<PAGE> 1
UNITED STATES
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 DECEMBER 31, 1993
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8549
NATIONAL INTERGROUP, INC.
______________________________
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 25-1425889
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1220 Senlac Drive, Carrollton, Texas 75006
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 214-446-4800
Indicate by check mark whether the registrant (1) had 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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
_____ _____
Number of shares of Common Stock outstanding as of February 10, 1994: 12,868,303
1
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PART 1. FINANCIAL INFORMATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
National Intergroup, Inc. and Subsidiaries (In Thousands, Except Per Share Amounts)
-----------------------------------------------------------------------------------------------------------
Three Months Ended
December 31,
----------------------------
1993 1992
----------- -----------
<S> <C> <C>
NET SALES $1,396,705 $1,301,304
COSTS AND EXPENSES
Cost of goods sold 1,310,158 1,217,786
Selling, general and administrative expenses 73,319 110,884
Depreciation and amortization 5,430 4,824
---------- ----------
7,798 (32,190)
OTHER INCOME 4,272 1,340
---------- ----------
Operating income (loss) 12,070 (30,850)
FINANCING COSTS
Interest income 568 370
Interest expense 6,731 4,981
---------- ----------
Financing costs, net 6,163 4,611
Income (loss) before National Steel Corporation, income tax
benefit and minority interest 5,907 (35,461)
National Steel Corporation
Net preferred dividend income 1,131 1,651
---------- ----------
Income (loss) before income tax benefit and minority interest 7,038 (33,810)
INCOME TAX BENEFIT (1,045) (24,613)
---------- ----------
Income (loss) before minority interest 8,083 (9,197)
Minority interest in net income (loss) of consolidated subsidiaries 504 (2,848)
---------- ----------
NET INCOME (LOSS) 7,579 (6,349)
Preferred stock dividends 3,210 1,338
---------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 4,369 $ (7,687)
---------- ----------
NET INCOME (LOSS) PER SHARE $ 0.28 $ (0.39)
========== ==========
AVERAGE NUMBER OF SHARES OUTSTANDING 15,394 19,697
---------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
National Intergroup, Inc. and Subsidiaries (In Thousands, Except Per Share Amounts)
------------------------------------------------------------------------------------------------------------
Nine Months Ended
December 31,
----------------------------
1993 1992
----------- ------------
<S> <C> <C>
NET SALES $ 4,054,541 $ 3,518,174
COSTS AND EXPENSES
Cost of goods sold 3,800,630 3,291,918
Selling, general and administrative expenses 211,713 226,527
Depreciation and amortization 16,192 13,855
----------- -----------
26,006 (14,126)
OTHER INCOME 6,646 4,739
----------- -----------
Operating income (loss) 32,652 (9,387)
FINANCING COSTS
Interest income 1,529 2,133
Interest expense 19,588 11,526
----------- -----------
Financing costs, net 18,059 9,393
----------- -----------
Income (loss) before National Steel Corporation, income tax
benefit and minority interest 14,593 (18,780)
National Steel Corporation
Net preferred dividend income 6,522 4,983
Unrealized loss on common stock investment (6,800) -
----------- -----------
(278) 4,983
----------- -----------
Income (loss) before income tax benefit and minority interest 14,315 (13,797)
INCOME TAX BENEFIT (1,558) (22,559)
----------- -----------
Income before minority interest 15,873 8,762
Minority interest in net income of consolidated subsidiaries 2,891 3,814
----------- -----------
NET INCOME 12,982 4,948
Preferred stock dividends 5,740 4,088
----------- -----------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 7,242 $ 860
----------- -----------
NET INCOME PER SHARE $ 0.40 $ 0.04
=========== ===========
AVERAGE NUMBER OF SHARES OUTSTANDING 18,264 20,057
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
National Intergroup, Inc. and Subsidiaries (Thousands of Dollars)
------------------------------------------------------------------------------------------------------------
December 31, March 31,
1993 1993
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 64,676 $ 54,504
Receivables - net 322,084 349,005
Inventories 712,453 620,143
Investment in National Steel Corporation common stock 39,300 46,100
Other current assets 17,335 14,378
----------- -----------
TOTAL CURRENT ASSETS 1,155,848 1,084,130
INVESTMENT IN NATIONAL STEEL CORPORATION PREFERRED STOCK 57,282 51,277
PROPERTY, PLANT AND EQUIPMENT 157,876 132,916
Less: allowances for depreciation and amortization 64,388 56,494
----------- -----------
93,488 76,422
OTHER ASSETS
Goodwill - net 229,809 232,119
Intangible assets - net 13,137 14,207
Pre-bankruptcy receivable from Phar-Mor, Inc. 28,758 29,465
Deferred tax asset, net of valuation allowance 40,411 38,524
Miscellaneous assets 49,218 35,951
----------- -----------
361,333 350,266
----------- -----------
TOTAL ASSETS $ 1,667,951 $ 1,562,095
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 708,756 $ 601,018
Accrued liabilities 62,885 71,276
Income taxes 23,511 25,182
Debt due within one year 7,654 13,476
----------- -----------
TOTAL CURRENT LIABILITIES 802,806 710,952
LONG-TERM DEBT 259,134 256,644
OTHER LIABILITIES 81,203 78,337
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 107,622 105,469
REDEEMABLE PREFERRED STOCK 163,543 50,599
STOCKHOLDERS' EQUITY
Common stock, $5.00 par value; authorized 50,000,000 shares; issued
23,993,537 at December 31, 1993 and 23,988,459 at March 31, 1993 119,968 119,942
Capital in excess of par value 207,257 207,204
Retained earnings 127,698 120,456
----------- -----------
454,923 447,602
Less: cost of common stock held in treasury - 11,125,441 shares at
December 31, 1993 and 4,291,936 shares at March 31, 1993 201,280 87,508
----------- -----------
253,643 360,094
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,667,951 $ 1,562,095
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
National Intergroup, Inc. and Subsidiaries (Thousands of Dollars)
---------------------------------------------------------------------------------------------------------
Nine Months Ended
December 31,
-------------------------
1993 1992
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 12,982 $ 4,948
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES:
Minority interest in net income of consolidated subsidiaries 2,891
Depreciation and amortization 16,192 3,814
Net preferred dividend income from National Steel Corporation (6,522) 13,855
Unrealized loss on National Steel Corporation common stock investment 6,800 (4,983)
Deferred tax benefit (2,453) -
Provision for losses on accounts receivable 3,078 (29,960)
Cash provided (used) by working capital items, net of acquisitions: 45,624
Receivables (101,157)
Inventories (92,310) (84,300)
Other assets (772) (173,366)
Accounts payable and accrued liabilities 100,593 (289)
Other (1,912) 206,503
1,267
---------- ---------
NET CASH USED BY OPERATING ACTIVITIES (62,590) (16,887)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment and development of software (31,928) (16,243)
Prepayment on long-term commitment (5,096) (7,500)
Acquisitions, net of cash acquired - (134,591)
Prepayment on notes receivable 1,861 7,300
Other investing activities (3,294) 5,629
---------- ---------
NET CASH USED BY INVESTING ACTIVITIES (38,457) (145,405)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock of Ben Franklin Retail Stores, Inc. - 7,850
Borrowings under term loan - 130,000
Repayments under term loan (125,000) (5,000)
Borrowings under revolving credit facilities 1,371,550 768,450
Repayments under revolving credit facilities (1,484,350) (651,850)
Proceeds from issuance of long-term debt 235,000 -
Repurchase of minority interest in consolidated subsidiary - (63,527)
Repurchase of common stock - (11,254)
Dividends paid to minority stockholders of FoxMeyer Corporation (1,157) (2,027)
Dividends paid on preferred stock (3,795) (4,125)
Proceeds from accounts receivable financing program 125,000 -
Other financing activities (6,029) (4,014)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 111,219 164,503
---------- ---------
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 10,172 2,211
Cash and Short-Term Investments, Beginning of Period 54,504 65,308
---------- ---------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 64,676 $ 67,519
---------- ---------
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Exchange of preferred stock for common stock $ 112,753 -
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
NATIONAL INTERGROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of National
Intergroup, Inc. and its subsidiaries (the "Corporation"), including FoxMeyer
Corporation ("FoxMeyer"), an 80.5% owned subsidiary, and Ben Franklin Retail
Stores, Inc. ("Ben Franklin"), a 67.2% owned subsidiary. All significant
intercompany balances and transactions have been eliminated.
The accompanying condensed consolidated balance sheet of the Corporation as of
December 31, 1993, the condensed statements of consolidated operations for the
three and nine months ended December 31, 1993 and 1992 and the condensed
statements of consolidated cash flows for the nine months ended December 31,
1993 and 1992 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited consolidated financial
statements and include all adjustments necessary for the fair presentation of
financial position, results of operations and cash flows. The results of
operations for the three and nine months ended December 31, 1993 are not
necessarily indicative of the results that may be expected for the entire year.
The condensed consolidated balance sheet as of March 31, 1993 was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles. Additional information is contained
in the Corporation's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended March 31, 1993, which should be
read in conjunction with this quarterly report.
NOTE 2 - NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is based on net income after preferred
stock dividend requirements and the weighted average number of shares of common
stock outstanding during the period after giving effect to stock options
considered to be dilutive common stock equivalents. Fully diluted net income
per share is not presented as it is substantially the same as primary earnings
per share or is anti-dilutive.
NOTE 3 - DEBT AND ACCOUNTS RECEIVABLE FINANCING
On January 13, 1994, the Corporation entered into a $15.0 million revolving
credit facility (the "Credit Facility") to be used by it for working capital
and general corporate purposes. The Credit Facility, which is secured by
shares of common stock of FoxMeyer, restricts the payment of dividends on the
Corporation's common stock and imposes limits on the repurchase of shares of
its common stock. In addition, certain other limitations and restrictions have
been placed on the Corporation by the Credit Facility. The Credit Facility
expires on April 1, 1996. The interest rate is a Euro-dollar rate (as defined)
plus 1.875% or the prime rate plus .25%. The Credit Facility replaced a $10.0
million credit facility under which $6.0 million was outstanding at December
31, 1993 at an interest rate of 4.875%.
On April 29, 1993, FoxMeyer issued $198.0 million of 7.09% senior notes due
April 15, 2005 (the "Senior Notes"). The Senior Notes are payable in eight
equal annual installments commencing on April 15, 1998. The Senior Notes
contain certain restrictions and covenants which, among other things, place
limitations on debt, liens, investments, payment of dividends by FoxMeyer,
repurchases of FoxMeyer's common stock and transactions with related parties.
In addition, the Senior Notes are subject to a prepayment penalty based on
current interest rates. Proceeds from the Senior Notes were used to pay down
balances then outstanding under FoxMeyer's primary credit facility (the
"FoxMeyer Credit Facility") including the retirement of the $125.0 million
outstanding under FoxMeyer's term loan facility (the "Term Loan").
6
<PAGE> 7
The FoxMeyer Credit Facility, which provided FoxMeyer with the Term Loan and a
$200.0 million revolving credit facility (the "FoxMeyer Revolving Credit
Facility"), was amended and restated on April 29, 1993, simultaneously with the
issuance of the Senior Notes. The amended FoxMeyer Credit Facility allowed for
the issuance of the Senior Notes, the prepayment and cancellation of the Term
Loan, the release of collateral previously pledged by FoxMeyer under the
FoxMeyer Credit Facility, the addition of a requirement to maintain a certain
ratio of total indebtedness to capitalization, the increase in the maximum
amount available under the FoxMeyer Revolving Credit Facility to $210.0 million
and the extension of the maturity of the FoxMeyer Credit Facility to March 31,
1996. The other terms of the FoxMeyer Credit Facility, including covenants,
limitations and restrictions, were not materially changed. Under the amended
FoxMeyer Credit Facility, FoxMeyer may select an interest rate based on a
Euro-dollar rate (as defined) plus 1.25%, the prime rate or rates available
from banks that are parties to the FoxMeyer Credit Facility. In addition, on
August 30, 1993 FoxMeyer entered into a separate one-year $40.0 million
revolving credit facility which provides for an interest rate based on a
Euro-dollar rate (as defined) plus 1.125% or the prime rate. The covenants
under this facility are substantially identical to those in the FoxMeyer Credit
Facility. The average amount and maximum amount borrowed under FoxMeyer's
revolving credit facilities during the nine months ended December 31, 1993,
were $106.8 million and $215.5 million, respectively. At December 31, 1993,
$19.7 million were outstanding under FoxMeyer's revolving credit facilities at
an interest rate of 6.0%.
On October 29, 1993, FoxMeyer entered into a one year agreement to sell a
percentage ownership interest in a defined pool of FoxMeyer's trade accounts
receivable. Under the terms of the agreement, FoxMeyer retained substantially
the same risk of credit loss as if the accounts receivable had not been sold.
Proceeds of $125.0 million from the sale were used to reduce amounts
outstanding under FoxMeyer's revolving credit facilities. Generally, an
undivided interest in new accounts receivable will be sold daily as existing
accounts receivable are collected to maintain the participation interest at
$125.0 million. The cost of the accounts receivable financing program is based
on a 30-day commercial paper rate plus certain fees. The total cost of the
program since its inception to December 31, 1993 was $.9 million and was
charged against "Other Income" in the accompanying condensed statements of
consolidated operations. Under the agreement, FoxMeyer also acts as agent for
the purchaser by performing recordkeeping and collection functions on the
participation interest sold. The agreement contains certain covenants which
are substantially identical to those contained in the FoxMeyer Credit Facility.
FoxMeyer's revolving credit facilities were amended to allow for the financing
program.
In June 1993, Ben Franklin issued $28.8 million of 7.5% convertible
subordinated notes due June 1, 2003 (the "Ben Franklin Notes"). The Ben
Franklin Notes are unsecured general obligations of Ben Franklin subordinated
to all existing and future senior debt and are convertible into the common
stock of Ben Franklin at $7.75 per share. The Ben Franklin Notes are
redeemable, at the option of Ben Franklin, in whole or in part, on or after
June 1, 1996, at redemption prices ranging from 105% of the principal amount
thereof in 1996 to 100% in 2002.
