<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 2-81315
FLOW INTERNATIONAL CORPORATION
DELAWARE 91-1104842
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
23500 - 64TH AVENUE SOUTH
KENT, WASHINGTON 98032
(206) 850-3500
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 .
--------- ----
The number of shares outstanding of common stock, as of November 28, 1995:
14,417,844 shares.
<PAGE>
FLOW INTERNATIONAL CORPORATION
INDEX
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
October 31, 1995 and April 30, 1995.. . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income -
Three Months Ended October 31, 1995 and 1994. . . . . . . . . . 4
Condensed Consolidated Statements of Income -
Six Months Ended October 31, 1995 and 1994. . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended October 31, 1995 and 1994. . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . 8
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . . . . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
- 2 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
October 31, April 30,
1995 1995
------ ------
(unaudited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash $ 1,836 $ 1,074
Trade Accounts Receivable, less allowances
for doubtful accounts of $1,166 and $1,150, respectively 31,309 31,638
Inventories 32,067 27,219
Deferred Income Taxes 2,334 1,335
Other Current Assets 5,707 4,719
-------- --------
Total Current Assets 73,253 65,985
Property and Equipment, net 25,751 24,533
Intangible Assets, net of accumulated
amortization of $2,746 and $2,275, respectively 13,848 13,361
Other Assets 3,176 1,605
-------- --------
$116,028 $105,484
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes Payable to Banks $ 3,251 $ 1,614
Current Portion of Long-Term Obligations 3,528 798
Accounts Payable 9,945 12,221
Accrued Payroll and Related Liabilities 3,696 3,542
Other Accrued Taxes 422 638
Other Accrued Liabilities 3,674 2,580
-------- --------
Total Current Liabilities 24,516 21,393
Long-Term Obligations 37,215 33,359
Deferred Income Taxes - 248
Minority Interest 978 681
Shareholders' Equity:
Series A 8% Convertible Preferred Stock -
$.01 par value, $500 liquidation preference, 1,000,000 shares
authorized, 0 issued
Common Stock - $.01 par value, 20,000,000 shares authorized
14,688,507 and 14,412,104 shares issued and outstanding,
respectively, at October 31, 1995
14,603,233 and 14,326,830 shares issued and outstanding,
respectively, at April 30, 1995 147 146
Capital in Excess of Par 37,622 37,602
Retained Earnings 15,322 11,456
Treasury Common Stock of 276,403 shares at cost (556) (556)
Cumulative Translation Adjustment 918 1,339
Loan to Employee Stock Ownership Plan and Trust (134) (184)
-------- --------
Total Stockholders' Equity 53,319 49,803
-------- --------
$116,028 $105,484
-------- --------
-------- --------
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statements
- 3 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
------------------
1995 1994
<S> <C> <C>
Revenue:
Sales $27,238 $19,132
Services 5,127 4,342
Rentals 3,257 3,284
------- -------
Total Revenues 35,622 26,758
Cost of Sales:
Sales 16,328 10,717
Services 3,750 3,098
Rentals 1,353 1,343
------- -------
Total Cost of Sales 21,431 15,158
------- -------
Gross Profit 14,191 11,600
Expenses:
Marketing 5,359 4,088
Research and Engineering 2,031 1,470
General and Administrative 3,713 2,871
------- -------
11,103 8,429
------- -------
Operating Income 3,088 3,171
Interest and Other Expense, net 758 468
------- -------
Income Before Provision for Income Taxes 2,330 2,703
Provision for Income Taxes 524 541
------- -------
Net Income $ 1,806 $ 2,162
------- -------
------- -------
Earnings Per Common and Equivalent Shares $ .12 $ .15
------- -------
------- -------
Average Common and Equivalent Shares Outstanding 15,233 14,299
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statements
- 4 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
------------------
1995 1994
<S> <C> <C>
Revenue:
Sales $52,138 $36,736
Services 10,468 8,625
Rentals 6,029 5,906
------- -------
Total Revenues 68,635 51,267
Cost of Sales:
Sales 30,391 20,569
Services 7,538 6,147
Rentals 2,610 2,513
------- -------
Total Cost of Sales 40,539 29,229
------- -------
Gross Profit 28,096 22,038
Expenses:
Marketing 10,613 7,903
Research and Engineering 3,855 2,849
General and Administrative 7,381 5,626
------- -------
21,849 16,378
------- -------
Operating Income 6,247 5,660
Interest and Other Expense, net 1,259 896
------- -------
Income Before Provision for Income Taxes 4,988 4,764
Provision for Income Taxes 1,122 953
------- -------
Net Income $ 3,866 $ 3,811
------- -------
------- -------
Earnings Per Common and Equivalent Shares $ .26 $ .27
------- -------
------- -------
Average Common and Equivalent Shares Outstanding 15,117 14,254
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statements
- 5 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
-----------------
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 3,866 $ 3,811
Adjustments to Reconcile Net Income to Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 3,508 2,503
Other 50 (50)
Increase in assets (6,598) (3,139)
Increase (decrease) in liabilities (2,997) 641
------- -------
Cash provided (used) by operating activities (2,171) 3,766
------- -------
Cash Flows from Investing Activities:
Expenditures for property and equipment (5,055) (3,302)
Payment for business combination, net of cash acquired (186)
Other 812 (168)
------- -------
Cash used by investing activities (4,429) (3,470)
------- -------
Cash Flows from Financing Activities:
Borrowings under line of credit agreements 57,784 40,455
Repayments under line of credit agreements (57,716) (39,088)
Proceeds from private debt placement 15,000
Payments of long-term debt (7,306) (3,066)
Proceeds from issuance of common stock 21 141
------- -------
Cash provided (used) by financing activities 7,783 (1,558)
------- -------
Effect of exchange rate changes on cash (421) 100
------- -------
Increase (decrease) in cash and cash equivalents 762 (1,162)
Cash and cash equivalents at beginning of period 1,074 1,351
------- -------
Cash and cash equivalents at end of period $ 1,836 $ 189
------- -------
------- -------
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Fair value of assets acquired $ 2,860
Cash paid for assets acquired (597)
-------
Liabilities assumed $ 2,263
-------
-------
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statements
- 6 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended October 31, 1995
(unaudited)
1. In the opinion of the management of Flow International Corporation (the
"Company"), the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position, statements of
income, and cash flows for the interim periods presented. These interim
financial statements should be read in conjunction with the April 30, 1995
consolidated financial statements.
2. Primary earnings per common share is computed by dividing net income
available to common stockholders by the weighted average number of shares
outstanding plus the equivalent shares attributable to dilutive stock
options during each period.
The weighted average number of shares outstanding, including equivalent
shares where required, for the three months ended October 31, 1995 and 1994
were 15,233,000 and 14,299,000, respectively, and for the six months ended
October 31, 1995 and 1994 were 15,117,000 and 14,254,000, respectively.
Fully diluted earnings per share do not differ materially from primary
earnings per share.
3. Inventories consist of the following:
(in thousands)
<TABLE>
<CAPTION>
October 31, 1995 April 30, 1995
---------------- --------------
<S> <C> <C>
Raw Materials and Parts $18,204 $15,794
Work in Process 6,164 4,432
Finished Goods 7,699 6,993
------- -------
$32,067 $27,219
------- -------
------- -------
</TABLE>
4. In September 1995, the Company signed a five-year secured revolving credit
agreement with its principal bank to refinance its domestic borrowings and
to provide a source of available cash. The new financing arrangement
comprises a $60 million reducing line of credit. In September 1995, the
Company also completed a ten-year $15 million private placement of debt
financing. The revolving credit agreement and private debt financing
require the Company to comply with certain financial covenants. As of
October 31, 1995, the Company was in compliance with all such covenants.
5. In May 1995, the Company invested in a joint venture with Okura & Co.,
Ltd., its exclusive Japanese distributor. The Company is the majority
partner of the joint venture, Flow Japan Corporation.
- 7 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the three months ended October 31, 1995 were
$35,622,000, an increase of 33%, or $8,864,000, compared to the like period in
the prior year. Year-to-date, total revenues were $68,635,000, an increase of
34%, or $17,368,000 compared to the first half of fiscal 1995. The increase for
the quarter and year-to-date compared to the like period in the prior year was
attributable to revenue growth in the Company's ultra-high pressure ("UHP")
business and access systems business. UHP revenues increased approximately 45%
for the quarter and 49% year-to-date compared to the prior year, while access
systems revenues increased approximately 18% for the quarter and 12% year-to-
date compared to the prior year. The Company's robotics and automation units,
acquired during the third quarter of fiscal 1995, significantly contributed to
the UHP revenue growth. The Company's UHP European operations recorded a 23%
increase in revenues compared to the same quarter of fiscal 1995.
Gross profit as a percentage of revenues decreased from 43% in the second
quarter of fiscal 1995 to 40% in the second quarter of fiscal 1996. Year-to-
date, gross profit as a percentage of revenues decreased from 43% in fiscal 1995
to 41% in fiscal 1996. Comparison of the total gross profit percentage is
dependent on the mix of revenue types, which includes sales, services, and
rentals; and the mix of spare parts and systems in sales revenues. The decrease
in gross profit as a percentage of revenues for the quarter and year-to-date was
primarily due to the change in UHP (sales) business mix resulting from the
Company's acquisitions of robotics and automation technology. Robotics systems
typically carry lower gross profits as a percentage of revenues than the
Company's pump, spare parts, and access systems businesses.
Operating expenses of $11,103,000 increased $2,674,000 for the quarter
ended October 31, 1995, compared to the same quarter of the prior year.
Operating expenses for the second quarter of fiscal 1996 were 31% of revenues,
approximately the same percentage of revenues as the second quarter of fiscal
1995. Year-to-date, operating expenses totalled $21,849,000 for fiscal 1996,
compared to $16,378,000 for fiscal 1995. Operating expenses were approximately
32% of revenues year-to-date for fiscal 1996 and fiscal 1995. The dollar
increase from the prior year for the quarter and year-to-date arose primarily
from the acquisitions made during the second half of fiscal 1995 and a Japanese
joint venture created during the first quarter of fiscal 1996.
Second quarter fiscal 1996 interest and other expense, net, of $758,000
represented an increase of $290,000 compared to the prior year. Year-to-date,
interest and other expense, net, totalled $1,259,000 for fiscal 1996, an
increase of $363,000 compared to the same period in fiscal 1995. Included in
current quarter and year-to-date interest and other expense, net, is
approximately $260,000 and $520,000, respectively, of additional interest
related to increased borrowings to finance the fiscal 1995 acquisitions and a
joint venture during the first quarter of fiscal 1996.
- 8 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income tax expense was lower than the statutory rate primarily due to lower
foreign tax rates, benefits from the foreign sales corporation, and a change in
the Company's FAS 109 valuation allowance.
The number of average shares outstanding for the second quarter increased
from 14,299,000 for fiscal 1995 to 15,233,000 for fiscal 1996. Year-to-date,
the average number of shares outstanding increased from 14,254,000 for fiscal
1995 to 15,117,000 for fiscal 1996.
As a result of the above, the Company recorded net income of $1,806,000, or
12 cents per share for the three months ended October 31, 1995, compared to
$2,162,000, or 15 cents per share for the same period in the prior year. Year-
to-date, net income for fiscal 1996 totalled $3,866,000, or 26 cents per share,
compared to $3,811,000, or 27 cents per share, for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was $2.2 million for the six months
ended October 31, 1995, primarily due to an increase in inventory and a decrease
in accounts payable. Net cash provided by operating activities was $3.8 million
during the same period a year ago.
In September 1995, the Company signed a five-year secured credit agreement
with its principal bank, US Bank of Washington N.A., to refinance its domestic
borrowings and to provide a source of available cash. The new financing
arrangement comprises a $60 million reducing line of credit. In September
1995, the Company also completed a ten-year $15 million private placement of
debt financing. The Company believes that the new financings, together with
other available credit facilities and working capital generated by operations,
will provide sufficient resources to meet its operating and capital requirements
in the foreseeable future. The revolving credit agreement and private debt
financing require the Company to comply with certain financial covenants. As of
October 31, 1995, the Company was in compliance with all such covenants.
Gross trade receivables at October 31, 1995 decreased by $313,000, or 1%,
from April 30, 1995. Days sales outstanding in gross accounts receivable can be
attributed to higher foreign sales where account payment terms are typically
longer than in the United States, and special payment terms negotiated on large
system orders. The Company's management does not believe these timing issues
will result in a material adverse impact on the Company's short-term liquidity
requirements.
Inventories at October 31, 1995 increased $4.8 million, or 18%, from April
30, 1995, primarily related to the higher levels of business and the inclusion
of the newly formed joint venture. Certain products manufactured by the
Company's robotic and automation divisions require an extended manufacturing
period, and therefore involve higher levels of work in process.
- 9 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is party to various legal actions incident to the
normal operations of its business, none of which is believed to be material to
the financial condition of the Company.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1995 Annual Meeting of Stockholders on August 30,
1995. At the meeting four directors were elected. Ron D. Barbaro, Arlen I.
Prentice and J. Michael Ribaudo were elected to three year terms ending with the
1998 Annual Meeting of Stockholders receiving, respectively, 12,511,055,
12,503,458 and 12,451,966 votes in favor, and 141,633, 149,180 and 200,672 votes
withheld. John S. Cargill was elected to a one year term ending with the 1996
Annual Meeting of Stockholders receiving, respectively, 12,492,986 votes in
favor, and 159,652 votes withheld. In addition, the Company's 1995 Long-Term
Incentive Compensation Plan (the "Plan") was approved. The Plan received
7,102,783 shares for approval, 2,265,397 shares against approval and 125,665
shares abstained. There were no broker non-votes for any of the above matters
submitted for vote.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
10.1 - Credit Agreement among Flow International
Corporation, as borrower, the Lenders listed herein, as lenders, and US Bank of
Washington, N.A. as agent for lenders dated September 25, 1995.
10.2 - Note purchase agreement dated September 25, 1995
(b) Reports on Form 8-K -
The Company filed a Current Report on Form 8-K on September 25,
1995 reporting the Company had completed a $75 million long-term financing
package, which included a $60 million, five-year revolving credit facility
provided by its principal bank and a $15 million, ten-year private note
placement.
The Company filed a Current Report on Form 8-K on September 25,
1995 reporting the resignation of Lee M. Andrews, Vice President and Chief
Financial Officer.
- 10 -
<PAGE>
FLOW INTERNATIONAL CORPORATION
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.
FLOW INTERNATIONAL CORPORATION
Date: December 6, 1995 /s/ Ronald W. Tarrant
---------------------
Ronald W. Tarrant
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: December 6, 1995 /s/ Elaine P. Scherba
---------------------
Elaine P. Scherba
Vice President, Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
- 11 -
<PAGE>
CREDIT AGREEMENT
among
FLOW INTERNATIONAL CORPORATION,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
and
U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION,
AS AGENT FOR LENDERS
Dated as of September 25, 1995
<PAGE>
CREDIT AGREEMENT
This credit agreement is made and entered into as of the 25th day of
September, 1995, among FLOW INTERNATIONAL CORPORATION, a Delaware corporation
("Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON SCHEDULE I ANNEXED HERETO
(each individually referred to herein as a "Lender" and collectively as
"Lenders"), and U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION, a national
banking association ("U. S. Bank"), as agent for Lenders (in such capacity
"Agent"). Words and phrases with initial capitalized letters have the meanings
assigned in ARTICLE I of this Agreement.
R E C I T A L S :
WHEREAS, Borrower desires that Lenders extend certain credit
facilities to Borrower to permit Borrower to renew, extend, and increase its
existing debt to U. S. Bank, to provide for the working capital requirements of
Borrower, and to pay fees and expenses in connection with the making of such
credit facilities; and
WHEREAS, Lenders are ready, able, and willing to provide the requested
credit facilities to Borrower on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 TERMS DEFINED. As used herein, the following terms have the
meanings set forth below:
"Affiliate" means a Person that now or hereafter, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Borrower. A Person shall be deemed to control a
corporation, limited liability company, or partnership if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management of such corporation, limited liability company, or partnership,
whether through the ownership of voting securities, by contract, or otherwise.
"Agent" means U. S. Bank in its capacity as agent for Lenders, and any
successor agent designated pursuant to SECTION 9.6 hereof.
-1-
<PAGE>
"Agreement" means this credit agreement and includes all amendments to
this Agreement.
"Applicable Law" means all applicable provisions and requirements of
all (a) constitutions, statutes, ordinances, rules, regulations, standards,
orders, and directives of any Governmental Bodies, (b) Governmental Approvals,
and (c) orders, decisions, decrees, judgments, injunctions, and writs of all
courts and arbitrators, whether such Applicable Laws presently exist, or are
modified, promulgated, or implemented after the date hereof.
"Applicable Margin" means, with respect to any borrowing based on the
LIBOR Rate, the rate per annum that is determined by reference to the following
matrix:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUNDED DEBT RATIO AS OF THE END APPLICABLE MARGIN
OF THE PREVIOUS FISCAL QUARTER
- --------------------------------------------------------------------------------
<S> <C>
Less than 1.5:1.0 1.0%
- --------------------------------------------------------------------------------
Equal to or greater 1.35%
than 1.5:1.0
and less than or equal to 3.0:1.0
- --------------------------------------------------------------------------------
Greater than 3.0:1.0 Default rate set forth
in SECTION 3.5 applies
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
"Benefitted Lender" has the meaning set forth in SECTION 10.4(A)
hereof.
"Borrower" means Flow International Corporation, a Delaware
corporation, and its successors.
"Borrowing Date" means any Business Day specified in a notice pursuant
to (a) SECTION 2.7 as a date on which Borrower requests Lenders to make Loans
hereunder, or (b) SECTION 2.9 as a date on which Borrower has requested Issuing
Bank to issue a Letter of Credit hereunder.
"Borrowing Notice" has the meaning set forth in SECTION 2.7(A).
"Business Day" means any day except a Saturday, Sunday, or other day
on which national banks in the state of Washington are authorized or required by
law to close.
"Capital Expenditures" means, for the relevant period, the aggregate
of all expenditures (whether paid in cash or other consideration or accrued as a
liability and including that portion of Capital Leases that is capitalized on
the balance sheet of Borrower and its Subsidiaries) by Borrower and its
Subsidiaries during such period that, in conformity
-2-
<PAGE>
with GAAP, are included in "additions to property, plant, or equipment" or
comparable items reflected in the statement of cash flows of Borrower and its
Subsidiaries.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal, or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash Flow" means Borrower's net income (after taxes) for the relevant
period, subject to the following adjustments:
(a) There shall be added to net income: (i) charges against
income consisting of depreciation of real and personal property,
amortization, write-off of goodwill, and other intangibles, and
(ii) interest expense; and
(b) There shall be deducted from net income: (i) cash paid by
Borrower during the relevant period for Capital Expenditures, and
(ii) dividends and distributions paid to Borrower's shareholders.
"Claims" has the meaning set forth in SECTION 10.13.
"Collateral" means all the property, real or personal, tangible or
intangible, now owned or hereafter acquired, in which Agent, for its benefit and
the ratable benefit of Lenders, or Private Lenders have been or are to be
granted a security interest by Borrower or any other Person.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods, or services by Borrower or
its Subsidiaries in the ordinary course of business of Borrower or its
Subsidiaries.
"Commitment Period" has the meaning set forth in SECTION 2.1 hereof.
"Commitment Transfer Supplement" has the meaning set forth in SECTION
10.3(c) hereof.
"Current Ratio" means the ratio of Borrower's current assets to
Borrower's current liabilities.
"Debt Service" means, as of the last day of the relevant period, the
current portion of Borrower's long-term Indebtedness, plus the sum of interest
expense for the relevant period.
-3-
<PAGE>
"Debt Service Coverage Ratio" means the ratio of Cash Flow to
Debt Service.
"Default" means any condition or event that constitutes an Event of
Default or with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Dollars" or "$" shall mean lawful money of the United States of
America.
"EBITDA" means, for the relevant period, Borrower's net income before
taxes to which charges against income consisting of depreciation of real and
personal property, amortization, write-off of goodwill and other intangibles
have been added, but which shall exclude, unless otherwise agreed to in writing
by Agent, the adjusted net income of any Subsidiary acquired by Borrower after
the date of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning set forth in SECTION 8.1.
"Existing Credit Agreement" means that certain credit agreement dated
as of October 14, 1992, between Borrower and U. S. Bank, as it may have been
amended or otherwise modified through the date of this Agreement.
"Existing Letters of Credit" means those certain letters of credit
listed on SCHEDULE II, annexed hereto issued by U. S. Bank pursuant to the
Existing Credit Agreement which will, as of the date of this Agreement, be
deemed outstanding as Letters of Credit issued pursuant to SECTION 2.8 of this
Agreement.
"Funding" means any disbursement of the proceeds of the Revolving
Credit Loans or the issuance or renewal of any Letters of Credit.
"Funded Debt Ratio" means, as of the date of measurement, the ratio of
(a) all Indebtedness of Borrower except (i) Trade Payables, and (ii) all accrued
liabilities, deferred taxes, and minority interests generated in the normal
course of business; to (b) the sum of (i) Borrower's EBITDA for the immediately
preceding four fiscal quarters of Borrower, plus (ii) in the event Borrower has
acquired any Subsidiaries during the immediately preceding four quarters of
Borrower, the EBITDA of such Subsidiaries from the first day of the immediately
preceding four quarters through the date of acquisition of each Subsidiary.
"GAAP" means, subject to the limitations on the application thereof
set forth in SECTION 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the accounting principles board of the American
Institute of Certified Public Accountants,
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in statements and pronouncements of the Financial Accounting Standards Board, or
in such other statements by such other entity as may be approved by a
significant segment of the accounting profession, in each case as the same are
applicable to the circumstances as of the date of determination.
"Governmental Approval" means any authorization, consent, approval,
certificate of compliance, license, permit, or exemption from, contract with,
registration or filing with, or report or notice to, any Governmental Body
required or permitted by Applicable Law.
"Governmental Body" means the government of the United States, any
state or any foreign country, or any governmental or regulatory official, body,
department, bureau, subdivision, agency, commission, court, arbitrator, or
authority, or any instrumentality thereof, whether federal, state, or local.
