loans (including amounts paid to the Collateral Agent as
cash collateral in respect of outstanding Letters of Credit) and principal of
Senior Notes have been paid to the Lenders and the Senior Noteholders in an
aggregate amount equal to $50,000,000 less the Holdback Amount) of Excess Cash
Flow for such fiscal year to be distributed by the Collateral Agent in
accordance with the provisions of paragraph (f) of this subsection 2.8.
(f) Any payments made to the Collateral Agent pursuant to
subsections 2.8 (a) through (e) hereof shall be distributed by the Collateral
Agent in accordance with subsection 3.4 or 3.5 (as applicable) of the Collateral
Agency and Intercreditor Agreement.
(g) All amounts distributed to the Agent pursuant to clauses
"THIRD" or "FOURTH" of subsection 3.5 of the Collateral Agency and Intercreditor
Agreement shall be applied as provided in such clauses. All amounts distributed
to the Agent pursuant to clause "Fifth" of subsection 3.5 of the Collateral
Agency and Intercreditor Agreement shall be applied FIRST to the prepayment of
the Term Loans (including interest thereon) in inverse order of maturity until
the Term Loans are paid in full, and SECOND to the cash collateralization of
<PAGE> 32
27
all outstanding Letters of Credit, and THIRD to the prepayment of the Revolving
Credit Loans (including interest thereon) and the permanent reduction of the
Revolving Credit Commitments by an amount equal to the amount of such prepayment
and FOURTH to all other amounts payable hereunder.
(h) The Borrower shall from time to time immediately prepay
outstanding Revolving Credit Loans to the extent that the Aggregate Outstanding
Revolving Extensions of Credit exceed the Borrowing Base at any time in effect.
(i) At any time before the Revolving Credit Commitments have
been permanently reduced to an amount less than or equal to $10,000,000, with
respect to any mandatory prepayments relating to any Asset Sale or equity
issuance or sale described in clauses (b), (c) or (d) of this subsection 2.8
with Net Cash Proceeds in excess of $15,000,000, the Borrower shall be entitled
to retain an amount (the "HOLDBACK AMOUNT") equal to the excess, if any, of (i)
$3,000,000 OVER (ii) the amount of Revolving Credit Loans outstanding on the
date of such mandatory prepayment in excess of $5,000,000.
(j) The Revolving Credit Commitments shall be automatically
and permanently reduced to a amount equal to $10,000,000 (irrespective of the
principal amount of Revolving Credit Loans outstanding on such date)
simultaneously with any mandatory prepayment made under this subsection 2.8 in
an aggregate amount equal to or greater than the difference between (x) the
Revolving Credit Commitments in effect on the date of such mandatory prepayment
and (y) $10,000,000.
2.9 INTEREST RATES AND PAYMENT DATES. (a) Each Loan shall bear
interest at a rate per annum equal to the ABR plus the Applicable Margin.
(b) If any Default or Event of Default shall have occurred and
be continuing, the principal of the Loans and any overdue interest, commitment
fee or other amount payable hereunder shall bear interest at a rate per annum
which is the rate that would otherwise be applicable to Loans hereunder plus 2%,
from the date of such non-payment until such principal, overdue interest,
commitment fee or other amount is paid in full (as well after as before
judgment).
(c) Interest shall be payable in arrears on each Interest
Payment Date, PROVIDED that interest accruing pursuant to the preceding
paragraph of this subsection shall be payable from time to time on demand.
2.10 AMENDMENT FEE; FACILITY FEE; COLLATERAL MONITORING FEE;
(a) The Borrower agrees to pay (i) to the Agent, for the pro rata account of
each Lender, an amendment fee of $247,500, payable on the Closing Date, (ii) to
the Agent for the account of the Agent the Agent's fee provided for in the fee
letter of even date herewith on the Closing Date and annually thereafter, and
(iii) the fees and expenses of the Collateral Monitoring Department of the Agent
in the amounts and on the dates set forth in the fee letter referred to in
clause (ii) above.
<PAGE> 33
28
(b) If the Borrower has not paid to the Lenders and the Senior
Noteholders mandatory prepayments of principal of Loans (including amounts paid
to the Collateral Agent as cash collateral in respect of outstanding Letters of
Credit) and principal of Senior Notes in an aggregate amount equal to at least
$20,000,000 less the Holdback Amount on or before June 30, 1996, then on July 1,
1996, the Borrower shall pay to the Agent for the pro rata account of the
Lenders, a facility fee equal to 1% of the average daily Aggregate Outstanding
Extensions of Credit during the period commencing on the Closing Date and ending
on June 30, 1996.
(c) If the Borrower has not paid to the Lenders and the Senior
Noteholders mandatory prepayments of principal of Loans (including amounts paid
to the Collateral Agent as cash collateral in respect of outstanding Letters of
Credit) and principal of Senior Notes in an aggregate amount equal to at least
$50,000,000 less the Holdback Amount on or before September 30, 1996, then on
October 1, 1996, the Borrower shall pay to the Agent for the pro rata account of
the Lenders, a facility fee equal to 1% of the average daily Aggregate
Outstanding Extensions of Credit during the period commencing on the Closing
Date and ending on September 30, 1996.
2.11 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees and
interest shall be calculated on the basis of a 365 day year for the actual days
elapsed. Any change in the interest rate on a Loan resulting from a change in
the ABR shall become effective as of the opening of business on the day on which
such change becomes effective. The Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Borrower, deliver to the Borrower a statement showing the
quotations used by the Agent in determining any interest rate.
2.12 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on account
of any commitment fee hereunder and any reduction of the Revolving Credit
Commitments of the Lenders shall be made pro rata according to the respective
Revolving Credit Commitment Percentages of the Lenders. Each payment (including
each prepayment) by the Borrower on account of principal of and interest on the
Loans shall be made pro rata according to the respective outstanding principal
amounts of the Loans then held by the Lenders. All mandatory prepayments of
Loans pursuant to subsection 2.8 shall be accompanied by the payment of interest
on the amount of the Loans prepaid to the date of such prepayment. All payments
(including prepayments) to be made by the Borrower hereunder, whether on account
of principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 Noon, New York City time, on the
due date thereof to the Agent, for the account of the Lenders, at the Agent's
office specified in subsection 10.2, in Dollars and in immediately available
funds. The Agent shall distribute such payments to the Lenders promptly upon
receipt in like funds as received. If any payment hereunder becomes due and
<PAGE> 34
29
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
(b) Unless the Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its Revolving Credit Commitment Percentage of such borrowing
available to the Agent, the Agent may assume that such Lender is making such
amount available to the Agent, and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Agent. A certificate of the Agent submitted to any Lender with respect to
any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's Revolving Credit Commitment Percentage of such
borrowing is not made available to the Agent by such Lender within three
Business Days of such Borrowing Date, the Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
Loans hereunder, on demand, from the Borrower.
2.13 REQUIREMENTS OF LAW. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority, in each
case made subsequent the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Letter of
Credit, any Application or change the basis of taxation of payments to
such Lender in respect thereof (except for Non-Excluded Taxes covered
by subsection 2.14 and changes in the rate of tax on the overall net
income of such Lender); or
(ii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making or maintaining
Loans or issuing or participating in Letters of Credit or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, the Borrower
shall promptly pay such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower, through the Agent, of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection submitted by such Lender,
through the Agent, to the Borrower shall be conclusive in the absence of clearly
demonstrable error. This covenant shall survive the termination of this
Agreement and the Revolving Credit Commitments and the payment of the Loans and
all other amounts payable hereunder.
<PAGE> 35
30
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case made subsequent to the date hereof, shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital as a consequence of its obligations hereunder or under any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, the
Borrower shall promptly pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection, it shall promptly notify the Borrower (with
a copy to the Agent) of the event by reason of which it has become so entitled.
A certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender to the Borrower (with a copy to the Agent) shall be
conclusive in the absence of manifest error. The Borrower shall not be obligated
to compensate any Lender pursuant to this subsection 2.13 for amounts accruing
prior to the date which is 180 days before such Lender notifies the Borrower of
such event, provided that such notice need not include a computation of amounts
in respect thereof. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.14 TAXES. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or any Lender as a result of a
present or former connection between the Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any Note). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("NON-EXCLUDED TAXES") are
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under any Note, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement,
PROVIDED, HOWEVER, that the Borrower shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
States of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Agent for its own account or for the account of such
Lender, as the case may be, a certified
<PAGE> 36
31
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be;
(ii) deliver to the Borrower and the Agent two further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested by
the Borrower or the Agent;
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 all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to a complete exemption from United States
backup withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 9.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions
hereof, the Issuing Bank, in reliance on the agreements of the other Lenders set
forth in subsection 3.4(a), agrees to issue letters of credit ("LETTERS OF
CREDIT") for the account of the Borrower on any Business Day during the
Commitment Period in such form as may be approved from time to time by the
Issuing Bank; PROVIDED that the Issuing Bank shall have no obligation to issue
<PAGE> 37
32
any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the Available Commitment
would be less than zero.
(b) Each Letter of Credit shall: (i) be denominated in Dollars
and shall be a standby letter of credit issued to support obligations of the
Borrower incurred in the ordinary course of business in respect of workers
compensation and other insurance obligations (PROVIDED that up to $250,000 face
amount of Letters of Credit may be issued for purposes other than supporting
such insurance obligations) and (ii) expire no later than the Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuing Bank shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower
may from time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may reasonably request. Upon receipt of any Application, the
Issuing Bank will process such Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Bank be required to
issue any Letter of Credit earlier than three Business Days after its receipt of
the 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 the
Issuing Bank and the Borrower. The Issuing Bank shall furnish a copy of such
Letter of Credit to the Borrower promptly following the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrower
shall pay to the Agent, for the account of the Issuing Bank and the L/C
Participants, a letter of credit commission with respect to each Letter of
Credit, computed for the period from the date of such payment to the date upon
which the next such payment is due hereunder at the rate of 2% per annum,
calculated on the basis of a 360 day year, of the aggregate amount available to
be drawn under such Letter of Credit on the date on which such fee is calculated
(.25% of such fee shall be payable to the Issuing Bank, and the remaining 1.75%
of such fee shall be payable to the L/C Participants to be shared ratably among
them in accordance with their respective Revolving Credit Commitment
Percentages). Such commissions shall be payable in advance on the date of
issuance of each Letter of Credit and on each L/C Fee Payment Date to occur
thereafter and shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse the Issuing Bank for such normal and customary
costs and expenses as are
<PAGE> 38
33
incurred or charged by the Issuing Bank in issuing, effecting payment under,
amending or otherwise administering any Letter of Credit.
(c) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this subsection.