The Ben Franklin revolving credit facility (the "Ben Franklin Credit Facility")
was amended in connection with the issuance of the Ben Franklin Notes to allow
for the issuance thereof and to amend certain covenants. At December 31, 1993,
no amounts were outstanding under the Ben Franklin Credit Facility. The
average and maximum amounts outstanding during the nine months ended December
31, 1993, were $2.1 million and $9.4 million, respectively.
Interest paid by the Corporation was $13.6 million and $6.3 million for the
nine months ending December 31, 1993 and 1992, respectively.
7
<PAGE> 8
NOTE 4 - INCOME TAXES
The Corporation adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("SFAS 109") in the fourth quarter of fiscal year
1993 and restated its prior year financial statements. The retroactive
application of SFAS 109 increased net income by $13.7 million or $.68 per share
for the nine months ended December 31, 1992. The increase was principally due
to the reduction of the deferred tax asset valuation allowance as a result of
Ben Franklin's public offering in May 1992 and the tender offer by the
Corporation and FoxMeyer for 3,300,000 shares of FoxMeyer's outstanding common
stock, which was completed in November 1992. The tender offer resulted in the
reconsolidation of FoxMeyer into the Corporation's federal income tax return.
Federal and state income taxes paid by the Corporation for the nine months
ended December 31, 1993 and 1992, were $.2 million and $1.1 million,
respectively.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
There are various pending claims and lawsuits arising out of the normal conduct
of the Corporation's businesses. Some of these claims involve environmental
liabilities attributable to former operating units that have been divested or
closed.
The Corporation has received various claims and demands from governmental
agencies relating to investigative and remedial actions required to address
environmental clean-up costs at various sites. The Corporation has also been
designated as a potentially responsible party ("PRP") by the Environmental
Protection Agency at several other sites. With respect to these sites,
numerous other PRP's have similarly been designated and, while the Corporation
may be held liable for the total costs of clean-up at a site if the other PRP's
are unable to perform, as a practical matter the costs of these sites are
typically shared with the other PRP's.
The total costs for clean-up at these sites are highly uncertain due to the
difficulty of estimating the magnitude of actual clean-up costs, the evolving
nature of government laws and regulations and the determination of the
Corporation's share of liability in proportion to other PRP's. The Corporation
has established reserves that it considers adequate based on current
information available to management, current government laws and regulations
and the assumption that other PRP's will be financially able to meet their
share of the costs.
Although liabilities associated with the above matters may be substantial,
management believes that the final outcome of these matters will not have a
materially adverse effect on the Corporation's financial condition. See Note 6
below.
FoxMeyer continues to monitor the Phar-Mor, Inc. ("Phar-Mor") bankruptcy
proceedings closely and to work through the Unsecured Creditors Committee as
Phar-Mor attempts to reorganize and emerge from bankruptcy. As part of its
restructuring, Phar-Mor has closed over 140 stores since its August 1992
bankruptcy filing. FoxMeyer believes the $40.0 million charge recorded in
December 1992 remains a reasonable estimate of its probable loss. However,
there could be future developments and additional information could become
available that may indicate that the estimated loss should be adjusted. The
Corporation believes any future adjustments, if they should be necessary, may
be material to the results of operations for the period or periods in which
reported but would not have a material adverse effect on the Corporation's
financial condition.
NOTE 6 - NATIONAL STEEL CORPORATION
On May 4, 1993, National Steel Corporation ("NSC") redeemed 10,000 shares of
the NSC preferred stock owned by the Corporation. The $67.8 million of
proceeds received on the redemption were immediately deposited by the
Corporation in the trust for the Weirton Retirement Program as required by the
Stock Purchase and
8
<PAGE> 9
Recapitalization Agreement dated as of June 26, 1990 among the Corporation, NSC
and NKK Corporation. A net gain of $2.4 million was realized on the redemption
and is included in "National Steel Corporation net preferred dividend income"
in the accompanying condensed statement of consolidated operations for the nine
months ended December 31, 1993.
During January 1994, the Corporation sold substantially all of its holdings in
NSC common stock for approximately $42.8 million. The Corporation, as part of
an agreement with NSC and NKK Corporation, has paid to NSC $10.0 million out of
the proceeds from the sale of the NSC common stock as a prepayment of potential
environmental liabilities for which the Corporation had previously agreed to
indemnify NSC.
NOTE 7 - SERIES A REDEEMABLE PREFERRED STOCK
In connection with an exchange offer, on November 4, 1993, the Corporation
accepted all of the 6,833,505 shares of its common stock that were tendered in
exchange for 3,416,753 shares of newly issued $4.20 Cumulative Exchangeable
Series A Preferred Stock, par value $5 per share, with a liquidation preference
of $40 (the "Series A Preferred Stock"). Dividends on the Series A Preferred
Stock will be payable quarterly. On and prior to October 15, 1996, the
Corporation, at its option, may pay dividends on the Series A Preferred Stock
in cash or by means of the issuance of such number of additional shares of
Series A Preferred Stock that have an aggregate liquidation preference equal to
the amount of the dividend. Thereafter, dividends will be payable in cash.
The Corporation is required to redeem the Series A Preferred Stock on November
30, 2003. The Series A Preferred Stock may be redeemed at the option of the
Corporation, in whole or in part, at any time on or after October 15, 1998 at
its liquidation preference plus unpaid dividends thereon. The common stock
accepted by the Corporation in connection with the exchange offer is being held
as treasury stock. The cost of the treasury stock is equal to the sum of the
direct expenses related to the exchange offer plus the fair market value of the
Series A Preferred Stock on the exchange date. The difference in the Series A
Preferred Stock's liquidation preference and its market value on the exchange
date is being amortized as additional preferred stock dividends and charged to
retained earnings over the life of the Series A Preferred Stock.
In addition, the Series A Preferred Stock will be exchangeable, at the option
of the Corporation, in whole but not in part, commencing on October 15, 1996
and on any dividend payment date thereafter, for the Corporation's 10 1/2%
Subordinated Notes due 2003 (the "Exchange Notes") with a principal amount
equal to the aggregate liquidation value of the outstanding Series A Preferred
Stock. The Exchange Notes will mature on November 30, 2003. The Exchange
Notes may be redeemed, at the option of the Corporation, in whole or in part,
at any time on and after October 15, 1998 at a redemption price equal to the
principal amount thereof. The payments of principal and interest on the
Exchange Notes will be subordinated to all senior indebtedness of the
Corporation.
9
<PAGE> 10
NATIONAL INTERGROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
National Intergroup, Inc. and its subsidiaries (the "Corporation") conduct
business principally through two operating units: the wholesale distribution of
a full line of pharmaceutical and health and beauty aid products by FoxMeyer
Corporation ("FoxMeyer"), and the franchising of general variety stores and the
franchising and operation of crafts stores, together with the wholesale
distribution of products to those stores, by Ben Franklin Retail Stores, Inc.
("Ben Franklin"). The Corporation also performs certain holding company,
corporate office and other miscellaneous activities (collectively, the "Holding
Company"). The following table identifies the net sales, gross profit and
operating income components attributable to these units (in millions of
dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ --------------------------
1993 1992 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales
FoxMeyer $ 1,310.6 $ 1,211.8 $ 3,797.8 $ 3,254.5
Ben Franklin 86.1 89.5 256.8 263.7
--------- --------- --------- ---------
$ 1,396.7 $ 1,301.3 $ 4,054.6 $ 3,518.2
--------- --------- --------- ---------
Gross Profit
FoxMeyer $ 70.2 $ 68.0 $ 208.5 $ 183.4
Ben Franklin 16.3 15.5 45.4 42.9
--------- --------- --------- ---------
$ 86.5 $ 83.5 $ 253.9 $ 226.3
--------- --------- --------- ---------
Operating Income (Loss)
FoxMeyer $ 18.8 $ (30.1) $ 42.5 $ (6.0)
Ben Franklin (4.8) 1.3 (3.4) 3.0
Holding Company (1.9) (2.0) (6.5) (6.4)
--------- --------- -------- ---------
$ 12.1 $ (30.8) $ 32.6 $ (9.4)
========= ========= ======== =========
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1993 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1992
FOXMEYER
Net sales increased 8.2% or $98.8 million to $1,310.6 million for the three
months ended December 31, 1993, as compared to the three months ended December
31, 1992. The increase in net sales occurred for every major customer group
except for the chain store segment. The largest percentage increases were in
sales to independents and alternate care facilities and in FoxMeyer's bulk
sales. Such increases were primarily attributable to several new accounts that
were obtained during fiscal 1993. The decrease in chain sales occurred
principally as a result of a decline of $43.5 million in sales to Phar-Mor,
Inc. ("Phar-Mor") when compared to the prior year period. Since its August
1992 bankruptcy, Phar-Mor has closed over 140 stores. After removing the
effect of sales to Phar-Mor, chain sales increased 6.2%.
10
<PAGE> 11
Gross margin of 5.4% in the three months ended December 31, 1993 was slightly
less than the 5.6% gross margin for the three months ended December 31, 1992.
The decline is principally the result of the continuing price competition in
the industry and increased sales to large volume, lower margin yet lower
cost-to-serve customers.
Operating expenses and other income were 4.0% of net sales for the three months
ended December 31, 1993 as compared to 8.1% of net sales for the three months
ended December 31, 1992. There were several one-time charges or credits which
affected both the current and prior periods. For the three months ended
December 31, 1992, FoxMeyer recorded $42.8 million in charges for the write-off
of amounts due from Phar-Mor and certain chain-store related software costs.
Excluding these charges, operating expenses and other income would have been
4.6% of net sales. For the three months ended December 31, 1993, FoxMeyer
recognized a $3.9 million gain on the termination of certain operating leases
which was partially offset by $.9 million of fees incurred in connection with
the new accounts receivable financing program. Absent such occurrences,
operating expenses and other income would have been 4.2% of net sales. The
proceeds from the sale of accounts receivable were used to reduce amounts
outstanding under FoxMeyer's revolving credit facilities thus reducing interest
expense. The $.9 million in fees incurred for the accounts receivable
financing program were charged against other income. The decrease in operating
expenses and other income as a percentage of net sales between the two periods,
exclusive of these credits or charges, was .4%. The decrease was primarily the
result of increased sales to lower cost-to-serve customers and cost containment
and reduction programs.
Operating income increased $49.0 million for the three months ended December
31, 1993, as compared to the prior year period. For the current period,
operating income was 1.4% of net sales as compared to an operating loss of 2.5%
for the prior year. The 3.9% increase was primarily the result of the decrease
in operating expenses and other income discussed above.
BEN FRANKLIN
Net sales decreased $3.4 million to $86.1 million for the three months ended
December 31, 1993, as compared to $89.5 million for the three months ended
December 31, 1992. Sales at company-owned and operated retail crafts
superstores were unchanged in the current three month period as compared to the
prior year as the number of stores opened remained at ten. Net warehouse sales
declined $3.7 million in the current period as compared to the prior year as a
result of the decrease in franchisee-owned variety and crafts stores from 929
at December 31, 1992 to 881 at December 31, 1993, and as a result of the
sluggish and highly competitive retail environment which had a significant
impact on purchases by franchisees.
Gross profit increased $.8 million for the three months ended December 31, 1993
to $16.3 million, as compared to $15.5 million for the prior year period.
Gross profit from wholesale sales increased $.4 million, despite a net decline
in wholesale sales of $3.7 million, due to the greater proportion of sales of
higher margin crafts merchandise. Gross profit increased at company-owned and
operated retail crafts superstores primarily from increased margins.
Operating expenses and other income increased $6.9 million to $21.1 million at
December 31, 1993, as compared to $14.2 million at December 31, 1992. The
increase is primarily the result of a $5.3 million charge related to a
re-engineering of Ben Franklin's wholesale operations. The charge covers costs
associated with work-force and inventory reductions, as well as restructuring
charges for relocating certain facilities and operations.
Ben Franklin had an operating loss of $4.8 million in the current period as
compared to an operating profit of $1.3 million in the prior year as a result
of the gross profit and operating expense activity described above.
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THE HOLDING COMPANY
The Holding Company's operating loss for the three months ended December 31,
1993 was $1.9 million, as compared to $2.0 million for the three months ended
December 31, 1992. The operating loss in both periods represents general and
administrative costs incurred by the Holding Company.
NATIONAL STEEL CORPORATION ("NSC")
The Corporation's net preferred dividend income from NSC was $1.1 million for
the three months ended December 31, 1993, as compared to $1.7 million for the
prior year period. The $.6 million decrease is primarily the result of the
redemption of shares of preferred stock described in Note 6 to the
Corporation's condensed consolidated financial statements which decreased the
net dividends received thereon.
NET FINANCING COSTS
Interest expense increased $1.7 million to $6.7 million for the three months
ended December 31, 1993, as compared to $5.0 million for the three months ended
December 31, 1992. The increase is primarily the result of the issuance of
long-term notes by both FoxMeyer and Ben Franklin. The additional debt was
primarily used to reduce balances outstanding under various existing FoxMeyer
and Ben Franklin credit facilities. Amounts outstanding under FoxMeyer's
revolving credit facilities were further reduced as a result of the completion
by FoxMeyer of a $125.0 million accounts receivable financing program in
October 1993. The $.9 million cost of this program for the three months ended
December 31, 1993 was charged against other income.
INCOME TAXES
The income tax benefit for the three months ended December 31, 1993 was
primarily the result of the reduction of the deferred tax asset valuation
allowance. Realization, and therefore, recognition of such deferred tax asset
was determined to be more likely than not based on current estimates.
The tax benefit for the three months ended December 31, 1992 includes
reductions in the deferred tax asset valuation allowance resulting from the
tender offer for FoxMeyer common stock which resulted in the Holding Company's
ownership exceeding 80%. The benefit also reflects the adjustment of income
tax expense recognized in the first six months of fiscal year 1993 as a result
of FoxMeyer's Phar-Mor write-off during the third quarter of fiscal year 1993.
MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARIES
The minority interest in the net income of consolidated subsidiaries was $.5
million for the three months ended December 31, 1993, compared to a minority
interest in the net loss of consolidated subsidiaries of $2.8 million for the
three months ended December 31, 1992. The increase was attributable to the
increase in net income of FoxMeyer as compared to the prior year partially
offset by a decrease in the net income of Ben Franklin as compared to the prior
year.