"Hazardous Materials" means oil or petrochemical products, PCB's,
asbestos, urea formaldehyde, flammable explosives, radioactive materials,
hazardous wastes, toxic substances, or related materials including but not
limited to substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," or "toxic substances"
under any Hazardous Materials Laws.
"Hazardous Materials Claims" means (a) enforcement, cleanup, removal,
or other regulatory actions instituted, completed, or threatened by any
Governmental Body pursuant to any applicable Hazardous Materials Laws; and
(b) claims made or threatened by any third party against Borrower or its
property relating to damage, contribution, cost recovery, compensation, loss, or
injury resulting from Hazardous Materials.
"Hazardous Materials Laws" means all Applicable Laws pertaining to
Hazardous Materials.
"Indebtedness" means all items that in accordance with GAAP would be
included in determining total liabilities as shown on the liabilities side of
the balance sheet as of the date that "Indebtedness" is to be determined and in
any event includes liabilities secured by any mortgage, deed of trust, pledge,
lien, or security interest on property owned or acquired, whether or not such a
liability has been assumed, and guaranties and endorsements (other than for
collection in the ordinary course of business) with regard to the obligations of
other Persons.
"Indemnified Liabilities" has the meaning set forth in SECTION 10.2
hereof.
"Indemnified Persons" has the meaning set forth in SECTION 10.2
hereof.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Issuing Lender" means U. S. Bank or any of its affiliates which from
time to time may be designated by U. S. Bank in its sole discretion to issue
Letters of Credit.
"L/C Application" has the meaning set forth in SECTION 2.9.
"L/C Participating Interest" means an undivided participating interest
in each Letter of Credit and the related L/C Application.
"Lenders" means the Persons identified as "Lenders" and listed on
SCHEDULE I of this Agreement, together with their successors and permitted
assigns pursuant to SECTION 10.3 hereof.
"Letters of Credit" means Commercial Letters of Credit and Standby
Letters of Credit issued or to be issued by Issuing Lender for the account of
Borrower or its Subsidiaries pursuant to the terms of this Agreement, together
with all Existing Letters of Credit.
"Letter of Credit Participation Certificate" has the meaning set forth
in SECTION 2.12(B).
"LIBOR Borrowing Rate" means the LIBOR Rate plus the Applicable
Margin.
"LIBOR Interest Period" means as to any LIBOR Rate Borrowing, a period
of 1, 2, 3, 6, 9, or 12 months commencing on the date the LIBOR Borrowing Rate
becomes applicable thereto; PROVIDED however, that: (a) no LIBOR Interest
Period shall be selected which would extend beyond the Commitment Period;
(b) any LIBOR Interest Period which would otherwise expire on a day which is not
a Business Day, shall be extended to the next succeeding Business Day, unless
the result of such extension would be to extend such LIBOR Interest Period into
another calendar month, in which event the LIBOR Interest Period shall end on
the immediately preceding Business Day; and (c) any LIBOR Interest Period that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
LIBOR Interest Period) shall end on the last Business Day of a calendar month
during which the applicable LIBOR Interest Period expires.
"LIBOR Rate" means for any LIBOR Interest Period, the fixed rate of
interest per annum (computed on the basis of a 360-day year and the actual
number of days elapsed) equal to the London Interbank Offered Rate, which is the
per annum rate of interest determined by Agent to be the rate at which deposits
in U.S. dollars are offered in the London Interbank market at approximately
11 a.m. (London time), two Business Days prior to the
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commencement of the applicable LIBOR Interest Period for a period of time
comparable to such LIBOR Interest Period, in an amount equal or comparable to
the applicable LIBOR Rate Borrowing, which rate shall be adjusted from time to
time to take into account the cost to U. S. Bank to maintain any reserves for a
Eurodollar deposit required to fund the amount of the applicable LIBOR Rate
Borrowing, and also to take into account any required statutory reserves for
foreign loans to United States residents, whether or not the applicable LIBOR
Rate Borrowing is so funded by U. S. Bank
"LIBOR Rate Borrowing" means any Revolving Credit Loan or portion
thereof for which Borrower has elected the LIBOR Borrowing Rate to apply. The
minimum amount of each LIBOR Rate Borrowing shall be $1,000,000 and integral
multiples thereof.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge, or any encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) in any option, trust, or other
preferential arrangement having the practical effect of any of the foregoing.
"Loans" means the Revolving Credit Loans and includes all renewals and
amendments thereof.
"Loan Documents" means this Agreement, the Note, together with all
other agreements, instruments, and documents arising out of or relating to this
Agreement, the Loans, or the Letters of Credit, as well as all renewals and
amendments thereof.
"Note" means the Revolving Credit Note and includes all renewals,
replacements, and amendments thereof.
"Obligations" means all obligations of every nature of Borrower and
its Subsidiaries from time to time owed to Agent, Lenders, Issuing Lender,
Private Lenders, or any of them under the Loan Documents or the loan documents
relating to the Private Debt, whether for principal, interest, reimbursement of
amounts drawn under Letters of Credit, fees, expenses, indemnification, or
otherwise.
"Participants" has the meaning set forth in SECTION 10.3(B) hereof.
"Participating Lender" means any Lender (other than Issuing Lender)
with respect to its L/C Participating Interest in Letters of Credit.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust, or other enterprise
or any Governmental Body.
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"Plan" means an employee pension benefit plan that is covered by ERISA
or subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and is either (a) maintained by Borrower or any ERISA Affiliate for
employees of Borrower or any ERISA Affiliate or (b) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which Borrower or any ERISA Affiliate is
then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Prime Borrowing Rate" means a per annum rate equal to the Prime Rate.
"Prime Rate" means that rate of interest announced by Agent from time
to time as its prime rate. The Prime Rate is not the lowest rate of interest
charged by Agent to any classification of Agent customers. For purposes of this
Agreement, each time the Prime Rate changes, a contemporaneous change shall
occur in the interest rate charged to Borrower on any Prime Rate Borrowings,
effective upon the announcement or publication of any such change in rate.
Agent shall not be obligated to notify Borrower of any change in the Prime Rate;
however, the Prime Rate is available upon inquiry of Agent.
"Prime Rate Borrowing" means any Revolving Credit Loan pursuant to the
terms of this Agreement which bears interest at the Prime Borrowing Rate.
Computations of interest for any Prime Rate Borrowing shall be based upon a
360 day year, for the actual number of days elapsed.
"Private Debt" means the Indebtedness of Borrower to Private Lenders
in the initial principal amount of $15,000,000.
"Private Lenders" means Connecticut General Life Insurance Company and
Life Insurance Company of North America, and their successors and assigns.
"Pro Rata Share" means with respect to all payments, computation, and
other matters relating to the Revolving Credit Commitment or the Revolving
Credit Loans of any Lender or any Letters of Credit issued or participations
herein purchased by any Lender, the percentage obtained by dividing (a) the
Revolving Loan Exposure of that Lender by (b) the aggregate Revolving Loan
Exposure of all Lenders. The initial Pro Rata Share of each Lender for purposes
hereof is set forth opposite the name of that Lender in SCHEDULE I annexed
hereto.
"Purchasing Lenders" has the meaning set forth in SECTION 10.3(c)
hereof.
"Requisite Lenders" means Lenders holding in excess of 66 2/3 percent
of the Revolving Loan Exposure, except that for purposes of determining the
Lenders entitled to declare the Note to be forthwith due and payable pursuant to
ARTICLE VIII, "Requisite Lenders" shall mean Lenders holding 75 percent or more
of the Revolving Loan Exposure.
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"Register" has the meaning set forth in SECTION 10.3(d) hereof.
"Revolving Credit Loan" has the meaning set forth in SECTION 2.1(a)
hereof and includes all renewals of and amendments to the Revolving Credit Loan.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the amount of such Lender's commitment as set forth in SCHEDULE I hereto.
"Revolving Credit Note" has the meaning set forth in SECTION 2.3
hereof and includes all renewals, replacements, and amendments of the Revolving
Credit Note.
"Revolving Loan Exposure" means, with respect to any Lender as of any
date of determination (a) prior to the termination of the Revolving Credit
Commitment, that Lender's Revolving Credit Commitment, and (b) after the
termination of the Revolving Credit Commitment, the sum of (i) the aggregate
outstanding principal amount of the Revolving Credit Loans of that Lender, plus
(ii) in the event that Lender is the Issuing Lender, the aggregate amount of all
drawings under Letters of Credit honored by that Lender and not theretofore
reimbursed by Borrower (net of any participations purchased by other Lenders in
the applicable Letters of Credit), plus (iii) the aggregate amount of all
participations purchased by that Lender in any drawings under Letters of Credit
on or by Issuing Lender and not therefore reimbursed by Borrower.
"Security Agreement" has the meaning set forth in SECTION 4.1(b) and
includes all amendments to the Security Agreement.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (a) Indebtedness of
Borrower or its Subsidiaries, (b) workers compensation liabilities of Borrower
or its Subsidiaries, (c) the obligations of third party insurers of Borrower or
its Subsidiaries arising by or virtue of the laws of any jurisdiction requiring
third party insurers, (d) obligations with respect to Capital Leases of Borrower
or its Subsidiaries, and (e) performance, payment, deposit, or surety
obligations of Borrower or its Subsidiaries in any case if required by law or
governmental rule or regulation or in accordance with custom and practice in the
industry; provided that Standby Letters of Credit may not be issued for the
purpose of supporting Indebtedness constituting "antecedent debt" (as that term
is used in Section 547 of the United States Bankruptcy Code).
"Subordinated Debt" means any unsecured Indebtedness of Borrower which
expressly contains in the instruments evidencing such Indebtedness or in the
indenture or other similar instrument under which such Indebtedness is issued
(which indenture or other similar instrument shall be binding on all holders of
such Indebtedness), subordination provisions in form and substance satisfactory
to Agent substantially to the effect that the holder agrees that
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the Indebtedness evidenced by such instrument, and any renewals or extensions
thereof, shall at all times and in all respects be subordinate and junior in
right of payment to the Obligations.
"Subsidiary" means, with respect to any Person (herein referred to as
the "parent"), any corporation, association or other business entity of which
more than 50 percent of the securities or other ownership interests having
ordinary voting power is, at the time as of which any determination is being
made, owned or controlled directly or indirectly by the parent or one or more
Subsidiaries of the parent, or by the parent and one or more Subsidiaries of the
parent.
"Subsidiary Security Agreement" has the meaning set forth in SECTION
4.1(c) and includes all amendments of the Subsidiary's Security Agreement.
"Tangible Net Worth" means Borrower's total stockholders' equity as
determined in accordance with GAAP as applied in Borrower's April 30, 1995,
balance sheet, less all net intangible assets including but not limited to
goodwill, licenses, franchises, trademarks, trade names, service marks, patents,
and copyrights.
"Tax" means for any Person, any tax, assessment, duty, levy, or other
change imposed by any Governmental Body on such Person or on any property,
revenue, income, or franchise of such Person and any interest or penalty with
respect to any of the foregoing.
"Total Revolving Credit Commitment" means the sum of the Revolving
Credit Commitments of all Lenders, but in no event shall the Total Revolving
Credit Commitment exceed during the time periods set forth below, the following
amounts:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEASURED FROM THE DATE TOTAL REVOLVING
OF THIS AGREEMENT CREDIT COMMITMENT
- --------------------------------------------------------------------------------
<S> <C>
First year $60,000,000
- --------------------------------------------------------------------------------
Second year $60,000,000
- --------------------------------------------------------------------------------
Third year $52,000,000
- --------------------------------------------------------------------------------
Fourth year $44,000,000
- --------------------------------------------------------------------------------
Fifth year $36,000,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
"Trade Payables" means amounts owing to suppliers and vendors for the
acquisition of inventory, goods, and services in the ordinary course of
business.
"Transferee" has the meaning set forth in SECTION 10.3(e) hereof.
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"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500 and any amendments thereof.
"Unreimbursed L/C Payment" has the meaning set forth in SECTION
2.12(b) hereof.
"U. S. Bank" means U. S. Bank of Washington, National Association, a
national banking association, and its successors and assigns.
"Working Capital" means Borrower's current assets, less Borrower's
current liabilities.
1.2 ACCOUNTING TERMS. Except as otherwise expressly provided in this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings and interpretations commonly applied under GAAP. Financial statements
and other information required to be delivered by Borrower to Agent and or
Lenders pursuant to clauses (a) (b), and (c) of SECTION 5.1 shall be prepared in
accordance with GAAP (except, with respect to interim financial statements,
normal and reasonable year-end audit adjustments) as in effect at the time of
such preparation. Calculations in connection with the definitions, covenants,
and other provisions of this Agreement shall utilize accounting principles and
policies in conformance with those used to prepare the financial statements
referred to in SECTION 7.9. Any financial or accounting term relating to
Borrower, whether defined herein or to be interpreted in conformity with GAAP,
refers to such term determined on a consolidated basis in accordance with GAAP.
1.3 RULES OF CONSTRUCTION. Unless the context otherwise requires,
the following rules of construction apply to the Loan Documents:
(a) Words in the singular include the plural, and words in the plural
include the singular.
(b) Provisions of the Loan Documents apply to successive events and
transactions.
(c) In the event of any inconsistency between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement govern.
(d) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
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1.4 INCORPORATION OF RECITALS AND EXHIBITS. The foregoing recitals
are incorporated into this Agreement by reference. All references to "Exhibits"
contained herein are references to exhibits attached hereto, the terms and
conditions of which are made a part hereof for all purposes.
ARTICLE II. REVOLVING CREDIT FACILITY
2.1 REVOLVING CREDIT COMMITMENTS.
(a) Subject to and upon the terms and conditions set forth herein,
and in reliance upon the representations, warranties, and covenants of Borrower
contained herein or made pursuant hereto, each Lender severally and not jointly
agrees to make loans (individually, a "Revolving Credit Loan" and collectively,
the "Revolving Credit Loans") to Borrower from time to time during the period
ending on November 30, 2000 ("Commitment Period"), provided that the aggregate
principal amount of the Revolving Credit Loans made by such Lender to Borrower
at any one time outstanding shall not exceed an amount equal to Lender's
Revolving Credit Commitment as set forth opposite such Lender's name on
SCHEDULE I, provided, further, that the aggregate principal amount of all
Revolving Credit Loans at any one time outstanding to Borrower shall not exceed,
in the aggregate, as to all Lenders, the Total Revolving Credit Commitment less
(i) the aggregate face amount of Letters of Credit outstanding at such time, and
(ii) all Unreimbursed L/C Payments at such time.
(b) During the Commitment Period, Borrower may use the Revolving
Credit Commitments (i) by borrowing, prepaying the Revolving Credit Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions of this Agreement, and (ii) by having Issuing Lender issue Letters of
Credit, having such Letters of Credit expire undrawn upon, or, if drawn upon,
reimbursing Issuing Lender for such drawing, and having Issuing Lender issue new
Letters of Credit, all in accordance with the terms and conditions of this
Agreement.
2.2 PURPOSES OF REVOLVING CREDIT LOANS. Borrower may use the
proceeds of the Revolving Credit Loans for renewing and refinancing its
Indebtedness to U. S. Bank under the Existing Loan Agreement, for the purpose of
making payments to Issuing Lender to reimburse Issuing Lender for drawings made
under the Letters of Credit, and for other general corporate purposes.
2.3 REVOLVING CREDIT NOTE. The Revolving Credit Loans to be made to
Borrower shall be evidenced by and repayable with interest in accordance with a
promissory note in the form of EXHIBIT A, payable to the order of Agent dated as
of the date hereof and in the principal amount of $60,000,000 ("Revolving Credit
Note").
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2.4 INTEREST RATES. Each time Borrower requests a new Revolving
Credit Loan, Borrower may, subject to SECTION 3.9, elect the Prime Borrowing
Rate or the LIBOR Borrowing Rate to apply to such new Revolving Credit Loan. At
any time prior to the expiration of an LIBOR Interest Period, and at any other
time with respect to Prime Rate Borrowings, Borrower may, subject to
SECTION 3.9, elect the Prime Borrowing Rate or the LIBOR Borrowing Rate to apply
to any existing LIBOR Rate Borrowing at the end of the LIBOR Interest Period or
to any existing Prime Rate Borrowing. In the event Borrower does not specify an
interest rate election as provided herein for a new Revolving Credit Loan or
prior to the end of any LIBOR Interest Period with respect to any existing LIBOR
Rate Borrowing, then the new Revolving Credit Loan or existing LIBOR Rate
Borrowing at the expiration of the LIBOR Interest Period shall be deemed to
constitute a Prime Rate Borrowing. Notwithstanding the foregoing, there shall
not be in excess of five LIBOR Rate Borrowings outstanding at any one time.
2.5 PAYMENT OF INTEREST. Until the Revolving Credit Loans shall have
been paid in full, Borrower shall pay in arrears to Agent for the account of
each Lender an amount equal to all accrued interest on the Revolving Credit
Loans on the last day of each month, commencing on the first such date following
the making of the Revolving Credit Loan, and on the last day of each month
thereafter.
2.6 REPAYMENT OF PRINCIPAL AND TERMINATION OF REVOLVING CREDIT
COMMITMENTS.
(a) On the dates that are three, four, and five years from the date
of this Agreement, Borrower shall pay Agent, for the account of each Lender, the
amount of principal necessary to reduce (i) the aggregate outstanding principal
of the Revolving Credit Loans, plus (ii) the aggregate face amount of Letters of
Credit then outstanding, to the Total Revolving Credit Commitment as of each
date.
(b) Borrower shall pay Agent for the account of each Lender all
outstanding principal, accrued interest, and other charges with respect to the
Revolving Credit Loans on November 30, 2000. The Revolving Credit Commitments
of Lenders shall automatically and permanently terminate on November 30, 2000.
2.7 BORROWING UNDER THE REVOLVING CREDIT COMMITMENTS; BORROWING
NOTICES.
(a) Borrower shall give Agent irrevocable notice (either in writing,
including facsimile, or orally) for each Prime Rate Borrowing. Borrower shall
give Agent irrevocable notice (either in writing, including facsimile, or orally
and promptly confirmed in writing) for each LIBOR Rate Borrowing at least two
Business Days (between 8 a.m. and 12 noon Seattle, Washington time) prior to the
date of the requested LIBOR Rate Borrowing.
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Each such written notice (a "Borrowing Notice") shall be in form and
substance acceptable to Agent and shall be given by, and any written notice or
confirmation of an oral notice shall be signed by, the chief executive officer,
chief operating officer, chief financial officer, or treasurer of Borrower, each
of whom is authorized to request Revolving Credit Loans and direct disposition
of any such Revolving Credit Loans until written notice by Borrower of the
revocation of such authority is received by Agent. The Borrowing Notice shall
specify the amount of the requested Revolving Credit Loan and the interest rate
option chosen by Borrower in accordance with SECTION 2.4 hereof. Each Borrowing
Notice shall be effective upon receipt, except that notices received by Agent
after 12 noon, Seattle time, on a Business Day shall be deemed to be received on
the immediately succeeding Business Day. Each Borrowing Notice and oral request
for a Prime Rate Borrowing shall be irrevocable and shall be deemed to
constitute a representation and warranty by Borrower that, as of the date of the
notice, (i) the statements set forth in ARTICLE VII hereof (except for SECTIONS
7.5, 7.10, and 7.13 hereof) are true and correct, (ii) no material adverse
change in Borrower's financial condition has occurred subsequent to the date of
the financial statements of Borrower for the most recent fiscal quarter then
ended which have been delivered to Agent, and (iii) no Event of Default has
occurred and is continuing. On receipt of such Borrowing Notice, Agent shall
promptly notify each Lender by telephone (confirmed promptly by facsimile) of
the information set forth in the Borrowing Notice. Each Lender shall before
12 noon (Seattle, Washington Time) on the specified date of borrowing make
available to Agent an amount in immediately available funds equal to the amount
of the Revolving Credit Loan to be made by such Lender. Upon fulfillment to
Agent's satisfaction of the applicable conditions set forth in SECTION 4.2
hereof, and after receipt by Agent of such funds, Agent will make such funds
available to Borrower by depositing them to the ordinary checking account
maintained by Borrower at Agent's office.
(b) Any Revolving Credit Loan made pursuant to subsection (a) above
shall be conclusively presumed to have been made to or for the benefit of
Borrower when made in accordance with such a request and direction for
disposition or when such Revolving Credit Loan is deposited to the credit of the
account of Borrower with Agent or is transmitted to any other bank with
directions to credit the same to the account of Borrower at such bank,
regardless of whether Persons other than those authorized hereunder to make
requests for Revolving Credit Loans have authority to draw against any such
account. Borrower acknowledges that Agent cannot effectively determine whether
a particular request for a Revolving Credit Loan is valid, authorized, or
authentic. It is nevertheless important to Borrower that it has the privilege
of making requests for Revolving Credit Loans in accordance with SECTION 2.7(a)
hereof. Therefore, to induce Agent to lend funds in response to such requests
and in consideration for Agent's agreement to receive and consider such
requests, Borrower assumes all risk of the validity, authenticity, and
authorization of such requests, whether or not the individual making such
requests has authority to request Revolving Credit Loans and whether or not the
aggregate sum owing exceeds the Total Revolving Credit Commitment.
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2.8 THE LETTERS OF CREDIT. Subject to and upon the terms and
conditions set forth herein, and in reliance upon the representations,
warranties, and covenants of Borrower contained herein, or made pursuant hereto,
Issuing Lender agrees from time to time during the Commitment Period to issue
for the account of Borrower and its Subsidiaries Letters of Credit, provided
that the aggregate face amount of Letters of Credit at any time outstanding
shall not exceed the lesser of (i) the Total Revolving Credit Commitment, less
(1) the aggregate principal amount of all Revolving Credit Loans then
outstanding, and (2) all Unreimbursed L/C Payments at such time, or
(ii) $20,000,000.