3.4 L/C PARTICIPATIONS. (a) The Issuing Bank irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Bank to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Bank, 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 Revolving Credit Commitment Percentage in the Issuing Bank's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each draft paid by the Issuing Bank thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is
paid under any Letter of Credit for which the Issuing Bank is not reimbursed in
full by the Borrower in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Issuing Bank upon demand at the Issuing Bank's
address for notices specified herein an amount equal to such L/C Participant's
Revolving Credit Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Rate, as quoted by the Issuing Bank, during the period from and including
the date such payment is required to the date on which such payment is
immediately available to the Issuing Bank, 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. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.4(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate per annum equal to the ABR plus 2.50%. A certificate of the
Issuing Bank submitted to any L/C Participant with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection 3.4(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the
Issuing Bank will distribute to such L/C Participant its pro rata share
thereof; PROVIDED, HOWEVER, that in the event that any such payment received by
the Issuing Bank shall be
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34
required to be returned by the Issuing Bank, such L/C Participant shall return
to the Issuing Bank the portion thereof previously distributed by the Issuing
Bank to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower
agrees to reimburse the Issuing Bank on each date on which the Issuing Bank
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Bank for the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Bank in connection with such payment. Each such payment shall be
made to the Issuing Bank at its address for notices specified herein in lawful
money of the United States of America and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrower under this subsection 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 Loans which were
then overdue.
3.6 OBLIGATIONS ABSOLUTE. (a) The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Bank or any
beneficiary of a Letter of Credit.
(b) The Borrower also agrees with the Issuing Bank that the
Issuing Bank shall not be responsible for, and the Borrower's Reimbursement
Obligations under subsection 3.5(a) shall not be affected by, among
other things, (i) 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 (ii) any dispute between or among the
Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or (iii) any claims whatsoever
of the Borrower against any beneficiary of such Letter of Credit or any such
transferee.
(c) The Issuing Bank shall not 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 the Issuing Bank's gross negligence or
willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
the Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence of willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Bank to the Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Bank shall promptly notify
the Borrower of the date and amount thereof. The responsibility of the Issuing
Bank to the 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
<PAGE> 40
35
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.
3.8 APPLICATION. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section , the provisions of this Section shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this
Agreement, restructure the Existing Loans and to make the Loans hereunder and
issue or participate in the Letters of Credit hereunder, the Borrower hereby
represents and warrants to the Agent and each Lender that:
4.1 FINANCIAL CONDITION. The consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31, 1995 and the
related consolidated statements of income and of cash flows for the fiscal year
ended on such date, accompanied by an opinion by Price Waterhouse, copies of
which have heretofore been furnished to each Lender, are complete and correct
and present fairly in accordance with GAAP the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal year then ended. The audited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31, 1995 and the
related audited consolidated statements of income and of cash flows for the
twelve-month period ended on such date, certified by a Responsible Officer,
copies of which have heretofore been furnished to each Lender, are complete and
correct and present fairly in accordance with GAAP the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the twelve-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Neither the
Borrower nor any of its consolidated Subsidiaries had, at the date of the most
recent balance sheet referred to above, any material Guarantee Obligation,
material contingent liability or material liability for taxes, or any material
long-term lease or unusual forward or long-term commitment, including, without
limitation, any material interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements. During the
period from December 31, 1995 to and including the date hereof there has been no
sale, transfer or other disposition by the Borrower or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial condition
of the Borrower and its consolidated Subsidiaries at December 31, 1995.
<PAGE> 41
36
4.2 NO CHANGE. Since December 31, 1995 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, and during the period from December 31, 1995 to and
including the date hereof no dividends or other distributions have been
declared, paid or made upon the Capital Stock of the Borrower nor has any of the
Capital Stock of the Borrower been redeemed, retired, purchased or otherwise
acquired for value by the Borrower or any of its Subsidiaries.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except to the extent that the failure to so qualify
or be in good standing could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of the Borrower, to borrow hereunder and the Borrower has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement and any Notes and each Loan Party has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party. No consent or authorization of,
filing with (other than Uniform Commercial Code filings and United States Patent
and Trademark Office and United States Copyright Office filings required under
the Security Documents), notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which any Loan Party is a party other
than those of which have already been obtained or made and are in full force and
effect. This Agreement has been, and each other Loan Document to which any Loan
Party is a party will be, duly executed and delivered on behalf of such Loan
Party. This Agreement constitutes, and each other Loan Document to which any
Loan Party is a party when executed and delivered will constitute, a legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
4.5 NO LEGAL BAR. The execution, delivery and performance of
the Loan Documents to which the Borrower is a party, the borrowings hereunder
and the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Borrower or of any of its Subsidiaries and will
not result in, or require, the creation or
<PAGE> 42
37
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation, except for
Liens created by the Security Documents.
4.6 NO MATERIAL LITIGATION. Except as set forth on Schedule
4.6, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby, or (b)
which could reasonably be expected to have a Material Adverse Effect.
4.7 NO DEFAULT. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by subsection 7.3.
4.9 INTELLECTUAL PROPERTY. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
could not reasonably be expected to have a Material Adverse Effect (the
"INTELLECTUAL PROPERTY"). Except as set forth on Schedule 4.9, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such material Intellectual Property or the validity or effectiveness of any such
material Intellectual Property, nor does the Borrower know of any valid basis
for any such claim. The use of such Intellectual Property by the Borrower and
its Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
4.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
4.11 TAXES. Except as set forth in Scheduled 4.11, each of the
Borrower and its Subsidiaries has filed or caused to be filed all tax returns
which, to the knowledge of the Borrower, are required to be filed and has paid
all taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or its Subsidiaries, as the
case may be); no tax
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38
Lien has been filed, and, to the knowledge of the Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge.
4.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation G or Regulation
U of the Board of Governors of the Federal Reserve System as now and from time
to time hereafter in effect. If requested by any Lender or the Agent, the
Borrower will furnish to the Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form G-1 or FR Form U-1
referred to in said Regulation G or Regulation U, as the case may be.
4.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value computed under GAAP of all accrued benefit obligations
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by more than $6,000,000. Neither
the Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multi-employer Plan, and neither the Borrower nor any
Commonly Controlled Entity would become subject to any liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multi-employer Plans as of the valuation date most closely preceding
the date on which this representation is made or deemed made. No such
Multi-employer Plan is in Reorganization or Insolvent.
4.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Borrower
is not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
The Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
4.15 SUBSIDIARIES. The persons set forth on Schedule 4.15
constitute all the Subsidiaries of the Borrower at the date hereof.
4.16 PURPOSE OF LOANS. The proceeds of the Loans shall be used
by the Borrower for working capital purposes in the ordinary course of business.
4.17 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
4.17:
(a) To the best knowledge of the Borrower, the facilities and
properties owned, leased or operated by the Borrower or any of its
Subsidiaries (the "PROPERTIES")
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39
do not contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations which (i) constitute
or constituted a violation of, or (ii) could reasonably be expected to
give rise to liability under, any Environmental Law except in either
case insofar as such violation or liability, or any aggregation
thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount.
(b) To the best knowledge of the Borrower, the Properties and
all operations at the Properties are in compliance, and have in the
last 5 years been in compliance, in all material respects with all
applicable Environmental Laws, and there is no contamination at, under
or about the Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the Borrower or
any of its Subsidiaries (the "BUSINESS") which could materially
interfere with the continued operation of the Properties or materially
impair the fair saleable value thereof.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties
or the Business, nor does the Borrower have knowledge or reason to
believe that any such notice will be received or is being threatened
except insofar as such notice or threatened notice, or any aggregation
thereof, does not involve a matter or matters that is or are reasonably
likely to result in the payment of a Material Environmental Amount.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a
manner or to a location which could reasonably be expected to give rise
to liability under, any Environmental Law, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of
at, on or under any of the Properties in violation of, or in a manner
that could reasonably be expected to give rise to liability under, any
applicable Environmental Law except insofar as any such violation or
liability referred to in this paragraph, or any aggregation thereof, is
not reasonably likely to result in the payment of a Material
Environmental Amount.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened,
under any Environmental Law to which the Borrower or any Subsidiary is
or will be named as a party with respect to the Properties or the
Business, 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 the Business except insofar as such
proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to result in the payment
of a Material Environmental Amount.
(f) There has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the
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40
operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation
of or in amounts or in a manner that could reasonably give rise to
liability under Environmental Laws except insofar as any such violation
or liability referred to in this paragraph, or any aggregation thereof,
is not reasonably likely to result in the payment of a Material
Environmental Amount.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO EXTENSION OF CREDIT. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, immediately prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
(a) LOAN DOCUMENTS. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of the
Borrower, with a counterpart for each Lender, (ii) the Pledge
Agreements, including any required Acknowledgement and Consents,
executed and delivered by a duly authorized officer of each party
thereto, with a counterpart or a conformed copy for each Lender, (iii)
the Subsidiaries Guarantee, executed and delivered by a duly authorized
officer of each party thereto, with a counterpart or a conformed copy
for each Lender and (iv) each of the Security Agreements, each executed
and delivered by a duly authorized officer of each party thereto, with
a counterpart or a conformed copy for each Lender.
(b) COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT. The Agent
shall have received, with a counterpart for each Lender, a Collateral
Agency and Intercreditor Agreement executed by the Senior Noteholders,
the Lenders and the Borrower.
(c) RELATED AGREEMENTS. The Agent shall have received, with a
copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of the Note Agreement (as amended through
the Closing Date), and such other documents or instruments as may be
reasonably requested by the Agent, including, without limitation, a
copy of any material instrument or security agreement or other material
contract to which the Borrower or its or their Subsidiaries may be a
party.
(d) LOCK-BOX AGREEMENT. The Agent shall have received, with a
copy for each Lender, a Lock-box Agreement or Agency Agreement, dated
the Closing Date, substantially in the form of Exhibit H-1 or H-2
hereto (each a "LOCK-BOX AGREEMENT"), executed by the Collateral Agent
and a duly authorized officer of each bank in which the Borrower or any
Domestic Subsidiary of the Borrower maintains a lock-box or other bank
account into which proceeds of Collateral are initially deposited.
(e) BORROWING CERTIFICATES. The Agent shall have received,
with a counterpart for each Lender, (i) a certificate of the Borrower,
dated the Closing Date, substantially in the form of Exhibit F-1, with
appropriate insertions and attachments, satisfactory in
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41
form and substance to the Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of the Borrower,
and (ii) a Borrowing Base Certificate executed by the Chief Financial
Officer of the Borrower.
(f) CORPORATE PROCEEDINGS OF THE BORROWER. The Agent shall
have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of the Borrower authorizing (i) the execution,
delivery and performance of this Agreement and the other Loan Documents
to which it is a party, (ii) the borrowings contemplated hereunder and
(iii) the granting by it of the Liens created pursuant to the Borrower
Security Documents, certified by the Secretary or an Assistant
Secretary of the Borrower as of the Closing Date, which certificate
shall be in form and substance satisfactory to the Agent and shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(g) BORROWER INCUMBENCY CERTIFICATE. The Agent shall have
received, with a counterpart for each Lender, a Certificate of the
Borrower, dated the Closing Date, as to the incumbency and signature of
the officers of the Borrower executing any Loan Document satisfactory
in form and substance to the Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the
Borrower.