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NINE MONTHS ENDED DECEMBER 31, 1993 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1992
FOXMEYER
Net sales increased 16.7% or $543.3 million to $3,797.8 million for the nine
months ended December 31, 1993, as compared to $3,254.5 million for the nine
months ended December 31, 1992. The first nine months of fiscal 1993 did not
include a full nine months of sales or operating results of Harris Wholesale
Company ("Harris") which was acquired on May 7, 1992. Had Harris operations
been included in the consolidated results for the full nine months of fiscal
1993, net sales would have been approximately $84.4 million higher. The
remaining increase of $458.9 million occurred for every major customer group.
The largest percentage increases were in sales to chain stores, independents
and alternate care facilities and in FoxMeyer's bulk sales. Such increases
were primarily attributable to several new accounts that were obtained during
fiscal 1993. The increase in chain sales occurred despite a decline of $141.9
million in sales to Phar-Mor when compared to the prior year period.
Gross margin was 5.5% for the first nine months of the current year as compared
to 5.6% for the same period in the prior year. Price competition in the
industry, a decline in the frequency and magnitude of price increases by
manufacturers, and increased sales to large volume, lower margin yet lower
cost-to-serve customers, continue to affect FoxMeyer's gross margin. However,
these factors were substantially offset by expanded sales of higher margin
over-the-counter medications, health and beauty aids and general merchandise
and by other marketing efforts.
Operating expenses and other income were 4.4% of net sales for the nine months
ended December 31, 1993, as compared to 5.8% in the prior year. There were
several one-time charges or credits which affected both the current and the
prior periods. For the nine months ended December 31, 1992, FoxMeyer recorded
$42.8 million in charges for the write-off of amounts due from Phar-Mor and
certain chain-store related software costs. Excluding these charges, operating
expenses and other income would have been 4.5% of net sales. For the nine
months ended December 31, 1993, FoxMeyer recognized a $3.9 million gain on the
termination of certain operating leases offset by $.9 million of fees incurred
in connection with the new accounts receivable financing program. Absent such
occurrences, operating expenses and other income would have been 4.5% of net
sales. Therefore, operating expenses and other income as a percentage of net
sales were approximately the same for both periods exclusive of the these
credits or charges. While increased sales to lower cost-to-serve customers and
cost containment and reduction programs decreased costs, these measures were
offset by costs associated with work force reductions, and by increased
expenditures relating to the redirection of FoxMeyer's product mix, information
systems development, the opening of new distribution facilities and the
expansion of complimentary business programs.
FoxMeyer's management believes that investments made in specialty distribution
services offered to a broader sales base, the shifting of product mix to higher
margin items, the benefits of improved information systems, continued emphasis
on cost containment and reduction programs and enhanced asset utilization
should lead to future improvements in FoxMeyer's performance.
Operating income increased $48.5 million for the nine months ended December 31,
1993, as compared to the prior year. As a percentage of net sales, operating
income for the current period was 1.1% as compared to an operating loss of .2%
for the prior year. The increase was primarily the result of the decrease in
operating expenses discussed above.
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<PAGE> 14
BEN FRANKLIN
Net sales decreased $6.9 million to $256.8 million for the nine months ended
December 31, 1993, as compared to $263.7 million for the nine months ended
December 31, 1992. Sales at company-owned and operated retail crafts
superstores increased $3.1 million for the nine months ended December 31, 1993
as compared to the prior year. The $3.1 million increase is primarily the
result of there being more stores open the entire period of the current fiscal
year as compared to the prior year. Net warehouse sales declined $10.5 million
in the current period as compared to the prior year as a result of the decrease
in franchisee-owned variety and crafts stores from 964 at April 1, 1992 to 881
at December 31, 1993, and as a result of the sluggish and highly competitive
retail environment which had a pronounced effect on purchases by franchisees.
Gross profit increased $2.5 million for the nine months ended December 31,
1993, to $45.4 million as compared to $42.9 million for the prior year. Gross
profit from wholesale sales increased $.3 million, despite a net decline in
wholesale sales of $10.5 million, due to the greater proportion of sales of
higher margin crafts merchandise. Gross profit increased at company-owned and
operated retail crafts superstores primarily from increased sales volume.
Operating expenses and other income increased $8.9 million to $48.8 million at
December 31, 1993, as compared to $39.9 million at December 31, 1992. The
increase in company-owned and operated retail crafts superstores opened during
the nine-month period of the current year as compared to the prior year
resulted in a $2.9 million increase in operating expenses. The remainder of
the increase is primarily the result of a $5.3 million charge related to a
re-engineering of Ben Franklin's wholesale operations. The charge covers costs
associated with work-force and inventory reductions, as well as restructuring
charges for relocating certain facilities and operations.
Ben Franklin had an operating loss of $3.4 million for the current year as
compared to a $3.0 million operating profit for the prior year as a result of
the gross profit and operating expense activity described above.
THE HOLDING COMPANY
The Holding Company's operating loss for the nine months ended December 31,
1993 was $6.5 million as compared to $6.4 million for the nine months ended
December 31, 1992. The operating loss in both periods represents general and
administrative costs incurred by the Holding Company.
NATIONAL STEEL CORPORATION
The Corporation's net preferred dividend income from NSC reflects income of
$6.5 million for the nine months ended December 31, 1993 as compared to $5.0
million for the prior year. The $1.5 million increase is primarily
attributable to a $2.4 million gain on the redemption of NSC preferred stock
held by the Corporation which was partially offset by the reduction in
preferred dividend income as a result of the redemption, as described in Note 6
to the Corporation's condensed consolidated financial statements. The
Corporation recognized a $6.8 million unrealized loss on the write-down of the
NSC common stock to current market value during the nine months ended December
31, 1993. There was no similar charge in the prior year.
NET FINANCING COSTS
Interest income decreased from $2.1 million for the nine months ended December
31, 1992, to $1.5 million in the current year. The decrease was primarily the
result of a decrease in the average funds held for investment by FoxMeyer and
the Holding Company in the current year as compared to the prior year.
Interest expense increased $8.1 million to $19.6 million for the nine months
ended December 31, 1993, as compared to $11.5 million for the nine months ended
December 31, 1992. The increase is the result of an increase in the average
borrowings outstanding of approximately $62.6 million under the Holding
Company, FoxMeyer and Ben Franklin
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<PAGE> 15
revolving credit facilities and the increase in long-term debt due to the
issuance of new notes by FoxMeyer and Ben Franklin. The additional debt, and
the decrease in funds held for investment, were primarily used during the prior
twelve months to finance the increase in net working capital, purchase of
property and equipment, the repurchase of the Corporation's and FoxMeyer's
common stock, the partial redemption of the Corporation's preferred stock and
the impact on FoxMeyer of the Phar-Mor bankruptcy. FoxMeyer completed a $125.0
million accounts receivable financing program in October 1993, which was used
to reduce amounts outstanding under FoxMeyer's revolving credit facilities. In
the future, this will reduce interest costs as the cost of this program will be
charged against other income.
INCOME TAXES
The current year income tax benefit was $1.6 million on income before taxes of
$14.3 million. The benefit was primarily the result of the reduction in the
deferred tax asset valuation allowance. Realization, and therefore
recognition, of such deferred tax asset was determined to be more likely than
not based on current estimates.
The Corporation's income tax benefit in the prior year was $22.6 million on a
$13.8 million loss before taxes. The tax benefit includes reductions in the
deferred tax asset valuation allowance resulting from the public offering of
Ben Franklin's common stock which reduced the Holding Company's ownership below
80% and to the tender offer for FoxMeyer common stock which resulted in the
Holding Company's ownership exceeding 80%. The benefit also reflects the
adjustment of income tax expense as a result of the Phar-Mor write-off during
the third quarter of fiscal 1993.
MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARIES
The minority interest in the net income of consolidated subsidiaries decreased
to $2.9 million for the nine months ended December 31, 1993, from $3.8 million
for the nine months ended December 31, 1992. While the minority interest in
FoxMeyer's net income increased as compared to the prior year, total minority
interest declined as a result of the decrease in the minority interest in Ben
Franklin resulting from the decline in their net income.
LIQUIDITY AND CAPITAL RESOURCES
Since March 31, 1993, the Corporation completed the following transactions:
. On April 29, 1993, FoxMeyer issued $198.0 million of 7.09% senior notes due
April 15, 2005 (the "Senior Notes"). The Senior Notes are payable in eight
equal annual installments commencing on April 15, 1998, and contain certain
restrictions and covenants including limitations on the payment of
dividends and transactions with the Holding Company. Proceeds from the
Senior Notes were used to reduce balances outstanding under FoxMeyer's
primary credit facility (the "FoxMeyer Credit Facility") including the
retirement of the $125.0 million outstanding under FoxMeyer's term loan
facility (the "Term Loan").
. Simultaneously with the issuance of the Senior Notes, the FoxMeyer Credit
Facility, which provided FoxMeyer with the Term Loan and a $200.0 million
revolving credit facility (the "FoxMeyer Revolving Credit Facility"), was
amended and restated to provide for the issuance of the Senior Notes, the
repayment of the Term Loan, an increase in the maximum amount available
under the FoxMeyer Revolving Credit Facility to $210.0 million and the
extension of the maturity date to March 31, 1996.
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<PAGE> 16
. In May 1993, NSC redeemed 10,000 shares of its preferred stock owned by the
Corporation for approximately $67.8 million. Proceeds from the redemption
were deposited by the Corporation in the trust for the Weirton Retirement
Program.
. On June 10, 1993, Ben Franklin issued $28.8 million of 7.5% convertible
subordinated notes due June 1, 2003 (the "Ben Franklin Notes"). The Ben
Franklin Notes are unsecured general obligations of Ben Franklin
convertible into Ben Franklin common stock at $7.75 per share. The Ben
Franklin Notes are redeemable on or after June 1, 1996 at prices ranging
from 105% of the principal amount thereof in 1996 to 100% in 2002. The Ben
Franklin revolving credit facility (the "Ben Franklin Credit Facility") was
amended at the same time to allow for the issuance of the Ben Franklin
Notes.
. On August 30, 1993, FoxMeyer entered into a separate one-year $40.0 million
revolving credit facility which provides for an interest rate based on a
Euro-dollar rate (as defined) plus 1.125% or the prime rate. This credit
facility will provide additional funding for seasonal increases in working
capital.
. On October 29, 1993, FoxMeyer entered into a one-year trade accounts
receivable financing program. Under this program, FoxMeyer received $125.0
million in proceeds from the sale with recourse of a percentage ownership
in a defined pool of accounts receivable. The proceeds were used to reduce
balances outstanding under FoxMeyer's revolving credit facilities.
. In November 1993, the Corporation exchanged 6,833,505 shares of its
outstanding common stock for 3,416,753 shares of new $4.20 Cumulative
Exchangeable Series A Preferred Stock (the "Series A Preferred Stock").
The Series A Preferred Stock has a liquidation preference of $40 per share
and is redeemable on November 30, 2003. The Corporation may pay dividends
on and prior to October 15, 1996 by means of the issuance of additional
shares of Series A Preferred Stock. The Corporation presently intends to
pay these dividends in additional shares of Series A Preferred Stock.
. In December 1993, the Corporation announced that it may purchase up to
1,300,000 shares of its common stock, either in the open market or in
privately negotiated purchases, as the Corporation may determine from time
to time.
. On January 13, 1994, the Holding Company entered into a $15.0 million
revolving credit facility (the "New Credit Facility") to be used for
working capital and general corporate purposes. The New Credit Facility,
which is secured by shares of common stock of FoxMeyer, restricts the
payment of dividends on the Corporation's common stock and imposes limits
on the repurchase of shares of its common stock. In addition, certain
other limitations and restrictions have been placed on the Corporation by
the New Credit Facility. The New Credit Facility expires April 1, 1996.
The interest rate is a Euro-dollar rate (as defined) plus 1.875% or the
prime rate plus .25%. The New Credit Facility replaced a $10.0 million
credit facility (the "Old Credit Facility").
The Corporation's consolidated working capital decreased by $20.2 million to
$353.0 million at December 31, 1993, as compared to $373.2 million at March 31,
1993. The decrease in working capital resulted primarily from the $125.0
million sale of accounts receivable by FoxMeyer under its accounts receivable
financing program described above. Without the sale of the accounts
receivables, working capital would have increased $104.8 million. Increased
inventory and accounts receivable balances (before the reduction for the
accounts receivable financing program) were generally the result of increased
sales.
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Long-term debt as a percentage of total capitalization decreased to 38.3% at
December 31, 1993, from 38.5% at March 31, 1993. The decrease in long-term
debt was attributable to the reduction of amounts outstanding under Ben
Franklin and FoxMeyer credit facilities which were paid down from proceeds from
the Senior Notes, the Ben Franklin Notes and the FoxMeyer accounts receivable
financing program. This was partially offset by increased borrowings for the
funding of capital expenditures, prepayment on a long-term commitment and the
payment of dividends.
FoxMeyer used the proceeds from the Senior Notes to retire the $125.0 million
outstanding on the Term Loan and to pay down amounts outstanding under the
FoxMeyer Revolving Credit Facility. The average and maximum amounts borrowed
under FoxMeyer's revolving credit facilities during the nine months ended
December 31, 1993, were $106.8 million and $215.5 million, respectively,
compared to $42.0 million and $194.6 million, respectively, for the nine months
ended December 31, 1992. At December 31, 1993, $19.7 million was outstanding
under FoxMeyer's revolving credit facilities at an interest rate of 6.0%.
While the average amount outstanding under the revolving credit facilities
increased $64.8 million, the accounts receivables financing program had
substantially reduced the balance outstanding at December 31, 1993.
Ben Franklin used a portion of the proceeds of the Ben Franklin Notes to retire
balances outstanding under the Ben Franklin Credit Facility. The average and
maximum amounts outstanding on the Ben Franklin Credit Facility during the nine
months ended December 31, 1993 were $2.1 million and $9.4 million,
respectively, compared to $6.5 million and $14.9 million, respectively, for the
nine months ended December 31, 1992. At December 31, 1993, no amounts were
outstanding under the Ben Franklin Credit Facility.