2.9 ISSUANCE OF LETTERS OF CREDIT.
(a) Borrower may request Issuing Lender to issue Letters of Credit by
delivering to Agent at its address specified in SECTION 10.1 hereof, a
commercial and/or standby letter of credit application and security agreement,
as the case may be, in Issuing Lender's then-customary form (the "L/C
Application"), completed to the satisfaction of Issuing Lender, and such other
certificates, documents, and other papers and information as Issuing Lender may
reasonably request.
(b) Each Letter of Credit issued hereunder shall, among other things,
(i) provide for the payment of sight drafts presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiration date occurring not later than the
expiration of the Commitment Period. Each L/C Application and each Letter of
Credit shall be subject to the Uniform Customs and, to the extent not
inconsistent therewith, the laws of the state of Washington.
2.10 PARTICIPATING INTEREST IN LETTERS OF CREDIT. Effective in the
case of each Letter of Credit as of the date of the issuance thereof, Issuing
Lender agrees to allot and does allot to each Participating Lender and such
Participating Lender severally and irrevocably agrees to take and does take in
such Letter of Credit and the related L/C Application a L/C Participating
Interest in a percentage equal to such Participating Lender's Pro Rata Share.
2.11 PROCEDURE FOR OPENING LETTERS OF CREDIT. Upon receipt of any L/C
Application from Borrower, Issuing Lender will process such L/C Application, and
the other certificates, documents, and other papers delivered to Issuing Lender
in connection therewith, in accordance with its customary procedures and shall
promptly open such Letters of Credit by issuing the original of such Letter of
Credit to the beneficiary thereof and by furnishing a copy thereof to Borrower.
Issuing Lender will send to each Participating Lender on a monthly basis a
summary of all Letters of Credit issued during such month. Issuing Lender's
failure to send such monthly summary shall not affect the obligations of each
Participating Lender under SECTION 2.12 hereof.
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2.12 LETTER OF CREDIT PAYMENTS.
(a) Borrower agrees (i) to reimburse Issuing Lender, immediately upon
its demand and otherwise in accordance with the terms of the L/C Application
relating thereto, for any payment made by Issuing Lender under any Letter of
Credit in accordance with its terms or at Borrower's request and (ii) to pay
interest on any unreimbursed payment in respect of any Letter of Credit from the
date of such payment until reimbursement in full thereof at a rate per annum
equal to the rate that would then be payable on any outstanding Prime Rate
Borrowings.
(b) In the event that Issuing Lender makes a payment in respect of
any Letter of Credit and is not reimbursed in full therefor forthwith upon
demand of Issuing Lender ("Unreimbursed L/C Payment"), and otherwise in
accordance with the terms of the related L/C Application, Issuing Lender will
promptly notify the Participating Lenders. Forthwith upon its receipt of any
such notice, each Participating Lender will transfer to Issuing Lender in
immediately available funds, an amount equal to its Pro Rata Share of such
Unreimbursed L/C Payment. Upon its receipt from each Participating Lender of
such amount, Issuing Lender will complete, execute and deliver to such
Participating Lender a letter of credit participation certificate (a "Letter of
Credit Participation Certificate"), in the form attached hereto as EXHIBIT B
dated the date of such receipt and in such amount.
(c) Whenever, at any time after Issuing Lender has made a payment in
respect of any Letter of Credit, and has received a Participating Lender's Pro
Rata Share of such Unreimbursed L/C Payment, Issuing Lender receives any
reimbursement on account of such Unreimbursed L/C Payment or any payment of
interest on account thereof, Issuing Lender will distribute to such
Participating Lender its Pro Rata Share thereof; provided, however, that in the
event that the receipt by Issuing Lender of such reimbursement or such payment
of interest, as the case may be, is required to be returned, such Participating
Lender will return to Issuing Lender any portion thereof previously distributed
by Issuing Lender to it.
2.13 LETTER OF CREDIT FEES.
(a) Borrower agrees to pay to Issuing Lender, for the account of
Issuing Lender and the Participating Lenders, a fee at the time of the issuance
of each Standby Letter of Credit in an amount equal to .75 percent per annum of
the face amount of each such Letter of Credit.
(b) Borrower agrees to pay to Issuing Lender, for the account of
Issuing Lender and the Participating Lenders, a fee at the time of the issuance
of each Commercial Letter of Credit in an amount equal to .375 percent of the
face amount of each such Letter of Credit.
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(c) In conjunction with the monthly statement to be sent by Issuing
Lender to each Participating Lender pursuant to SECTION 2.11 hereof, Issuing
Lender will distribute to each Participating Lender its Pro Rata Share of the
remaining issuance fees for such Letters of Credit. No payment of fees shall be
made to Participating Lenders with respect to the Existing Letters of Credit.
2.14 FURTHER ASSURANCES. Borrower hereby agrees, from time to time,
to do and perform any and all acts and to execute any and all further
instruments reasonably requested by Agent or Issuing Lender to effect more fully
the purposes of this Agreement and to issue the Letters of Credit hereunder.
2.15 OBLIGATIONS ABSOLUTE. The payment obligations of Borrower under
this Agreement shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:
(a) The existence of any claim, setoff, defense, or other right that
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), Issuing Lender, Agent or any Lender, or any other
Person, whether in connection with this Agreement, the transactions contemplated
herein, or any unrelated transaction;
(b) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid, or unenforceable in any
respect or any statement therein being untrue or inaccurate in any respect, so
long as Agent has not engaged in willful misconduct or gross negligence in
connection therewith; or
(c) Payment by Issuing Lender at the request of Borrower under any
Letter of Credit against presentation of any draft or certificate which does not
comply with the terms of such Letter of Credit.
2.16 ASSIGNMENTS. No Participating Lender's participation in any
Letter of Credit, or any of its rights or duties hereunder shall be subdivided,
assigned, or transferred without the prior written consent of Issuing Lender.
Such consent may be given or withheld without the consent or agreement of any
other Participating Lender.
2.17 LETTER OF CREDIT AND LENDER'S ACCEPTANCE RESERVES.
(a) If any future imposition of any Applicable Law or any change in
any Applicable Law or change in the interpretation or application of any
Applicable Law or compliance by Issuing Lender with any request or directive
(whether or not in the course of law) from any central bank or other
Governmental Body shall either (i) impose, modify, deem,
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or make applicable any reserve, special deposit, assessment or similar
requirement against Letters of Credit issued by Issuing Lender or (ii) impose
upon Issuing Lender any other condition regarding this Agreement, any Letter of
Credit, and the result of any event referred to in clause (i) or (ii) above
shall be to increase the cost to Issuing Lender of issuing or maintaining any
Letter of Credit (which increase in costs shall be the result of Issuing
Lender's reasonable allocation of the aggregate of such costs increases
resulting from such events), then upon demand by Issuing Lender, Borrower shall
immediately pay to Issuing Lender, from time to time as specified by Issuing
Lender, additional amounts which shall be sufficient to compensate Issuing
Lender for such increased costs, together with interest on each such amount from
the date demanded until payment in full thereof at a rate per annum equal to the
Prime Rate. A certificate as to such increased costs incurred by Issuing
Lender, submitted by Issuing Lender to Borrower, shall be conclusive, absent
manifest error, as to the amount thereof. To the extent that Issuing Lender is
unable to calculate any additional amount it is entitled to claim pursuant to
this SECTION 2.17 until after termination of this Agreement and payment of the
Note, this covenant shall survive the termination of this Agreement and payment
of Note.
(b) Borrower agrees that the provisions of the foregoing paragraph
(a), the provisions of each L/C Application providing for the reimbursement of
payment to Issuing Lender in the event of the imposition or implementation of,
or increase in, any reserve, special deposit or similar requirement in respect
of the Letter of Credit relating thereto shall apply equally to each
Participating Lender in respect of its L/C Participating Interest in such Letter
of Credit.
2.18 EXISTING LETTERS OF CREDIT. Notwithstanding anything to the
contrary herein, as of the date of this Agreement, all of the Existing Letters
of Credit shall be deemed to be Letters of Credit issued hereunder and shall be
subject to all of the terms and provisions of this Agreement, including all
terms and provisions applicable to Letters to Credit under this Agreement. Each
Lender agrees that its obligations with respect to Letters of Credit pursuant to
SECTIONS 2.8 through 2.13 shall, as of the date of this Agreement, include the
Existing Letters of Credit. With respect to each Existing Letter of Credit, for
the period commencing on the date of this Agreement to and including the
expiration date of any such Existing Letter of Credit, Borrower shall not be
required to pay the letter of credit fees provided for in SECTION 2.13 herein.
2.19 UNUSED PORTION FEE. Borrower agrees to pay Agent, for the
account of Lenders based upon each Lender's Pro Rata Share, a fee for the
Revolving Credit Commitment in an amount equal to 0.10 percent per annum of the
average unused portion of the Total Revolving Credit Commitment; provided,
however, that for purposes of the calculation of the unused portion fee only (a)
from the date of this Agreement through October 31, 1996, the amount of the
Total Revolving Credit Commitment shall be considered to be $45,000,000, (b)
from November 1, 1996, through October 31, 1997, the amount of the Total
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Revolving Credit Commitment shall be considered to be $52,000,000, and (c)
thereafter the amount of the Total Revolving Credit Commitment shall be
considered to be that set forth in the definition of "Total Revolving Credit
Commitment" set forth in SECTION 1.1 herein. Such fee shall accrue from and
include the date of this Agreement throughout the term of the Revolving Credit
Loans and shall be payable quarterly in arrears on the last day of April, July,
October, and January and on any day that the Revolving Credit Loans are paid in
full and Lenders' commitment to make further Fundings under the Revolving Credit
Commitment has expired or terminated. Computations of such fee shall be based
on an 360-day year for the actual number of days elapsed.
ARTICLE III. GENERAL PROVISIONS APPLICABLE TO THE LOANS
3.1 MANNER OF PAYMENT. All sums payable to Agent pursuant to this
Agreement shall be paid directly to Agent in immediately available United States
funds. Borrower authorizes Agent to debit Borrower's account No. 0227329372
maintained at U. S. Bank to make all payments due under this Agreement, the
Note, and the other Loan Documents. Whenever any payment to be made hereunder
or on any of the Note becomes due and payable on a day other than a Business
Day, such payment may be made on the next succeeding Business Day and such
extension of time shall in such case be included in computing interest on such
payment.
3.2 STATEMENTS. Agent shall send Borrower statements of all amounts
due hereunder; the statements shall be considered correct and conclusively
binding, absent manifest error, on Borrower unless Borrower notifies Agent to
the contrary within 60 days of receipt of any statement that Borrower claims to
be incorrect. Borrower agrees that accounting entries made by Agent with
respect to Borrower's loan accounts shall constitute evidence of all
disbursements of Loan proceeds and payments made on the Loans. Without limiting
the methods by which Agent may otherwise be entitled by Applicable Law to make
demand for payment of the Loans upon Borrower, Borrower agrees that any
statement, invoice, or payment notice from Agent to Borrower with respect to any
principal or interest obligation of Borrower to Agent shall be deemed to be a
demand for payment in accordance with the terms of such statement, invoice, or
payment notice. Under no circumstances shall a demand by Agent for partial
payment of principal or interest or both be construed as a waiver by Agent of
its right thereafter to demand and receive payment (in part or in full) of any
remaining principal or interest obligation.
3.3 BOOK ENTRY LOAN ACCOUNT. Agent shall establish a book entry loan
account for each of the Loans in which Agent will make debit entries of all
Fundings pursuant to the terms of this Agreement. Agent will also record in the
applicable loan account, in accordance with customary banking practices, all
interest and other charges, expenses, and other items properly chargeable to
Borrower, if any, together with all payments made by
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Borrower on account of the Indebtedness evidenced by Borrower's respective loan
accounts and all other sums credited to the respective loan accounts. The debit
balance of Borrower's respective loan accounts shall reflect the amount of
Borrower's Indebtedness to Lenders from time to time by reason of advances,
charges, payments, or credits.
3.4 COMPUTATIONS OF INTEREST AND FEES. All computations of interest
and fees shall be based on a 360-day year for the actual number of days elapsed.
Upon Borrower's request, Agent shall as soon as practicable notify Borrower and
Lenders of each determination of an LIBOR Rate. A change in the interest rate
on a Loan resulting from a change of the Prime Rate shall become effective as of
the opening of business on the day on which such change in the Prime Rate
becomes effective.
3.5 DEFAULT INTEREST. Upon the occurrence and during the continuance
of any Event of Default then (a) all LIBOR Rate Borrowings shall be converted
into Prime Rate Borrowings at the end of the applicable LIBOR Interest Periods
for such LIBOR Rate Borrowings (which conversion shall occur automatically), and
(b) the interest rate charged on all Prime Rate Borrowings may, at the option of
Agent, be increased to a rate of interest equal to 2 percent per annum in excess
of the Prime Rate.
3.6 MAXIMUM INTEREST RATE. Notwithstanding any provision contained
herein or in the Note, the total liability of Borrower for payment of interest
pursuant hereto, including late charges, shall not exceed the maximum amount of
interest permitted by Applicable Law to be charged, collected, or received from
Borrower; and if any payments by Borrower include interest in excess of that
maximum amount, Lenders shall apply the excess first to reduce the unpaid
balance of the Loans, then the excess shall be returned to Borrower.
3.7 LATE CHARGE. If any payment of principal or interest required
under any of the Loans is 15 days or more past due, Borrower shall pay to Agent
a late charge of 5 percent of the delinquent payment or $5, whichever is
greater, for each such late payment. The 15 day period provided for herein
shall not be construed as a waiver of any Default or Event of Default resulting
from any late payment under any of the Loans.
3.8 PREPAYMENTS. Borrower may prepay all or any portion of any Prime
Rate Borrowing without penalty or premium. In the event Borrower prepays all or
any part of any LIBOR Rate Borrowing prior to the expiration of the applicable
Interest Period, other than in response to action taken by Agent pursuant to
SECTION 3.9(C), Borrower shall pay to Agent a yield maintenance premium in an
amount calculated pursuant to the prepayment formula attached hereto as EXHIBIT
C. All prepayments shall be applied to the last maturing principal payment due
under the Loans being prepaid.
3.9 LIBOR RATE BORROWING PROVISIONS.
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(a) Borrower may obtain LIBOR Borrowing Rate quotes from Agent
between 8 a.m. and 12 noon (Seattle, Washington time) on any Business Day. Any
LIBOR Borrowing Rate quoted (i) before 10 a.m. shall be based on the LIBOR Rate
determined as of approximately 8 a.m. on such day, and Borrower may request an
advance at such rate only by giving Agent notice in accordance with SECTION 2.7
hereof before 10 a.m. on such date; and (ii) between 10 a.m. and 12 noon shall
be based on the LIBOR Rate determined as of approximately 10 a.m. on such day,
and Borrower may request an advance at such rate only by giving Agent notice in
accordance with SECTION 2.7 hereof not later than 12 noon on such date.
(b) If at any time the LIBOR Rate is unascertainable or unavailable
to any Lender or if LIBOR Rate loans become unlawful, the option to select the
LIBOR Borrowing Rate shall terminate immediately. If the LIBOR Borrowing Rate
then is in effect, (i) it shall terminate automatically with respect to all
LIBOR Rate Borrowings (1) on the last day of each then applicable LIBOR Interest
Period, if Lenders may lawfully continue to maintain such loans, or
(2) immediately if any Lender may not lawfully continue to maintain such loans
through such day, and (ii) subject to SECTION 3.5 hereof, the Prime Borrowing
Rate automatically shall become effective as to such amounts upon such
termination.
(c) If at any time after the date hereof (i) any revision in or
adoption of any applicable law, rule, or regulation or in the interpretation or
administration thereof (1) shall subject any Lender or its Eurodollar lending
office to any tax, duty, or other charge, or change the basis of taxation of
payments to any Lender with respect to any loans bearing interest based on the
LIBOR Rate, or (2) shall impose or modify any reserve, insurance, special
deposit, or similar requirements against assets of, deposits with or for the
account of, or credit extended by any Lender or its Eurodollar lending office,
or impose on any Lender or its Eurodollar lending office any other condition
affecting any such loans, and (ii) the result of any of the foregoing is (1) to
increase the cost to any Lender of making or maintaining any such loans or
(2) to reduce the amount of any sum receivable under this Agreement or the Note
by any Lender or its Eurodollar lending office, Borrower shall pay Agent for the
account of Lenders within 15 days after demand by Agent such additional amount
as will compensate such Lenders for such increased cost or reduction. The
determination hereunder by Agent of such additional amount shall be conclusive
in the absence of manifest error. If any Lender or Agent demands compensation
under this SECTION 3.9(C), Borrower may upon three Business Days notice to Agent
pay the accrued interest on all LIBOR Rate Borrowings, together with any
additional amounts payable under SECTION 3.9(C). Subject to SECTION 3.5 hereof,
upon Borrower's paying such accrued interest and additional costs, the Prime
Borrowing Rate immediately shall be effective with respect to the unpaid
principal balance of such LIBOR Rate Borrowings.
(d) Upon any termination of any LIBOR Rate Borrowing as a result of
(i) acceleration under SECTION 8.2 hereof, or (ii) repayment in response to a
notice under SECTION 3.9(C) hereof, Borrower shall pay to Agent on behalf of
Lenders on demand such
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amount as Agent reasonably determines (determined as though 100 percent of the
applicable LIBOR Rate Borrowing had been funded in the applicable Eurodollar
market) is equivalent to all direct or indirect losses, expenses, liabilities,
or reductions in yield to Lenders resulting therefrom, whether incurred in
connection with liquidation or reemployment of funds or otherwise.
(e) If Borrower chooses the LIBOR Borrowing Rate, Borrower shall pay
interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lenders may have obtained the funds loaned to Borrower
from sources other than the applicable Eurodollar market. Agent's determination
of the LIBOR Borrowing Rate and any such taxes or charges shall be conclusive in
the absence of manifest error. At Borrower's request, Agent shall provide
Borrower with information reflecting how Agent determined the LIBOR Rate.
(f) Notwithstanding any other term of this Agreement, Borrower may
not select the LIBOR Borrowing Rate if a Default or an Event of Default
hereunder has occurred and is continuing.
(g) Nothing contained in this Agreement, including without limitation
the determination of any LIBOR Interest Period or Agent's quotation of any LIBOR
Borrowing Rate, shall be construed to prejudice Lenders' right to decline to
make any requested Revolving Credit Loan.
3.10 LOAN FEE. Borrower agrees to pay to U. S. Bank, for its own
account, a nonrefundable loan fee pursuant to the terms of letter agreement
dated of even date herewith between U. S. Bank and Borrower.
3.11 PRO RATA TREATMENT AND PAYMENTS.
(a) Each Loan, each payment by Borrower on account of any fee paid
for the benefit of Lenders hereunder (other than as set forth in
SECTIONS 2.13(c) and 3.10 hereof) and any reduction of the Revolving Credit
Commitments of Lenders hereunder shall be made pro rata according to the
respective Pro Rata Shares of Lenders. Each payment (including each prepayment)
by Borrower on account of principal of and interest on the Loans shall be made
pro rata according to the Pro Rata Share of each Lender. Agent shall distribute
such payments to Lenders promptly on receipt in like funds as received. All
payments made by Agent to a Lender shall be via federal wire transfer.
(b) Unless Agent shall have been notified in writing by any Lender
prior to a Borrowing Date that such Lender will not make available the amount
that would constitute its Pro Rata Share of the Loan on such date available to
Agent, Agent may assume that such Lender has made such amount available to Agent
on such Borrowing Date and Agent may, in reliance upon such assumption, make
available to Borrower a corresponding amount. If such
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amount is made available to Agent on a date after such Borrowing Date, such
Lender shall pay to Agent on demand an amount equal to the product of (i) the
daily average federal funds rate during such period as quoted by Agent, times
(ii) the amount of such Lender's Pro Rata Share of such Loan, times (iii) a
fraction the numerator of which is the number of days that elapse from and
including such Borrowing Date to the date on which such Lender's Pro Rata Share
of such Loan shall have become immediately available to Agent and the
denominator of which is 360. A certificate of Agent submitted to any Lender
with respect to any amount owing under this SECTION 3.11(B) shall be conclusive,
absent manifest error.
(c) All payments (other than prepayments) made by Borrower hereunder
shall be credited, to the extent of the amount thereof, in the following manner:
(i) first, against fees, expenses, and indemnities due hereunder; (ii) second,
against accrued interest on all amounts in default (including drawn amounts of
Letters of Credit); (iii) third, against accrued interest on Revolving Credit
Loans not in default; and (iv) fourth, against principal of Revolving Credit
Loans; provided, however, that if an Event of Default has occurred and is
continuing at the time of such payment, then Agent shall be entitled to apply
the payment in the manner it shall deem appropriate.
ARTICLE IV. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT FOR INITIAL LOANS. The obligation of each
Lender to make the initial Funding hereunder is subject to the satisfaction of
the following conditions precedent:
(a) Agent shall have received this Agreement, with a counterpart for
each Lender, and the Revolving Credit Note, duly executed and delivered by the
respective parties thereto.
(b) Agent shall have received, with a counterpart for each Lender,
duly executed and delivered by Borrower, an amended and restated security
agreement in the form attached hereto as EXHIBIT D ("Security Agreement"),
granting to Agent for its benefit and the ratable benefit of Lenders a first
priority security interest in all of the accounts, inventory, general
intangibles, trademarks, trade names, service marks, patents, and applications
therefor, chattel paper, and documents of Borrower, now owned or hereafter
acquired, together with the proceeds thereof.
(c) Agent shall have received, with a counterpart for each Lender,
duly executed and delivered by each United States Subsidiary of Borrower, a
security agreement in the form attached hereto as EXHIBIT E ("Subsidiary
Security Agreement"), granting to Agent for its benefit and the ratable benefit
of Lenders a first priority security interest in all of the accounts, inventory,
general intangibles, trademarks, trade names, service marks, patents, and
applications therefore, chattel paper, and documents of each such Subsidiary,
now owned or
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hereafter acquired, together with the proceeds thereof, as well as an
unconditional guaranty in the form attached hereto as EXHIBIT F ("Guaranty").
(d) Agent shall have received, duly executed and delivered by
Borrower or Borrower's Subsidiary, such financing statements and other documents
deemed necessary by Agent to perfect the security interests granted to Agent for
its benefit and the ratable benefit of Lenders.