(h) CORPORATE PROCEEDINGS OF SUBSIDIARIES. The Agent shall
have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of each Subsidiary of the Borrower which is a party
to a Loan Document authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is a party and (ii) the
granting by it of the Liens created pursuant to the Security Documents
to which it is a party, certified by the Secretary or an Assistant
Secretary of each such Subsidiary as of the Closing Date, which
certificate shall be in form and substance satisfactory to the Agent
and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(i) SUBSIDIARY INCUMBENCY CERTIFICATES. The Agent shall have
received, with a counterpart for each Lender, a certificate of each
Subsidiary of the Borrower which is a Loan Party, dated the Closing
Date, as to the incumbency and signature of the officers of such
Subsidiaries executing any Loan Document, satisfactory in form and
substance to the Agent, executed by the President or any Vice President
and the Secretary or any Assistant Secretary of each such Subsidiary.
(j) CORPORATE DOCUMENTS. The Agent shall have received, with a
counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of each Loan Party, certified
as of the Closing Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of the such Loan Party.
(k) CONSENTS, LICENSES AND APPROVALS. The Agent shall have
received, with a counterpart for each Lender, a certificate of a
Responsible Officer of the Borrower
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(i) attaching copies of all consents, authorizations and filings
referred to in and required to be obtained by subsection 4.4, and (ii)
stating that such consents, licenses and filings are in full force and
effect, and each such consent, authorization and filing shall be in
form and substance satisfactory to the Agent.
(l) FEES. The Agent shall have received the fees referred to
in subsection 2.10(a) and the fees and expenses of Simpson Thacher &
Bartlett, counsel to the Agent, required to be paid pursuant to
subsection 10.5.
(m) LEGAL OPINIONS. The Agent shall have received, with a
counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Bingham, Dana
& Gould, counsel to the Borrower, dated the Closing Date and
addressed to the Agent and the Lenders substantially in the
form of Exhibit G-1.
(ii) the executed legal opinion of Paul Buffum,
Secretary and Counsel of the Borrower, dated the Closing Date
and addressed to the Agent and the Lenders substantially in
the form of Exhibit G-2.
(iii) the executed legal opinion of Richards
Layton & Finger, Delaware counsel to the Borrower, dated the
Closing Date and addressed to the Agent and the Lenders
substantially in the form of Exhibit G-3.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Agent may reasonably
require.
(n) PLEDGED STOCK; STOCK POWERS. The Agent shall have received
the certificates representing the shares pledged pursuant to the Pledge
Agreements, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the
pledgor thereof, each endorsed in blank by a duly authorized officer of
the pledgor thereof.
(o) LIEN PERFECTION. The Agent shall have received executed
copies of all filings, recordings and registrations, including, without
limitation, duly executed financing statements on form UCC-1, necessary
or, in the opinion of the Agent, desirable to perfect the Liens created
by the Security Documents.
(p) LIEN SEARCHES. The Agent shall have received the results
of a recent search by a Person satisfactory to the Agent, of the
Uniform Commercial Code, judgement and tax lien filings which may have
been filed with respect to personal property of the Borrower, and the
results of such search shall be satisfactory to the Agent.
(q) INSURANCE. The Agent shall have received evidence in form
and substance satisfactory to it that all of the requirements of
subsection 6.5, Section 5(1) of the
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Borrower Security Agreements and subsection 4.3 of the Subsidiaries
Security Agreement shall have been satisfied.
(r) CONSENTS. The Agent shall have received evidence from the
Borrower that the Senior Noteholders have given all consents required
pursuant to the Note Agreement to the transactions contemplated hereby
and the other Loan Documents.
(s) NOTE AGREEMENT AMENDMENT. The Note Agreement dated on or
about the Closing Date shall be in form and substance satisfactory to
the Lenders.
5.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to
make any extension of credit requested to be made by it on any date (including,
without limitation, its initial extension of credit) is subject to the
satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Borrower in or pursuant to
the Loan Documents shall be true and correct in all material respects
on and as of such date as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) ADDITIONAL MATTERS. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory in form and substance to the
Agent.
(d) CERTIFICATE. At any time prior to the date on which the
Revolving Credit Commitments have been permanently reduced to an amount
less than or equal to $10,000,000, the Agent shall have received a
certificate of a Responsible Officer of the Borrower certifying that
the proceeds of such Loans are expected to be required by the Borrower
and its Subsidiaries during the ten Business Day period following the
date such Loan is made for the purposes permitted by this Agreement and
to maintain working capital balances during such period consistent with
past practice.
Each borrowing by the Borrower hereunder and each issuance of any Letter of
Credit issued hereunder shall constitute a representation and warranty by the
Borrower as of the date thereof that the conditions contained in this subsection
5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Revolving
Credit Commitments remain in effect or any amount is owing to any Lender or the
Agent hereunder
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44
or under any other Loan Document, the Borrower shall and (except in the case of
delivery of financial information, reports and notices) shall cause each of its
Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income and retained
earnings of the Borrower and its consolidated Subsidiaries for such
fiscal year and the consolidated statement of cash flows of the
Borrower and its consolidated Subsidiaries for such year, setting forth
in each case in comparative form the figures for the previous year, in
the case of consolidated statements, reported on without a "going
concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Price Waterhouse or other independent
certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, the unaudited consolidated and
consolidating balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income and retained
earnings of the Borrower and its consolidated Subsidiaries and the
consolidated statement of cash flows of the Borrower and its
consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments and subject to not having
footnotes to the extent not included in the financial statements set
forth in the Borrower's quarterly reports on Form 10-Q);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default under subsections 7.1,
7.7, 7.9 and 7.14, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a certificate of a
Responsible Officer stating that, to the best of such Officer's
knowledge, during such period (i) no Subsidiary has been
<PAGE> 50
45
formed or acquired (or, if any such Subsidiary has been formed or
acquired, the Borrower has complied with the requirements of subsection
6.11 with respect thereto), (ii) neither the Borrower nor any of its
Subsidiaries has changed its name, its principal place of business, its
chief executive office or the location of any material item of tangible
Collateral without complying with the requirements of this Agreement
and the Security Documents with respect thereto and (iii) the Borrower
has observed or performed in all material respects all of its covenants
and other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such Officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate;
(c) on the twelfth Business Day following the end of each
fiscal month (or more frequently as the Agent shall request if an Event
of Default has occurred and is continuing) a certificate substantially
in the form of Exhibit F-2 hereto (a "BORROWING BASE CERTIFICATE"),
certified by the Chief Financial Officer of the Borrower as true and
correct, setting forth the amount of Eligible Inventory and Eligible
Accounts Receivables as of the last day of such month, attached to
which shall be detailed information, an aging schedule of Eligible
Accounts Receivables and the reports described on Schedule 6.2(c);
(d) not later than first day of each fiscal year of the
Borrower, a copy of the projections by the Borrower of the operating
budget and cash flow budget of the Borrower and its Subsidiaries for
such fiscal year, such projections to be accompanied by a certificate
of a Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that
such Officer has no reason to believe they are incorrect or misleading
in any material respect;
(e) within five days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its
stockholders, and within five days after the same are filed, copies of
all financial statements and reports which the Borrower may make to, or
file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(f) within five days after the same are received by the
Borrower, copies of any reports, letters or other correspondence from
the independent certified public accountants of the Borrower and/or any
of the Borrower's Subsidiaries addressed to the Board of Directors (or
any committee thereof) of the Borrower and/or any of the Borrower's
Subsidiaries;
(g) within twelve Business Days after the end of each month,
the internal monthly operating report (the "RED BOOK") of the Borrower
and its business units; and
(h) promptly, such additional financial and other information
as any Lender may from time to time reasonably request (including,
without limitation, any appropriate revisions to the Borrower's
business plan for fiscal year 1996).
<PAGE> 51
46
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue
to engage in business of the same general type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as otherwise
permitted pursuant to subsection 7.5; comply with all Contractual Obligations
and Requirements of Law except to the extent that failure to comply therewith
could not, in the aggregate, be reasonably expected to have a Material Adverse
Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted; maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks (but including in any event public liability,
product liability and business interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business;
and furnish to each Lender, upon written request, full information as to the
insurance carried.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; upon
reasonable advance notice (provided no Event of Default has occurred and is
continuing), permit representatives of any Lender to visit and inspect any of
its properties and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired and to discuss
the business, operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public accountants; and
permit an independent financial consultant, engaged at the Borrower's expense
and on terms reasonably satisfactory to the Borrower, to assist in the analysis
of such records and accounts and in evaluating the performance and operations of
the Borrower.
6.7 NOTICES. Promptly give notice to the Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
<PAGE> 52
47
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries in which the amount involved is $1,000,000 or more
and not covered by insurance or in which injunctive or similar relief
is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multi-employer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multi-employer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of,
any Plan; and
(e) any development or event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) Comply with, and ensure compliance
by all tenants and subtenants, if any, with, all applicable Environmental Laws
and obtain and comply in all material respects with and maintain, and ensure
that all tenants and subtenants obtain and comply in all material respects with
and maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so could not be reasonably 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 in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect.
6.9 MODIFICATIONS TO INDEBTEDNESS UNDER THE SENIOR NOTES. (a)
The Borrower agrees promptly to provide to the Agent and each Lender an executed
copy of any amendment, supplement or modification to the Note Agreement and
notify the Agent in writing prior to executing any such amendment, supplement or
modification. The Borrower shall not execute any amendment, supplement or other
modification to the Note Agreement which would alter in any way any material
economic term thereof (including, without limitation, interest rates, fees,
amortizations and prepayments) without the prior written consent of the Majority
Lenders.
<PAGE> 53
48
(b) Notwithstanding the terms of clause (a) of this subsection
6.9, if the Note Agreement is hereafter amended such that any material terms
thereof (including without limitation, pricing, affirmative covenants, negative
covenants, amortization, events of default and mandatory prepayments) are more
favorable to the Noteholders than the terms hereof (giving due account to the
terms existing on the date hereof) are to the Lenders (as determined by the
Agent and the Lenders in their reasonable judgment), the Borrower shall,
simultaneously with such amendment to the Note Agreement, enter into an
amendment of this Agreement in order to incorporate herein such favorable terms,
if the Agent and Majority Lenders so request.
6.10 FURTHER ASSURANCES. Upon the request of the Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Agent, for the benefit of the Lenders,
Liens on the Collateral that are duly perfected in accordance with all
applicable Requirements of Law.
6.11 ADDITIONAL COLLATERAL. (a) With respect to any assets
acquired after the Closing Date by the Borrower or any of its Domestic
Subsidiaries that are intended to be subject to the Lien created by any of the
Security Documents but which are not so subject (other than any assets described
in paragraph (b), (c) or (d) of this subsection), promptly (and in any event
within 30 days after the acquisition thereof): (i) execute and deliver to the
Collateral Agent such amendments to the relevant Security Documents or such
other documents as the Collateral Agent shall deem necessary or advisable to
grant to the Collateral Agent, for the benefit of the Lenders and the Senior
Noteholders, a Lien on such assets, (ii) take all actions requested by the
Collateral Agent to cause such Lien to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by the Agent, and
(iii) if requested by the Collateral Agent, deliver to the Collateral Agent
legal opinions relating to the matters described in clauses (i) and (ii)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Collateral Agent.