FoxMeyer's capital expenditures for the first nine months of fiscal 1994 were
$18.3 million. FoxMeyer expects to spend an additional $11.0 million on
capital improvements during the current fiscal year. Ben Franklin spent $13.6
million during the same period on capital expenditures and expects to spend an
additional $2.0 million during fiscal 1994. Of Ben Franklin's capital
expenditures, approximately $11.2 million related to the purchase of a
warehouse that was formerly subleased from FoxMeyer. Ben Franklin financed
$8.3 million of the purchase price with a seven-year balloon note at the prime
rate.
FoxMeyer expects to fund its anticipated working capital needs, future capital
expenditures, and quarterly dividends on its common stock from cash generated
by operations, from its accounts receivable financing program and from
additional borrowings under its revolving credit facilities.
Ben Franklin expects to fund its anticipated working capital needs and future
capital expenditures, including new store openings of company- owned and
operated retail crafts superstores, from cash generated by operations,
remaining proceeds received from the issuance of the Ben Franklin Notes,
borrowings under the Ben Franklin Credit Facility, credit from its vendors and
customer financing through its prepayment incentive program.
At December 31, 1993, the Holding Company had unrestricted cash balances of
$1.2 million. In addition, the Holding Company had $4.0 million available
under the Old Credit Facility and $1.7 million available under a revolving loan
agreement with FoxMeyer. The Holding Company's cash requirements include the
funding of monthly operating expenses, lease commitments, benefit obligations,
dividend payments on the Corporation's redeemable preferred stock and mandatory
sinking fund payments thereon, and cash outlays attributable to environmental
liabilities of previously owned businesses, the amounts and timing of which are
uncertain.
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On January 13, 1994, the Holding Company entered into the New Credit Facility
adding $5.0 million to its available credit line. In addition, during January
1994, the Holding Company sold substantially all of its NSC common stock
holdings for approximately $42.8 million. After paying $10.0 million of such
proceeds to NSC for the purpose of prepaying potential environmental
liabilities for which the Corporation had previously agreed to indemnify NSC,
the remaining funds were available to meet Holding Company expenditures. The
$10.0 million transferred to NSC will reduce future environmental expenditures
that the Holding Company may have been committed to fund. See the discussion
under Item 1. Legal Proceedings - National Steel Corporation in Part II below
for a description of the funding of certain environmental expenditures.
The Holding Company will rely on cash on hand, including amounts received from
the sale of the NSC common stock, dividends received on shares of FoxMeyer
common stock, payments from FoxMeyer under its tax sharing agreement, funds
available under the revolving loan agreement with FoxMeyer and funds available
under the New Credit Facility to meet its cash funding obligations.
OTHER
As a result of the substantial decrease in interest rates in the United States,
the Corporation is re-evaluating the discount rates it uses in the
calculation of its pension, postretirement health care and life insurance
benefits and Weirton pension benefits. The Corporation anticipates that the
rates to be used to determine these benefit liabilities at March 31, 1994 will
be substantially less than the March 31, 1993 average rates. The decrease in
the discount rate will have no current period effect on net income; however,
future earnings will be impacted. There could also be a charge to retained
earnings for any plans where the pension benefits exceed plan assets at March
31, 1994.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the matters reported in the Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993, as
supplemented by the Corporation's Quarterly Reports on Form 10-Q for
the quarters ended June 30, 1993 and September 30, 1993, respectively,
the following additional information is provided:
NATIONAL STEEL CORPORATION
In accordance with the Agreement dated February 3, 1993 (the
"Agreement"), by and among the Corporation, NII Capital Corporation,
NKK Corporation, NKK U.S.A. Corporation and National Steel Corporation
("NSC"), the Corporation deposited with NSC, after the sale by the
Corporation of common stock of NSC, $1,323,818.16 on January 14, 1994
and $8,676,181.84 on January 20, 1994, for a total of $10,000,000.
The Agreement requires NSC to discharge certain environmental
liabilities ("Covered Environmental Liabilities") as those liabilities
become due and owing after January 14, 1994, up to the $10,000,000
amount received from the Corporation.
The Corporation paid all liabilities, costs, expenses, attorneys' fees
and disbursements relating to the Covered Environmental Liabilities
through January 14, 1994. Subsequent to such date, liabilities and
costs incurred at the following sites will be administered and
discharged by NSC pursuant to the Agreement:
. Swissvale Site, Swissvale, Pennsylvania;
. Buckeye Site, Bridgeport, Ohio;
. Municipal and Industrial Disposal Company Site, Elizabeth,
Pennsylvania;
. Tex Tin Site, Texas City, Texas;
. Weirton Steel Corporation Sites, Weirton, West Virginia;
. High-view Terrace Site, West Seneca, New York;
. Lowry Landfill Site, Aurora, Colorado.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10-A Loan Agreement dated January 13, 1994 among the Corporation
and Banque Paribas, As Agent, and the Banks named herein.
11 Computation of earnings per share of common stock
(b) Reports on Form 8-K
The Corporation filed the following reports on Form 8-K during the
three months ended December 31, 1993:
Form 8-K dated November 4, 1993 announcing the completion of the
Corporation's exchange offer of one share of $4.20 Cumulative
Exchangeable Series A Preferred Stock for two shares of the
Corporation's common stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL INTERGROUP, INC.
By: /s/ EDWARD L. MASSMAN
______________________________
Edward L. Massman
Controller
(Chief Accounting Officer)
Date: February 10, 1994
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<PAGE> 1
EXHIBIT 10-A
LOAN AGREEMENT
AMONG
NATIONAL INTERGROUP, INC.
AND
BANQUE PARIBAS, AS AGENT
AND
THE BANKS NAMED HEREIN
Dated as of January 13, 1994
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<PAGE> 2
LOAN AGREEMENT
This LOAN AGREEMENT is made and entered into as of January 13, 1994,
by and among NATIONAL INTERGROUP, INC., a Delaware corporation, BANKS (as
hereinafter defined) and BANQUE PARIBAS, a bank organized under the laws of the
Republic of France, as Agent for Banks.
In consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITION OF TERMS
1.1 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to the Loan Documents shall be prepared in accordance
with GAAP unless otherwise specifically provided herein, and the
characterization of all expenditures as current or capital shall be determined
in accordance with GAAP.
1.2 Terms Defined. Certain terms used in the Loan Documents shall
have the definitions assigned to them in this Section 1.2 or in the contexts in
which they appear. Such definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and words of any gender shall
include each other gender where appropriate.
Advance. Means any advance or disbursement of funds under the
Facility.
Affiliate. Means, with respect to a specified Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person. For purposes of this definition "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used herein with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Securities or otherwise.
Agent. Means Banque Paribas, as agent for Banks pursuant to this
Agreement, and its successors and assigns in such capacity.
Aggregate Commitment. Means $15,000,000, subject to reduction as
provided in Section 2.11.
Agreement. Means this Loan Agreement, as it may be amended, renewed,
extended, restated, replaced, substituted, supplemented or otherwise modified
from time to time.
Asset. Means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible or contingent or certain, and
includes, without limitation, Securities.
Assignment and Acceptance. Means an Assignment and Acceptance entered
(or to be entered) into by a Bank and an Eligible Assignee, and accepted (or to
be accepted) by Agent, substantially in the form of Exhibit A hereto.
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Bank. Means any bank or other financial institution identified on the
signature pages of this Agreement and on Schedule 1 hereto or any Eligible
Assignee or Affiliate of a Bank which becomes a Bank in accordance with Section
10.6 of this Agreement, and "Banks" means all of such banks, financial
institutions, Eligible Assignees and Affiliates which become Banks in
accordance with Section 10.6.
Bankruptcy Code. Means Title 11 of the United States Code, as
amended, and all rules issued pursuant thereto.
Base Financial Statements. Means (a) with respect to Borrower, the
Financial Statements of Borrower and its Consolidated Subsidiaries as of and
for the fiscal year ended March 31, 1993, and (b) with respect to FoxMeyer, the
Financial Statements of FoxMeyer and its consolidated subsidiaries as of and
for the fiscal year ended March 31, 1993.
Base Rate. Means the variable rate of interest established from time
to time by Citibank, N.A., New York, New York (at its head office) (or such
other bank as may be designated by Agent as provided below), as its prime or
base rate of interest for commercial loans, which rate of interest may or may
not be the lowest rate charged by such bank on similar loans or to similar
borrowers; provided, however, that, in lieu of Citibank, N.A. or any successor
bank to Citibank, N.A. for purposes of establishing the Base Rate, Agent may,
at any time and from time to time upon five Business Days' prior written notice
to Borrower, designate (a) NationsBank of Texas, N.A. (at its head office) or
(b) any other bank as may be reasonably acceptable to Borrower, as the
reference bank for purposes of establishing the Base Rate. Each change in the
Base Rate shall become effective without prior notice to Borrower automatically
as of the opening of business on the date of such change in the Base Rate.
Base Rate Loan. Means that portion of any Loan which bears interest at
a rate determined by reference to the Base Rate.
Base Rate Margin. Means one-quarter of one percent (0.25%).
Ben Franklin. Means Ben Franklin Retail Stores, Inc., a Delaware
corporation.
Ben Franklin Adjustment. Means the amount of any loss of Borrower
attributable to any sale of common capital stock of Ben Franklin.
Board of Governors. Means the Board of Governors of the Federal
Reserve System.
Borrower. Means National Intergroup, Inc., a Delaware corporation.
Borrowing Base. Means, as of the date of any determination by Agent,
an amount equal to forty-nine and nine-tenths percent (49.9%) of the fair
market value of the FoxMeyer Stock and the other (if any) Margin Stock pledged
as Collateral in compliance with this Agreement in which Agent, on behalf of
Banks, has a first priority Lien as security for the Obligations, which fair
market value shall be equal to the closing sale price of such stock on the
immediately preceding Business Day, as appearing on any regularly published
reporting or quotation service; provided, however, that if, at any time, the
FoxMeyer Stock and/or the other (if any) Margin Stock does not appear on any
regularly published reporting or quotation service, Borrower and Agent shall
negotiate in good faith to reach an agreement regarding the method of
determining the fair market value of such stock (taking into consideration
marketability, transfer restrictions and all other relevant factors), in which
case such fair market value shall be determined as so agreed or, in the absence
of an agreement, shall be determined in good faith by Agent.
Borrowing Base Certificate. Means a certificate substantially in the
form of Exhibit B hereto, appropriately completed and executed by a Financial
Officer of Borrower, evidencing computation of the
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Borrowing Base.
Borrowing Base Deficiency. Means, as of the date of any
determination, the amount, if any, by which (a) the sum of (i) the aggregate
outstanding principal amount of all Loans plus (ii) the aggregate Letter of
Credit Outstanding, exceeds (b) the Borrowing Base in effect on such date.
Business Day. Means a day (other than Saturday or Sunday) on which
commercial banks are open for business in Houston, Texas, and in New York, New
York.
Capital Lease. Means, as of the date of any determination, any lease
of an Asset which is (or should be) capitalized on a balance sheet of the
lessee prepared as of such date in accordance with GAAP.
Cash Collateral Account. Means as provided in Section 3.2(a).
CERCLA. Means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended and in
effect from time to time, and all rules and regulations issued pursuant
thereto.
Change of Control. Means an event or series of events by which (a)
any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of
the Exchange Act) other than the present shareholders of Borrower is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under such Act), directly or
indirectly, of Securities representing more than 40% of the combined voting
power of the then outstanding voting Securities of Borrower and (b) at any time
during the term of this Agreement, a majority of the Board of Directors of
Borrower shall consist of Persons other than Continuing Directors of Borrower.
For purposes of this definition, "Continuing Director" means any member of the
Board of Directors on the date hereof and any other member of the Board of
Directors who shall be nominated or elected to succeed a Continuing Director by
at least two-thirds (2/3) of the Continuing Directors who are then members of
the Board of Directors.
Claims. Means as provided in Section 8.3(i).
Clean Air Act. Means the Clean Air Act (42 U.S.C. Section 7401 et
seq.), as amended and in effect from time to time, and all rules and
regulations issued pursuant thereto.
Clean Water Act. Means the Clean Water Act (33 U.S.C. Section 1251 et
seq.), as amended and in effect from time to time, and all rules and
regulations issued pursuant thereto.
Closing Date. Means the date of this Agreement.
Code. Means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and all rules and regulations issued pursuant
thereto.
Collateral. Means any and all Assets in which Agent or any Bank is
now or hereafter granted a Lien as security for all or any portion of the
Obligations, including, without limitation, the Liens created or to be created
pursuant to the Security Documents and pursuant to Section 3.2(b) (in the Cash
Collateral Account) and the other terms and provisions of this Agreement.
Commitment. Means, with respect to each Bank, such Bank's Commitment
to make Loans under the Facility in the maximum amount of its Pro Rata Share of
the Aggregate Commitment, subject to reduction as provided in Section 2.11.
Commitment Letter. Means that certain letter agreement dated December
10, 1993, from Paribas to Borrower as agreed to and accepted by Borrower as of
December 10, 1993, including the Term Sheet attached
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thereto, as amended.
Consolidated Subsidiary. Means the Major Subsidiaries and any other
Subsidiary of Borrower included as a consolidated subsidiary as of such date in
the consolidated financial statements of Borrower prepared in accordance with
GAAP, and "Consolidated Subsidiaries" means all of such Subsidiaries.
Controlling Person. Means, with respect to Borrower, any "person" or
"group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act)
that is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of Securities representing more than 5%
of the combined voting power of the then outstanding voting Securities of
Borrower.
Conversion Notice. Means as provided in Section 2.8(a).
Current Date. Means a date no more than 30 days prior to the Closing
Date or, with respect to matters occurring after the Closing Date, the
applicable reference date.
Debtor Relief Laws. Means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
law for the relief of debtors from time to time in effect and generally
affecting the rights of creditors.
Default. Means the occurrence of any event which, with notice or lapse
of time or both, would become an Event of Default (and, unless otherwise
expressly stated or the context in which such term is used otherwise indicates,
includes an Event of Default), and "default" means the occurrence of any event
which, with notice or lapse of time or both, would become an event of default
under the agreement, document or instrument in question (and, unless otherwise
expressly stated or the context in which such term is used otherwise indicates,
includes such an event of default).