(e) Agent shall have received from counsel for Borrower, with a
counterpart for each Lender, an opinion addressed to Agent and Lenders and dated
as of the date of this Agreement, in the form attached hereto as EXHIBIT G.
(f) No Default or Event of Default hereunder shall exist, and after
having given effect to the requested Loan or Letter of Credit, no Default or
Event of Default shall exist.
(g) All representations and warranties of Borrower contained herein
or otherwise made in writing in connection herewith shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the initial Loan or Letter of
Credit.
(h) All corporate proceedings of Borrower shall be satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including records of all corporate proceedings, that
Agent has requested in connection therewith, such documents where appropriate to
be certified by proper corporate authorities or Governmental Bodies. Borrower
shall provide Agent with the following documents prior to or upon the execution
of this Agreement:
(i) Copies of the certificate of incorporation of Borrower,
together with all amendments thereto, certified by Borrower to be true
and complete;
(ii) A certificate of authority for Borrower in the states of
Delaware and Washington, dated within 30 days of the date of the
execution of this Agreement; and
(iii) A certified resolution of the directors and incumbency
certificate of Borrower and each United States Subsidiary of Borrower,
in the forms attached hereto as EXHIBITS H-1 and H-2, respectively.
(i) Agent shall have received such evidence deemed necessary by Agent
that Agent's security interests in the Collateral constitute first priority and,
together with the
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security interests granted to Private Lenders, exclusive security interests,
except as otherwise provided herein.
(j) Agent shall have received a Borrowing Notice from Borrower for
the initial Funding hereunder.
(k) Agent shall have received insurance certificates and lender loss
payable endorsements on casualty/property loss insurance in forms satisfactory
to Agent to the effect set forth in SECTION 5.5 hereof.
(l) There shall have been no material adverse change in the financial
condition of Borrower or any of Borrower's Subsidiaries, between July 12, 1995,
and the date of this Agreement.
(m) Agent shall have received a statement describing all material
litigation involving Borrower or its Subsidiaries, certified as true by its
legal counsel, in form and substance satisfactory to Agent.
(n) Agent shall have received for its account the fees referred to in
SECTION 3.10.
(o) Agent shall have received, with a counterpart for each Lender,
duly executed and delivered by Private Lenders, an intercreditor agreement in
the form attached hereto as EXHIBIT I.
4.2 CONDITIONS PRECEDENT TO ALL LOANS, ETC. The obligation of each
Lender to make any Revolving Credit Loan and the obligation of Issuing Bank to
issue any Letter of Credit, is subject to the fulfillment, to the satisfaction
of Agent, of the following conditions precedent on the date such Loan is made or
such Letter of Credit is issued:
(a) The conditions set forth in SECTION 4.1 shall have been
previously satisfied, and Agent shall have received evidence satisfactory to
Agent of satisfaction thereof.
(b) Agent shall have received for each requested Revolving Credit
Loan, a Borrowing Notice, and for each requested Letter of Credit, an L/C
Application.
(c) There shall be executed and delivered to Agent such further
instruments, agreements, and documents, as may be reasonably necessary or proper
in the opinion of Agent to confirm the obligations of Borrower to Agent and
Lenders hereunder, the grant of security therefor, and the proper use of the
proceeds of all Revolving Credit Loans.
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(d) Upon request by Agent, there shall be executed and delivered to
Agent, unconditional and absolute guaranties of Borrower's payment of the
Obligations and performance of its other obligations under this Agreement, made
by such Subsidiaries of Borrower as designated by Agent.
(e) At the request of Agent, there shall be executed and delivered to
Agent such instruments, agreements, and documents as may be reasonably necessary
or proper in the opinion of Agent to grant to Agent for its benefit and the
ratable benefit of Lenders a first priority security interest in all personal
property of any Subsidiary that Borrower may acquire after the date of this
Agreement.
(f) At the request of Agent, there shall be executed and delivered to
Agent such pledge agreements as may be reasonably necessary or proper in the
opinion of the Agent to grant to Agent for its benefit and the ratable benefit
of Lenders a first priority security interest in all shares of stock
representing Borrower's ownership of any Subsidiary that Borrower may acquire
after the date of this Agreement.
(g) The representations and warranties of Borrower in ARTICLE VII
hereof (except for SECTIONS 7.5, 7.10, and 7.13 hereof) shall be true on the
date of each Loan or issuance of each Letter of Credit with the same force and
effect as if made on and as of that date.
(h) No Default or Event of Default shall exist, and after having
given effect to the requested Loan or Letter of Credit, no Default or Event of
Default shall exist.
(i) To the extent not previously delivered, all other documents,
agreements, and instruments from or with respect to Borrower or any other Person
that may be called for hereunder shall be duly executed and delivered to Agent,
including but not limited to all documents, agreements, and instruments deemed
necessary by Agent to perfect its security interest in Collateral acquired after
the date of this Agreement. For the purposes of this Agreement, the waiver of
delivery of any document, agreement, or instrument from or with respect to
Borrower or any other Person does not constitute a continuing waiver with
respect to the obligation to fulfill the conditions precedent to the making or
renewal of each Loan and the issuance of each Letter of Credit hereunder.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that so long as this Agreement is
in effect, the Note remains outstanding and unpaid, any amount remains available
to be drawn under any Letter of Credit, or any Obligation remains outstanding,
Borrower shall and shall cause each of its Subsidiaries to:
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5.1 FINANCIAL DATA. Keep its books of account in accordance with
GAAP, consistently applied, and furnish to Agent:
(a) As soon as practicable and in any event within 45 days after the
close of each fiscal quarter of Borrower, (i) Borrower's 10-Q reports filed with
the Securities and Exchange Commission, and (ii) the following consolidated
unaudited financial statements of Borrower for each such fiscal quarter, all in
reasonable detail and certified by Borrower to present fairly in all material
respects the financial position of Borrower: balance sheet, statement of
income, and statement of cash flows.
(b) As soon as practicable and in any event within 90 days after the
close of each fiscal year of Borrower, (i) Borrower's 10-K reports filed with
the Securities and Exchange Commission, and (ii) the following consolidated
financial statements of Borrower, setting forth the corresponding figures for
the previous fiscal year in comparative form where appropriate, all in
reasonable detail and audited (without any qualification or exception deemed
material by Agent) by Borrower's current independent certified public accountant
or such other independent certified public accountants selected by Borrower and
satisfactory to Agent: balance sheet, statement of income, and statement of
cash flows. Borrower shall provide Agent with a copy of its independent
certified public accountants' management letter or other similar report or
correspondence to Borrower promptly upon receipt by Borrower.
(c) Concurrently with (a) and (b), a certificate of the chief
financial officer (or in his absence the corporate controller, treasurer, or
assistant treasurer) of Borrower, (i) certifying that during such period (for
purposes of compliance with financial covenants, such certificate shall specify
that as of the date of such financial statements Borrower is not in Default with
respect to such financial covenants) no Default or Event of Default existed or
if any such Default or Event of Default existed, specifying the nature thereof,
the period of existence thereof, and what action Borrower proposes to take or
has taken with respect thereto; and (ii) demonstrating compliance (by providing
calculations or otherwise, in reasonable detail), as of the dates of the
financial statements being furnished at such time, with the covenants set forth
in SECTIONS 6.14, 6.15, 6.17, 6.18 (with the quarterly and annual financial
statements required under subsections (a) and (b) above) and 6.16 (only with the
annual financial statements required under subsection (b) above).
(d) Upon request by Agent, consolidating balance sheets by entity for
Borrower and each of the Subsidiaries.
(e) As soon as practicable and in any event within 45 days after the
close of each fiscal quarter of Borrower accounts receivable and accounts
payable agings for each such quarter in a form and in such detail as is
acceptable to Agent.
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(f) Upon request by Agent, copies of all reports relative to the
operations of Borrower, its Subsidiaries and their Affiliates prepared for
Borrower's shareholders or filed with the Securities and Exchange Commission.
(g) As soon as practicable and in any event within 90 days after the
beginning of each fiscal year of Borrower, a budget of the financial operations
of Borrower and its Subsidiaries for each such year in a form and in such detail
as is acceptable to Agent.
(h) Promptly upon the occurrence of any Default or Event of Default,
a certificate signed by Borrower, specifying the nature thereof, the period of
existence thereof, and what action Borrower proposes to take or has taken with
respect thereto.
(i) With reasonable promptness, such other information regarding the
business, operations, and financial condition of Borrower and its Subsidiaries
as Agent or any Lender may from time to time reasonably request.
5.2 LICENSES AND PERMITS. Maintain all material Governmental
Approvals and all related or other material agreements necessary for Borrower to
operate its business, as it now exists or as it may be modified or expanded.
Borrower will at all times comply with all Applicable Laws materially relating
to the operations, facilities, or activities of Borrower or its Subsidiaries.
5.3 MAINTENANCE OF PROPERTIES. Keep Borrower's properties in good
repair and in good working order and condition, in a manner consistent with past
practices and comparable to industry standards; from time to time make all
appropriate and proper repairs, renewals, replacements, additions, and
improvements thereto; and keep all equipment that may now or in the future be
subject to compliance with any Applicable Laws in full compliance with such
Applicable Laws.
5.4 PAYMENT OF CHARGES. Duly pay and discharge all material
(a) Taxes, imposed on or against Borrower or its property or assets, or upon any
property leased by Borrower, prior to the date on which penalties attached
thereto, unless and to the extent only that such Taxes, after written notice
thereof having been given to Agent, are being contested in good faith and by
appropriate proceedings, (b) claims allowed by Applicable Laws, whether for
labor, materials, rentals, or anything else, which could, if unpaid, become a
Lien upon Borrower's property or assets or the outstanding capital stock of
Borrower or adversely affect the facilities or operations of Borrower, (unless
and to the extent only that the validity thereof is being contested in good
faith and by appropriate proceedings after written notice thereof has been given
to Agent); (c) Trade Payables in accordance with the terms thereof or generally
prevailing industry standards; and (d) other Indebtedness heretofore or
hereafter incurred or assumed by Borrower, unless such Indebtedness be renewed
or extended. In the event any
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<PAGE>
charge is being contested by Borrower or its Subsidiaries as allowed above,
Borrower or its Subsidiaries shall establish adequate reserves against possible
liability therefor.
5.5 INSURANCE.
(a) Maintain insurance upon Borrower's properties and business
insuring against such risks in accordance with prevailing industry standards.
Borrower shall cause each insurance policy issued in connection therewith to
provide and shall cause the insurer issuing such policy to certify to Agent that
(i) if such insurance is proposed to be canceled or materially changed for any
reason whatsoever, such insurer will promptly notify Agent, and such
cancellation or change shall not be effective as to Agent for 30 days after
receipt by Agent of such notice, unless the effect of the change is to extend or
increase coverage under the policy; (ii) Agent will have the right at its
election to remedy any default in the payment of premiums within 30 days of
notice from the insurer of the default; and (iii) loss payments from
casualty/property loss insurance in excess of $250,000 in each instance will be
payable jointly to the Borrower and Agent as secured party or otherwise as its
interest may appear.
(b) From time to time upon request by Agent, promptly furnish or
cause to be furnished to Agent evidence, in form and substance satisfactory to
Agent, of the maintenance of all insurance, indemnities, or bonds required by
this SECTION 5.5 or by any license, lease, or other agreement to be maintained,
including but not limited to copies as Agent may request of policies,
certificates of insurance, riders, assignments, and endorsements relating to the
insurance and proof of premium payments.
5.6 INSPECTION. Allow any representative of Agent to visit and
inspect any of the properties of Borrower, to examine the books of account and
other records and files of Borrower, and to discuss the affairs, business,
finances, and accounts of Borrower and its Subsidiaries with their officers,
employees, and accountants, all at such reasonable times and as often as Agent
may desire.
5.7 HAZARDOUS SUBSTANCES.
(a) Borrower hereby covenants and agrees that so long as any
Obligation is outstanding:
(i) Borrower will not permit its property, any property of any
of its Subsidiaries, or any portion thereof to be a site for the
storage, use, generation, manufacture, disposal or transportation of
Hazardous Materials, except for supplies used in the ordinary course
of Borrower's business in compliance with all Hazardous Materials
laws;
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<PAGE>
(ii) Borrower will not permit any Hazardous Materials to be
disposed of off its property or any property of any of its
Subsidiaries other than in properly licensed disposal sites;
(iii) Borrower, at Borrower's sole cost and expense, will
keep and maintain its property, the property of its Subsidiaries and
each portion thereof in compliance with and shall not cause or permit
its property or any portion thereof to be in violation of any
Hazardous Materials Laws; and
(iv) Borrower will immediately advise U. S. Bank in writing of
any Hazardous Material Claim.
(b) Borrower agrees to indemnify Agent and Lenders and hold them
harmless from and against any and all claims, demands, damages, losses, liens,
liabilities, penalties, fines, lawsuits, and other proceedings and costs and
expenses (including attorney fees), arising directly or indirectly from or out
of or in any way connected with (i) the accuracy of the representations
contained in SECTION 7.18 hereof; (ii) any activities on its property or the
property of its Subsidiaries during Borrower's or its Subsidiaries' ownership,
possession, or control of such property which directly or indirectly results in
such property or any other property becoming contaminated with Hazardous
Materials; (iii) the discovery of Hazardous Materials on its property or any of
its Subsidiaries' property; (iv) the cleanup of Hazardous Materials from its
property or any of its Subsidiaries' property; and (v) the discovery of
Hazardous Materials or the cleanup of Hazardous Materials from adjacent or other
property that has become contaminated as a result of any activity on Borrower's
property or the property of its Subsidiaries. As among Borrower, Agent, and
Lenders, Borrower acknowledges that it will be solely responsible for all costs
and expenses relating to the cleanup of Hazardous Materials from its property,
the property of its Subsidiaries, or any other properties that become
contaminated with Hazardous Materials as a result of activities on or the
contamination of its property or the property of its Subsidiaries.
(c) Borrower's obligations under this SECTION 5.7 are unconditional
and shall not be limited by any nonrecourse or other limitations of liability
provided for in the Loan Documents. The representations, warranties, and
covenants of Borrower set forth in this SECTION 5.7 and SECTION 7.18 hereof
(including but not limited to the indemnity provided for in SECTION 5.7(B)
above) shall survive the closing and repayment of the Loans to Borrower; and, to
the extent permitted by Applicable Laws and Hazardous Materials Laws, shall
survive the transfer of its property by foreclosure proceedings (whether
judicial or nonjudicial), deed in lieu of foreclosure, or otherwise. Borrower
acknowledges and agrees that its covenants and obligations hereunder are
separate and distinct from its obligations under the Loans and the Loan
Documents.
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<PAGE>
5.8 CORPORATE EXISTENCE. Maintain and preserve the corporate
existence of Borrower.
5.9 NOTICE OF DISPUTES AND OTHER MATTERS. Promptly give written
notice to Agent of:
(a) Any citation, order to show cause, or other legal process or
order that could have a material adverse effect on Borrower, directing Borrower
to become a party to or to appear at any proceeding or hearing by or before any
Governmental Body that has granted to Borrower any Governmental Approval, and
include with such notice a copy of any such citation, order to show cause, or
other legal process or order;
(b) Any (i) refusal, denial, threatened denial, or failure by any
Governmental Body to grant, issue, renew, or extend any material Governmental
Approval; (ii) proposed or actual revocation, termination, or modification
(whether favorable or adverse) of any material Governmental Approval by any
Governmental Body; (iii) dispute or other action with regard to any material
Governmental Approval by any Governmental Body; (iv) notice from any
Governmental Body of the imposition of any material fines or penalties or
forfeitures; or (v) threats or notice with respect to any of the foregoing or
with respect to any proceeding or hearing that might result in any of the
foregoing;
(c) Any dispute concerning or any threatened nonrenewal or
modification of any material lease for real or personal property to which
Borrower is a party; or
(d) Any actions, proceedings, or claims of which Borrower may have
notice that may be commenced or asserted against Borrower in which the amount
involved is $500,000 or more and is not covered by insurance (excluding
deductibles and self-insured retention) or which, if not solely a claim for
monetary damages, could, if adversely determined, have a material adverse effect
on Borrower.
5.10 EXCHANGE OF NOTE. Upon receipt of a written notice of loss,
theft, destruction, or mutilation of the Note, and upon surrendering such Note
for cancellation if mutilated, execute and deliver a new Note or a Note of like
tenor in lieu of such lost, stolen, destroyed, or mutilated Note. Any Note
issued pursuant to this SECTION 5.10 shall be dated so that neither gain nor
loss of interest shall result therefrom.
5.11 MAINTENANCE OF LIENS. At all times maintain the liens and
security interests provided under or pursuant to this Agreement as valid and
perfected first Liens on the property and assets intended to be covered thereby.
Except as contemplated under SECTION 6.3, Borrower shall take all action
requested by Agent necessary to assure that Agent for itself and Lenders has a
valid and exclusive Lien on all Collateral.
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5.12 OTHER AGREEMENTS. Comply with all covenants and agreements set
forth in or required pursuant to any of the other Loan Documents.
5.13 AFTER-ACQUIRED COLLATERAL. At the request of Agent, execute and
deliver to Agent appropriate instruments in order to effectuate the proper
granting and perfection of a first priority security interest in or assignment
of all accounts, inventory, general intangibles, chattel paper, documents and
similar property hereafter acquired by Borrower, concurrently with the
acquisition thereof.
5.14 FURTHER ASSURANCES. Within ten days of request by Agent, duly
execute and deliver or cause to be duly executed and delivered to Agent such
further instruments, agreements, and documents and do or cause to be done such
further acts as may be necessary or proper in the opinion of Agent to carry out
more effectively the provisions and purpose of this Agreement and the other Loan
Documents.
5.15 MAINTENANCE OF BANK ACCOUNTS. As security for repayment of the
Loans, maintain its principal United States cash concentration and disbursement
accounts with Agent. Borrower hereby grants to Agent for its benefit and the
ratable benefit of Lenders, a security interest in all such accounts in order to
secure the repayment of the Obligations.
5.16 GUARANTIES AND SECURITY AGREEMENTS FROM SUBSIDIARIES. Subject to
SECTION 6.7 hereof, after any entity becomes a United States Subsidiary of
Borrower, such Subsidiary shall execute and deliver to Agent, promptly upon
Agent's request (a) a Guaranty, (b) a Subsidiary Security Agreement granting
Agent for its benefit and the ratable benefit of Lenders a first priority and
exclusive security interest in all accounts, inventory, and general intangibles
of such Subsidiary, and (c) such other documents and agreements as Agent may
reasonably request. All of the foregoing documents shall be in form and
substance satisfactory to Agent.
ARTICLE VI. NEGATIVE COVENANTS
Borrower covenants and agrees that so long as this Agreement is in
effect, the Note remains outstanding or unpaid, any amount remains available to
be drawn under any Letter of Credit, or any Obligation remains outstanding,
Borrower shall not and shall not permit any of its Subsidiaries to, without the
prior written consent of Requisite Lenders, which consent shall not be
unreasonably withheld with respect to SECTIONS 6.1 through 6.12 hereof:
6.1 DIVIDENDS AND DISTRIBUTIONS. During the continuance of any
Default or Event of Default, or if the payment or distribution would result in a
Default or an Event of Default, declare or pay any cash distributions or
dividends or return any capital to any of its shareholders; authorize or make
any distribution, payment, or delivery of property or cash to
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any of its shareholders; redeem, retire, purchase, or otherwise acquire,
directly or indirectly, for consideration, any of its shares or other interests
now or hereafter outstanding; or set aside any funds for any of the foregoing
purposes; provided, however, that nothing contained in this SECTION 6.1 shall
prohibit Borrower's Subsidiaries from making any distribution or dividend to
Borrower.
6.2 TRANSACTIONS WITH AFFILIATES. Except on arm's length terms or in
the ordinary course of business consistent with practices of Borrower prior to
the date of this Agreement: (a) enter into any transaction in which an
Affiliate shall have any interest; (b) make any payment or agree to make any
payment to any such Affiliate; or (c) transfer or agree to transfer ownership or
possession of any of its business or assets, tangible or intangible, real,
personal, or mixed, to any Affiliate.
6.3 LIENS. Contract, create, incur, assume, or suffer to exist any
Lien upon or grant any interest in any of its property or assets whether now
owned or hereafter acquired, except (a) Liens granted pursuant to this
Agreement; (b) Liens on the Collateral granted to secure repayment of the
Private Debt; (c) Liens in connection with worker's compensation, unemployment
insurance, or other social security obligations; (d) good faith deposits in
connection with bids, tenders, contracts, or leases or deposits to secure public
statutory obligations; (e) mechanic's, carrier's, repairmen's, or other like
Liens in the ordinary course of business with respect to obligations that are
not overdue or that are being contested in good faith and for which appropriate
reserves have been established or for which deposits to obtain the release of
such liens have been made; (f) Liens for Taxes imposed upon Borrower or any of
its Subsidiaries, or its property, operations, income, products, or profits that
are not at the time due or payable or for which, if the validity thereof is
being contested in good faith by legal or administrative proceedings,
appropriate reserves have been established; (g) encumbrances consisting of
zoning regulations, easements, rights-of-way, survey exceptions, and other
similar restrictions on the use of real property or minor irregularities in
title thereto that do not materially impair the use of such property in the
operation of the business of Borrower or any of its Subsidiaries; (h) Liens
arising out of judgments or awards with regard to which Borrower or any of its
Subsidiaries, shall be prosecuting an appeal in good faith and for which a stay
of execution has been issued and appropriate reserves established; (i) short-
term purchase money security interests; and (j) the currently existing liens
listed on EXHIBIT J.
6.4 ADVANCES AND LOANS. Except by Borrower to its Subsidiaries:
(a) lend money, make credit available (other than in the ordinary course of
business to customers), or lend property or the use thereof to any Person;
(b) guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly or by any instrument having the effect of assuring any Person's
payment, performance, or capability) the Indebtedness, performance, obligations,
stock, or dividends of any Person; or (c) agree to do any of the foregoing.
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Notwithstanding the foregoing, Borrower and its Subsidiaries may endorse
negotiable instruments for deposit or collection in the ordinary course of
business.