(b) At the Borrower's next annual shareholders' meeting, which
shall occur on or before August 1, 1996, the Borrower will use its best efforts
to obtain all necessary consents from its shareholders to amend its
Capitalization Documents such that the Borrower is permitted to pledge or grant
a security interest to the Collateral Agent in all of its assets not subject to
the Lien of the Security Documents. Within ten (10) Business Days of obtaining
such consents, the Borrower will enter into such documents and execute such
instruments in form and substance reasonably satisfactory to the Collateral
Agent for the purposes of pledging or granting a security interest in such
assets to the Collateral Agent.
(c) With respect to any Person that, subsequent to the Closing
Date, becomes a Subsidiary (other than a Foreign Subsidiary), the Borrower shall
promptly notify the Agent and promptly upon the request of the Collateral Agent:
(i) execute and deliver to the Collateral Agent, for the benefit of the Lenders
and the Senior Noteholders, a new pledge
<PAGE> 54
49
agreement or such amendments or supplements to the relevant Pledge Agreement as
the Agent shall reasonably deem necessary or advisable to grant to the
Collateral Agent, for the benefit of the Lenders and the Senior Noteholders, a
Lien on the Capital Stock of such Subsidiary which is owned by the Borrower or
any of its Subsidiaries, (ii) deliver to the Collateral Agent the certificates
representing such Capital Stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of the Borrower or such
Subsidiaries, as the case may be, (iii) cause such new Subsidiaries (A) to
become a party to the Subsidiaries Guarantee, the Subsidiaries Security
Agreement and the Collateral Agency and Intercreditor Agreement, in each case
pursuant to documentation which is in form and substance reasonably satisfactory
to the Agent, and (B) to take all actions necessary or advisable to cause the
Lien created by the Subsidiaries Security Agreement to be duly perfected in
accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may be
requested by the Collateral Agent and (iv) if requested by the Collateral Agent,
deliver to the Collateral Agent legal opinions relating to the matters described
in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the Collateral
Agent.
(d) With respect to any Person that, subsequent to the Closing
Date, becomes a Foreign Subsidiary, the Borrower shall promptly notify the
Collateral Agent and promptly upon the request of the Collateral Agent: (i)
execute and deliver to the Collateral Agent a new pledge agreement or such
amendments or supplements to the relevant Pledge Agreement as the Collateral
Agent shall reasonably deem necessary or advisable to grant to the Collateral
Agent, for the benefit of the Lenders and the Senior Noteholders, a Lien on the
Capital Stock of such Subsidiary which is owned by the Borrower or any of its
Subsidiaries (provided that in no event shall more than 65% of the Capital Stock
of any such Subsidiary be so pledged if the Collateral Agent reasonably
determines that a pledge of more than 65% would have adverse tax consequences),
(ii) deliver to the Collateral Agent any certificates representing such Capital
Stock, together with undated stock powers executed and delivered in blank by a
duly authorized officer of the Borrower or such Subsidiary, as the case may be,
and take or cause to be taken all such other actions under the law of the
jurisdiction of organization of such Foreign Subsidiary as may be necessary or
advisable to perfect such Lien on such Capital Stock and (iii) if requested by
the Collateral Agent, deliver to the Collateral Agent legal opinions relating to
the matters described in clauses (i) and (ii) immediately preceding, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Collateral Agent.
6.12 ANNUAL COLLATERAL AUDIT. The Borrower will permit at its
expense, a collateral audit to be conducted by a Person chosen by the Agent, on
any date specified by the Agent during each calendar year (or more frequently if
the Majority Lenders should so request) during the Revolving Credit Commitment
Period.
6.13 1997 FINANCIAL COVENANTS. (a) By January 1, 1997 (the
"AMENDMENT DATE"), the Borrower, the Agent and the Lenders shall commence
negotiations in good faith, based on the Borrower's business plan for 1997, in
order to enter into an amendment to this Agreement for the purpose of continuing
the financial covenants contained in subsection 7.1
<PAGE> 55
50
of this Agreement through the Termination Date. If after 30 days after the
Amendment Date, the Borrower, the Majority Lenders and the Agent have not agreed
on appropriate levels for such financial covenants through the Termination Date,
the Agent in its reasonable judgment shall set such levels and the Borrower, the
Agent and the Lenders shall execute an amendment to this Agreement on the 31st
day after the Amendment Date for the purposes of including the levels with
respect to such financial covenants set by the Agent as part of this Agreement
for the period through the Termination Date.
(b) During the ten Business Day period after any mandatory
prepayment in excess of $15,000,000 is made pursuant to subsections 2.8(b), (c)
or (d) of this Agreement, the Borrower, the Agent and the Lenders shall
negotiate in good faith in order to enter into an amendment to this Agreement
for the purpose of resetting the financial covenants contained in subsection 7.1
herein. If after ten Business Days of such mandatory prepayment, the Borrower,
the Majority Lenders and the Agent have not agreed on appropriate levels for
such financial covenants, the Agent in its reasonable judgment shall prepare, on
the eleventh Business day after such mandatory prepayment, an amendment to this
Agreement for the purpose of resetting the levels of such financial covenants.
The Borrower, the Agent and the Lenders shall execute such amendment for the
purposes of incorporating such levels, as set by the Agent, into this Agreement.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Revolving
Credit Commitments remain in effect or any amount is owing to any Lender or the
Agent hereunder or under any other Loan Document, the Borrower shall not and
shall not permit any of its Subsidiaries to, directly or indirectly:
7.1 FINANCIAL CONDITION COVENANTS.
<TABLE>
(a) MAINTENANCE OF EBITDA. Permit EBITDA of the Borrower and
its Subsidiaries, measured on a cumulative basis for any test period
set forth below, as at the last day of such test period, to be less
than the amount set forth opposite such test period below:
<CAPTION>
rata
- ----
QUARTER AMOUNT
------- ------
<S> <C>
January 1, 1996 - March 31, 1996 $ 1,640,000
January 1, 1996 - June 30, 1996 $ 7,800,000
January 1, 1996 - September 30, 1996 $19,150,000
January 1, 1996 - December 31, 1996 $27,300,000
</TABLE>
(b) MAINTENANCE OF EBITDA RATIO. Permit, in the aggregate for
the Borrower and its Subsidiaries, the ratio of (i) EBITDA plus
Consolidated Lease Expense to (ii) Consolidated Fixed Charges, measured
on a cumulative basis for any test period set
<PAGE> 56
51
forth below, as at the last day of such test period to be less than the
ratio set forth below opposite such test period:
<TABLE>
<CAPTION>
Quarter Ratio
------- -----
<S> <C>
January 1, 1996 - March 31, 1996 .97:1
January 1, 1996 - June 30, 1996 1.89:1
January 1, 1996 - September 30, 1996 2.91:1
January 1, 1996 - December 31, 1996 3.09:1
</TABLE>
<TABLE>
(c) MAINTENANCE OF TANGIBLE NET WORTH. Permit Consolidated
Tangible Net Worth at any time during any period set forth below to be
less than the amount set forth opposite such period below:
<CAPTION>
Quarter Amount
------- ------
<S> <C>
Fourth Quarter 1995 $38,000,000
First Quarter 1996 $35,400,000
Second Quarter 1996 $36,000,000
Third Quarter 1996 $39,700,000
Fourth Quarter 1996 and thereafter $41,600,000
</TABLE>
7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness of the Borrower to any Domestic Subsidiary
(that is a party to the Subsidiaries Guarantee and the Subsidiaries
Security Agreement) and of any Domestic Subsidiary (that is a party to
the Subsidiaries Guarantee and the Subsidiaries Security Agreement) to
the Borrower or any other Domestic Subsidiary (that is a party to the
Subsidiaries Guarantee and the Subsidiaries Security Agreement);
(c) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance the acquisition or construction of fixed or capital
assets (whether pursuant to a loan, a Financing Lease or otherwise) in
an aggregate principal amount not exceeding as to the Borrower and its
Subsidiaries $3,000,000 at any time outstanding;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2;
(e) Indebtedness of a Person which becomes a Subsidiary after
the date hereof, PROVIDED that (i) such indebtedness existed at the
time such Person became a Subsidiary and was not created in
anticipation thereof and (ii) immediately after giving effect to the
acquisition of such Person by the Borrower or by any Subsidiary no
Default or Event of Default shall have occurred and be continuing;
<PAGE> 57
52
(f) the incurrence of any other Indebtedness with the prior
written consent of the Majority Lenders, provided that the Net Cash
Proceeds thereof are applied to the mandatory prepayment of the Loans
in accordance with subsection 2.8; and
(g) Indebtedness of any Foreign Subsidiary to the Borrower or
to any Domestic Subsidiary not otherwise permitted under subsection 7.2
in an aggregate amount not in excess of $2,000,000 at any time
outstanding.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, PROVIDED that adequate
reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with
GAAP (or, in the case of Foreign Subsidiaries, generally accepted
accounting principles in effect from time to time in their respective
jurisdictions of incorporation);
(b) carriers', statutory landlord's liens, warehousemen's,
mechanics', materialmen's, repairmen's or other like Liens arising in
the ordinary course of business which are not overdue for a period of
more than 60 days or which are being contested in good faith by
appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule
7.3, securing Indebtedness permitted by subsection 7.2(d), PROVIDED
that no such Lien is spread to cover any additional property after the
Closing Date and that the amount of Indebtedness secured thereby is not
increased;
(g) Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 7.2(c) incurred to finance the
acquisition of fixed or capital assets,
<PAGE> 58
53
PROVIDED that (i) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or capital assets,
(ii) such Liens do not at any time encumber any property other than the
property financed by such Indebtedness, (iii) the amount of
Indebtedness secured thereby is not increased and (iv) the principal
amount of Indebtedness secured by any such Lien shall at no time exceed
80% of the greater of (x) the original purchase price of such property
or (y) the fair market value of such property as reasonably determined
by the Board of Directors of the Borrower;
(h) Liens on the property or assets of a corporation which
becomes a Subsidiary after the date hereof securing Indebtedness
permitted by subsection 7.2(e), PROVIDED that (i) such Liens existed at
the time such corporation became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any
property or assets of such corporation after the time such corporation
becomes a Subsidiary, and (iii) the amount of Indebtedness secured
thereby is not increased;
(i) Liens created pursuant to the Security Documents; and
(j) judgment Liens in the aggregate amount not in excess of
$500,000 created by or resulting from any litigation or legal
proceeding if released or bonded within 60 days of the date of creation
thereof unless such litigation or legal proceeding could reasonably be
expected to have a Material Adverse Effect or results in an Event of
Default.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof
and listed on Schedule 7.4;
(b) the Subsidiaries Guarantee; and
(c) guarantees made in the ordinary course of business by the
Borrower or any of its Subsidiaries of Indebtedness of the Borrower or
any such Subsidiary, as the case may be, permitted by subsection 7.2.