Default Rate. Means a rate per annum equal to the lesser of (a) the
Maximum Lawful Rate or (b) three percent (3%) plus the interest rate then (at
the time of determination of the Default Rate) applicable to Base Rate Loans
pursuant to Section 2.6(c)(i).
Eligible Assignee. Means (a) a commercial bank having total assets in
excess of $5,000,000,000, (b) an insurance company or a financial institution
having total assets in excess of $1,000,000,000, or (c) a bank loan fund having
total assets in excess of $250,000,000; provided, that, unless Bank shall
otherwise agree in writing, (i) any holder of any capital stock of Borrower
shall not be an Eligible Assignee and (ii) any commercial bank or financial
institution referred to in clause (a) or (b) preceding that is organized under
the laws of a country other than the U.S. must, to be an Eligible Assignee, be
acting, for purposes of this Agreement, through a branch or agency of such bank
or financial institution located in the U.S.
Environmental Laws. Means all applicable Federal, State and local
laws, rules, regulations, ordinances, orders and binding decrees relating to
pollution control, environmental contamination or other environmental matters
or otherwise governing the generation, use, handling, collection, treatment,
storage, transportation, recovery, re-cycling, removal, discharge or disposal
of Hazardous Materials (including, without limitation, CERCLA, RCRA, the Clean
Water Act and the Clean Air Act).
ERISA. Means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and all rules and regulations issued
pursuant thereto.
Eurodollar Advance Failure. Means as set forth in the definition of
the term Eurodollar Consequential Loss.
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Eurodollar Business Day. Means a Business Day on which dealings in
U. S. Dollars are carried out in the London interbank market.
Eurodollar Consequential Loss. Means such amount or amounts as shall,
in the reasonable judgment of any Bank, compensate such Bank for any loss, cost
or expense incurred by such Bank as a result of any of the following, whether
voluntary or involuntary: (a) any payment or prepayment of any portion of any
Eurodollar Loan on a date other than the last day of the Interest Period
applicable thereto (a "Eurodollar Prepayment"); (b) the conversion of the rate
of interest on any Eurodollar Loan from the rate of interest determined by
reference to the Eurodollar Rate to another rate of interest available
hereunder (subject to the provisions of this Agreement applicable to the
selection of any such interest rate) with respect to any portion of such
Eurodollar Loan on a date other than the last day of the Interest Period
applicable thereto (a "Eurodollar Conversion"); (c) the rescission of a
Rollover Notice to another Interest Period or of a notice of a conversion from
another interest rate to the rate of interest determined by reference to the
Eurodollar Rate prior to the commencement of the Interest Period (a "Eurodollar
Rescission"); or (d) after Borrower's request that a Eurodollar Loan be made
pursuant to this Agreement, the failure of all or any portion of such
Eurodollar Loan to be made under this Agreement due to the action or inaction
of Borrower (a "Eurodollar Advance Failure") including, without limitation,
Borrower's failure to satisfy any condition precedent to the making of any
Eurodollar Loan. Compensation owing to any Bank as a result of any such loss,
cost or expense resulting from a Eurodollar Prepayment (or a Eurodollar
Conversion, Eurodollar Rescission or Eurodollar Advance Failure, if and to the
extent applicable) shall include, without limitation, an amount equal to the
sum of (i) the amount of the interest that, but for such event, such Bank would
have earned for the remainder of the applicable Interest Period, reduced, if
such Bank is, in the ordinary course of its business and through reasonable
efforts, able to redeploy the amount so affected for any portion of such
Interest Period, by the interest earned by such Bank as a result of such
redeployment, plus (ii) any expense or penalty incurred by such Bank.
Eurodollar Conversion. Means as set forth in the definition of the
term "Eurodollar Consequential Loss."
Eurodollar Loan. Means that portion of any Loan which bears interest
at a rate determined by reference to the Eurodollar Rate.
Eurodollar Prepayment. Means as set forth in the definition of the
term "Eurodollar Consequential Loss."
Eurodollar Rate. Means, with respect to each Eurodollar Loan for each
Interest Period, a rate per annum equal to (a) the Interbank Offered Rate,
divided by (b) 1.00 minus the Eurodollar Reserve Requirement.
Eurodollar Rate Margin. Means one and seven-eighths of one percent
(1.875%).
Eurodollar Rescission. Means as set forth in the definition of the
term "Eurodollar Consequential Loss."
Eurodollar Reserve Requirement. Means, as of the date of any
determination, that percentage (expressed as a decimal fraction) which is in
effect on such day, as prescribed by the Board of Governors (or any successor),
for determining the maximum reserve requirements (including, without
limitation, basic, supplemental, marginal and emergency reserves) applicable to
"Eurocurrency liabilities" as defined (as of such date) in Regulation D or
under any other then applicable similar or successor regulation which
prescribes reserve requirements applicable to eurocurrency liabilities or
eurocurrency fundings. Each good faith determination by Agent of the
Eurodollar Reserve Requirement shall be conclusive in the absence of manifest
error.
Event of Default. Means as provided in Section 8.1.
Exchange Act. Means the Securities Exchange Act of 1934, as amended
and in effect from time to time, and all rules and regulations issued pursuant
thereto.
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Exhibit. Means, unless specifically indicated otherwise, exhibits
attached to this Agreement.
Facility. Means the credit facility in the maximum amount of the
Commitment made available pursuant to Section 2.1.
Federal Funds Rate. Means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published or quoted on the
next succeeding Business Day by the Federal Reserve Bank of New York.
Final Interest Payment Date. Means, with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to such Loan.
Financial Officer. Means, with respect to any corporation, the chief
executive officer, chief financial officer, treasurer, assistant treasurer or
controller of such corporation.
Financial Statements. Means the Base Financial Statements and all
other financial statements delivered to Agent pursuant to this Agreement or any
other Loan Document on or about the Closing Date or at any time after the
Closing Date, and includes, without limitation, balance sheets, statements of
operations, statements of stockholder's equity and statements of cash flows
prepared in comparative form with respect to the corresponding period of the
preceding fiscal year and prepared in accordance with GAAP and including any
notes comprising a part thereof.
FoxMeyer. Means FoxMeyer Corporation, a Delaware corporation.
FoxMeyer Default. Means an "Event of Default" as such term is defined
in the FoxMeyer Loan Agreement or, if such term is or becomes no longer defined
in the FoxMeyer Loan Agreement, a default under the FoxMeyer Loan Agreement and
the lapse of any applicable cure period with respect thereto.
FoxMeyer Drug Company. Means FoxMeyer Drug Company, a Kansas
corporation.
FoxMeyer Loan Agreement. Means that certain Amended and Restated Loan
Agreement dated as of April 29, 1993, by and among FoxMeyer Corporation,
FoxMeyer Drug Company, FoxMeyer Trading Company, Harris Wholesale Company, the
financial institutions which are parties thereto, Citicorp USA, Inc. as agent
for such financial institutions, and Banque Paribas and NationsBank of Texas,
N.A., as co-agents for such financial institutions, as it may be amended,
renewed, extended, restated, replaced, substituted, supplemented or otherwise
modified from time to time.
FoxMeyer/NII Loan Facility. Means the credit facilities in the
aggregate principal amount of $30,000,000 evidenced and governed by that
certain Loan Agreement dated as of November 25, 1992, as amended by letter
agreements dated April 21, 1993 and September 30, 1993, by and between
FoxMeyer, as lender, and Borrower, as borrower, as such credit facilities or
loan agreement may be further amended or modified from time to time.
FoxMeyer Stock. Means shares of common capital stock of FoxMeyer.
FoxMeyer Trading Company. Means Merchandise Coordinator Services
Corporation, a Delaware corporation (which generally is doing business as
FoxMeyer Trading Company).
Funded Debt. Means, as of the date of any determination, with respect
to Borrower, the sum of the following (without duplication): (a) all
Indebtedness evidenced by the Notes, (b) all Indebtedness which would be
classified as funded debt or long-term debt, including the current portions
thereof, on a balance sheet of Borrower prepared as of such date in accordance
with GAAP, (c) all Indebtedness of Borrower having a final
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maturity (or which is renewable or extendible at the option of the obligor for
a period ending) more than one year after the date of creation thereof,
notwithstanding that payments in respect thereof are required to be made by the
obligor less than one year after the date of the creation thereof or that any
amount thereof is at the time included also in current liabilities of such
obligor, (d) all Indebtedness of Borrower outstanding under a revolving credit
or similar agreement providing for borrowings (and renewals and extensions
thereof) over a period of more than one year, notwithstanding that any such
Indebtedness is created within one year of the expiration of such agreement,
(e) all capital stock of Borrower which is convertible, at the option of the
holder thereof, into debt Securities or other Indebtedness of Borrower on or
before the Maturity Date and (f) all capital stock of Borrower which is
redeemable on or before the Maturity Date.
GAAP. Means generally accepted accounting principles, applied on a
consistent basis with Borrower's most recent audited Financial Statements
existing as of the Closing Date, set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants or
in statements of the Financial Accounting Standards Board which are applicable
in the circumstances as of the date of such Financial Statements; and the
requisite that such principles be applied on a consistent basis means that the
accounting principles in a current period are comparable in all material
respects to those applied in a preceding period, with any exceptions thereto
noted.
Governmental Requirements. Means any and all laws, ordinances, rules
and regulations of any Tribunal applicable to Borrower, any Subsidiary or any
of its or their Assets.
Group Member. Means Borrower and each other Person which is a member
of a "controlled group" including, or under common control with, Borrower
within the meaning of Sections 414(b) and (c) of the Code or Section
4001(a)(14) of ERISA.
Guaranty. Means, with respect to any Person, any contract, agreement
or understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without limitation,
agreements (a) to purchase such Indebtedness or any Asset constituting security
therefor, (b) to advance or supply funds for the purchase or payment of such
Indebtedness or to maintain net worth or working capital or other balance sheet
conditions, or otherwise to advance or make available funds for the purchase or
payment of such Indebtedness, (c) to purchase an Asset or service primarily for
the purpose of assuring the holder of such Indebtedness of the ability of the
primary obligor to make payment of the Indebtedness, or (d) otherwise to
assure the holder of the Indebtedness of the primary obligor against loss with
respect thereto; provided, however, that such term shall not include the
endorsement of negotiable instruments or documents for deposit or collection in
the ordinary course of business.
Harris. Means Harris Wholesale Company, a Delaware corporation f/k/a
The Harris Companies, Inc.
Hazardous Materials. Means (a) any "hazardous waste" as defined in
RCRA, (b) any "hazardous substance" as defined in CERCLA, (c) any "toxic
pollutants" as defined in the Clean Water Act, (d) any "hazardous air
pollutants" as defined in the Clean Air Act, (e) friable asbestos, (f)
polychlorinated biphenyls, (g) underground storage tanks, whether empty, filled
or partially filled with any substance and (h) any substance the presence of
which on the property in question is prohibited by, in violation of or results
in noncompliance with any Environmental Laws.
HLT. Means a highly-leveraged transaction or the functional
equivalent thereof, as such term or the functional equivalent thereof is used
or defined from time to time by any U.S. bank regulatory authority.
Indebtedness. Means, with respect to any Person, any and all
indebtedness, liabilities and obligations of such Person, including, without
limitation and without duplication, (a) all "liabilities" which would be
reflected on a balance sheet of such Person prepared in accordance with GAAP,
(b) all indebtedness, liabilities or obligations of such Person with respect to
any Guaranty, (c) all obligations of such Person with respect to any Capital
Lease (but excluding obligations of such Person with respect to any operating
lease), (d) all obligations of such Person with respect to any banker's
acceptance or as an account party with respect to any letter of credit, (e) all
net obligations of such Person with respect to any Interest Rate Protection
Agreement, (f) all indebtedness,
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liabilities or obligations secured by a Lien on any Asset of such Person to the
extent of the value of such Asset, and (g) all deferred payment obligations,
however characterized, incurred in connection with the acquisition by such
Person of Assets and/or Securities, including deferred payment obligations
relating to non-compete and/or consulting agreements.
Indemnitee. Means as provided in Section 8.3(i).
Interbank Offered Rate. Means, with respect to each Interest Period,
the rate of interest per annum determined by Agent to be the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at
which deposits in immediately available freely transferable funds in U.S.
Dollars are offered to Paribas (at approximately 11:00 a.m., London, England
time, one Eurodollar Business Day prior to the first day of such Interest
Period) in the London interbank market for delivery on the first day of such
Interest Period, such deposits being for a period of time equal or comparable
to such Interest Period and in an amount equal or comparable to the principal
amount of the Eurodollar Loan to which such Interest Period relates. Each
determination by Agent of the Interbank Offered Rate shall be conclusive in the
absence of manifest error.
Interest Payment Date. Means (a) with respect to any Base Rate Loan,
the last day of each March, June, September and December commencing on the
first of such days to occur after such Loan is made or any Eurodollar Loan is
converted to a Base Rate Loan and (b) with respect to any Eurodollar Loan as to
which Borrower has selected an Interest Period of one, two or three months, the
last day of the Interest Period relating to such Eurodollar Loan and (c) with
respect to any Eurodollar Loan as to which Borrower has selected an Interest
Period of six months, the last day of the three month period falling within
such Interest Period (i.e., the day that is three months from the first day of
such Interest Period) and the last day of such Interest Period.
Interest Period. Means, with respect to a Eurodollar Loan, a period
commencing: (a) on the borrowing date of such Eurodollar Loan, or (b) on the
conversion date pertaining to such Eurodollar Loan, if such Eurodollar Loan is
made pursuant to a conversion as described in Section 2.8(a) hereof, or (c) on
the day following the last day of the Interest Period during which Borrower
gives a Rollover Notice in the case of a rollover to a successive Interest
Period as described in Section 2.8(c) hereof; and in the case of (a), (b) and
(c) preceding, ending on the numerically corresponding day of the calendar
month that is one, two, three or six months after the commencement date of the
Interest Period, as Borrower shall elect in accordance with Sections 2.3(a),
2.8(a) or 2.8(c) hereof; provided, that (i) any Interest Period which would
otherwise end on a day which is not a Eurodollar Business Day shall be extended
to the next succeeding Eurodollar Business Day unless such Eurodollar Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Eurodollar Business Day, (ii) any Interest Period
that begins on the last Eurodollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (i) above, end on
the last Eurodollar Business Day of the calendar month in which the Interest
Period terminates, and (iii) if the Interest Period for any Eurodollar Loan
would otherwise end after the Maturity Date, such Interest Period shall end on
the Maturity Date.