6.5 INVESTMENTS. Invest in (by capital contribution or otherwise),
acquire, purchase, or make any commitment to purchase the obligations, stock, or
equity of any Person except (a) direct obligations of the government of the
United States of America or any agency or instrumentality thereof,
(b) interest-bearing certificates of deposit or repurchase agreements issued by
any commercial banking institution satisfactory to Agent, (c) stock or
obligations issued in settlement of claims of Borrower or its Subsidiaries
against others by reason of bankruptcy or a composition or readjustment of debt
or reorganization of any debtor of Borrower or its Subsidiaries, or
(d) commercial paper and corporate and municipal bonds with a rating of BBB or
better.
6.6 CONSOLIDATION, MERGER, AND SALE OF ASSETS. Wind up, liquidate,
or dissolve Borrower's affairs or enter into any transaction of merger or
consolidation with any Person; convey, sell, lease, or otherwise dispose of (or
agree to do any of the foregoing at any time) any of its material licenses,
contracts, or permits; sell all or a substantial part of its property or assets
or sell any part of its property or assets necessary or desirable for the
conduct of its business as now generally conducted or as proposed to be
conducted; sell any of its notes receivable, installment or conditional sales
agreements, or accounts receivable; purchase, lease, or otherwise acquire all or
a substantial part of the property or assets of any other Person, except as
provided in SECTION 6.7 herein.
6.7 SUBSIDIARIES. Form or acquire any Person or any portion thereof
(a) for $250,000 or less, unless Borrower has previously provided to Agent
financial information with respect to the proposed acquisition, or (b) in excess
of $250,000, unless Borrower has (i) previously provided to Agent financial
information with respect to the proposed acquisition, and (ii) Agent has
approved the acquisition in writing, which approval shall not be unreasonably
withheld.
6.8 TYPE OF BUSINESS. Enter into any business is substantially
different from or not connected with the business in which Borrower is presently
engaged or make any substantial change in the nature of its business or
operations; PROVIDED, HOWEVER, BORROWER MAY ESTABLISH OPERATIONS TO PROVIDE
FINANCING TO THE CUSTOMERS OF BORROWER AND THE SUBSIDIARIES , THE PROCEEDS OF
WHICH SHALL BE USED TO FINANCE THE PURCHASE OF GOODS AND SERVICES FROM BORROWER
AND THE SUBSIDIARIES.
6.9 CHANGE OF CHIEF EXECUTIVE OFFICE OR NAME. Change (a) the chief
executive office of Borrower, (b) Borrower's name, or (c) the location of any of
the Collateral; or adopt or use any trade name without (x) prior written notice
to Agent and (y) the execution, delivery, and filing (and payment of filing fees
and taxes) of all such documents as
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may be necessary or advisable in the opinion of Agent to continue to perfect and
protect the Liens on the Collateral.
6.10 CHANGE IN DOCUMENTS. Materially amend, supplement, terminate, or
otherwise modify in any way Borrower's certificate of incorporation, or other
documents delivered to Agent hereunder or executed in connection herewith.
6.11 CONTROL. Enter into any agreement (other than employment
agreements) with any Person that confers upon such Person the right or authority
to control or direct a major portion of the business or assets of Borrower.
6.12 PENSION PLAN. Terminate or partially terminate any Plan now
existing or hereafter established for Borrower or ERISA Affiliates or withdraw
from participation therein under circumstances that result or could result in
liability to the Pension Benefit Guaranty Corporation, to the fund by which the
Plan is funded, or to the employees (or their beneficiaries) for whom the Plan
is or shall be maintained; or permit any other event or circumstance to occur
that results or could result in liability to the Pension Benefit Guaranty
Corporation or a violation of ERISA.
6.13 TANGIBLE NET WORTH. Permit Tangible Net Worth at the end of any
fiscal quarter of Borrower during the following periods to be less than:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TIME PERIOD TANGIBLE NET WORTH
- --------------------------------------------------------------------------------
<S> <C>
Date of Agreement $33,000,000
to 4/29/96
- --------------------------------------------------------------------------------
4/30/96 to 4/29/97 $35,000,000
- --------------------------------------------------------------------------------
4/30/97 to 4/29/98 $50,000,000
- --------------------------------------------------------------------------------
4/30/98 and thereafter $65,000,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE>
6.14 FUNDED DEBT RATIO. Permit the Funded Debt Ratio at the end of
any fiscal quarter of Borrower during the following periods to be greater than:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TIME PERIOD FUNDED DEBT RATIO
- --------------------------------------------------------------------------------
<S> <C>
Date of Agreement
to 4/30/97 3.00:1.0
- --------------------------------------------------------------------------------
5/1/97 to 4/30/98 2.50:1.0
- --------------------------------------------------------------------------------
5/1/98 to 4/30/99 2.25:1.0
- --------------------------------------------------------------------------------
5/1/99 and thereafter 2.00:1.0
- --------------------------------------------------------------------------------
</TABLE>
6.15 DEBT SERVICE COVERAGE RATIO. Permit the Debt Service Coverage Ratio
for any fiscal year of Borrower to be less than 1.5:1.0 as of the end of any
fiscal year of Borrower during the terms of the Loans.
6.16 CURRENT RATIO. Permit the Current Ratio at the end of any fiscal
quarter of Borrower to be less than 2.0:1.0 during the terms of the Loans.
6.17 WORKING CAPITAL. Permit Working Capital at the end of any fiscal
quarter of Borrower during the following periods to be less than:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TIME PERIOD WORKING CAPITAL
- --------------------------------------------------------------------------------
<S> <C>
Date of Agreement
to 4/29/96 $40,000,000
- --------------------------------------------------------------------------------
4/30/96 to 4/29/97 $50,000,000
- --------------------------------------------------------------------------------
4/30/97 to 4/29/98 $55,000,000
- --------------------------------------------------------------------------------
4/30/98 and thereafter $60,000,000
- --------------------------------------------------------------------------------
</TABLE>
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
In order to induce Agent and Lenders to enter into this
Agreement, to make the Loans, and to induce Issuing Lender to issue the Letters
of Credit as herein provided, Borrower hereby makes the following
representations, covenants, and warranties to Agent and each Lender, all of
which shall survive the execution and delivery of this Agreement and shall not
be affected or waived by any inspection or examination made by or on behalf of
Agent:
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7.1 CORPORATE STATUS. Borrower is a corporation organized and
validly existing under the laws of the state of Delaware. Borrower has the
power and authority to own its property and assets and to transact the business
in which it is engaged or presently proposes to engage. Borrower is qualified
to do business in all states except where the failure to be qualified could not
have a material adverse effect on Borrower.
7.2 POWER AND AUTHORITY. Borrower has the power to execute,
deliver, and carry out the terms and provisions of this Agreement and each of
the Loan Documents and has taken all necessary action to authorize the
execution, delivery, and performance of this Agreement and the other Loan
Documents, the borrowings hereunder, and the making and delivery of the Note and
all Loan Documents delivered hereunder. This Agreement constitutes and the Note
and other Loan Documents and instruments issued or to be issued hereunder, when
executed and delivered pursuant hereto, constitute or will constitute the
authorized, valid, and legally binding obligations of Borrower enforceable in
accordance with their respective terms.
7.3 NO VIOLATION OF AGREEMENTS. Borrower is not in default under
any material provision of any agreement to which it is a party or in violation
of any Applicable Laws. The execution and delivery of this Agreement, the Note,
the other Loan Documents, and the instruments incidental hereto; the
consummation of the transactions herein or therein contemplated; and compliance
with the terms and provisions hereof or thereof (a) will not violate any
material Applicable Law and (b) will not conflict or be inconsistent with;
result in any breach of any of the material terms, covenants, conditions, or
provisions of; constitute a default under; or result in the creation or
imposition of (or the obligation to impose) any lien, charge, or encumbrance
upon any of the property or assets of Borrower pursuant to the terms of: any
material Governmental Approval, mortgage, deed of trust, lease, agreement, or
other instrument to which Borrower is a party, by which Borrower may be bound,
or to which Borrower may be subject, and (c) will not violate any of the
provisions of the certificate of incorporation of Borrower. No Governmental
Approval is necessary (x) for the execution of this Agreement, the making of the
Note, or the assumption and performance of this Agreement or the Note by
Borrower or (y) for the consummation by Borrower of the transactions
contemplated by this Agreement including but not limited to the grant of the
security interests to Agent.
7.4 RECORDING AND ENFORCEABILITY. Neither the certificate of
incorporation, bylaws, or other applicable corporate documents of Borrower nor
other agreements require recording, filing, registration, notice, or other
similar action in order to insure the legality, validity, binding effect, or
enforceability against all Persons of this Agreement, the Note, or other Loan
Documents executed or to be executed hereunder, other than filings or recordings
that may be required under the Uniform Commercial Code or in connection with the
perfection of the security interests of Agent in patents, trademarks, and
similar types of Collateral.
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<PAGE>
7.5 LITIGATION. Except as set forth in EXHIBIT K, there are no
actions, suits, or proceedings pending or threatened against or affecting
Borrower before any Governmental Body that could have a material adverse effect
on Borrower or the Collateral. Borrower is not in default under any material
provision of any Applicable Law or Governmental Approval of any Governmental
Body which could have a material adverse effect on Borrower or on the
Collateral.
7.6 GOOD TITLE TO PROPERTIES. Borrower has good and marketable
title to, or a valid leasehold interest in, its property and assets, subject to
no Liens, except those permitted under the provisions of SECTION 6.3 of this
Agreement.
7.7 LICENSES AND PERMITS. All Governmental Approvals with respect
to the business of Borrower were to Borrower's knowledge duly and validly issued
by the respective Governmental Bodies, are in full force and effect, and are to
Borrower's knowledge valid and enforceable in accordance with their terms. With
regard to such Governmental Approvals, no fact or circumstance exists that
constitutes or, with the passage of time or the giving of notice or both, would
constitute a material default under any thereof, or permit the grantor thereof
to cancel or terminate the rights thereunder, except upon the expiration of the
full term thereof. Borrower presently holds all material Governmental Approvals
as are necessary or advisable in connection with the conduct of its business as
now conducted and as presently proposed to be conducted.
7.8 PROPERTIES IN GOOD CONDITION. All the material properties of
Borrower are, and all material properties to be added in connection with any
contemplated expansion will be in good repair and good working order and
condition in a manner consistent with past practices of Borrower, and comparable
to industry standards and are and will be in compliance with all Applicable
Laws.
7.9 FINANCIAL STATEMENTS. The audited financial statements of
Borrower dated April 30, 1995, and all schedules and notes included in such
financial statements present fairly (i) the financial position of Borrower as of
the date of said statements and (ii) the results of operations of Borrower for
the periods covered thereby; and there are not any significant liabilities that
should have been reflected in the financial statements or the notes thereto
under GAAP generally accepted accounting principles, contingent or otherwise,
including liabilities for Taxes or any unusual forward or long-term commitments,
that are not disclosed or reserved against in the statements referred to above
or in the notes thereto or that are not disclosed herein. All such financial
statements have been prepared in accordance with GAAP. There has been no
material adverse change (including but not limited to any such change occasioned
by accident, act of God, war, fire, flood, explosion, strike or other labor
dispute, or orders or action by any Governmental Body or public utility) in the
operations, business, property, assets, or condition (financial or otherwise) of
Borrower since April 30, 1995, or Borrower's most recent 10-Q report filed with
the Securities and Exchange Commission.
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<PAGE>
7.10 MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the financial condition of Borrower since Borrower's audited financial
statements dated April 30, 1995.
7.11 TAXES. Borrower has duly filed all tax returns and reports
required by Applicable Law to be filed; and all Taxes upon Borrower or upon its
assets that are due and payable have been paid (except as otherwise permitted in
this Agreement).
7.12 LICENSE FEES. Borrower has paid all fees and charges that have
become due for any material Governmental Approval for its business or has made
adequate provisions for any such fees and charges that have accrued.
7.13 TRADEMARKS, PATENTS, ETC. Attached hereto as EXHIBIT L is a
schedule of all trademarks, trade names, service marks, patents, and
applications therefor currently held by Borrower or in which it has an interest,
e.g., a license. Borrower possesses all necessary trademarks, trade names,
service marks, copyrights, patents, patent rights, and licenses to conduct its
businesses as now and as proposed to be conducted, without conflict with the
rights or claimed rights of others.
7.14 GOVERNMENTAL APPROVALS. Attached hereto as EXHIBIT M is a
schedule of all material Governmental Approvals necessary for the operation of
Borrower's business.
7.15 DISCLOSURE. To the best of Borrower's knowledge, the exhibits
hereto, the financial information and statements referred to in SECTION 7.9
hereof, any certificate, statement, report or other document furnished to Agent
by Borrower or any other Person in connection herewith or in connection with any
transaction contemplated hereby, and this Agreement, do not contain any untrue
statements of material fact or omit to state any material fact necessary in
order to make the statements contained therein or herein not misleading.
7.16 REGULATIONS U AND X. Borrower does not own and no part of the
proceeds hereof will be used to purchase or carry any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any
margin stock. Borrower is not engaged principally or as one of its important
activities in the business of extending credit for the purpose of purchasing or
carrying any margin stock. If requested by Agent, Borrower will furnish to
Agent a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in said Regulation. No part of the proceeds of the Loans
will be used for any purpose that violates or is inconsistent with the
provisions of Regulation X of said Board of Governors.
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7.17 NAMES. Neither Borrower nor any of its predecessors operate or
do business or during the past five years have operated or done business under a
fictitious, trade, or assumed name.
7.18 CONDITION OF PROPERTY. Except as otherwise disclosed to Agent,
Borrower hereby represents and warrants to Agent that as of the date hereof and
continuing hereafter, Borrower's property (both owned and leased) and each
portion thereof (a) are not and to the best knowledge of Borrower after due
investigation have not been a site for the use, generation, manufacture,
storage, disposal, or transportation of any Hazardous Material; (b) are
presently in compliance with all Hazardous Materials Laws; and (c) are not being
used and to the best knowledge of Borrower after due investigation have not been
used in any manner that has resulted in or will result in Hazardous Materials
being spilled or disposed of on any adjacent or other property.
7.19 PENSION PLANS. No "reportable event" as defined in
Section 4043(b) of Title IV of ERISA has occurred and is continuing with respect
to any Plan. In addition, each of the Plans are in compliance with the
requirements of ERISA, including the minimum funding requirements.
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for the Event of
Default, whether it shall relate to one or more of the parties hereto, and
whether it shall be voluntary or involuntary or be pursuant to or affected by
operation of Applicable Law):
(a) If Borrower shall fail to (i) pay any interest, principal, or
other amount on the Note within five days after such interest, principal, or
other amount becomes due in accordance with the terms thereof or hereof, or (ii)
reimburse Issuing Bank in accordance with SECTION 2.12 hereof in respect of any
Letter of Credit; or
(b) If Borrower or any of its Subsidiaries shall (i) default in
payment of principal of or interest on any Indebtedness for money borrowed,
including the Private Debt, or Capital Lease obligations (other than as set
forth in SECTION 8.1(A) above), if the outstanding principal (or capitalized)
amount of such Indebtedness is $100,000 or more, after any applicable grace
period provided in the instrument or agreement under which such Indebtedness was
created; or (ii) default in the observance or performance of any other material
provisions of any agreement or condition relating to any such Indebtedness 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 to cause, with the
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giving of notice if required, such Indebtedness to become due prior to the date
of maturity, any applicable grace period having expired; or
(c) If any representation or warranty (i) made by Borrower in this
Agreement or (ii) made by Borrower or any other Person in any document,
certificate, or statement furnished pursuant to this Agreement or in connection
herewith, is false or misleading in any material respect; or
(d) If Borrower fails to observe or perform, or to cause any
Subsidiary to observe or perform, any term, covenant, or agreement to be
performed or observed pursuant to ARTICLES V and VI hereof; or
(e) If Borrower fails to observe or perform, or to cause any
Subsidiary to observe or perform, (not otherwise specified in this SECTION 8.1)
any term, covenant, or agreement to be performed or observed pursuant to the
provisions of this Agreement, the other Loan Documents, or any other agreement
incidental hereto and such default is not cured within 30 days; or
(f) If Borrower or any of its Subsidiaries fails to perform any of
its obligations under any of the Loan Documents not otherwise specified in this
SECTION 8.1, or if the validity of any of such documents has been disaffirmed by
or on behalf of any of the parties thereto other than Agent or Lenders and such
default is not cured within 30 days; or
(g) If custody or control of any substantial part of the property
of Borrower or any of its Subsidiaries is assumed by any Governmental Body or if
any Governmental Body takes any final action, the effect of which would be to
have a material adverse effect on Borrower and its Subsidiaries; or
(h) If (i) 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 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, or other similar
official for it or for all or any substantial part of its assets, or Borrower or
any of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Borrower or any of its
Subsidiaries any case, proceeding, or other action of a nature referred to in
clause (i) above which (X) results in the entry of an order for relief or any
such adjudication or appointment or (Y) remains undismissed, undischarged,
unstayed, or unbonded for a period of 60 days; or (iii) there shall be commenced
against Borrower or any of its Subsidiaries any case, proceeding, or other
action seeking issuance of a warrant of attachment, execution,
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distraint, or similar process against all or any substantial part of its assets
that results in the entry of an order for any such relief which shall not have
been vacated, discharged, stayed, or bonded pending appeal within 60 days from
the entry thereof; or (iv) 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 clauses (i), (ii), or (iii) above;
or (v) Borrower or any of its Subsidiaries shall admit in writing its inability
to pay its debts as they become due or shall, within the meaning of the
Bankruptcy Code, generally not pay its debts (other than debts that are the
subject of a bona fide dispute) as they become due; or (vi) Borrower or any of
its Subsidiaries suspends or discontinues its business; or
(i) If there is any refusal or failure by any Governmental Body to
issue, renew, or extend any lease or material Governmental Approval with respect
to the operation of the business of Borrower and its Subsidiaries, or any
denial, forfeiture or revocation by any Governmental Body of any Governmental
Approval that could have a material adverse effect on Borrower and its
Subsidiaries; or
(j) If any of the events described in SECTION 5.9 hereof occur or
are threatened and, in Agent's reasonable judgment, such event jeopardizes or
could reasonably be expected to jeopardize repayment of the Note or
reimbursement of any draw under any Letter of Credit; or
(k) If (i) any Plan shall be terminated pursuant to Subtitle C of
Title IV ERISA, (ii) a trustee shall be appointed by the appropriate
U. S. District Court to administer such Plan, (iii) the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any such Plan, or (iv) any
such Plan fails to satisfy the minimum funding standards for such Plan for a
Plan year as established in Section 412 of the Internal Revenue Code; or
(l) One or more judgments or decrees shall be entered against
Borrower or any of its Subsidiaries involving in the aggregate liability (not
paid or fully covered by insurance) of $250,000 or more which judgment or decree
shall not have been vacated, discharged, stayed, or bonded pending appeal within
30 days from entry thereof; or
(m) If there shall occur any event that has a material adverse
effect upon the business or financial condition of Borrower and its Subsidiaries
and that materially increases Lenders' risk that Borrower will not repay the
Loans or pay the amount of any draw under the Letter of Credit.
8.2 ACCELERATION; REMEDIES.
(a) If any Event of Default described in SECTIONS 8.1(H)(I) or (II)
shall occur then immediately and automatically (i) the Revolving Credit
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing
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under this Agreement and the Note shall immediately become due and payable and
Lenders' obligations to make any Loan shall immediately terminate, and (ii) all
obligations of Borrower in respect of the Letters of Credit, although contingent
and unmatured, shall become immediately due and payable and Issuing Lender's
obligation to open the Letters of Credit shall immediately terminate.
(b) If any other Event of Default other than described in
SECTION 8.1(H), (I), or (II) shall occur and be continuing, with the consent of
Requisite Lenders, Agent may, or upon the request of Requisite Lenders, Agent
shall (i) by notice to Borrower, declare the Revolving Credit Commitments and
Issuing Lender's obligation to open the Letters of Credit to be terminated
forthwith, whereupon such obligations shall immediately terminate; and (ii) by
notice of default to Borrower, (1) declare all or a portion of the Loans
hereunder, with accrued interest thereon, and all other amounts owing under this
Agreement and the Note to be due and payable forthwith, whereupon the same shall
immediately become due and payable; and (2) declare all or a portion of the
obligations of Borrower in respect of the Letters of Credit, although contingent
and unmatured, to be due and payable forthwith, whereupon the same shall
immediately become due and payable and/or demand that Borrower discharge any or
all of the obligations supported by the Letters of Credit by paying or prepaying
any amount due or to become due in respect of such obligations.
(c) Except as expressly provided above in this SECTION 8.2,
presentment, demand, purchase, and all other notices of any kind are hereby
expressly waived. Agent and Lenders may proceed to protect and enforce its
rights hereunder or realize on any or all security granted pursuant hereto in
any manner or order it deems expedient without regard to any equitable
principles of marshaling or otherwise. No failure or delay on the part of
Agent, any Lender, or the holder of any of the Note in exercising any right,
power, or privilege hereunder and no course of dealing between Borrower and
Agent, any Lender, or the holder of any of the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power, or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
that Agent, any Lender, or any subsequent holder of any of the Note would
otherwise have. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances or shall constitute a waiver of the right of Agent and/or Lenders
to any other or further action in any circumstances without notice or demand.
ARTICLE IX. AGENCY PROVISIONS
9.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers hereunder and under the other Loan Documents as are delegated to Agent by
the terms hereof or thereunder,
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together with such powers as are reasonably incidental thereto. Agent shall
have no duties or responsibilities except those expressly set forth hereunder
and in the other Loan Documents. The duties of Agent shall be mechanical and
administrative in nature; Agent shall not have by reason of any Loan Document a
fiduciary relationship in respect of any Lender; and nothing in any Loan
Document, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of the Loan Documents except as
expressly set forth herein. As to any matters not expressly provided for by
this Agreement, including enforcement or collection of the Loans, or other
Obligations, Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining) upon the instructions of Lenders,
acting in agreement, and such instructions shall be binding upon all Lenders,
provided that Agent shall not be required to take any action which exposes Agent
to personal liability or which is contrary to the Loan Documents or Applicable
Law. In the absence of instructions from Lenders, Agent shall have authority,
in its sole discretion, to take or not to take any action, unless this Agreement
specifically requires the consent of Requisite Lenders and any such action or
failure to act shall be binding on Lenders and on all holders of the Note. Each
Lender and each holder of any Note shall execute and deliver such additional
instruments, including powers of attorney in favor of the Agent, as may be
necessary or desirable to enable Agent to exercise its powers hereunder and
under the other Loan Documents.