7.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease (as lessor),
assign, transfer or otherwise dispose of, all or substantially all of its
property, business or assets, or make any material change in its present method
of conducting business, except:
(a) any Subsidiary (other than Cerion) of the Borrower may be
merged or consolidated with or into the Borrower (PROVIDED that the
Borrower shall be the continuing or surviving corporation) or with or
into any one or more wholly owned Subsidiaries of the Borrower
(PROVIDED that the wholly owned Subsidiary or Subsidiaries shall be the
continuing or surviving corporation); and
<PAGE> 59
54
(b) any wholly owned Subsidiary may sell, lease (as lessor),
transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Borrower or any other wholly
owned Subsidiary of the Borrower.
7.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease (as
lessor), assign, transfer or otherwise dispose of any of its property, business
or assets (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person other
than the Borrower or any wholly owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out or
no longer useful property in the ordinary course of business; PROVIDED
that the Net Cash Proceeds of each such transaction are used to acquire
like replacement property;
(b) the sale or other disposition by the Borrower or any of
its Subsidiaries of any assets (except for the sale of inventory or
obsolete, worn out or not longer useful assets in the ordinary course
of business and except as otherwise permitted by subsections 7.5 and
7.6) in an amount not to exceed $500,000 on an individual basis and
$1,000,000 on a cumulative basis over the duration of the Revolving
Credit Commitment Period;
(c) the sale of inventory in the ordinary course of business;
(d) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business consistent with
the Borrower's past practice in connection with the compromise or
collection thereof;
(e) as permitted by subsection 7.5(b); and
(f) the sale of any other assets or property with the prior
written consent of the Majority Lenders PROVIDED that the Net Cash
Proceeds thereof are applied to the mandatory prepayment of the Loans
in accordance with subsection 2.8.
7.7 LIMITATION ON LEASES. Permit Consolidated Lease Expense
for any fiscal year of the Borrower to exceed $3,000,000.
7.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary, except (i) any Subsidiary of the Borrower may pay cash dividends
to the Borrower and any Subsidiary of the Borrower may be paid cash dividends by
any of its Subsidiaries and (ii)
<PAGE> 60
55
repurchase of stock from employees or former employees in an aggregate amount
not to exceed $50,000 per year.
<TABLE>
7.9 LIMITATION ON CAPITAL EXPENDITURES. Make any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for
expenditures in the ordinary course of business not exceeding, in the aggregate
for the Borrower and its Subsidiaries during any of the fiscal years of the
Borrower set forth below, the amount set forth opposite such fiscal year below:
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1995 $17,200,000
1996 $17,000,000
1997 $17,000,000
</TABLE>
PROVIDED, that up to 100% of any such amount if not so expended in the fiscal
year for which it is permitted above, may be carried over for expenditure in the
next following fiscal year.
7.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make or
permit to exist any advance, loan, extension of credit or capital contribution
to, or purchase any stock, bonds, notes, debentures or other securities of or
any assets constituting a business unit of, or make any other investment in, any
Person, except :
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans to officers and employees of the Borrower listed on
Schedule 7.10(c) in aggregate principal amounts outstanding not to
exceed the respective amounts set forth for such officers on said
Schedule;
(d) loans and advances after the date hereof to officers and
employees of the Borrower or its Subsidiaries for travel, entertainment
and relocation expenses in the ordinary course of business in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$1,000,000 at any one time outstanding;
(e) loans, advances and investments by the Borrower in its
Domestic Subsidiaries that are parties to the Subsidiaries Guarantee
and the Subsidiaries Security Agreement and investments by such
Subsidiaries in the Borrower and in other Domestic Subsidiaries that
are parties to the Subsidiaries Guarantee and the Subsidiaries Security
Agreement; PROVIDED that on any date on which any such Domestic
Subsidiary ceases to be a party to the Subsidiaries Guarantee and the
Subsidiaries Security Agreement, all such loans, advances and
investments shall be immediately repaid to the Borrower;
<PAGE> 61
56
(f) investments after the date hereof by the Borrower or any
of its Domestic Subsidiaries in any Foreign Subsidiary in an aggregate
amount not exceeding $2,000,000 at any time outstanding; and
(g) investments existing on the date hereof and listed in
Schedule 7.10(g).
7.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. (a) Make any optional payment or prepayment on or redemption or
purchase of any Indebtedness (other than the Loans and other than Indebtedness
(excluding the Senior Notes) with a principal amount outstanding not in excess
of $3,000,000) or (b) amend, modify or change, or consent or agree to any
material amendment, modification or change to any of the terms of any instrument
relating to or evidencing any Indebtedness (other than the Senior Notes) in
excess of $3,000,000.
7.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate; PROVIDED, HOWEVER, the
foregoing shall not prohibit (i) transactions between the Borrower and its
Subsidiaries or among the Borrower's Subsidiaries, (ii) investments, loans and
advances permitted by subsection 7.10 and payments permitted by subsection 7.8,
(iii) employment agreements, severance arrangements, employee incentive
arrangements and stock incentive arrangements entered into in the ordinary
course of business, (iv) intercompany arrangements approved by the Majority
Lenders in writing between the Borrower and Cerion described in the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on March
21, 1996 and summarized on Schedule 7.12, for the registration of common stock
of Cerion.
7.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or such
Subsidiary.
7.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal
year of the Borrower to end on a day other than December 31.
7.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into or
permit to exist with any Person any agreement, other than (a) this Agreement,
(b) the Capitalization Documents (c) the Note Agreement, (d) any industrial
revenue bonds, purchase money debt instruments or Financing Leases permitted by
this Agreement (in which cases, any prohibition or limitation shall only be
effective against the assets financed thereby), and (e) the overdraft facility
of Nashua Photo Limited with Midland Bank not in excess of 2,000,000 pounds
<PAGE> 62
57
sterling, or any refinancing or replacement thereof not in excess of such
amount, provided that any prohibition or limitation shall be effective only
against the assets of Nashua Photo Limited, which prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
7.16 LIMITATION ON LINES OF BUSINESS. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Borrower and its Subsidiaries are engaged on the date of this Agreement and
any business substantially related thereto.
7.17 HEDGE AGREEMENTS. Enter into any Hedge Agreement after
the date hereof other than spot and forward foreign exchange contracts (not to
exceed six months in duration) in an aggregate notional principal amount for all
such contracts not to exceed $4,000,000 and only in the following currencies:
Belgian Francs, Canadian Dollars, British Pounds and Dutch Gilders.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
or any Reimbursement Obligation when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest on any Loan, or
any other amount payable hereunder, within five days after any such
interest or other amount becomes due in accordance with the terms
hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection with
this Agreement or any such other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Subsections
6.1, 6.2, 6.6, 6.7, 6.9, 6.11, 6.13 and Section 7 hereof, Section 5 of
the Pledge Agreements, Section 5 of the Borrower Security Agreement or
Section 4 of the Subsidiaries Security Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days; or
<PAGE> 63
58
(e) The Borrower or any of its Subsidiaries shall (i) default
in any payment of principal of or interest of any Indebtedness (other
than the Loans) or in the payment of any Guarantee Obligation, beyond
the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable; PROVIDED, HOWEVER, that
no Default or Event of Default shall exist under this paragraph unless
the aggregate amount of Indebtedness and/or Guarantee Obligations in
respect of which any default or other event or condition referred to in
this paragraph shall have occurred shall be equal to at least $250,000;
or
(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the Borrower or
any of its Subsidiaries shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a
<PAGE> 64
59
Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single
Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Majority
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Majority
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multi-employer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $5,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the
entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or the Borrower or any other
Loan Party which is a party to any of the Security Documents shall so
assert or (ii) the Lien created by any of the Security Documents shall
cease to be enforceable and of the same effect and priority purported
to be created thereby; or
(j) The Subsidiaries Guarantee shall cease, for any reason, to
be in full force and effect or any Guarantor shall so assert; or
(k) (i) Any Person or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (A)
shall have acquired beneficial ownership of 25% or more of any
outstanding class of Capital Stock having ordinary voting power in the
election of directors of the Borrower or (B) shall obtain the power
(whether or not exercised) to elect a majority of the Borrower's
directors or (ii) the Board of Directors of the Borrower shall not
consist of a majority of Continuing Directors; "CONTINUING DIRECTORS"
shall mean the directors of the Borrower on the Closing Date and each
other director, if such other director's nomination for election to the
Board of Directors of the Borrower is recommended by a majority of the
then Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Revolving Credit Commitments shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then
<PAGE> 65
60
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Lenders, the Agent may, or upon the
request of the Majority Lenders, the Agent shall, by notice to the Borrower
declare the Revolving Credit Commitments to be terminated forthwith, whereupon
the Revolving Credit Commitments shall immediately terminate; and (ii) with the
consent of the Majority Lenders, the Agent may, or upon the request of the
Majority Lenders, the Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
Subject to the terms of the Collateral Agency and Intercreditor
Agreement, 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, the Borrower shall at such time deposit in
a cash collateral account opened by, and maintained under the exclusive domain
and control of, the Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit. The Borrower hereby grants to the
Agent, for the benefit of the Issuing Bank and the L/C Participants, a security
interest in such cash collateral to secure all obligations of the Borrower under
this Agreement and the other Loan Documents. Amounts held in such cash
collateral account shall be applied by the 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, been returned undrawn, or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder. After all such Letters of Credit shall have expired or been fully
drawn upon, all Reimbursement Obligations shall have been satisfied and all
other obligations of the Borrower hereunder shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Agent, for the account
of the Issuing Bank and the L/C Participants, such further documents and
instruments as the Agent may reasonably request to evidence the creation and
perfection of the within security interest in such cash collateral account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE AGENT
9.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, 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 Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in
<PAGE> 66
61
this Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its
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 Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. The 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 any other Loan
Document, or to inspect the properties, books or records of the Borrower.
9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, 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 Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Majority Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Majority 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 Loans.
<PAGE> 67
62
9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
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 Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Majority Lenders; PROVIDED that unless and
until the Agent shall have received such directions, the 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.
9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the 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 Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Loan Percentages in effect on the date on which indemnification
is sought, 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 Loans) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of, the
Revolving Credit Commitments, this Agreement, any of 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 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 resulting solely from the
<PAGE> 68
63
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Loans and all other amounts payable
hereunder.
9.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower as though the Agent were not the Agent
hereunder and under the other Loan Documents. With respect to the Loans made by
it, the 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 the Agent, and the terms "Lender" and "Lenders" shall include the Agent in
its individual capacity.