Interest Rate Protection Agreement. Means any agreement evidencing an
arrangement designed to protect Borrower against fluctuations in interest
rates.
Issuer. Means, with respect to any Letter of Credit, (a) Paribas or
(b) any other Bank approved by Agent that Borrower selects as the issuer of
such Letter of Credit and who agrees to issue such Letter of Credit.
L/C Application. Means an application and agreement, in form and
substance satisfactory to Issuer and Agent, executed by Borrower in connection
with the issuance, amendment, renewal or extension of any Letter of Credit.
L/C Request Certificate. Means a L/C Request Certificate in the form
of Exhibit C hereto, appropriately completed, executed by Borrower and
delivered to Agent and Issuer pursuant to Section 2.3(b) in connection with
Borrower's request for the issuance, amendment, renewal or extension of a
Letter of Credit.
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Letter of Credit. Means a standby letter of credit issued by an Issuer
for the account of Borrower pursuant to this Agreement.
Letter of Credit Outstandings. Means, as of the date of any
determination, the sum of (a) the aggregate undrawn amount of the Letters of
Credit then outstanding plus (b) the aggregate of all amounts theretofore drawn
under Letters of Credit which have not been reimbursed by Borrower.
Lien. Means any interest in any Asset securing any Indebtedness owed
to, or a claim by, a Person other than the owner of such Asset, whether such
interest is based on the common law or any statute or contract, and includes,
without limitation, any lien, mortgage, deed of trust, collateral assignment,
chattel mortgage, security interest, tax lien, pledge, encumbrance, conditional
sale or title retention arrangement or a lease, consignment or bailment for
security purposes.
Loan. Means any Advance made under the Facility, and includes, without
limitation, any Advance made pursuant to Section 2.3(f) and any amount drawn
under any Letter of Credit, and "Loans" means all of such Advances.
Loan Documents. Means, collectively, this Agreement, the Note, the
Letters of Credit, the Security Documents and any and all other agreements,
documents, instruments and certificates now or hereafter executed or delivered
in connection with any of the foregoing (including, without limitation, those
agreements, documents, instruments and certificates, the forms of which appear
as Exhibits hereto), as such agreements, documents, instruments and
certificates may be amended, renewed, extended, restated, replaced,
substituted, supplemented or otherwise modified from time to time.
Loan Request Certificate. Means a Loan Request Certificate in
the form of Exhibit D hereto, appropriately completed, executed by Borrower and
delivered to Agent pursuant to Section 2.3(a) in connection with Borrower's
request for an Advance.
Major Subsidiaries. Means Ben Franklin, FoxMeyer, FoxMeyer Drug
Company, FoxMeyer Trading Company, Harris and each Subsidiary, whether existing
on the date hereof or any time hereafter, that has total assets, determined as
of the end of its then most recent fiscal quarter, in excess of $75,000,000.
Majority Banks. Means, as of the date of any determination, Banks
that hold (inclusive of Letter of Credit Outstandings held by virtue of
purchases from Issuers pursuant to Section 2.3(e)), in the aggregate, more than
50% of the sum of the aggregate principal amount of the Loans then outstanding
plus the aggregate of Letter of Credit Outstandings or, if no Loan or Letter of
Credit Outstandings are then outstanding, Banks that hold, in the aggregate,
more than 50% of the Aggregate Commitment.
Margin Stock. Means margin stock, as such term is defined in
Regulation U.
Material Adverse Effect. Means any (a) material adverse effect
whatsoever upon the validity, performance or enforceability of any Loan
Document, the validity, enforceability, perfection or intended priority of any
Lien created or intended to be created thereunder or the rights or remedies of
a pledgee of any stock constituting Collateral, (b) material adverse effect
upon the financial condition or business or operations of Borrower or Borrower
and the Major Subsidiaries taken as a whole, as compared to that existing as of
September 30, 1993 or (c) material adverse effect upon the ability of Borrower
to fulfill its payment obligations under the Loan Documents.
Maturity Date. Means April 1, 1996.
Maximum Aggregate Letter of Credit Amount. Means $8,000,000.
Maximum Lawful Rate. Means the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest from time
to time permitted under Federal or State laws now or hereafter
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applicable to the Obligations in question, after taking into account, to the
extent required by applicable law, any and all relevant payments and charges
deemed to be interest (whether or not so characterized by the parties) and
calculations. Banks hereby notify and disclose to Borrower that, for purposes
of Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as it may be amended from time to
time, the applicable rate ceiling shall be the "indicated rate" ceiling from
time-to-time in effect as limited by Art. 5069-1.04(b); provided, however,
that, to the extent permitted by applicable law, Banks shall have the right to
change the applicable rate ceiling from time to time in accordance with
applicable law.
Multiemployer Plan. Means a "multiemployer plan", as such term is
defined in Section 3(37) of ERISA.
Net Proceeds. Means (a) the sum of all the gross proceeds and value of
other consideration (including, without limitation, cash, promissory notes and
accounts receivable) payable to or for the benefit of or received by any Person
with respect to the sale or other disposition for value of an Asset, including
proceeds of such proceeds and other consideration, less (b) the sum of the (i)
title and recording expenses, commissions (other than commissions payable to an
Affiliate of such Person) and other fees and expenses incurred by such Person
directly as a consequence of such sale or other disposition, plus (ii) the
amount of any capital gains tax (if any) which such Person shall be required to
pay as a result of such sale or other disposition.
Net Worth. Means, as of the date of any determination, the remainder
of (a) total stockholder's equity (including capital stock, additional paid-in
capital and retained earnings after deducting treasury stock) which would
appear on a consolidated balance sheet of Borrower and the Consolidated
Subsidiaries prepared as of such date in accordance with GAAP, minus (b) all
capital stock of Borrower which is redeemable on or before the Maturity Date
minus (c) all capital stock of Borrower which is convertible, at the option of
the holder thereof, into debt Securities or other Indebtedness of Borrower on
or before the Maturity Date.
NII Management Agreement. Means that certain Amended and Restated
Management Agreement dated as of January 1, 1992, between Borrower and
FoxMeyer.
Note and Notes. Means as provided in Section 2.1(d).
NSC. Means National Steel Corporation, a Delaware corporation.
NSC Agreement. Means that certain Agreement dated as of February 3,
1993, by and among Borrower, NII Capital Corporation, NKK Corporation, NKK
U.S.A. Corporation and NSC.
Obligations. Means (a) any and all present and future Indebtedness,
obligations or liabilities, and any and all amendments, renewals, extensions,
restatements, replacements, substitutions, supplements or changes in form
thereof, or any part thereof, of Borrower, now or hereafter owing to any one or
more of Agent and Banks under or in connection with this Agreement, the Note
and the other Loan Documents, including, without limitation, all Loans, Letters
of Credit, Reimbursement Obligations, costs, fees, expenses and obligations of
indemnity under the Loan Documents, and (b) all interest accruing thereon and
attorneys' fees and other costs and expenses incurred in the enforcement or
collection thereof, regardless of whether any such Indebtedness, obligations
and liabilities described in (a) and (b) above are direct, indirect, fixed,
contingent, joint, several or joint and several.
Other Taxes. Means as provided in Section 2.12(b).
Paribas. Means Banque Paribas, a bank organized under the laws of the
Republic of France.
PBGC. Means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Pension Plan. Means any "employee benefit plan", as defined in Section
3(2) of ERISA, including a Multiemployer Plan, which is subject to Title IV of
ERISA, where (a) such plan is maintained by Borrower or
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any Group Member, (b) Borrower or any Group Member contributes or is required
to contribute to such plan, (c) Borrower or any Group Member contributed or was
required to contribute to such plan at any time during the five calendar years
preceding the date of this Agreement, or (d) Borrower or any Group Member has
incurred or may incur liability, including contingent liability, under Title IV
of ERISA, either to such plan or to the PBGC with respect to such plan;
provided, however, that, for purposes of this Agreement, neither the Weirton
Liabilities nor the Weirton Retirement Program is a Pension Plan.
Permitted Cash Investments. Means investments in (a) indebtedness,
evidenced by notes maturing not more than 180 days after the date of issue,
issued or guaranteed by the U.S. or any agency thereof, (b) time deposits and
certificates of deposit, maturing not more than 180 days after the date of
issue, issued by any financial institution (including, without limitation, a
Bank) which maintains a long-term debt rating of at least "BBB" (or its then
equivalent) according to Standards & Poor's Corporation or a Thompson Bankwatch
rating of at least "C" and which has combined capital and surplus and undivided
profits of not less than $1,000,000,000, or any other financial institution if
the amount on deposit is fully insured by The Federal Deposit Insurance
Corporation, (c) commercial paper, maturing not more than 180 days after the
date of issue, issued by a corporation (other than an Affiliate of Borrower)
with a rating of "P-1" (or its then equivalent) according to Moody's Investors
Service, Inc., "A-1" (or its then equivalent) according to Standard & Poors
Corporation, "F-1" (or its then equivalent) according to Fitch's Investors
Service, Inc. or "D-1" (or its then equivalent) according to Duff & Phelps, or
a better rating, (d) master note arrangements or deposit arrangements with
entities which have ratings meeting the standard of (b) or (c) above, (e) money
market funds that invest only in debt securities (including, without
limitation, bankers' acceptances, bearer deposit notes, loan participations,
promissory notes and medium-term notes) which mature within 400 days after the
date of purchase and which have ratings meeting the standard of (b) or (c)
above or which, if unrated, are determined by the fund to be of comparable
quality to debt securities which have such ratings, and (f) repurchase
agreements in connection with obligations which are permitted for investment
under the categories set forth above.
Permitted Liens. Means, with respect to any Asset, (a) Liens securing
the Loans in favor of Agent and Banks; (b) pledges or deposits made in the
ordinary course of business to secure payment of worker's compensation
insurance (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs; (c) Liens imposed by mandatory provisions of law and arising in the
ordinary course of business (such as materialmen's, mechanics' and
warehousemen's Liens and other like Liens) securing Indebtedness whose payment
is not yet due; (d) Liens imposed by mandatory provisions of law for taxes,
assessments and governmental charges or levies imposed upon a Person or upon
such Person's income or profits or property if the same are not yet due and
payable or if (i) the amount, applicability or validity thereof is (at the time
in question) being contested in good faith by appropriate action promptly and
diligently conducted and adequate cash reserves (segregated to the extent
required by GAAP) have been set aside therefor, (ii) levy and execution thereon
have been stayed and continue to be stayed and (iii) they do not in the
aggregate materially detract from the value of the property of the Person in
question or materially impair the use of such property in such Person's
business; (e) Liens arising from good faith deposits in connection with
tenders, leases, real estate bids or contracts (other than contracts involving
the borrowing of money), pledges or deposits to secure public or statutory
obligations and deposits to secure (or in lieu of) surety, stay, appeal or
customs bonds and deposits to secure the payment of taxes, assessments, customs
duties or other similar charges; (f) encumbrances consisting of zoning
restrictions, restrictive covenants, encroachments, protrusions, easements or
other restrictions on or affecting the use of real property or which would
appear on a survey or title report covering such property, provided that such
items do not in the aggregate materially detract from the value of the property
of the Person in question or materially impair the use of such property in such
Person's business, and none of which is violated by existing or proposed
structures or land use; (g) Liens solely securing purchase money Indebtedness
incurred in the ordinary course of business for the purchase of computers,
trucks and other equipment used in the ordinary course of business, provided
that each such Lien is limited to the equipment so financed; (h) Liens
affecting up to 4,500,000 shares of FoxMeyer Stock, other than the Collateral,
securing the FoxMeyer/NII Loan Facility; (i) Liens affecting up to 500,000
shares of FoxMeyer Stock, other than the Collateral; (j) Liens affecting shares
of capital stock of NSC; (k) Liens affecting shares of capital stock of Ben
Franklin; and (l) Liens, if any, described on Schedule 2 hereto; provided,
however, that none of the aforesaid Permitted Liens may attach or relate to any
of the Collateral or any capital stock of any Major Subsidiary except
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as expressly permitted by clause (i) of Section 6.2(g).
Person. Means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
PIK Securities. Means any Securities which do not mature until after
the Maturity Date and (a) as to which any interest or dividends (or the like)
paid or payable thereon on or before the Maturity Date shall be paid in kind
(and not in cash) by the issuance of additional Securities of the same class or
(b) which are issued at a discount from their face or par value and do not pay
interest or dividends (or the like).
Plan. Means, individually and collectively, (a) any Pension Plan, (b)
any "employee benefit plan", as defined in Section 3(3) of ERISA, as to which
Borrower or any Consolidated Subsidiary is a party or is bound or with respect
to which it has any direct, indirect or contingent liability, (c) all other
plans, programs, arrangements and methods of contribution or compensation
providing any material remuneration or benefits (other than the cash payment of
wages or salary) to any current or former employee(s) of Borrower or any
Consolidated Subsidiary as to which Borrower or any Consolidated Subsidiary is
a party or is bound or with respect to which it has any direct, indirect or
contingent liability; provided, however, that, for purposes of this Agreement,
neither the Weirton Liabilities nor the Weirton Retirement Program is a Plan.
Prescribed Forms. Means such duly executed form(s), statement(s) or
document(s), and in such number of copies, which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (a) an income
tax treaty between the U. S. and the country of residence of the Bank providing
the form(s), statement(s) or document(s), (b) the Code, or (c) any applicable
rule or regulation under the Code, permit Borrower to make payments hereunder
for the account of such Bank free of, or at a reduced rate of, deduction or
withholding of income or similar taxes.
Prior Loan Agreement. Means that certain Loan Agreement dated as of
July 12, 1993, by and between Borrower and Paribas.