9.2 DUTIES AND OBLIGATIONS.
(a) Neither Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or omitted to be taken by it or
any of them under or in connection with this Agreement or any other Loan
Document except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent (i) may treat each
Lender which is a party hereto as the party entitled to receive payments
hereunder until Agent receives written notice of the assignment of such Lender's
interest herein signed by such Lender and a written agreement of the assignee
that it is bound hereby to the same extent as it would have been had it been an
original party hereto, in each case in form satisfactory to Agent; (ii) may
consult with legal counsel (including, with the consent of Borrower, counsel for
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties, or representations made in or in connection with this
Agreement, any other Loan Document, or in any instrument or document furnished
pursuant hereto or thereto; (iv) shall not have any duty to ascertain or to
inquire as to the performance of any of the terms, covenants, or conditions of
the Loan Documents on the part of Borrower, or as to the use of the proceeds of
the Loan, or as to the existence or possible existence of any Default or Event
of Default; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness, or value of this
Agreement, of any other Loan Document, or of any instrument
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or document furnished pursuant hereto or thereto; and (vi) shall incur no
liability under or in respect to this Agreement or any other Loan Document by
acting upon any oral or written notice, consent, certificate, or other
instrument or writing (which may be by telegram, facsimile transmission, cable,
or telex) believed by it to be genuine and signed, sent or made by the proper
party or parties or by acting upon any representation or warranty of Borrower
made or deemed to be made herein or in any other Loan Document.
(b) Agent will transmit to Lenders copies of all documents received
from Borrower pursuant to the requirements hereof other than documents which, by
the terms hereof, Borrower are obligated to deliver directly to Lenders.
(c) Each Lender or its assignees shall furnish to Agent in a timely
fashion such documentation (including, but not by way of limitation, IRS Forms
Nos. 101 and 4224) as may be required by applicable law or regulation to
establish such Lender's status for tax withholding purposes.
9.3 RIGHTS OF AGENT AS LENDER. With respect to the Loans made by
Agent and the Note issued to Agent, Agent in its individual capacity as a Lender
and not as Agent, shall have the same rights hereunder and otherwise as any
other Lender and may exercise the same as though it were not Agent, and it is
understood and agreed that Agent may exercise its rights and powers under other
agreements and instruments to which it is or may be a party, and engage in other
transactions with Borrower as though it were not Agent hereunder.
9.4 LENDERS' CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender and based
upon such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based upon such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action hereunder and the other Loan
Documents.
9.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrower) ratably according to their respective Pro
Rata Share from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against Agent in any way relating to or arising out of this Agreement
or any other Loan Document or any action taken or omitted by Agent under this
Agreement or any other Loan Document, except any such as result from Agent's
gross negligence or willful misconduct. Without limiting the foregoing, each
Lender agrees to reimburse Agent promptly on demand in proportion to its Pro
Rata Share for any out-of-pocket expenses, including attorney fees, incurred by
Agent in connection with the administration or enforcement or
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preservation of any rights under any Loan Document (to the extent that Agent is
not reimbursed for such expenses by Borrower).
9.6 SUCCESSOR AGENT. Agent may give written notice of resignation
at any time to Lenders and, subject to Borrower's prior written consent, (which
consent shall not be unreasonably withheld), may be removed at any time with
cause by agreement of Lenders. Lenders, acting in agreement, shall have the
right to appoint a successor Agent. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges, and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement, other than from liabilities to
Lenders for Agent's gross negligence or willful misconduct arising prior to the
date of such discharge. Until the acceptance by such a successor Agent, the
retiring Agent shall continue as "Agent" hereunder. After any retiring Agent's
resignation or removal hereunder as Agent shall become effective, the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
9.7 NO EFFECT ON BORROWER. Lenders and Agent agree that this
ARTICLE IX outlines the rights and responsibilities of Agent and Lenders as
among themselves and is not intended to affect the rights or obligations of
Borrower under this Agreement or the other Loan Documents, other than Borrower
being obligated to treat the successor Agent as "Agent for all purposes."
ARTICLE X. MISCELLANEOUS
10.1 NOTICES. All notices, requests, consents, demands, approvals,
and other communications hereunder shall be deemed to have been duly given,
made, or served if made in writing and delivered personally, sent via facsimile,
or mailed by first class mail, postage prepaid, to the respective parties to
this Agreement. For purposes of this Agreement, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof. The designation of the persons to be so notified or the address of such
persons for the purposes of such notice may be changed from time to time by
similar notice in writing, except that any communication with respect to a
change of address shall be deemed to be given or made when received by the party
to whom such communication was sent.
10.2 PAYMENT OF EXPENSES AND TAXES. Borrower agrees (a) to pay or
reimburse Agent for all of 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, the Loan Documents and any other
documents prepared in connection therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to
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Agent, (b) to pay or reimburse Agent and each Lender for all their respective
reasonable costs and expenses incurred in connection with, and to pay,
indemnify, and hold Agent, each Lender, and their respective officers,
directors, employees, and agents and attorneys (the "Indemnified Persons")
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 arising out of or in connection with, the
enforcement or preservation of any rights under the Loan Documents and any such
other documents prepared in connection therewith, including without limitation,
the reasonable fees and disbursements of counsel to Agent and each Lender, (c)
to pay, indemnify, and to hold Agent and each Lender 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 (other than
income and gross revenue taxes), if any, which may be payable or determined to
be payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, any Loan
Document and any such other documents including, without limitation, the
reasonable fees and disbursements of counsel to Agent and each Lender in
connection with the foregoing and in connection with advising Agent with respect
to its rights and responsibility under any Loan Document and (d) to pay,
indemnify, and hold the Indemnified Persons 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 (including, without limitation, reasonable fees and disbursements of
counsel) which may be incurred by or asserted against any Indemnified Person
arising out of or in connection with any investigation, litigation or proceeding
related to the Loan Documents or the use of the proceeds of the Loans, whether
or not any of the Indemnified Persons is a party thereto or by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to make payments under, Letters of Credit, (it being agreed that nothing in this
SECTION 10.2 is intended to limit Borrower's obligations pursuant to
SECTION 2.12) (all the foregoing, collectively, the "Indemnified Liabilities"),
provided, that Borrower shall have no obligation hereunder with respect to
Indemnified Liabilities of any Indemnified Person arising from (i) the gross
negligence or willful misconduct of such Indemnified Person, (ii) legal
proceedings commenced against Agent or a Lender by any security holder or
creditor thereof arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such, (iii) disputes between Agent
and the Lenders and (iv) legal proceedings which are resolved in favor of
Borrower. The agreements in this subsection shall survive repayment of the Note
and all other amounts payable hereunder.
10.3 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS.
(a) This Agreement and the other Loan Documents shall be binding
upon and inure to the benefit of Borrower, Lenders, Agent, all future holders of
the Note and their respective successors and assigns, except that Borrower may
not assign or transfer any of its
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rights or obligations under any Loan Document without the prior written consent
of each Lender.
(b) Any Lender may, with the prior written consent of all the
Requisite Lenders 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 a Lender, the Note, the commitments or any other interest of a
Lender hereunder. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement, and Borrower and Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and such Participant shall have no voting
rights as a Lender hereunder. Borrower agrees that if amounts outstanding under
this Agreement and the Note 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 be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement or any Note to the
same extent as if the amount of its participating interest were owing directly
to it under this Agreement or any Note to the same extent as if the amount of
its participating interest were owing directly to it under this Agreement or any
Note; provided that such right of setoff shall be subject to the obligation of
such Participant to share with Lenders, and Lenders agree to share with such
Participant, as provided in SECTION 10.4 hereof. In addition, Borrower agrees
that each Participant shall be entitled to the benefits of SECTIONS 2.17 and 3.9
hereof with respect to its participation in the Revolving Credit Commitments,
the Loans, and the Letters of Credit outstanding from time to time; provided
that no Participant shall be entitled to receive any greater amount pursuant to
such subsection than such Lender would have been entitled to receive in respect
to the amount of the participation transferred by such Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to any
Lender or any Affiliate thereof and, with the consent of Agent (which in each
case shall not be unreasonably withheld), to one or more additional banks or
financial institutions ("Purchasing Lenders") all or a portion (in an amount
equal to or greater than $10,000,000) of its rights and obligations under this
Agreement, the L/C Applications, and the Note, pursuant to an agreement
substantially in the form of EXHIBIT N (a "Commitment Transfer Supplement"),
executed by such Purchasing Lender, such transferor Lender (and, in the case of
a Purchasing Lender that is not then a Lender or an Affiliate thereof, by
Borrower and Agent), and delivered to Agent for its acceptance and recording in
the Register. Upon such execution, delivery, acceptance and recording from and
after the Transfer Effective Date specified in such Commitment Transfer
Supplement, (x) the Purchasing Lender thereunder shall be a party hereto and, to
the extent provided in such Commitment Transfer Supplement, have the rights and
obligations of a
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Lender hereunder with a Commitment as set forth therein, and (y) the transferor
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement (and, in the case of a
Commitment Transfer Supplement covering all or the remaining portion of a
transferor Lender's rights and obligations under this Agreement, such transferor
Lender shall cease to be a party hereto). Such Commitment Transfer Supplement
shall be deemed to amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender and the resulting
adjustment of Pro Rata Shares, if any, arising from the purchase by such
Purchasing Lender of all of the rights and obligations of such transferor Lender
under this Agreement and any Note. On or prior to the Transfer Effective Date
specified in such Commitment Transfer Supplement, the Transferor Lender shall
make appropriate arrangements with Issuing Lender so that replacement Letter of
Credit Participation Certificates are issued to the Transferor Lender, and new
Letter of Credit Participation Certificates or replacement Letter of Credit
Participation Certificates, as appropriate, are issued to each Purchasing
Lender, in each case indicating L/C Participating Interests reflecting their
respective revised Revolving Credit Commitments. Each such new Letter of Credit
Participation Certificate or replacement Letter of Credit Participation
Certificate, as the case may be, shall be dated the date of the related original
Letter of Credit Participation Certificate.
(d) Agent shall maintain at its address referred to in SECTION 10.1
a copy of each Commitment Transfer Supplement delivered to it and a register
(the "Register") for the recordation of the names and addresses of Lenders and
the Commitment of, and principal amount 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 Borrower, Agent and may treat each Person whose name is
recorded in the Register as the owner of the Loans recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "Transferee") any prospective Transferee any and
all financial information in such Lender's possession concerning Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of Lender's in connection with such Lender's credit evaluation
of Borrower and its Affiliates prior to becoming a party to this Agreement.
10.4 ADJUSTMENTS; SETOFF.
(a) If any Lender (a "Benefitted Lender") shall at any time receive
any payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by setoff,
pursuant to events or proceedings of the nature referred to in SECTION 8.1(h)
hereof, or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of such
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Lender's Loans, or interest thereon, such Benefited Lender shall purchase for
cash from the other Lenders such portion of each such other Lender's Loans, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefited Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
all Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefited Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. Borrower agrees that each
Lender so purchasing a portion of another Lender's Loan may exercise all rights
of payment (including, without limitation, rights of setoff) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
Agent shall promptly give Borrower notice of any setoff, provided that the
failure to give such notice shall not affect the validity of such setoff.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, to the extent permitted by law,
without prior notice to Borrower, any such notice being expressly waived by
Borrower to the extent permitted by applicable law, upon the filing of a
petition under any of the provisions of the United States Bankruptcy Code or
amendments thereto, by or against; the making of an assignment for the benefit
of creditors by; the application for the appointment, or the appointment, of any
receiver of, or of any of the property of; the issuance of any execution against
any of the property of; the issuance of a subpoena or order, in supplementary
proceedings, against or with respect to any of the property of; or the issuance
of a warrant of attachment against any of the property of; Borrower, to setoff
and apply against any Indebtedness, whether matured or unmatured, of Borrower to
such Lender, any amount owing from such Lender to Borrower, at or at any time
after, the happening of any of the above mentioned events, and the aforesaid
right of setoff may be exercised by such Lender against Borrower or against any
trustee in bankruptcy, debtor in possession, assignees for the benefit of
creditors, received or execution, judgment or attachment creditor of Borrower,
or against anyone else claiming through or against Borrower or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor, notwithstanding the
fact that such right of setoff shall not have been exercised by such Lender
prior to the making, filing or issuance, or service upon such Lender of, or of
notice of, any such petition; assignment for the benefit of creditors;
appointment or application for the appointment of a receiver; or issuance of
execution, subpoena, order or warrant. Each Lender agrees promptly to notify
Borrower and Agent after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such setoff and application.
10.5 SETOFF. Borrower hereby pledges and gives to Agent and each
Lender, and any Participant, a lien and security interest in the balance of any
deposit account maintained by Borrower at Agent or such Lender (as the case may
be), or any Participant to secure payment of all obligations to Lenders under
the Loan Documents. In the case of
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Borrower's Default hereunder, Borrower hereby authorizes Agent and Lenders or
any such Participant at their sole option, at any time and from time to time, to
apply to the payment of all or any portion of the Obligations any deposit
balance or balances now or hereafter in the possession of Agent, Lenders, or
such Participant that belong to or are owed to Borrower.
10.6 WAIVER OF SETOFF. In the event that any Lender sells all or
any portion of the Loans to any Participant, Borrower hereby waives the right to
interpose any setoff, counterclaim, or cross-claim (other than compulsory
counterclaims or cross-claims) in connection with any litigation or dispute
under this Agreement, regardless of the nature of such setoff, counterclaim, or
cross-claim.
10.7 FEES AND COMMISSIONS. Borrower agrees to indemnify Agent and
Lenders and hold them harmless with regard to any commissions, fees, judgments,
or expenses of any nature and kind that Agent and Lenders may become liable to
pay by reason of any claims by or on behalf of Borrower's brokers, finders, or
agents in connection with any act or failure to act by Borrower or any
litigation or similar proceeding arising from such claims. Borrower states that
it is aware of no valid basis for any such claims.
10.8 AMENDMENTS AND WAIVERS.
(a) No Loan Document nor any terms thereof may be amended,
supplemented, or modified, except in accordance with the provisions of this
SECTION 10.8. Subject to the terms of subsection (b) below and with the written
consent of the Requisite Lenders, Agent and Borrower may, from time to time,
enter into written amendments, supplements, or modifications hereto, for the
purpose of adding any provisions to any Loan Document or changing in any manner
the rights of Lenders or of Borrower thereunder or waiving, on such terms and
conditions as Agent may specify in such instrument, any of the requirements of
any Loan Document.
(b) Notwithstanding subsection (a) above, no amendment, waiver, or
consent shall, unless in writing and signed by Requisite Lenders, do any of the
following: (i) reduce the percentage specified in the definition of Requisite
Lenders; (ii) subject Lenders to any additional obligations; (iii) reduce the
principal of, or interest on, the Note or any fees under this Agreement;
(iv) postpone any date fixed for any payment of principal of, or interest on,
the Note or any fees under this Agreement; (v) consent to the assignment or
transfer by Borrower of any of their rights and obligations under this
Agreement; or, (vi) waive any Default or Event of Default and its consequences;
and provided further, that no amendment, waiver, or consent shall, unless in
writing and signed by Agent in addition to the Requisite Lenders, affect the
rights or duties of Agent under of the Loan Documents.
(c) Any such waiver, any such amendment, supplement, or
modification shall be binding upon Borrowers, Lenders, Agent, and all future
holders of the Note. In the
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case of any waiver, Borrower, Lenders, and Agent shall be restored to their
former position and rights hereunder and under the outstanding Note, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.9 SEVERABILITY. If any provision of this Agreement or any of the
Loan Documents is held invalid under any Applicable Laws, such invalidity shall
not affect any other provision of this Agreement that can be given an effect
without the invalid provision, and, to this end, the provisions hereof are
severable.
10.10 DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and do not affect
the meaning or construction of any of the provisions hereof.
10.11 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder and under the other Loan Documents shall be construed
in accordance with and shall be governed by the laws of the state of Washington.
10.12 CONSENT TO JURISDICTION, SERVICE, AND VENUE. For the purpose
of enforcing payment of any of the Note, performance of the obligations under
any of the Note, any arbitration award under the other Loan Documents, or
otherwise in connection herewith, Borrower hereby consents to the jurisdiction
and venue of the courts of the state of Washington or of any federal court
located in such state including but not limited to the Superior Court of
Washington for King County and the United States District Court for the Western
District of Washington. Borrower hereby waives the right to contest the
jurisdiction and venue of courts located in King County, Washington, on the
ground of inconvenience or otherwise and waives any right to bring any action or
proceeding against Agent and Lenders in any court outside King County,
Washington. The provisions of this Section do not limit or otherwise affect the
right of Agent and Lenders to institute and conduct action in any other
appropriate manner, jurisdiction, or court and do not otherwise limit Borrower's
right to contest such manner, jurisdiction, or court as may be sought by Agent
and Lenders in any such action.
10.13 ARBITRATION.
(a) Borrower, Agent, or any Lender may require that all disputes,
claims, counterclaims, and defenses, including those based on or arising from
any alleged tort ("Claims") relating in any way to the Loans be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and Title 9 of the U. S. Code. All Claims will
be subject to the statutes of limitations that would be applicable if they were
litigated.
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(b) This provision is void if the Loans, at the time of the
proposed submission to arbitration, are secured by real property located outside
of Oregon or Washington or if the effect of the arbitration procedure (as
opposed to any Claims of Borrower) would be to materially impair Agent's or
Lender's ability to realize on any Collateral pursuant to an arbitration ruling
favorable to Agent and/or Lenders.
(c) If arbitration occurs and each party's Claim is less than
$100,000, one neutral arbitrator will decide all issues; if either party's Claim
is equal to or greater than $100,000, three neutral arbitrators will decide all
issues. All arbitrators will be active Washington State Bar members in good
standing. All arbitration hearings will be held in Seattle, Washington. In
addition to all other powers, the arbitrator or arbitrators shall have the
exclusive right to determine all issues of arbitrability and shall have the
authority to issue subpoenas. Judgment on any arbitration award may be entered
in any court with jurisdiction.
(d) If any party institutes any judicial proceeding relating to the
Loans, that action shall not be a waiver of the right to submit any Claim to
arbitration. In addition, each has the right before, during, and after any
arbitration to exercise any number of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
nonjudicial foreclosure against real or personal collateral, (iv) provisional
remedies, including injunction, appointment of a receiver, attachment, claim and
delivery, and replevin.
10.14 COUNTERPARTS. This Agreement and each of the Loan Documents
may be executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to constitute an original agreement, but all of such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
10.15 TERMINATION OF EXISTING CREDIT AGREEMENT. Upon execution of
this Agreement and satisfaction of the conditions precedent set forth in
SECTION 4.1 herein, the Existing Credit Agreement shall terminate and be of no
further force and effect. Notwithstanding the foregoing, the Revolving Credit
Loan shall constitute a renewal and refinancing of the credit facilities
provided in the Existing Credit Agreement, and accordingly all security
agreements, UCC financing statements, and other documents evidencing a security
interest in all or any portion of the assets of Borrower or its Affiliates
arising out of or related to the Existing Credit Agreement shall remain in full
force and effect, and shall continue to secure the Revolving Credit Loans and
other credit facilities provided for in this Agreement.
10.16 STATUTORY NOTICE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
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IN WITNESS WHEREOF, Borrower and Agent, and Lenders have caused
this Agreement to be duly executed by the respective, duly authorized
signatories as of the date first above written.
BORROWER:
FLOW INTERNATIONAL CORPORATION
By
-------------------------------------
Title
-----------------------------------
Notice Address: 23500 - 64th Avenue S.
Kent, Washington 98032
Facsimile: (206) 813-3311
Attention: Lee M. Andrews, Vice President
and Chief Financial Officer
LENDERS:
U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By
--------------------------------------
Mark Tsutakawa,
Vice President
Notice Address: U. S. Bank of Washington,
National Association
10800 N.E. 8th, Suite 1000
Bellevue, Washington 98004
Facsimile: (206) 450-5889
Attention: Mark Tsutakawa
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FLOW INTERNATIONAL CORPORATION
23500 - 64th Avenue South
Kent, Washington 98032
7.20% Senior Notes due September 26, 2005
September 1, 1995
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
Flow International Corporation, a Delaware corporation (the
"COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $15,000,000
aggregate principal amount of its 7.20% Senior Notes due September 26, 2005 (the
"NOTES", such term to include any such notes issued in substitution therefor
pursuant to Section 14 of this Agreement or the Other Agreement (as hereinafter
defined)). The Notes shall be substantially in the form set out in Exhibit 1,
with such changes therefrom, if any, as may be approved by you and the Company.
Certain capitalized terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and you will purchase from the Company, at
the Closing provided for in Section 4, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (the "OTHER
AGREEMENTS") identical with this Agreement with each of the other purchasers
named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such
Closing to the Other Purchaser of Notes in the principal amount specified
Note Purchase Agreement/Flow International Corporation
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opposite its name in Schedule A. Your obligation hereunder and the obligations
of the Other Purchaser under the Other Agreement are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
3. SECURITY.
The Notes are to be secured by (i) a Security Agreement, dated as
of the date hereof, between the Company and the Bank Agent, as agent for the
holders of the Notes, substantially in the form annexed hereto as Exhibit A
(which, together with all supplements and amendments thereto, is referred to
herein as the "Security Agreement") relating to the Collateral which is owned by
the Company, and (ii) a Subsidiary Security Agreement, dated as of the date
hereof, between certain U.S. Subsidiaries and the Bank Agent, as agent for the
holders of the Notes, substantially in the form annexed hereto as Exhibit B
(which, together with all supplements and amendments thereto, is referred to
herein as the "Subsidiary Security Agreement") relating to the Collateral which
is owned by such U.S. Subsidiaries. The Security Documents will create a first
priority security interest in the Collateral for the benefit of the Bank Agent,
as agent for the holders of the Notes PARI PASSU with the first priority
security interest in the Collateral for the benefit of the Bank Agent, as agent
for the Bank Lenders. The Security Documents will be in a form substantially
identical to the form of the Bank Security Documents.
4. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchaser shall occur at the offices of CIGNA Investments, Inc., 900
Cottage Grove Road, Bloomfield, Connecticut 06002, at 10:00 a.m., local time, at
a closing (the "CLOSING") on September 26, 1995 or on such other Business Day
thereafter on or prior to October 31, 1995, as may be agreed upon by the Company
and you and the Other Purchaser. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
0226000610 at U.S. Bank of Washington, National Association, Kent, Washington,
ABA # 125000105. If at the Closing the Company shall fail to
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Note Purchase Agreement/Flow International Corporation
<PAGE>
tender such Notes to you as provided above in this Section 4, or any of the
conditions specified in Section 5 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
5. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to
you at the Closing is subject to the fulfillment to your satisfaction, prior to
or at the Closing, of the following conditions:
5.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.
5.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 6.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Sections 11.1, 11.3, 11.4, 11.6, 11.8, or 11.11 had such Sections applied since
such date.
5.3. COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 5.1, 5.2 and 5.12 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered
to you a certificate certifying as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of the Notes and the Agreements.
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Note Purchase Agreement/Flow International Corporation
<PAGE>
5.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from Preston, Gates and
Ellis, special counsel for the Company, covering the matters set forth in
Exhibit 5.4(a) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you), and (b)
from John Leness, general counsel for the Company, covering the matters set
forth in Exhibit 5.4(b) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request.
5.5. SECURITY DOCUMENTS.
(a) The Company and certain of its U.S. Subsidiaries shall have
duly authorized, executed and delivered all such security agreements and other
instruments, documents and agreements creating security interests, in form and
substance satisfactory to you, as shall be necessary, in your sole discretion,
to grant or create valid first priority Liens, in and to all of the Collateral,
equally and ratably securing the obligations of the Company and such U.S.
Subsidiaries to the holders of the Notes pursuant to the Financing Documents and
to the Bank Lenders under the Bank Credit Agreement, including, without
limitation, the Security Documents and the Bank Security Documents.
(b) To the extent required by the Bank Agent in connection with
the initial closing under the Bank Credit Agreement, all actions necessary to
perfect the Liens of the Bank Agent in the Collateral for the benefit of the
Bank Lenders and the holders of the Notes (including without limitation the
filing of all financing statements or amendments to financing statements with
appropriate public officials and the payment of all recording, documentary,
stamp and other similar taxes and fees) shall have been taken in accordance with
the terms of the provisions of the Security Documents and written confirmation
thereof received by you. The Liens of the Bank Agent in the Collateral shall be
valid and enforceable, perfected (to the extent required by the Bank Agent)
except as permitted by Section 11.7, shall rank prior to any Liens or claims of
any other creditor or Person in and to the Collateral.
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Note Purchase Agreement/Flow International Corporation
<PAGE>
5.6. SUBSIDIARY GUARANTY AGREEMENTS.
Each of the U.S. Subsidiaries shall have executed and delivered
the Subsidiary Guaranty Agreement in favor of the Bank Agent, as agent for the
holders of the Notes, substantially in the form annexed hereto as Exhibit C
(which, together with all supplements and amendments thereto, is referred to
herein as the "Subsidiary Guaranty Agreement") pursuant to which each U.S.
Subsidiary shall guaranty, jointly and severally, the obligations of the Company
with respect to the Notes and this Agreement. The form of the Subsidiary
Guaranty Agreement shall be substantially identical to the Bank Subsidiary
Guaranty Agreement.
5.7. INTERCREDITOR AGREEMENT.
An Intercreditor Agreement, substantially in the form of Exhibit
D to this Agreement, shall have been duly authorized, executed and delivered by
the Bank for itself and as Bank Agent, the other Bank Lenders, the Company, and
each initial purchaser of the Notes and shall be in full force and effect and
you shall have received an original executed copy thereof.
5.8. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
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Note Purchase Agreement/Flow International Corporation
<PAGE>
5.9. SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to the
Other Purchaser and the Other Purchaser shall purchase the Notes to be purchased
by them at the Closing as specified in Schedule A.
5.10. PAYMENT OF COUNSEL FEES.
Without limiting the provisions of Section 16.1, the Company
shall have paid on or before the Closing the allocated costs and expenses of
your inhouse counsel to the extent reflected in a statement of such counsel
rendered to the Company at least one Business Day prior to the Closing.
5.11. PRIVATE PLACEMENT NUMBER.
The Company shall deliver satisfactory evidence that it has
applied for a Private Placement number to be issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) for the Notes.
5.12. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 5.12, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 6.5.
5.13. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you, your in-house
counsel and your special local counsel, and you, your in-house counsel and your
special local counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
6
Note Purchase Agreement/Flow International Corporation
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
6.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority to
own or hold under lease the properties it purports to own or hold under lease,
to transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreement and the Notes and to perform the
provisions hereof and thereof.
6.2. AUTHORIZATION, ETC.
This Agreement, the Other Agreement, the Security Documents and
the Notes have been duly authorized by all necessary corporate action on the
part of the Company, and this Agreement, the Other Agreement and the Security
Documents constitute, and upon execution and delivery thereof each Note will
constitute, legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Upon execution and delivery thereof the Security Documents will create for the
benefit of the holders of the Notes a valid first priority security interest in
the Collateral subject only to Liens permitted by Section 11.7 and subject to
the provisions of the Intercreditor Agreement.
6.3. DISCLOSURE.
The Company, through its agent, Dain Bosworth Incorporated, has
delivered to you and each Other Purchaser a copy of a Confidential Information
Memorandum, dated July 1995 (the "MEMORANDUM"; PROVIDED, HOWEVER, for the
purposes of this Section 6.3, the term "Memorandum" shall not include the
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Note Purchase Agreement/Flow international Corporation
<PAGE>
analysts reports, product information and press releases relating to products
contained therein), relating to the transactions contemplated hereby.
The Memorandum fairly describes, in all material respects, the general nature of
the business and principal properties of the Company and its Subsidiaries.
Except as disclosed in Schedule 6.3, this Agreement, the Memorandum, the
documents, certificates or other writings delivered to you by or on behalf of
the Company in connection with the transactions contemplated hereby and the
financial statements listed in Schedule 6.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 6.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 6.5, since April 30, 1995, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
6.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 6.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 6.4 as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 6.4).
(c) Each Subsidiary identified in Schedule 6.4 is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified as a
foreign
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<PAGE>
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the Other
Agreement, the agreements listed on Schedule 6.4 and customary limitations
imposed by corporate law statutes) restricting the ability of such Subsidiary to
pay dividends out of profits or make any other similar distributions of profits
to the Company or any of its Subsidiaries that owns outstanding shares of
capital stock or similar equity interests of such Subsidiary.
6.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 6.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
6.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Other Agreement and the Notes will not (i) contravene, result in
any breach of, or constitute a default under, or result in the creation of any
Lien in respect of any property of the Company or any Subsidiary under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or bylaws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority
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applicable to the Company or any Subsidiary or (iii) violate any provision of
any statute or other rule or regulation of any Governmental Authority applicable
to the Company or any Subsidiary.
6.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing
or declaration with, any Governmental Authority is required in connection with
the execution, delivery or performance by the Company of this Agreement, the
Other Agreement or the Notes.
6.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 6.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any property of the
Company or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
6.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
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reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of the Company and its Subsidiaries have been determined
by an audit by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended April 30, 1990.
6.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title
to their respective real and personal properties that individually or in the
aggregate are Material, including all Collateral and all other such properties
reflected in the most recent audited balance sheet referred to in Section 6.5 or
purported to have been acquired by the Company or any Subsidiary after said date
(except as sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
6.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 6.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries.
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6.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities. The term "BENEFIT LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106, without
regard to liabilities attributable to continuation coverage mandated by section
4980B of the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the Other
Agreement and the issuance and sale of the Notes hereunder 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(c)(1)(A)-
(D) of the Code. The representation by the Company in the
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first sentence of this Section 6.12(e) is made in reliance upon and subject to
the accuracy of your representation in Section 7.2 as to the sources of the
funds used to pay the purchase price of the Notes to be purchased by you.
6.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered
the Notes or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than you, the Other Purchaser and not more than 20 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
6.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as
set forth in Schedule 6.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 20% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 20% of
the value of such assets. As used in this Section, the terms "MARGIN STOCK" and
"PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said
Regulation G.
6.15. EXISTING INDEBTEDNESS; FUTURE LIENS; EXISTING INVESTMENTS.
(a) Except as described therein, Schedule 6.15 sets forth a
complete and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of September 22, 1995, since which date there has been no
Material change in the amounts, interest rates, sinking funds, instalment
payments or maturities of the Indebtedness of the Company or its Subsidiaries.
Neither the Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
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Indebtedness of the Company or such Subsidiary and no event or condition exists
with respect to any Indebtedness of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
(b) 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 thereto or any other contract or agreement (including its articles of
incorporation, charter, by-laws or other constitutive documents) that limits the
amount of, or otherwise imposes restrictions on the incurring of, Indebtedness
of the Company of the type to be evidenced by the Note Purchase Agreements or
the Notes, except as set forth in the agreements listed in Schedule 6.15 hereto
(none of the terms of which are violated by the issuance of the Notes or the
execution and delivery of, or compliance with the Note Purchase Agreements by
the Company, other than ones for which effective consents have been obtained and
delivered to you).
(c) Except as disclosed in Schedule 6.15, neither the Company
nor any Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 11.7.
(d) Except as described therein, Schedule 6.15 sets forth a
complete and correct list of all outstanding Investments of the Company and its
Subsidiaries as of September 22, 1995 (other than (a) property used or to be
used in the ordinary course of business of the Company and its Subsidiaries; (b)
current assets arising from the sale of goods and services in the ordinary
course of business of the Company and its Subsidiaries; (c) Investments in its
Subsidiaries), since which date there has been no Material change in such
Investments.
6.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
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6.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
6.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge
of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to
real properties now or formerly owned, leased or operated by any
of them or to other assets or their use, except, in each case,
such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them and has not disposed of
any Hazardous Materials in a manner contrary to any Environmental
Laws in each case in any manner that could reasonably be expected
to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased
or operated by the Company or any of its Subsidiaries are in
compliance with applicable Environmental Laws, except where
failure to comply could not reasonably be expected to result in a
Material Adverse Effect.
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6.19. COMPANY AND SUBSIDIARIES.
The Company and the Subsidiaries are part of one consolidated
business entity and are directly dependent upon each other for and in connection
with their respective business activities and their respective financial
resources. The Subsidiaries will receive direct economic and financial benefits
from the Indebtedness incurred under the Notes and the incurrence of such
Indebtedness is in the best interest of the Subsidiaries.
7. REPRESENTATIONS OF THE PURCHASER.
7.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, PROVIDED that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
7.2. SOURCE OF FUNDS.
You represent that, for the purpose only of determining whether
the acquisition by you of the Notes to be purchased by you hereunder is a
"prohibited transaction" (as that term is used in section 406 of ERISA or
section 4975 of the Code), at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source does not include any asset of any "employee benefit
plan" as defined in Section 3(3) of ERISA, or its related trust, or "plan"
as defined in section 4975 of the Code, or its related trust (each a
"PLAN"); or
(b) the Source is an insurance company general account of which the
assets are such that if any of them are, or are deemed to be, assets of any
Plan, the acquisition of the Notes by you pursuant hereto is eligible
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for and satisfies the requirements of Prohibited Transaction Exemption
("PTE") 95-60 (issued July 12, 1995); or
(c) the Source is an insurance company separate account (as
contemplated by the exception set forth in 29 C.F.R. Section
2510.3-101(h)(1)(iii)) that is maintained solely in connection with fixed
contractual obligations of an insurance company under which the amounts
payable, or credited, to any Plan having an interest in such account and to
any participant or beneficiary of such plan (including any annuitant) are
not affected in any manner by the investment performance of the separate
account; or
(d) the Source is an insurance company pooled separate account,
within the meaning of Prohibited Transaction Exemption ("PTE") 90-1 (issued
January 29, 1990), and, except as you have disclosed to the Company in
writing pursuant to this paragraph (d), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account; or
(e) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (c); or
(f) the Source is a governmental plan; or
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(g) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(h) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 7.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
8. INFORMATION AS TO COMPANY.
8.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter,
(ii) consolidated statements of income of the Company and its
Subsidiaries, for such quarter, and
(iii) consolidated statements of income and cash flow of the
Company and its Subsidiaries for the portion of the fiscal year ending
with such quarter (in the case of the first, second and third fiscal
quarters),
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial Officer
as fairly presenting, in all material respects, the financial position of
the companies being reported on and their results of operations and cash
flows, subject to changes resulting from year-end adjustments, PROVIDED
that delivery
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within the time period specified above of copies of the Company's Quarterly
Report on Form 10-Q prepared in compliance with the requirements therefor
and filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this Section 8.1(a);
(b) ANNUAL STATEMENTS -- within 105 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP,
and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
such financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their results
of operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable basis for
such opinion in the circumstances; PROVIDED that the delivery within the
time period specified above of the Company's Annual Report on Form 10-K for
such fiscal year (together with the Company's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange
Act) prepared in accordance with the requirements therefor and filed with
the Securities and Exchange Commission, shall be deemed to satisfy the
requirements of this Section 8.1(b);
(c) SEC AND OTHER REPORTS -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all financial
press releases and other releases or
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statements made available generally by the Company or any Subsidiary
to the public concerning developments that are Material;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person
has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 12(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if
any, that the Company or an ERISA Affiliate proposes to take with
respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant
to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty
or excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably
be expected to have a Material Adverse Effect;
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(f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental
Authority directed to the Company relating to any order, ruling,
statute or other law or regulation that could reasonably be expected
to have a Material Adverse Effect;
(g) DELIVERY OF NOTICES TO BANK AGENT -- contemporaneously with
the delivery to the Bank Agent, copies of all notices, reports, and
financial information delivered to the Bank Agent in accordance with
the terms of the Bank Credit Agreement which are not otherwise
required to be delivered to the holders of the Notes pursuant to the
provisions of this Section 8.1; and
(h) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of Notes.
8.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 8.1(a) or Section 8.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was
in compliance with the requirements of Section 11.3 through Section
11.11, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or
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annual period covered by the statements then being furnished to the
date of the certificate and that such review shall not have disclosed
the existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such condition
or event existed or exists (including, without limitation, any such
event or condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
8.3. INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in
writing; and
(b) DEFAULT -- if a Default or Event of Default then exists, at
the expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and
as often as may be requested.
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9. PREPAYMENT OF THE NOTES.
9.1. REQUIRED PREPAYMENTS.
On September 26, 1999 and on each September 26 thereafter to and
including September 26, 2004, the Company will prepay $2,142,857 principal
amount (or such lesser principal amount as shall then be outstanding) of the
Notes at par and without payment of the Make-Whole Amount or any premium,
PROVIDED that upon any partial prepayment of the Notes pursuant to Section 9.2
or purchase of the Notes permitted by Section 9.5 the principal amount of each
required prepayment of the Notes becoming due under this Section 9.1 on and
after the date of such prepayment or purchase shall be reduced in the same
proportion as the aggregate unpaid principal amount of the Notes is reduced as a
result of such prepayment or purchase.
9.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
aggregate amount equal to not less than $1,000,000 in the case of a partial
prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 9.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall
specify such date, the aggregate principal amount of the Notes to be prepaid on
such date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 9.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment,
the Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
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9.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.
9.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section
9, the principal amount of each Note to be prepaid shall mature and become due
and payable on the date fixed for such prepayment, together with interest on
such principal amount accrued to such date and the applicable Make-Whole Amount,
if any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
9.5. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
9.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, PROVIDED that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 9.2 or has become or
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is declared to be immediately due and payable pursuant to Section
13.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called
Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied an the same periodic basis as that on which
interest an the Notes is payable) equal to the Reinvestment Yield
with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, the sum of (x) the yield to maturity
implied by (i) the yields reported, as of 10:00 A.M. (New York
City time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display
designated as "PX1" on The BLOOMBERG (or such other display as
may replace PX1 on The BLOOMBERG) 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 (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest
day for which such yields have been so reported as of the second
Business Day 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 (y) fifty basis points (.50%). Such implied
yield will 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 (1) the actively traded U.S. Treasury security with the
average life closest to and greater than the Remaining Average
Life and (2) the actively traded U.S. Treasury security with the
average life closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, 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) the
principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b)
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the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, PROVIDED that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 9.2 or
13.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 9.2 or has become or is declared to be immediately due and payable
pursuant to Section 13.1, as the context requires.
10. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
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10.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
10.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, PROVIDED that this Section shall not prevent
the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
10.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file
all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, PROVIDED
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
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10.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 11.2 and 11.10, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Subsidiaries (unless merged into the Company or a
Subsidiary) and all rights and franchises of the Company and its Subsidiaries
unless, in the good faith judgment of the Company, the termination of or failure
to preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, have a Material Adverse
Effect.
10.6. MAINTENANCE OF LIENS ON COLLATERAL; ADDITIONAL COLLATERAL; ADDITIONAL
SUBSIDIARY GUARANTY AGREEMENTS.
(a) The Company agrees that it will take or cause to be taken
all action necessary to maintain and preserve the Liens granted under the
Security Agreement and the Subsidiary Security Agreement, including, without
limitation, the proper filing and refiling of appropriate Uniform Commercial
Code financing statements and continuation statements so as to make and keep
effective the Lien on the Collateral intended to be created by the Security
Agreement and the Subsidiary Security Agreement, paying all required filing fees
in connection therewith and executing and delivery such instruments of further
assurance as the holders of the Notes or the Bank Agent may from time to time
require; PROVIDED, HOWEVER, in accordance with the provisions of the
Intercreditor Agreement, if the Bank Agent releases any or all of the Liens
created by the Bank Security Documents, the Bank Agent shall also release the
identical Liens granted under the Security Documents.
(b) At such time as the Bank Agent requires that the Company
grant a security interest in the shares of stock or other equity interests of
any or all of its Subsidiaries to secure the obligations of the Company under
the Bank Credit Agreement (the agreement pursuant to which such security
interest is granted, as amended or supplemented from time to time, the "BANK
PLEDGE AGREEMENT"), the Company shall execute and deliver to each holder of
Notes a copy of the Pledge Agreement, between the Company and the Bank Agent, as
agent for the holders of the Notes, in substantially identical form to the Bank
Pledge Agreement (which, together with all supplements and amendments thereto,
is referred to herein as the "PLEDGE AGREEMENT"), together with copies of all
other documents, instruments and opinions (which shall also be addressed to such
holders) delivered to the Bank Agent in connection with such Pledge Agreement,
and shall take all other action necessary to grant to the Bank Agent,
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as agent for the holders of the Notes, a first priority security interest in
such shares of stock or equity interests, PARI PASSU with the security interest
in such shares of stock or equity interests as are granted to the Bank Agent
pursuant to the Bank Pledge Agreement.
(c) At such time as the Bank Agent requires that the Company
deliver any guaranty from any of its Subsidiaries which is not then a party to
the Subsidiary Guaranty Agreement, the Company shall cause each such Subsidiary
to execute and deliver to each holder of Notes a Subsidiary Guaranty Agreement,
and the Company shall deliver to each holder of Notes such other documents,
instruments or opinions has such holders may deem appropriate in connection with
the delivery of such Subsidiary Guaranty Agreement.
(d) The Company further agrees that if at any time the Company
or any one or more of its Subsidiaries (i) amends any Bank Security Document,
the Company will enter, or cause such Subsidiaries to enter, into a similar
amendment to the comparable Security Document or (ii) executes and delivers to
the Bank Agent any new Bank Security Document granting a Lien on any new
Collateral, the Company will, or will cause such Subsidiaries to, execute and
deliver to the Bank Agent as agent for the holders of the Notes a new
substantially identical Security Document granting a Lien on such new
Collateral.
11. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
11.1. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter
into directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
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11.2. MERGER, CONSOLIDATION, ETC.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case
may be (the "Successor Corporation"), shall be a solvent corporation
organized and existing under the laws of the United States or any State
thereof (including the District of Columbia), and, if the Company is not
the Successor Corporation, (i) such corporation shall have executed and
delivered to each holder of any Notes its assumption of the due and punct-
ual performance and observance of each covenant and condition of this
Agreement, the Other Agreement and the Notes and (ii) shall have caused to
be delivered to each holder of any Notes an opinion of nationally
recognized independent counsel, or other independent counsel reasonably
satisfactory to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof;
(b) immediately after giving effect to such transaction, (i) no
Default or Event of Default shall have occurred and be continuing and (ii)
the Successor Corporation would be permitted by the provisions of Section
11.3 hereof to incur at least $1.00 of additional Debt owing to a Person
other than a Subsidiary of the Successor Corporation.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 11.2 from its liability under this Agreement or the Notes.
11.3. LIMITATION ON INDEBTEDNESS.
(a) The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create, incur, assume, guarantee, or otherwise
become directly or indirectly liable with respect to, any Debt, unless on
the date the Company or such Subsidiary becomes liable with respect to any
such Debt and immediately after giving effect thereto and the concurrent
retirement of any other Debt,
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(i) no Default or Event of Default exists, and
(ii) Consolidated Debt does not exceed 58% of
Consolidated Total Capitalization.
(b) The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create, incur, assume, guarantee, or otherwise
become directly or indirectly liable with respect to, any Current Debt,
unless on the date the Company or such Subsidiary becomes liable with
respect to any such Debt and immediately after giving effect thereto and
the concurrent retirement of any other Current Debt,
(i) no Default or Event of Default exists, and
(ii) Consolidated Current Debt does not exceed the
greater of (x) 10% of Consolidated Total Capitalization or (y)
$15,000,000.