9.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 10
days' notice to the Lenders. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Majority Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
(provided that it shall have been approved by the Borrower), shall succeed to
the rights, powers and duties of the Agent hereunder. Effective upon such
appointment and approval, the term "Agent" shall mean such successor agent, and
the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Loans. After any retiring
Agent's resignation as Agent, the provisions of this Section 8 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Majority Lenders may, or, with the written consent of the
Majority Lenders, the Agent may, from time to time, (a) enter into with the
Borrower written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the Borrower hereunder or thereunder or (b) waive, on such terms and
conditions as the Majority Lenders or the Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; PROVIDED,
HOWEVER, that no such waiver and no such amendment, supplement or modification
shall (i) reduce the amount or extend the scheduled date of maturity of any Loan
or of any installment thereof, or reduce the stated rate of any interest or fee
payable hereunder or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender's Revolving
Credit Commitments, in each case without the consent of each Lender affected
thereby, or (ii) amend, modify or waive any provision of this subsection or
reduce the percentage specified in the definition of Majority Lenders or
Majority Lenders, or consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement and the other Loan
Documents or release all or substantially all of the Collateral
<PAGE> 69
64
(except as provided in subsection 8.10(a) of the Collateral Agency and
Intercreditor Agreement), in each case without the written consent of all the
Lenders, (iii) amend, modify or waive any provision of Section 9 without the
written consent of the then Agent, or (iv) make any increases in the percentages
specified in the definition of Borrowing Base, increase the L/C Commitment or
make any material amendments or modifications to subsection 2.8 of this
Agreement, in each case without the prior written consent of all the Lenders.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrower and the Agent, and as set forth in Schedule
1.1(a) in the case of the other parties hereto, or to such other address as may
be hereafter notified by the respective parties hereto:
<TABLE>
<CAPTION>
<S> <C>
The Borrower: Nashua Corporation
44 Franklin Street
P.O. Box 2002
Nashua, New Hampshire 03061-2002
Telex: 94-3438
Answerback: NASHCORP
Telecopier: (603) 880-5860
Attention: Treasurer
The Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: John Huber
Fax: (212) 270-2625
</TABLE>
PROVIDED that any notice, request or demand to or upon the Agent or the Lenders
pursuant to subsection 2.2, 2.4, 2.7 or 3.2 shall not be effective until
received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any
<PAGE> 70
65
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
10.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to
pay or reimburse the Agent for all its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent, (b) to pay or reimburse each
Lender and the Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
fees and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Agent, (c) to pay,
indemnify, and hold each Lender and the Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Agent harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
other Loan Documents and any such other documents, including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower, any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
PROVIDED that the Borrower shall have no obligation hereunder to the Agent or
any Lender with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Agent or any such Lender or (ii) legal
proceedings commenced against the Agent or any such Lender by any holder of any
securities of the Agent or such Lender or any creditor of the Agent or such
Lender arising out of and based solely upon rights afforded any such holder of
securities or creditor solely in its capacity as such. The agreements in this
subsection shall survive repayment of the Loans and all other amounts payable
hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent and their respective successors and assigns,
except that the Borrower may not assign or
<PAGE> 71
66
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("PARTICIPANTS") participating interests in any
Loan owing to such Lender, any Revolving Credit Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clauses (i) and (ii) of the proviso to subsection . The Borrower agrees that
if amounts outstanding under this Agreement are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement, PROVIDED that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in subsection 10.7(a) and the
Collateral Agency and Intercreditor Agreement as fully as if it were a Lender
hereunder. The Borrower also agrees that each Participant shall be entitled to
the benefits of subsections 2.13 and 2.14 with respect to its participation in
the Revolving Credit Commitments and the Loans outstanding from time to time as
if it was a Lender; PROVIDED that, in the case of subsection 2.14, such
Participant shall have complied with the requirements of said subsection and
PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender may, in the ordinary course of its banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of the
Agent and, provided no Default or Event of Default shall have occurred and is
continuing, with the consent of the Borrower (which shall not be unreasonably
withheld), to an additional bank, financial institution or other investment
entity (an "ASSIGNEE") all or any part of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit I, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by the Agent) and delivered to the Agent for its
acceptance and recording in the Register, PROVIDED that, in the case of any such
<PAGE> 72
67
assignment to an additional bank, financial institution or other investment
entity, the sum of the aggregate principal amount of the Loans, the aggregate
amount of the L/C Obligations and the aggregate amount of the Available
Commitments being assigned and, if such assignment is of less than all of the
rights and obligations of the assigning Lender, the sum of the aggregate
principal amount of the Loans, the aggregate amount of the L/C Obligations and
the aggregate amount of the Available Commitments remaining with the assigning
Lender are each not less than 20% of the aggregate principal amount of the
Loans, the aggregate amount of the L/C Obligations and the aggregate amount of
the Available Commitments of all the Lenders then outstanding (or such lesser
amount as may be agreed to by the Agent and the Borrower). Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and the Collateral Agency and Intercreditor Agreement and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and thereunder with a Revolving Credit
Commitment as set forth therein, and (y) the assigning Lender thereunder shall,
to the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). The consent of the Borrower shall not be required, and, unless
requested by the Assignee and/or the assigning Lender, new Notes shall not be
required to be executed and delivered by the Borrower, for any assignment which
occurs at any time when any of the events described in Section 8(f) shall have
occurred and be continuing.
(d) The Agent, on behalf of the Borrower, shall maintain at
the address of the Agent referred to in subsection 10.2 a copy of each
Assignment and Acceptance delivered to it and a register (the "REGISTER") for
the recordation of the names and addresses of the Lenders and the Revolving
Credit Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Lenders may
(and, in the case of any Loan or other obligation hereunder not evidenced by a
Note, shall) treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents, notwithstanding any
notice to the contrary. Any assignment of any Loan or other obligation
hereunder not evidenced by a Note shall be effective only upon appropriate
entries with respect thereto being made in the Register. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Agent) together with payment
to the Agent of a registration and processing fee of $4,000, the Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower.
<PAGE> 73
68
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee
any and all financial information in such Lender's possession concerning the
Borrower and its Affiliates which has been delivered to such Lender by or on
behalf of the Borrower pursuant to this Agreement or which has been delivered to
such Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Borrower and its Affiliates prior to becoming a party
to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
10.7 ADJUSTMENTS; SET-OFF. (a) Subject to the terms of the
Collateral Agency and Intercreditor Agreement, if any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of its Loans or
the Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 8(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans or
the Reimbursement Obligations owing it, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan or the Reimbursement
Obligations owing it, or shall provide such other Lenders with the benefits of
any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Agent after any such set-off and
application made by such Lender, PROVIDED that the failure to give such notice
shall not affect the validity of such set-off and application.
10.8 GENERAL RELEASE. (a) Each of the Borrower and its
Subsidiaries, on behalf of itself and its predecessors, successors and assigns,
together with its past, present and
<PAGE> 74
69
future officers, directors, agents, representatives, partners, joint venturers,
affiliates and the successors and assigns of any and all of them, in connection
with this Agreement, and for good and sufficient consideration, the receipt and
sufficiency of which are hereby acknowledged, do hereby forever release and
discharge the Agent and the Lenders and their officers, directors, employees,
agents, representatives, successors and assigns (the "BANK RELEASEE"), from any
and all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, extents,
executions, claims, and demands whatsoever, in law, admiralty, or equity, which
against the Bank Releasee, or any of them, it ever had, now has, or hereafter
can, shall or may have for, upon, or by reason of any matter, cause or thing
whatsoever arising from or relating to the Existing Credit Agreement (or related
documents) or the transactions contemplated thereby from the beginning of the
world to the Closing Date, whether known or unknown, asserted or unasserted (the
"RELEASED OBLIGOR CLAIMS"), and hereby further irrevocably agrees not to
commence or join any suit, action or proceeding, at law or equity, in respect of
the Released Obligor Claims.
10.9 CONFIDENTIALITY. Each Lender agrees to keep confidential
all non-public information provided to it by the Borrower pursuant to this
Agreement that is designated by the Borrower in writing as confidential;
PROVIDED that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Agent or any other Lender, (ii) to any Transferee;
provided that if such Transferee is a Participant such Participant agrees to be
bound by the terms of this subsection 10.9, (iii) to its employees, directors,
agents, attorneys, accountants and other professional advisors, (iv) upon the
request or demand of any Governmental Authority having jurisdiction over such
Lender, (v) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law,
(vi) which has been publicly disclosed other than in breach of this Agreement,
or (vii) in connection with the exercise of any remedy hereunder or under any
Loan Document.
10.10 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Agent.
10.11 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.12 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Agent and the Lenders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
<PAGE> 75
70
10.13 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.14 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 10.2
or at such other address of which the Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
10.15 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
<PAGE> 76
71
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
<PAGE> 77
72
10.16 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
NASHUA CORPORATION
By: /s/
-------------------------------
Name:
Title:
CHEMICAL BANK, as Agent, Issuing Bank and
as a Lender
By: /s/
-------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------
Name:
Title:
BANK OF MONTREAL
By:
-------------------------------
Name:
Title:
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
NASHUA CORPORATION
By:
-------------------------------
Name:
Title:
CHEMICAL BANK, as Agent, Issuing Bank and
as a Lender
By:
-------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Linda A. Sternfelt
-------------------------------
Name: Linda A. Sternfelt
Title: Vice President
BANK OF MONTREAL
By:
-------------------------------
Name:
Title:
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
NASHUA CORPORATION
By:
-------------------------------
Name:
Title:
CHEMICAL BANK, as Agent, Issuing Bank and
as a Lender
By:
-------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------
Name:
Title:
BANK OF MONTREAL
By: /s/
-------------------------------
Name:
Title:
<PAGE> 81
Schedule 1.1(a)
<TABLE>
REVOLVING CREDIT COMMITMENTS
<CAPTION>
================================================================================
LENDER REVOLVING CREDIT COMMITMENT
- --------------------------------------------------------------------------------
<S> <C>
CHEMICAL BANK $6,000,000.00
- --------------------------------------------------------------------------------
BANK OF MONTREAL $6,000,000.00
- --------------------------------------------------------------------------------
FIRST NATIONAL BANK OF BOSTON $6,000,000.00
================================================================================
</TABLE>
<PAGE> 82
Schedule 1.1(b)
<TABLE>
TERM LOANS
<CAPTION>
================================================================================
LENDER TERM LOANS
- --------------------------------------------------------------------------------
<S> <C>
CHEMICAL BANK $16,000,000.00
- --------------------------------------------------------------------------------
BANK OF MONTREAL $16,000,000.00
- --------------------------------------------------------------------------------
FIRST NATIONAL BANK OF BOSTON $16,000,000.00
================================================================================
</TABLE>
<PAGE> 83
Schedule 1.l(c)
<TABLE>
EXISTING LETTERS OF CREDIT
--------------------------
(issued by Bank of Montreal)
<CAPTION>
L/C NUMBER FACE AMOUNT BENEFICIARY_ EXPIRATION DATE
- ---------- ----------- ------------ ---------------
<S> <C> <C> <C>
00000000910772 $1,117,833.00 Home Insurance Co. 12/31/96
00000000911195 $1,031,590.00 Home Insurance Co. 12/31/96
00000000911503 $ 818,223.00 National Union Fire Insurance of 12/31/96
Pittsburgh
00000000911643 $ 50,000.00 Collectron of Arizona, Inc. 5/01/96
</TABLE>
<PAGE> 84
CREDIT AGREEMENT
SCHEDULE 4.6
------------
MATERIAL LITIGATION
NASHUA CORPORATION
- ------------------
1. In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh")
filed a Complaint with the United States District Court, District of
New Hampshire, alleging Nashua's infringement of U.S. patents 4,611,730
and 4,878,603 relating to certain toner cartridges for Ricoh copiers.