Proceeds. Means the sum of all the gross proceeds and value of other
consideration (including, without limitation, cash, promissory notes and
accounts receivable) payable to or for the benefit of or received by any Person
with respect to the sale or other disposition for value of an Asset, including
proceeds of such proceeds and other consideration.
Proprietary Rights. Means all patents, copyrights, trademarks,
servicemarks, trade names, trade styles and applications and licenses relating
thereto and rights thereunder.
Pro Rata Share. Means, with respect to each Bank, as of the date of
any determination, such Bank's proportionate share of the Aggregate Commitment
(and the Loans and Letters of Credit made and issued, respectively,
thereunder). As of the date of this Agreement, the Pro Rata Share of each Bank
is as set forth on Schedule 1 hereto.
RCRA. Means the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq.) as amended and in effect from time to time, and
all rules and regulations issued pursuant thereto.
Real Estate Partnership. Means any joint venture, partnership or other
entity involving (a) Borrower or any Affiliate of Borrower and (b) Bernstein
Millbank, Inc., Bernstein Millbank, Limited Partnership or any new Bernstein
partnership and engaged in the business of buying, owning or disposing of real
estate or related assets.
Reference Banks. Means Paribas and such other Bank or Banks (if any)
as Agent may, in addition to Paribas, designate as Reference Banks from time to
time in Agent's discretion upon notice to Borrower and Banks.
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Register. Means as provided in Section 10.6(d).
Regulation D. Means Regulation D of the Board of Governors from time
to time in effect and shall include any successor or other regulation relating
to reserve requirements applicable to member banks of the Federal Reserve
System (or its successor).
Regulation G. Means Regulation G of the Board of Governors from time
to time in effect and shall include any successor or other regulation hereafter
promulgated by the Board of Governors to replace Regulation G and having
substantially the same function.
Regulation U. Means Regulation U of the Board of Governors from time
to time in effect and shall include any successor or other regulation hereafter
promulgated by the Board of Governors to replace Regulation U and having
substantially the same function.
Reimbursement Obligation. Means Borrower's obligation to reimburse an
Issuer for any drawing under, or payment made by such Issuer with respect to,
any Letter of Credit, and "Reimbursement Obligations" means all of such
obligations.
Reportable Event. Means any reportable event as defined in Section
4043 of Title IV of ERISA, as modified by applicable regulations.
Required Banks. Means, as of the date of any determination, Banks
that hold (inclusive of Letter of Credit Outstandings held by virtue of
purchases from Issuers pursuant to Section 2.3(e)), in the aggregate, more than
66.66% of the sum of the aggregate principal amount of the Loans then
outstanding plus the aggregate of Letter of Credit Outstandings or, if no Loan
or Letter of Credit Outstandings are then outstanding, Banks that hold, in the
aggregate, more than 66.66% of the Aggregate Commitment.
Restricted Payments. Means (a) cash dividends or distributions or any
other dividends or distributions on, or in respect of, any class of capital
stock or equity interests of Borrower, except for distributions made solely in
shares of stock or equity interests of the same class, (b) any and all funds,
cash or other payments made in respect of the retirement, redemption,
repurchase or other acquisition of such stock or equity interests, unless such
stock or equity interests shall be redeemed or acquired through the exchange of
such stock or equity interests with stock or equity interests of the same
class, (c) any loan or advance by Borrower to, or other investment by Borrower
in, the holder of any such stock or equity interests, and (d) any payment made
by Borrower to FoxMeyer or any subsidiary of FoxMeyer pursuant to the Tax
Sharing Agreement or any other tax sharing agreement or other similar agreement
relating to the payment of any tax.
Riverside Loan. Means the Indebtedness of Borrower evidenced by that
certain Promissory Note dated June 1, 1993, in the original principal amount of
$2,500,000 made by Borrower payable to the order of Riverside Insurance
Company, Ltd.
Rollover Notice. Means as provided in Section 2.8(c).
Schedule. Means, unless specifically indicated otherwise, schedules
attached to this Agreement.
SEC. Means the Securities and Exchange Commission and/or any entity
succeeding to any or all of its functions.
Section. Means, unless specifically indicated otherwise, sections and
subsections of this Agreement.
Securities. Means any and all securities of any type or character,
including, without limitation, (a) capital stock or other equity rights, bonds,
notes or other instruments convertible into capital stock or other equity
interests, and (b) options, warrants or other rights to acquire capital stock
or other equity interests.
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Security Documents. Means the agreements, documents, instruments and
certificates referred to in Section 3.1, and all other security agreements,
pledges, assignments, agency agreements, guaranties, mortgages, deeds of trust,
financing statements, stock certificates, stock powers and related agreements,
documents, instruments and certificates as may exist or be required from time
to time which create or evidence a Lien or which constitute a Guaranty
securing, guaranteeing or ensuring collection, payment or performance of all or
any portion of the Obligations, as the same may be amended, renewed, extended,
restated or supplemented from time to time.
Stated Rate. Means as provided in Section 2.6(e).
Subsidiary. Means, with respect to Borrower as of the date of any
determination, (a) any corporation or other entity in which more than 50% of
the voting shares or other voting equity interests is owned, directly or
indirectly, by Borrower or (b) any other corporation or other entity with
respect to which Borrower has the power, directly or indirectly, to direct or
cause the direction of the management and policies of such corporation or other
entity, and "Subsidiaries" means all of such corporations or other entities.
Substitute Rate. Means as provided in Section 2.9(b).
Tax Sharing Agreement. Means that certain Tax Sharing Agreement dated
as of November 25, 1992, by and among Borrower and FoxMeyer (and as agreed to
by each of the consolidated subsidiaries of Borrower and FoxMeyer), as it may
be amended, renewed, extended, restated, replaced, substituted, supplemented or
otherwise modified from time to time in compliance with Section 6.2(n).
Termination Event. Means (a) a Reportable Event (other than a
Reportable Event for which, under applicable regulations, a 30-day notice to
the PBGC is not required), (b) a withdrawal described in Section 4063 of ERISA,
(c) a cessation of operations described in Section 4062(e) of ERISA, (d) the
withdrawal of a Group Member from a Pension Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA with
respect to such Pension Plan, (e) the filing of a notice of intent to terminate
a Pension Plan or the treatment of a Pension Plan amendment as a termination
under Section 4041(c) of ERISA, (f) the institution of proceedings by the PBGC
to terminate or have a trustee appointed to administer a Pension Plan, (g) any
other event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan, or (h) the partial or complete withdrawal of any Group Member
from a Multiemployer Plan.
Tribunal. Means any Federal, State, municipal or other governmental
department, judicial body, commission, board, bureau, agency or instrumentality
of the U. S. or of any State, commonwealth, country, nation, territory,
possession, county, parish or municipality, whether now or hereafter
constituted and/or existing, and also means and includes any arbiter or
mediator having authority over the particular matter at issue.
UCC. Means the Uniform Commercial Code as enacted in the applicable
jurisdiction, as amended and in effect from time to time.
U.S. Means the United States of America.
Weirton Adjustment. Means any non-cash charge occurring after the
Closing Date attributable to adjustments in the Weirton Retirement Program.
Weirton Liabilities. Means certain employee benefit and environment
liabilities retained by NSC in connection with the sale (the "Weirton Sale") by
NSC of its Weirton Steel division ("Weirton") in 1983 and for which Borrower is
contractually obligated to indemnify NSC pursuant to the Weirton Liabilities
Agreement.
Weirton Liabilities Agreement. Means that certain Weirton Liabilities
Agreement dated as of August 22, 1984, the Amended and Restated Weirton
Liabilities Agreement dated as of June 26, 1990 and the Amendment to the
Amended and Restated Weirton Liabilities Agreement dated as of July 31, 1991,
as they may
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be amended, renewed, extended, restated, replaced, substituted, supplemented or
otherwise modified from time to time.
Weirton Retirement Program. Means an employee pension benefit plan,
within the meaning of Section 3(2) of ERISA, sponsored and maintained by NSC
which provides pension benefits for retired NSC employees and certain active
NSC employees transferred to Weirton in connection with the Weirton Sale and
which is based on service earned prior to the Weirton Sale.
Weirton Sale. Means as provided in the definition of "Weirton
Liabilities" in this Section 1.2.
Withholding Taxes. Means as provided in Section 2.12(a).
ARTICLE II
THE LOANS AND LETTERS OF CREDIT
2.1 Revolving Loan Facility.
(a) Commitment. Upon the terms and subject to the conditions set
forth in this Agreement, and upon request of Borrower as provided herein, each
Bank agrees, severally and not jointly, (i) to make Advances to or for the
account of Borrower from the date hereof to (but excluding) the Maturity Date,
and (ii) to issue, or participate in the issuance of, Letters of Credit for the
account of Borrower and to renew and extend Letters of Credit, from time to
time, from the date hereof to (but excluding) the Maturity Date pursuant to the
terms of the L/C Request Certificate and L/C Application therefor; provided,
however, that (A) the aggregate principal amount of all the Advances made by
such Bank under this Section 2.1(a) and outstanding plus such Bank's Pro Rata
Share of the aggregate of Letter of Credit Outstandings may not at any time
exceed such Bank's Commitment and (B) the aggregate principal amount of all the
Advances made by all Banks under this Section 2.1(a) and outstanding plus the
aggregate of Letter of Credit Outstandings may not at any time exceed the
Aggregate Commitment. Each Loan and Letter of Credit shall be made or issued as
a part of a borrowing or credit accommodation consisting of revolving loans
made by Banks or a Letter of Credit issued by the Issuer thereof and
participated in by Banks in accordance with their respective Pro Rata Shares
thereof; provided, however, that the failure of any Bank to advance its Pro
Rata Share of any such Loan or to issue any Letter of Credit or participate in
the issuance of any Letter of Credit to the extent of its Pro Rata Share shall
not in itself relieve any other Bank of its obligation under this Section
2.1(a) (it being agreed, however, that no Bank shall be responsible for the
failure of any other Bank to comply with such other Bank's obligation). Prior
to the Maturity Date, Borrower may borrow, repay and reborrow under the
Facility up to the full amount of the Aggregate Commitment in accordance with
the terms of this Agreement. Banks shall not make any Advances under the
Facility after the Maturity Date or issue, or participate in the issuance of,
any Letter of Credit or renew or extend any Letter of Credit which has an
expiration date that is subsequent to the Maturity Date unless Banks agree
otherwise and arrangements satisfactory to Banks, in their sole discretion, are
made to secure any Reimbursement Obligation that may exist subsequent to the
Maturity Date.
(b) Borrowing Base. Notwithstanding anything to the contrary
contained in Section 2.1(a) or elsewhere in this Agreement, no Bank shall be
obligated, pursuant to Section 2.1(a) or otherwise, to make any Advance to or
for the account of Borrower or to issue, or participate in the issuance of, any
Letter of Credit for the account of Borrower or to amend, renew or extend any
Letter of Credit, and Borrower shall not be entitled to borrow or cause the
issuance, amendment, renewal or extension of any Letter of Credit, pursuant to
Section 2.1(a) or otherwise if, after giving full effect to the requested
Advance by such Bank and all other Banks or the requested Letter of Credit or
the amendment, renewal or extension thereof, as the case may be, the sum of (i)
the aggregate outstanding principal amount of all Loans plus (ii) the aggregate
Letter of Credit Outstandings, would exceed the Borrowing Base.
(c) Additional Matters Regarding Letters of Credit.
Notwithstanding anything to the contrary contained in Section 2.1(a) or
elsewhere in this Agreement, (i) the aggregate Letter of Credit Outstandings
may
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not at any time exceed the Maximum Aggregate Letter of Credit Amount and (ii)
no Letter of Credit may be (A) issued for a term exceeding one year, (B) issued
for credit enhancement purposes in connection with borrowed money, except for a
Letter of Credit which may be issued in an amount not to exceed $3,000,000 in
connection with Borrower's existing airplane lease with General Electric
Capital Corporation or a successor airplane lease, or (C) used in whole or in
part for the purpose, whether immediate, incidental or ultimate, of purchasing
or carrying any Margin Stock.
(d) Notes. Each Bank's Advances outstanding under its Commitment
shall be evidenced by a promissory note, dated the Closing Date, executed by
Borrower and payable to the order of Bank in the maximum original principal
amount of such Bank's Commitment, substantially in the form of Exhibit E hereto
(as amended, renewed, extended, restated, replaced, substituted, supplemented
or otherwise modified from time to time, individually, a "Note" and,
collectively, the "Notes").
(e) Use of Proceeds. All proceeds of the Loans and all Letters of
Credit shall be used by Borrower solely for working capital purposes or general
corporate purposes of Borrower, provided, however, that (i) the initial Advance
shall be made on the Closing Date and the proceeds thereof shall be used to pay
in full all outstanding Indebtedness owed by Borrower to Paribas under the
Prior Loan Agreement and (ii) none of the Loans or Letters of Credit may be
used by Borrower, directly or indirectly, for any of the following purposes:
(A) to pay any dividends on or with respect to any common stock issued by
Borrower, (B) to purchase or carry any Margin Stock other than (1) Margin Stock
issued by FoxMeyer or (2) Margin Stock issued by any other corporation if,
after giving effect to such purchase, Borrower shall be in compliance with
Section 6.2(d), or (C) to make any payments due under or with respect to the
NSC Agreement.
2.2 Determinations of Borrowing Base. The Borrowing Base shall be
calculated by Borrower as of the Closing Date and as of the date of each
Borrowing Base Certificate required to be delivered by Borrower to Bank
pursuant to Section 4.2(e) or 6.3(a) (whether or not Borrower actually delivers
such Borrowing Base Certificate) and shall be certified to Agent by a Financial
Officer of Borrower as of the Closing Date and in conjunction with each such
Borrowing Base Certificate to be delivered by Borrower to Agent pursuant to
Section 4.2(e) or 6.3(a); provided, however, that, notwithstanding anything to
the contrary contained in this Agreement or any Borrowing Base Certificate,
Agent shall have the final right to review and adjust, at any time and from
time to time and in its good faith judgment based upon any information
available to Agent, any determination made by Borrower with respect to the
Borrowing Base to the extent such determination is not in accordance with this
Agreement; and provided, further, however, that, in the event that Borrower
fails to timely or appropriately deliver any such Borrowing Base Certificate,
the Borrowing Base shall be calculated in good faith by Agent in its sole
discretion but consistent with the requirements of this Agreement relating to
the calculation of the Borrowing Base. In the event, at any time or from time
to time, (a) Agent determines that the Borrowing Base is different from the
amount calculated as such by Borrower pursuant to the then most recent
Borrowing Base Certificate delivered to Agent or (b) Agent calculates the
Borrowing Base due to Borrower's failure to timely or appropriately do so, then
Agent shall, in a reasonably prompt fashion, notify Borrower and each Bank of
the Borrowing Base as so determined by Agent; provided, however, that the
failure to give any such notification shall not result in any liability to
Agent.