For the purposes of this Section 11.3, any Person becoming a Subsidiary after
the date hereof shall be deemed, at the time it becomes a Subsidiary, to have
incurred all of its then outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such Debt at the time of
such extension, renewal or refunding.
11.4. LIMITATION ON SUBSIDIARY INDEBTEDNESS.
The Company will not at any time permit any Subsidiary to,
directly or indirectly, create, incur, assume, guarantee, have outstanding, or
otherwise become or remain directly or indirectly liable with respect to, any
Debt other than:
(a) Debt of a Subsidiary outstanding on the date hereof and disclosed
in Schedule 6.15, and any extension, renewal or refunding thereof, PROVIDED
that the principal amount thereof is not increased after the date hereof;
(b) Debt of a Subsidiary owed to the Company or a Wholly-Owned
Subsidiary;
(c) (x) Debt of a Joint Venture Subsidiary owed directly by such
Joint Venture Subsidiary to a Joint Venture Partner, and (y) Debt of a
Joint
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Venture Subsidiary owed to a Person or Persons other than the Company or
such Joint Venture Partner, but only to the extent of the portion of the
principal amount of such Debt which is guaranteed by such Joint Venture
Partner, PROVIDED, HOWEVER, that the portion of the principal amount of
such Debt (A) which is not guaranteed by a Joint Venture Partner, (B) which
is guaranteed by the Company, or (C) for which the Company or another
Subsidiary is jointly and severally liable (either as the result of the
operation of law or as the result of an agreement) with such Joint Venture
Partner, shall not be permitted to be incurred by such Joint Venture
Subsidiary except in accordance with subparagraph (e) of this Section 11.4;
(d) Debt of a Subsidiary outstanding at the time such Subsidiary
becomes a Subsidiary, PROVIDED that (i) such Debt shall not have been
incurred in contemplation of such Subsidiary becoming a Subsidiary and (ii)
immediately after such Subsidiary becomes a Subsidiary no Default or Event
of Default shall exist, and PROVIDED FURTHER that any extension, renewal or
refunding thereof shall not increase the principal amount thereof and no
Default or Event of Default exists at the time of such extension, renewal
or refunding; or
(e) Debt of a Subsidiary in addition to that otherwise permitted by
the foregoing provisions of this Section 11.4, PROVIDED that on the date
the Subsidiary incurs or otherwise becomes liable with respect to any such
additional Debt and immediately after giving effect thereto and the
concurrent retirement of any other Debt,
(i) no Default or Event of Default exists, and
(ii) the total amount of (x) all Debt incurred pursuant to
this subparagraph (e) PLUS (y) the aggregate amount of all
reimbursement obligations of the Company or any Subsidiary under
any Standby Letter of Credit does not exceed 20% of Consolidated
Total Capitalization.
For the purposes of this Section 11.4, any Person becoming a Subsidiary after
the date hereof shall be deemed, at the time it becomes a Subsidiary, to have
incurred all of its then outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such Debt at the time of
such extension, renewal or refunding.
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11.5. RESTRICTED PAYMENTS.
(a) LIMITATION. The Company will not, and will not permit any
of its Subsidiaries to, at any time, declare or make, or incur any liability to
declare or make, any Restricted Payment UNLESS immediately after giving effect
to such action:
(i) the aggregate amount of Restricted Payments of the
Company and its Subsidiaries declared or made during the period
commencing on August 1, 1995 and ending on the date such
Restricted Payment is declared or made, inclusive, would not
exceed 50% of Consolidated Net Income for such period (or minus
100% of Consolidated Net Income for such period if Consolidated
Net Income for such period is a loss);
(ii) no Default or Event of Default would exist; and
(iii) the Company would be permitted by the provisions
of Section 11.3 to incur at least $1.00 of additional Debt owing
to a Person other than a Subsidiary of the Company.
(b) TIME OF PAYMENT. The Company will not, nor will it permit
any of its Subsidiaries to, authorize a Restricted Payment that is not payable
within sixty (60) days of authorization.
11.6. CURRENT RATIO.
The Company will not, at any time, permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities to be less than
1.25 to 1.
11.7. LIENS.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
property or asset (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any such Subsidiary,
whether now owned or held or hereafter acquired, or any income or profits
therefrom, or assign or otherwise convey any right to receive income or profits,
except:
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(a) Liens securing the Notes and obligations of the Company
under the Bank Credit Agreement, which Liens shall, at all times, be PARI
PASSU; PROVIDED, HOWEVER, if, in accordance with the Intercreditor
Agreement, the Bank Agent releases all of the Liens securing the
obligations of the Company under the Bank Credit Agreement and all of the
Liens securing the Notes, thereafter no Liens securing the Bank Credit
Agreement shall be permitted unless such Liens also secure the Notes;
(b) other Liens existing on the date of this Agreement and securing
the Debt of the Company and its Subsidiaries identified on Schedule 6.15 as
"Flow Canada Revolving Line of Credit" and ["Flow Europe GMBH Bank debt"];
(c) any Lien created to secure all or any part of the purchase price,
or to secure Debt incurred or assumed to pay all or any part of the
purchase price or cost of construction, of property (or any improvement
thereon) acquired or constructed by the Company or a Subsidiary after the
date of the Closing, PROVIDED that
(i) any such Lien shall extend solely to the item or items
of such property (or improvement thereon) so acquired or
constructed and, if required by the terms of the instrument
originally creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired for specific
use in connection with such acquired or constructed property (or
improvement thereon) or which is real property being improved by
such acquired or constructed property (or improvement thereon),
(ii) the principal amount of the Debt secured by any such
Lien shall at no time exceed an amount equal to the lesser of (A)
the cost to the Company or such Subsidiary of the property (or
improvement thereon) so acquired or constructed and (B) the Fair
Market Value (as determined in good faith by the board of
directors of the Company) of such property (or improvement
thereon) at the time of such acquisition or construction, and
(iii) any such Lien shall be created contemporaneously
with, or within thirty (30) days after, the acquisition or
construction of such property;
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(d) Liens for taxes, assessments or other governmental charges the
payment of which is not at the time required by Section 10.4;
(e) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens, in each case, incurred in
the ordinary course of business for sums not yet due or the payment of
which is not at the time required by Section 10.4;
(f) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social security or
retirement benefits, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety bonds,
appeal bonds, bids, leases (other than Capital Leases), performance bonds,
purchase, construction or sales contracts and other similar obligations, in
each case not incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the deferred purchase
price of property;
(g) any attachment or judgment Lien, unless the judgment it secures
shall not, within fifteen (15) days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have
been discharged within five (5) days after the expiration of any such stay;
(h) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to, and not interfering with, the ordinary conduct of the
business of the Company or any of its Subsidiaries, PROVIDED that such
Liens do not, in the aggregate, materially detract from the value of such
property;
(i) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Subsidiary or
its becoming a Subsidiary, or any Lien existing on any property acquired by
the Company or any Subsidiary at the time such property is so acquired
(whether or not the Debt secured thereby shall have been assumed), PROVIDED
that (i) no such Lien shall have been created or assumed in contemplation
of such consolidation or merger or such Person's becoming a Subsidiary or
such acquisition of property, and (ii) each such Lien shall extend solely
to the item or items of property so
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acquired and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to or is
acquired for specific use in connection with such acquired property;
(j) any Lien renewing, extending or refunding any Lien permitted
by paragraphs (b), (c) or (i) of this Section 11.7, PROVIDED that (i)
the principal amount of Debt secured by such Lien immediately prior to
such extension, renewal or refunding is not increased or the maturity
thereof reduced, (ii) such Lien is not extended to any other property,
and (iii) immediately after such extension, renewal or refunding no
Default or Event of Default would exist; and
(k) other Liens not otherwise permitted by paragraphs (a)
through (j), PROVIDED that the Debt secured by such Liens does not
exceed 5% of Consolidated Total Capitalization.
11.8. MINIMUM FIXED CHARGES COVERAGE.
The Company will not, at any time, permit the Fixed Charges
Coverage Ratio to be less than 2.00 to 1.
11.9. MINIMUM CONSOLIDATED NET WORTH.
The Company will not, at any time, permit Consolidated Net Worth
to be less than the sum of (a) $40,000,000, plus (b) 50% of its aggregate
Consolidated Net Income (but only if a positive number) for the period beginning
on May 1, 1995 and ending at the end of the most recently completed fiscal
quarter.
11.1O. SALE OF ASSETS.
The Company will not, and will not permit any of its Subsidiaries
to, make any Transfer, PROVIDED that the foregoing restriction does not apply to
a Transfer if:
(a) the property that is the subject of such Transfer
constitutes either (i) inventory held for sale, or (ii) equipment,
fixtures, supplies or materials no longer required in the operation of
the business of the Company or such Subsidiary or that is obsolete,
and, in the case of any Transfer described in clause (i) or clause
(ii), such Transfer is in the ordinary course of business (an
"Ordinary Course Transfer"); or
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(b) either
(i) such Transfer is from a Subsidiary to the Company or a
Wholly-Owned Subsidiary, or
(ii) such Transfer is from the Company to a Wholly-Owned
Subsidiary, or
(iii) such Transfer is from the Company to a Subsidiary
(other than a Wholly-Owned Subsidiary) or from a Subsidiary to
another Subsidiary and in either case is for Fair Market Value,
so long as immediately before and immediately after the consummation
of such transaction, and after giving effect thereto, no Default or
Event of Default exists or would exist (each such Transfer, an
"Intergroup Transfer"); or
(c) such Transfer is not an Ordinary Course Transfer or an
Intergroup Transfer (such transfers collectively referred to as
"Excluded Transfers"), and all of the following conditions shall have
been satisfied with respect thereto (the date of the consummation of
such Transfer of property being referred to herein as the "Property
Disposition Date"):
(i) such Transfer does not involve a Substantial Portion
of the property of the Company and its Subsidiaries,
(ii) in the good faith opinion of the Company, the Transfer
is in exchange for consideration with a Fair Market Value at
least equal to that of the property exchanged, and is in the best
interests of the Company, and
(iii) immediately after giving effect to such transaction no
Default or Event of Default would exist.
11.11. RESTRICTED INVESTMENTS.
(a) LIMITATION. The Company will not, and will not permit any
of its Subsidiaries to, declare, make or authorize any Restricted Investment
unless immediately after giving effect to such action:
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(i) the aggregate amount of Restricted Investments (valued
immediately after such action) would not exceed 20% of Consolidated
Total Capitalization as of the end of the most recent fiscal quarter;
and
(ii) no Default or Event of Default would exist.
(b) INVESTMENTS OF SUBSIDIARIES. Each Person which becomes
a Subsidiary of the Company after the date of the Closing will be deemed to
have made, on the date such Person becomes a Subsidiary of the Company, all
Restricted Investments of such Person in existence on such date. Investments
in any Person that ceases to be a Subsidiary of the Company after the date of
the Closing (but in which the Company or another Subsidiary continues to
maintain an Investment) will be deemed to have been made on the date on which
such Person ceases to be a Subsidiary of the Company.
(c) DEFINITIONS. The term "RESTRICTED INVESTMENTS" means all
Investments except the following:
(a) property to be used in the ordinary course of business of
the Company and its Subsidiaries;
(b) current assets arising from the sale of goods and services
in the ordinary course of business of the Company and its
Subsidiaries;
(c) Investments in one or more Subsidiaries or any Person that
concurrently with such Investment becomes a Subsidiary;
(d) Investments existing on the date of the Closing and
disclosed in Schedule 6.15;
(e) Investments in United States Governmental Securities,
PROVIDED that such obligations mature within 365 days from the date of
acquisition thereof;
(f) Investments in certificates of deposit or banker's
acceptances issued by an Acceptable Bank, PROVIDED that such
obligations mature within 365 days from the date of acquisition
thereof;
(g) Investments in commercial paper given the highest rating by
a credit rating agency of recognized national standing and maturing
not more than 270 days from the date of creation thereof;
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(h) Investments in Repurchase Agreements; and
(i) Investments in tax-exempt obligations of any state of the
United States of America, or any municipality of any such state, in
each case rated "AA" or better by S&P, "Aa2" or better by Moody's or
an equivalent rating by any other credit rating agency of recognized
national standing, PROVIDED that such obligations mature within 365
days from the date of acquisition thereof.
For purposes of this Agreement, an Investment shall be valued at the lesser of
(i) cost and (ii) the value at which such Investment is to be shown on the books
of the Company and its Subsidiaries in accordance with GAAP. As of any date,
the calculation of the value of any Investment which is outstanding or which is
to be made shall be determined in U.S. Dollars and any Investment which is
stated to be payable in a currency other than U.S. Dollars shall be determined
in U.S. Dollars using the exchange rate with respect to such currency as of such
date.
As used in this definition of "Restricted Investments":
"ACCEPTABLE BANK" means any bank or trust company (i) which is
organized under the laws of the United States of America or any State
thereof, (ii) which has capital, surplus and undivided profits
aggregating at least $500,000,000, and (iii) whose long-term unsecured
debt obligations (or the long-term unsecured debt obligations of the
bank holding company owning all of the capital stock of such bank or
trust company) shall have been given a rating of "A" or better by
S&P, "A2" or better by Moody's or an equivalent rating by any other
credit rating agency of recognized national standing.
"ACCEPTABLE BROKER-DEALER" means any Person other than a natural
person (i) which is registered as a broker or dealer pursuant to the
Exchange Act and (ii) whose long-term unsecured debt obligations shall
have been given a rating of "A" or better by S&P, "A2" or better by
Moody's or an equivalent rating by any other credit rating agency of
recognized national standing.
"MOODY'S" means Moody's Investors Service, Inc.
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"REPURCHASE AGREEMENT" means any written agreement
(a) that provides for (i) the transfer of one or more
United States Governmental Securities in an aggregate principal
amount at least equal to the amount of the Transfer Price
(defined below) to the Company or any of its Subsidiaries from an
Acceptable Bank or an Acceptable Broker-Dealer against a transfer
of funds (the "Transfer Price") by the Company or such Subsidiary
to such Acceptable Bank or Acceptable Broker-Dealer, and (ii) a
simultaneous agreement by the Company or such Subsidiary, in
connection with such transfer of funds, to transfer to such
Acceptable Bank or Acceptable Broker-Dealer the same or
substantially similar United States Governmental Securities for a
price not less than the Transfer Price plus a reasonable return
thereon at a date certain not later than 365 days after such
transfer of funds,
(b) in respect of which the Company or such Subsidiary
shall have the right, whether by contract or pursuant to
applicable law, to liquidate such agreement upon the occurrence
of any default thereunder, and
(c) in connection with which the Company or such
Subsidiary, or an agent thereof, shall have taken all action
required by applicable law or regulations to perfect a Lien in
such United States Governmental Securities.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"UNITED STATES GOVERNMENTAL SECURITY" means any direct obligation
of, or obligation guaranteed by, the United States of America, or any
agency controlled or supervised by or acting as an instrumentality of
the United States of America pursuant to authority granted by the
Congress of the United States of America, so long as such obligation
or guarantee shall have the benefit of the full faith and credit of
the United States of America which shall have been pledged pursuant to
authority granted by the Congress of the United States of America.
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11.12. TAX CONSOLIDATION.
The Company will not consent to or permit the filing of or be a
party to any consolidated income tax return on behalf of itself or any of its
Subsidiaries with any Person (other than a consolidated income tax return of the
Company and its own Subsidiaries).
12. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any
Note for more than five Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Section 8.1(d), or in Sections 11.1 through
11.11, inclusive; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 12) and such default is
not remedied within 30 days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a
Note (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of Section
12); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or
incorrect in any material respect on the date as of which made; or
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(f) (1) the Company or any Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $100,000
beyond any period of grace provided with respect thereto, or (ii) the
Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Indebtedness in an
aggregate outstanding principal amount of at least $100,000 or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition
such Indebtedness has become, or has been declared (or one or more
Persons are entitled to declare such Indebtedness to be), due and
payable before its stated maturity or before its regularly scheduled
dates of payment, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time
or the right of the holder of Indebtedness to convert such
Indebtedness into equity interests), (x) the Company or any Subsidiary
has become obligated to purchase or repay Indebtedness before its
regular maturity or before its regularly scheduled dates of payment in
an aggregate outstanding principal amount of at least $100,000, or (y)
one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying,
or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or
other similar law of any jurisdiction, (iii) makes an assignment for
the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
(v) is adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of
its Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving
a petition for
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relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or any such
petition shall be filed against the Company or any of its Subsidiaries
and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $250,000 (which are not paid or fully covered
by insurance and the liability of the insurer is not being challenged
or questioned) are rendered against one or more of the Company and its
Subsidiaries and which judgments are not, within 60 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; or
(j) the Company or any Subsidiary shall fail to perform or
observe any agreement or covenant contained in any of the Security
Documents, or any Subsidiary shall fail to perform or observe any
agreement or covenant contained in the Subsidiary Guaranty Agreement;
or
(k) any Lien created by any Security Document shall cease to be
a valid and enforceable Lien or any such Lien shall cease to be a
perfected Lien (other than Liens which have been released by the Bank
Agent in accordance with the provisions of the Intercreditor
Agreement); or
(l) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee
to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of ERISA)
under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $100,000, (iv) the Company or any ERISA Affiliate shall
have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan,
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<PAGE>
or (vi) the Company or any Subsidiary establishes or amends
any employee welfare benefit plan that provides post-employ-
ment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and
any such event or events described in clauses (i) through
(vi) above, either individually or together with any other
such event or events, could reasonably be expected to have a
Material Adverse Effect.
As used in Section 12(l), the terms "EMPLOYEE BENEFIT PLAN" and
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
13. REMEDIES ON DEFAULT, ETC.
13.1. ACCELERATION.
(a) If an Event of Default with respect to the
Company described in paragraph (g) or (h) of Section 12 (other
than an Event of Default described in clause (i) of paragraph (g)
or described in clause (vi) of paragraph (g) by virtue of the
fact that such clause encompasses clause (i) of paragraph (g))
has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred
and is continuing, any holder or holders of more than 25% in
principal amount of the Notes at the time outstanding may at any
time at its or their option, by notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in
paragraph (a) or (b) of Section 12 has occurred and is
continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at
its or their option, by notice or notices to the Company,
declare all the Notes held by it or them to be immediately due
and payable.
Upon any Notes becoming due and payable under this
Section 13.1, whether automatically or by declaration, such Notes
will forthwith mature and the entire unpaid principal amount of
such Notes, plus (x) all accrued and unpaid interest thereon and
(y) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every
case
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without presentment, demand, protest or further notice, all of which are hereby
waived. The Company acknowledges, and the parties hereto agree, that each
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of a Make-Whole Amount by the Company in the event
that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
13.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 13.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
13.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 13.1, the holders of not less than 76%
in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 18, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 13.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
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13.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 16,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 13, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The name
and address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the Company shall not
be affected by any notice or knowledge to the contrary. The Company shall give
to any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
14.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note.
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<PAGE>
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of Exhibit 1. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $100,000, PROVIDED that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 7.2.
14.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (PROVIDED that if the holder of such
Note is, or is a nominee for, an original Purchaser or another holder
of a Note with a minimum net worth of at least $10,000,000, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
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15. PAYMENTS ON NOTES.
15.1. PLACE OF PAYMENT.
Subject to Section 15.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made
in Kent, Washington at the principal office of the Company in such jurisdiction.
The Company may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be either
the principal office of the Company in such jurisdiction or the principal office
of a bank or trust company in such jurisdiction.
15.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note,
and notwithstanding anything contained in Section 15.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 15.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 14.2. The Company will afford the
benefits of this Section 15.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 15.2.
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16. EXPENSES, ETC.
16.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including the
allocated costs and expenses of your in-house counsel and the reasonable
attorneys' fees of your special counsel and, if reasonably required, local or
other counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any work-
out or restructuring of the transactions contemplated hereby and by the Notes.
The Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
16.2. SURVIVAL.
The obligations of the Company under this Section 16 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
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 subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
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shall be deemed representations and warranties of the Company under this
Agreement. 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
hereof.
18. AMENDMENT AND WAIVER.
18.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance
of any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6, 7 or 22, or any defined term (as it is
used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 13 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 9, 12(a), 12(b), 13, 18 or
21.
18.2. SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 18 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
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additional interest, fee or otherwise, or grant any security, to any holder of
Notes as consideration for or as an inducement to the entering into by any
holder of Notes or any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.
18.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section
18 applies equally to all holders of Notes and is binding upon them and upon
each future holder of any Note and upon the Company without regard to whether
such Note has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. 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 herein, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
18.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
19. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
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(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of Lee M. Andrews, Vice
President - Chief Financial Officer, or at such other address as the
Company shall have specified to the holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually
received.
20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 20
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
21. CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, "CONFIDENTIAL INFORMATION"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
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being confidential information of the Company or such Subsidiary, PROVIDED that
such term does not include information that (a) was publicly known or otherwise
known to you prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary or (d) constitutes financial statements delivered to
you under Section 8.1 that are otherwise publicly available. You will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information of
third parties delivered to you, PROVIDED that you may deliver or disclose
Confidential Information to (i) your directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 21, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 21), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 21),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 21 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 21.
53
Note Purchase Agreement/Flow International Corporation
<PAGE>
22. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 7. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 22), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
22), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
23. MISCELLANEOUS.
23.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by
or on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
23.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
23.3. SEVERABILITY.
Any provision of this Agreement that 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
54
Note Purchase Agreement/Flow International Corporation
<PAGE>
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
23.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
23.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
23.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of Washington excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
23.7. STATUTORY NOTICE.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT,
OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
* * * * *
55
Note Purchase Agreement/Flow International Corporation
<PAGE>
If you are in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
FLOW INTERNATIONAL CORPORATION
By /s/ Ronald W. Tarrant
--------------------------------------
Name: Ronald W. Tarrant
Title: Chairman, President and
Chief Executive Officer
The foregoing is hereby
agreed to as of the
date thereof
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By /s/ James G. Schelling
-----------------------------------
Name: James G. Schelling
Title: Managing Director
56
Note Purchase Agreement/Flow International Corporation
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