The Complaint seeks damages and injunctive relief. The products
involved constitute an insignificant amount of Nashua's sales. The
Company believes it has substantial defenses and intends to defend the
action vigorously.
2. During 1994, the Internal Revenue Service (IRS) completed an
examination of the Company's corporate income tax returns for the years
1988 through 1991. As a result of the IRS' findings, the Company agreed
to and paid additional taxes and interest of $7.8 million in January
1995 in connection with adjustments related mainly to the tax treatment
of certain items associated with the 1990 sale of the International
Office Systems business. On January 13, 1995, the IRS issued a Notice
of Deficiency in the amount of $8.7 million in connection with the tax
years 1990 and 1991. The tax deficiency relates to the tax treatment of
income recognized in connection with the 1990 sale of the Office
Systems business. The major issues relate to foreign tax credits,
foreign earnings and profits computation, and the treatment of the
disposition of preferred stock of a foreign subsidiary. The Company
disagrees with the position taken by the IRS and filed a formal protest
of the deficiency on February 9, 1995. In management's opinion, the
ultimate disposition of this matter will not have a material adverse
effect on the financial position or results of operations of the
Company.
<PAGE> 85
SCHEDULE 4.9
------------
INTELLECTUAL PROPERTY
NASHUA CORPORATION
- ------------------
See description of Ricoh litigation in Schedule 4.6.
<PAGE> 86
SCHEDULE 4.11
-------------
TAXES
NASHUA CORPORATION
- ------------------
See description of IRS matter in Schedule 4.6.
<PAGE> 87
SCHEDULE 4.15
-------------
SUBSIDIARIES
<TABLE>
NASHUA CORPORATION
- ------------------
<CAPTION>
DOMESTIC INCORPORATED
<S> <C>
Cerion Holdings Inc. (1) Delaware
Cerion Technologies Inc. (5) Delaware
Nashua Belmont Limited (2) Delaware
Nashua Commercial Products Corporation (1) Delaware
Nashua International, Inc. (1) Delaware
Nashua Photo European Investments, Inc. (2) Delaware
Nashua Photo Inc. (1) Delaware
Nashua Photo International Investments, Inc. (2) Delaware
Nashua Photo Licensing Inc. (2) Delaware
Nashua P.R., Inc. (1) Delaware
Nippon Nashua Incorporated (1) Delaware
Promolink Corporation (I) Delaware
FOREIGN INCORPORATED
Nashua Europe B.V. (1) Netherlands
Nashua FSC Limited (1) Jamaica
Nashua Photo B.V. (2) Netherlands
Nashua Photo Limited (2) Canada
Nashua Photo Limited (2) England
Nashua Photo S.N.C. (3) France
Postal Film Services (Country-Wide) Limited (4) England
<FN>
- ---------------------
(1) Stock held by Nashua Corporation
(2) Stock held by Nashua Photo Inc.
(3) Stock held 50% by Nashua Photo European Investments, Inc.
and 50% by Nashua Photo International Investments, Inc.
(4) Stock held by Nashua Photo Limited [England]
(5) Stock held by Cerion Holdings Inc.
</TABLE>
<PAGE> 88
Schedule 4.17
-------------
ENVIRONMENTAL MATTERS
Nashua Corporation
- ------------------
Nashua, New Hampshire
- ---------------------
Groundwater contamination attributable to historic operations of the Borrower is
the subject of a Groundwater Management Zone program approved by the State of
New Hampshire. Groundwater management is limited at this point to monitoring
only.
Historic fuel oil leakage is the subject of a remediation program which has been
submitted for approval by the State of New Hampshire. Application has been made
for reimbursement of up to 80% of program costs through the State's Oil
Discharge and Disposal Clean-up Fund (ODD).
Merrimack, New Hampshire (Graphic Products Division)
- ------------------------
The inadvertent discharge of VOC's into the soil at the Borrower's Graphic
Products Division tank farm in the mid-1980's as well as a leaking underground
pipe supplying toluene from the underground storage tank farm has been the
subject of a remediation program previously approved by the State of New
Hampshire. That program will be the subject of a revised remediation program
application designed to make the remediation effort more effective.
Watervliet, New York
- --------------------
A leak of solvents from underground lines in the late 1960's resulting in soil
and groundwater contamination has been reported to New York State environmental
authorities and is the subject or discussion concerning methods of remediation.
The Borrower has brought suit against its insurer and Norton Company, from which
the facility was purchased in 1974, for reimbursement of all costs associated
with investigation and remediation of the contamination.
PCB soil contamination has been identified on a vacant lot owned by the Borrower
adjacent to the Watervliet facility. The contamination relates to occupancy by a
prior lessee of the lot. The Borrower and Norton Company reported the
contamination to state officials in the mid 1980's and have agreed to share
equally the costs of investigation and remediation.
Champaign, Illinois
- -------------------
Current permitted air emission limits are being exceeded and application for an
amended permit is expected to be filed by May 1, 1996.
<PAGE> 89
Schedule 4.17
-------------
(Page Two)
ENVIRONMENTAL MATTERS
Omaha, Nebraska
- ---------------
Soil and groundwater contamination by VOC's from historic operations were
reported to state environmental authorities in the mid 1980's. At that time, the
Borrower was permitted to monitor groundwater, without remediation. Recently,
the adequacy of monitoring has been the subject of reevaluation, and the
Borrower is preparing a revised monitoring plan for submission to the State.
Other
- -----
The Borrower has been identified as a Potentially Responsible Party at the
following Superfund sites. The Borrower's participation at these sites is not
expected to require additional financial obligations to the Borrower in a
Material Adverse Amount.
- Union Chemical, S.Hope, Maine
- Silresin, Lowell, Massachusetts
- PAS, Oswego, New York (and satellites)
- Solvents Recovery of New England, Southington, Connecticut
- Old Southington Landfill, Southington, Connecticut
<PAGE> 90
Schedule 6.2
<TABLE>
BORROWING BASE REPORT
<CAPTION>
03/01/95 03/01/95 03/01/96 03/01/96 03/01/96 03/01/96
Imaging SCPD Label Tape NET Photo Total
-------- -------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Accounts Recievable Detail
--------------------------
Total accounts recievable aging $13,359 $4,261 $4,883 $6,205 $7,510 $1,228 $37,448
Less:
(a) Not in compliance with law 0
(b) Not assignable 0
(c) Subject to any liens 0
(d) Collection requires additional performance 0
(e) Account subject to other, ?????????? 0
(f) Account is affiliate, sub, division, employee 0
(g) Government Account (Fed, State, City, any) 960 960
(h) Defaulted account (any loss recognized) 0
(i) Affiliate of defulted account [ (h) above ] 0
(j) Warranty breached on the account 0
(k) Cross age 25% 413 75 56 48 82 676
(l) Account has filed Bankruptcy 0
(m) Greater than 60 days past due 605 210 (70) 260 129 132 1,256
Credit reclass 212 66 97 20 41?
(n) Foreign accounts 2,??0 11 206 1,003 123 3,606
(o) Contra account (vendor/customer) offset 0
(p) Foreign currency [ should be above in (n) ] 0
(q) Account in consignment, subject to charge-back 2 2
Credit memos to be issued 27 27
(r) Bank has determined account to be uncollectable 0
Dealer/agent credits reserve 2,858 2,858
(s) Account whose Nashua is in default of performance 0
(t) Nashua does not have the sole title to the account 0
(u) Account not from the sale in the normal course of business 0
Terms 67 67
Freight 12 12
Deposits 128 128
Rebates 23 23
(v) Terms not in normal course of business 0
(w) Terms with net payment over 60 from invoice date 0
(x) Concentration (account greater than 10% of total 513 513
eligible A/R) 0
(y) Promissory note, sh???? paper not endorsed by Bank 0
(Z) Account with Returned Check greater than $10,000 0
(aa) Account placed for collection 0
----------------------------------------------------------------
Eligible Accounts Recievable 5,962 3,878 4,592 4,023 7,130 501 28,374
Advance Rate 75% 75% 75% 75% 75% 75% 75%
----------------------------------------------------------------
Available Accounts Recievable 4,472 2,?07 3,444 3,017 5,348 376 20,164
================================================================
</TABLE>
<PAGE> 91
<TABLE>
Annex 3
8G(i) TITLE TO PROPERTIES
<CAPTION>
EXISTING LIENS
NASHUA CORPORATION
Date UCC# State Securities Party Assignee Collateral
- ---- ---- ----- ---------------- -------- ----------
<S> <C> <C> <C> <C> <C>
10/18/93 93211065 CA Hewlett-Pacard Co. Specific equipment list
05/05/92 2984907 IL Common Equipment Co. Clark Credit Corp Specific equipment
11/09/92 3049948 IL Chelsea Management Group Ltd. Leased equipment
05/27/93 3126877 IL Common Equipment Co. Clark Credit Corp Specific equipment
03/02/92 077119 MA Image Polymers Inventory owned by S.P.
09/15/93 185613 MA A/L Systems Goods & proceeds of pressure
sensitive labels & label products
11/18/91 377019 NH Image Polymers C. Goods on consignment
06/24/93 403963 NH A/L Systems Goods & proceeds of pressure
sensitive labels & label products
04/04/94 418798 NH Siemens Nixdorf Printing System (1)2090 Model 2 LED Printer
01/03/93 435296 NH IBM Credit Corp IBM equipment on lease
06/24/93 93-215 NH A/L Systems Goods & proceeds of pressure
sensitive labels & label products
06/24/93 070666 NH A/L Systems Goods & proceeds of pressure
sensitive labels & label products
01/05/95 072831 NH IBM Credit Corp IBM equipment on lease
09/11/95 667530 NE J Q Office Equipment of Omaha Specific equipment (copier &
accessories)
- ----------
<FN>
* In addition, Nashua Photo Limited has given Midland Bank plc an undertaking
that it will not pledge any of its assets. See letter dated 19 October 1995.
</TABLE>
<PAGE> 92
Schedule 7.2
<TABLE>
OUTSTANDING INDEBTEDNESS
<CAPTION>
NASHUA CORPORATION
<S> <C>
Senior Notes (Prudential) $15,000,000.00
U.K. Lease (Newton Abbott) $ 1,836,000.00
Microsharp Note $ 225,000.00
Nashua Photo Ltd overdraft line (Midland Bank plc) Up to Stlg 2,000,000.00
Intercompany loan as listed on Schedule 7.10(g)
Guarantees as listed on Schedule 7.4
</TABLE>
<PAGE> 93
Schedule 7.3
<TABLE>
EXISTING LIENS
<CAPTION>
NASHUA CORPORATION
04/01/96
Date UCC# State Secured Party Assignee Collateral
---- ---- ----- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
10/18/93 93211065 CA Hewlett-Pacard Co. Specific equipment list
05/05/92 2984907 IL Common Equipment Co. Clark Credit Corp. Specific equipment
11/09/92 3049948 IL Chelsea Management Group Ltd. Leased equipment
05/27/93 3126877 IL Common Equipment Co. Clark Credit Corp. Specific equipment
03/02/92 077119 MA Image Polymers Co. Inventory owned by S.P.
09/15/93 185613 MA A/L Systems Goods & proceeds of pressure
sensitive labels & label products
11/18/91 377019 NH Image Polymers Co. Goods on consignment
06/24/93 403963 NH A/L Systems Goods & proceeds of pressure
sensitive labels & label products
04/04/94 418798 NH Siemens Nixdorf Printing Systems (1) 2090 Model 2 LED Printer
01/03/95 435296 NH IBM Credit Corp. IBM equipment on lease
06/24/93 93-215 NH A/L Systems Goods & proceeds of pressure
sensitive labels & label products
06/24/93 070666 NH A/L Systems Goods & proceeds of pressure
sensitive labels & label products
01/05/95 072831 NH IBM Credit Corp. IBM equipment on lease
09/11/95 667530 NE J Q Office Equipment of Omaha Specific equipment (copier & accessories)
<FN>
* In addition, Nashua Photo Limited has given Midland Bank plc an undertaking that it will not
pledge any of its assets. See letter dated 19 October 1995.
</TABLE>
<PAGE> 94
Schedule 7.4
<TABLE>
GUARANTEE OBLIGATIONS
<CAPTION>
NASHUA CORPORATION
04/01/96
Letters of Credit
Bank Beneficiary Amount Reason
---- ----------- ------ -------
<S> <C> <C> <C> <C>
Bank of Montreal SLCDC 3896/910772 Home Insurance $1,117,833 Workers' Comp 1993
Bank of Montreal SLCDC 3896/911195 Home Insurance $1,031,590 Workers' Comp 1994
Bank of Montreal SLCDC 3896/911503 AIG $ 818,223 Workers' Comp 1995
Bank of Montreal SLCDC 3896/911503 Collectron $ 50,000 Mexico, potential termination costs
</TABLE>
OTHER
Guaranty obligations under Prudential Note Purchase Agreement
<PAGE> 95
Schedule 7.10(c)
<TABLE>
EMPLOYEE LOANS OUTSTANDING
<CAPTION>
NASHUA CORPORATION
04/01/96
<S> <C>
Corporation Ledger:
Geng Pache 122,159.99
Mary Beth Frost 1,350.00
John Ireland 7,500.00
Betsy Cziria 5,200.00
Label Division Ledger:
Ed Sylofski 74,000.00
----------
210,209.99
==========
</TABLE>
<PAGE> 96
Schedule 7.10(g)
<TABLE>
EXISTING INVESTMENTS
<CAPTION>
NASHUA CORPORATION
Curr Amount
---- ------
<S> <C> <C>
Intercompany Note from Nashua Photo B.V. ESB 48,841,688.83
Intercompany Note from Nashua Photo B.V. ESB 4,200,000.00
Intercompany Note from Nashua Photo B.V. NLG 1,206,825.74
Intercompany Note from Nashua Photo B.V. NLG 1,707,239.95
Intercompany Note from Nashua Belmont Limited GBP 5,179,000.00
Intercompany Note from Nashua Photo B.V. BEF 54,098,921.16
Intercompany Note from Cerion Technologies, Inc. USD 10,000,000.00
Equity investments by the Borrower and Subsidiaries in any Subsidiaries
outstanding on the date hereof.
</TABLE>
<PAGE> 97
Schedule 7.12
-------------
For purposes of this SCHEDULE 7.12 the term "Company" shall refer to Cerion
Technologies Inc. and the term "Nashua" shall refer to Nashua Corporation.
Intercompany Agreement. Pursuant to an intercompany agreement between the
Company and Nashua (the "Intercompany Agreement"), the Company and Nashua will
cooperate in providing each other with certain financial information, and, to
the extent requested by the Company, Nashua agrees to continue to provide the
Company with certain management and administrative services, including legal,
tax, employee benefit and similar corporate staff services (collectively, the
"Nashua Services"), to the same extent as currently provided. Nashua may
delegate performance of the Nashua Services to any subsidiary, affiliate or
employee of Nashua or its subsidiaries or affiliates or to a third party, at the
sole discretion of Nashua. The Nashua Services will be provided, to the extent
requested by the Company, for a period ending on the first anniversary of the
date of the Intercompany Agreement. The Company will pay Nashua its actual costs
in providing the Nashua Services, as reasonably determined by Nashua. The
Intercompany Agreement provides that, to the extent allowed by Delaware law, the
Company will indemnify and release Nashua from any liability that might result
from the provision of these services, including services provided by a
third party.
The Company intends to arrange to obtain certain services that have been
provided by Nashua from third parties or from Company personnel. The Company
believes that when such arrangements are in place, such services will likely be
provided at rates that are somewhat higher than the rates currently charged by
Nashua. However, the Company believes that the effect of these higher costs will
not be material.
Tax Allocation Agreement. The Company is currently included in the
consolidated federal income tax returns of Nashua. In general, Nashua's tax
allocation policy provides that the consolidated or combined tax provision is
allocated among the entities in its consolidated group based principally upon
taxable income directly related to each entity. Upon completion of the offering
contemplated hereby, the Company will no longer be included in such
consolidated or combined tax returns. Instead, it will file its own federal,
state and local income tax returns and pay its own taxes on a separate company
basis. Pursuant to a tax allocation agreement between the Company and Nashua
(the "Tax Allocation Agreement"), however, the Company will remain obligated to
pay to Nashua any income taxes the Company would have had to pay if it had filed
separate tax returns for the tax period beginning on January 1, 1996, and ending
on the date of the consummation of the offering contemplated hereby (to the
extent that it has not previously paid such amounts to Nashua). In addition, if
the tax liability attributable to the Company for any previous tax period during
which the Company was included in a consolidated federal income tax return
filed by Nashua or a combined state return is adjusted as a result of any action
taken by any taxing authority or court, then the Company will pay to Nashua the
amount of any increase in such liability and Nashua will pay to the Company the
amount of any decrease in such liability (in either case together with interest
and penalties). The Company's tax liability for previous years will not be
affected by any increase or decrease in Nashua's tax liability, if such
increase or decrease is not directly attributable to the Company. After
completion of the offering contemplated hereby, the Company will continue to be
subject under existing
<PAGE> 98
federal regulations to several liability for the consolidated federal income
taxes for any tax year in which it was a member of any consolidated group of
which Nashua was the common parent. Pursuant to the Tax Allocation Agreement,
however, Nashua has agreed to indemnify the Company for any federal income tax
liability of Nashua or any of its subsidiaries (other than that which is
attributable to the Company) that the Company could be required to pay, and the
Company has agreed to indemnify Nashua for any liability Nashua may incur in
respect of the Company's separate company taxes.
Registration Rights Agreement. In connection with the offering contemplated
hereby, the Company and Nashua will enter into a Registration Rights Agreement
(the "Registration Rights Agreement"), which, among other things, will provide
that, upon the request of Nashua, the Company will register under the Securities
Act any of the shares of Common Stock held by Nashua for sale in accordance with
Nashua's intended method of disposition thereof, and will take such other
actions as are necessary to permit the sale thereof in various jurisdictions,
subject to certain restrictions on, among other things, the frequency of
requested registrations, the amount of shares to be registered and the duration
of such rights. Subject to certain conditions, including the release from or
expiration of the 180-day lockup agreement with the Underwriters, for a period
of seven years following completion of the offering contemplated hereby, Nashua
may demand registration once in any twelve-month period, as long as such demand
covers at least 5% of the Common Stock then owned by Nashua and as long as
Nashua (along with its transferees) owns at least 5% of the Common Stock at the
time of such demand. Nashua also has a "piggyback" right, for a period of seven
years following completion of the offering contemplated hereby, to include the
shares of Common Stock held by it in certain other registrations of common
equity securities of the Company initiated by the Company on its own behalf or
on behalf of its other stockholders. Nashua has agreed to pay offering expenses
in connection with a registration made on its demand, unless the Company causes
shares to be registered for itself or a third party in such registration, in
which case the Company will pay any resulting incremental expenses of
registering shares not held by Nashua. In the event Nashua exercises its
"piggyback" registration rights, Nashua will pay any resulting incremental
expense of registering shares held by Nashua. Upon notice, Nashua may transfer
its rights under the Registration Rights Agreement to purchasers or transferees
of 20% or more of the initial shares of Common Stock owned by Nashua under
certain circumstances. The Registration Rights Agreement contains certain
indemnification and contribution provisions: (i) by Nashua for the benefit of
the Company and related persons; and (ii) by the Company for the benefit of
Nashua and related persons, as well as any potential underwriter.
The Company, its officers and directors and Nashua have agreed that,
subject to certain exceptions, for a period of 180 days after the date of this
Prospectus, without the prior written consent of the Representative, they will
not offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of any Common Stock or securities convertible or exchangeable into, or
exercisable for, Common Stock (except Common Stock or securities issued pursuant
to the 1996 Stock Incentive Plan described in this Prospectus) or, in the case
of the officers and directors and Nashua, in any other manner transfer all or a
portion of the economic consequences associated with the ownership of any such
Common Stock, or file or cause to be filed any registration statement with the
Commission related to any of the foregoing.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE NASHUA CORPORATION FOR THE 3 MONTHS ENDED MARCH
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3 MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-29-1996
<EXCHANGE-RATE> 1
<CASH> 11,064
<SECURITIES> 0
<RECEIVABLES> 30,990
<ALLOWANCES> 0
<INVENTORY> 15,937
<CURRENT-ASSETS> 96,381
<PP&E> 128,271
<DEPRECIATION> 60,133
<TOTAL-ASSETS> 222,450
<CURRENT-LIABILITIES> 70,516
<BONDS> 0
0
0
<COMMON> 18,681
<OTHER-SE> 53,426
<TOTAL-LIABILITY-AND-EQUITY> 222,450
<SALES> 101,497
<TOTAL-REVENUES> 101,497
<CGS> 75,297
<TOTAL-COSTS> 104,061
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,539
<INCOME-PRETAX> (3,981)
<INCOME-TAX> (1,741)
<INCOME-CONTINUING> (2,240)
<DISCONTINUED> 206
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,034)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> 0
</TABLE>