2.3 Borrowing, Issuance, Reimbursement and Related Procedures.
(a) Loan Request Certificate. Except with respect to Advances to
be made under the Facility pursuant to Section 2.3(f) which do not require a
Loan Request Certificate, Banks shall make Advances to Borrower in accordance
with the terms hereof upon receipt by Agent of a Loan Request Certificate
appropriately completed and specifying all information called for in the Loan
Request Certificate, including, without limitation, the following information:
(i) the requested amount of such Advance, which amount
must be equal to (A) $100,000, or an integral multiple of $10,000 in
excess thereof, with respect to each Advance of a Base Rate Loan and
(B) $500,000, or an integral multiple of $100,000 in excess thereof,
with respect to each Advance of a Eurodollar Loan;
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(ii) whether such Advance shall be a Base Rate Loan or a
Eurodollar Loan;
(iii) in the case of an Advance requested to be a
Eurodollar Loan, the duration of the Interest Period applicable
thereto; and
(iv) the requested date of such Advance, which date
shall be a Business Day in the case of a Base Rate Loan and a
Eurodollar Business Day in the case of a Eurodollar Loan.
Such Loan Request Certificate shall be delivered by Borrower to Agent (i) with
respect to any requested Base Rate Loan, not later than 11:00 a.m., Houston,
Texas time, on the requested date of the Advance, and (ii) with respect to any
requested Eurodollar Loan, not later than 10:00 a.m., Houston, Texas time, at
least two Eurodollar Business Days prior to the requested date of the Advance,
and in all cases the Loan Request Certificate shall be effective and
irrevocable upon receipt thereof by Agent. Borrower may not select an Interest
Period with respect to a Eurodollar Loan which begins prior to any date upon
which principal of the Loans is to be paid and ends after such payment date
unless, after giving effect to such selection of an Interest Period, the sum of
the aggregate amount of the then outstanding Eurodollar Loans which have
Interest Periods which shall end on or prior to such payment date plus the
aggregate amount of the Base Rate Loans then outstanding shall be equal to or
greater than the principal amount of the Loans required to be paid on such
payment date.
(b) L/C Request Certificate and L/C Application. A L/C Request
Certificate and L/C Application relating thereto with respect to each requested
issuance, amendment, renewal or extension of a Letter of Credit shall be
delivered by Borrower to Agent and Issuer, and the L/C Application relating
thereto shall be delivered by Borrower to Issuer, not later than 10:00 a.m.,
Houston, Texas time, at least three Business Days prior to the requested date
of the issuance, amendment, renewal or extension of the Letter of Credit, and
in all cases the L/C Request Certificate shall be effective and irrevocable
upon receipt thereof by Agent or Issuer. Issuer shall, if the requested terms
of such Letter of Credit or amendment, renewal or extension thereof are not
inconsistent with this Agreement and are otherwise reasonably acceptable to
Issuer in its discretion, issue the requested Letter of Credit or amend, renew
or extend the appropriate Letter of Credit for the account of Borrower in
accordance with the terms hereof upon receipt of such L/C Request Certificate
and such L/C Application appropriately completed and specifying all information
called for in the L/C Application (which information shall include (unless not
applicable), without limitation, the requested date of issuance of such Letter
of Credit, which date shall be a Business Day, the requested face amount of
such Letter of Credit, the expiration date of such Letter of Credit, the name
and address of the beneficiary of such Letter of Credit, the form of such
Letter of Credit or the amendment, renewal or extension thereof requested and
such other information as Issuer shall require pursuant to the L/C
Application). Each L/C Request Certificate, L/C Application and Letter of
Credit shall not contain any terms or conditions that are inconsistent with
this Agreement; provided, however, that (i) if any terms or conditions
contained in any L/C Request Certificate, L/C Application or Letter of Credit
are inconsistent with this Agreement, this Agreement shall control as between
and among the parties to this Agreement and (ii) notwithstanding anything to
the contrary contained herein, Borrower's Reimbursement Obligations shall
exist, and shall not be impaired, reduced or otherwise affected by, any such
inconsistent terms or conditions.
(c) Notice to Banks. Upon receipt of a Loan Request Certificate
or a L/C Request Certificate, Agent shall promptly notify each Bank of the
contents thereof and of such Bank's Pro Rata Share with respect thereto. Upon
determination of the interest rate applicable to any Eurodollar Loan pursuant
to clause (ii) of Section 2.6(c), Agent shall promptly notify each Bank of such
interest rate.
(d) Funding of Loans. Not later than 2:00 p.m., Houston, Texas
time, on the funding date set forth in the Loan Request Certificate with
respect to any Loan or on the first Business Day following such Bank's receipt
of notice from Paribas or Issuer pursuant to Section 2.3(f), each Bank shall,
subject to the satisfaction (or effective waiver) of all applicable conditions
precedent, make available its Pro Rata Share of the requested Advance, in
immediately available funds, to Agent at Agent's address referred to in Section
10.1, and, unless Agent determines that any applicable condition precedent has
not been satisfied (or effectively waived), Agent shall, not later than 2:00
p.m., Houston, Texas time on the same date, make the funds so received from
Banks available to (i) Borrower or (ii) with respect to an Advance under the
Facility pursuant to Section 2.3(f), Issuer
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at Agent's address or at such other place as Agent and such recipient may
mutually agree from time to time. Unless Agent shall have received written
notice from a Bank prior to the date of any requested Advance of a Loan that
such Bank will not make available to Agent such Bank's Pro Rata Share of such
Advance, Agent may assume that such Bank has timely made such share available
to Agent on the date of such requested Advance and Agent may (but shall not be
obligated to), in reliance upon such assumption, make available to Borrower or
Issuer, as appropriate, on such date a corresponding amount. If and to the
extent that such Bank shall not have made its Pro Rata Share thereof available
to Agent, such Bank and Borrower jointly and severally agree to pay to Agent,
forthwith upon demand, such corresponding amount, together with interest
thereon, for each day from the date such amount is made available by Agent
until the date such amount is repaid to Agent at (i) with respect to Borrower,
the interest rate applicable to the subject Loan and (ii) with respect to such
Bank, the Federal Funds Rate. If (and only if) such Bank shall repay to Agent
any of such corresponding amount, such amount repaid shall constitute such
Bank's share of the Loan for purposes of this Agreement.
(e) Issuance of Letters of Credit. Not later than 10:00 a.m.,
Houston, Texas time, on the issuance or effective date set forth in the L/C
Application, Issuer shall deliver the requested Letter of Credit or the
amendment, renewal or extension thereof to Agent at Agent's address referred to
in Section 10.1. Unless Agent determines that any applicable condition
precedent has not been satisfied, Agent shall, not later than 1:00 p.m.,
Houston, Texas time on the same date, make the Letter of Credit or the
amendment, renewal or extension thereof available to Borrower at Agent's
aforesaid address for Borrower's delivery thereof to the beneficiary thereof.
Immediately upon the issuance of any Letter of Credit, Issuer shall be deemed
to have sold and transferred to each other Bank, and each such other Bank shall
be deemed unconditionally and irrevocably to have purchased and received from
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such other Bank's Pro Rata Share, in such Letter of Credit (as
the same may thereafter be amended, renewed or extended pursuant to this
Agreement), each drawing thereunder and the obligations of Borrower under this
Agreement and the L/C Application with respect thereto and any security
therefor or guaranty pertaining thereto. Upon any change in the Pro Rata Share
of any Bank which may hereafter occur, it is hereby agreed that, with respect
to all Letters of Credit then outstanding, there shall be an automatic
adjustment to the interest and participation hereby created to reflect the new
Pro Rata Share of the assigning and assignee Banks. Any action taken or omitted
by Issuer under or in connection with a Letter of Credit, if taken or omitted
in the absence of gross negligence or willful misconduct, shall not create for
Issuer any resulting liability to any other Bank.
(f) Reimbursement under Letters of Credit; Advances under Letters
of Credit. Drafts drawn under each Letter of Credit shall be promptly
reimbursed by Borrower to Issuer not later than the first Business Day
following the date of drawing and shall bear interest from the date of drawing
until reimbursed in full at a rate per annum equal to the interest rate in
effect during such period for Base Rate Loans (which rate shall be the Default
Rate during the period when an Event of Default has occurred and is
continuing). The payment by Issuer of a draft drawn under any Letter of Credit
shall constitute, for all purposes of this Agreement, the making, concurrently
with such payment and without any requirement for compliance with any condition
precedent set forth in Article IV, by Issuer of an Advance under the Facility,
which shall be a Base Rate Loan, in the amount of such payment. In the event
and to the extent that (i) any draft drawn under any Letter of Credit shall not
have been promptly reimbursed, and/or (ii) any interest accrued thereon shall
not have been promptly paid, by Borrower pursuant to this Section 2.3(f),
Issuer shall promptly notify Agent, and Agent shall promptly notify each other
Bank, of such failure, and each such other Bank shall, on the first Business
Day following such notification, and notwithstanding (A) anything to the
contrary contained in Section 2.1 or elsewhere in this Agreement or (B) any
Borrowing Base Deficiency, the existence of any Default or Event of Default or
the inability of or failure by Borrower or any Subsidiary to comply with any
condition precedent set forth in Article IV (which conditions precedent shall
not apply to this Section 2.3(f)), make an Advance under the Facility, which
Advance shall be a Base Rate Loan and shall be used to repay the applicable
portion of Issuer's Loan and interest accrued thereon resulting from such
drawing, in an amount equal to such Bank's Pro Rata Share of such drawing and
interest accrued thereon, which amount shall promptly and unconditionally be
made available to Agent pursuant to Section 2.3(d), for the account of Issuer
as reimbursement for such drawing and interest accrued thereon, in immediately
available funds. If and to the extent any such other Bank shall not have so
made its Pro Rata Share of the amount of such drawing and interest accrued
thereon available to Agent for the account of Issuer, such other Bank agrees to
pay to Issuer, forthwith on demand, such amount, together with interest
thereon, for each
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day from such date until the date such amount is paid to Issuer at the Federal
Funds Rate. The failure of any such other Bank to make available to Agent for
the account of Issuer such Bank's Pro Rata Share of any drawing under any
Letter of Credit and any interest accrued thereon shall not relieve any other
such Bank of its obligation hereunder to make so available such Bank's Pro Rata
Share thereof on the date required, as specified above, but no Bank shall be
responsible for the failure of any other Bank to so make available such other
Bank's Pro Rata Share thereof. Whenever Issuer receives a payment of a
Reimbursement Obligation from Borrower as to which Issuer has received any
payments from the other Banks pursuant to this Section 2.3(f) or interest
thereon, Issuer shall pay to each other Bank which has paid its Pro Rata Share
thereof, in immediately available funds, an amount equal to such other Bank's
Pro Rata Share thereof.
2.4 Principal Payments. Subject to the terms of this Agreement,
the unpaid principal amount of the Loans shall be due and payable by Borrower
in full on the Maturity Date.
2.5 Prepayments.
(a) Voluntary Prepayments. Subject to the terms of this
Agreement, including Section 2.9(d), Borrower may prepay the Loans in whole or
in part at any time and from time to time by notifying Agent of the particular
Loans to be prepaid, the amount of such prepayment and the prepayment date;
provided, however, that (i) with respect to partial prepayments of the Loans,
the prepayment of principal must be in an amount equal to (A) $10,000 or an
integral multiple of $1,000 in excess thereof, with respect to Base Rate Loans
and (B) $100,000 or an integral multiple of $100,000 in excess thereof, with
respect to Eurodollar Loans, (ii) no prepayment of Eurodollar Loans shall be
permitted pursuant to this Section 2.5(a) unless (A) such prepayment is made on
the last day of the Interest Period applicable thereto or (B) if such
prepayment is made prior to such last day, the Eurodollar Consequential Loss
estimated by Agent to be attributable to such Eurodollar Prepayment is, if
Agent in its discretion makes such request for payment at such time, paid by
Borrower concurrently with such prepayment (any such payment or request for
payment of the estimated Eurodollar Consequential Loss shall be subject to
adjustment based upon the actual amounts owing by Borrower with respect to such
Eurodollar Prepayment pursuant to this Agreement), (iii) no prepayment of
Eurodollar Loans shall be permitted pursuant to this Section 2.5(a) if, as a
result of any such prepayment, the aggregate principal amount of the Eurodollar
Loans remaining outstanding pursuant to the Advance thereof shall be less than
$500,000, and (iv) Borrower may prepay Eurodollar Loans only upon three
Business Days' prior written notice to Agent. Agent shall, promptly after
receiving notice from Borrower of any voluntary prepayment to be made pursuant
to this Section 2.5(a), notify each Bank of the principal amount of the Loans
held by such Bank which are to be prepaid, the prepayment date and the manner
of application of the prepayment. Any notice by Borrower given with respect to
a proposed prepayment of a Eurodollar Loan shall be irrevocable and shall
commit Borrower to prepay such Loan in accordance with such notice unless such
notice is revoked by Borrower prior to any reliance on such notice by any Bank.
Unless Borrower expressly informs Agent to the contrary prior to or
concurrently with any voluntary prepayment, such prepayment shall be applied
first to accrued interest (in the order of the Loans specified in Section
2.5(c)) and then to principal (in the order of the Loans specified in Section
2.5(c)).
(b) Mandatory Prepayment; Borrowing Base Deficiency. Subject to
the terms of this Agreement, including Section 2.9(d), if, upon any
determination of the Borrowing Base in accordance with Section 2.2, Agent
determines that a Borrowing Base Deficiency exists, then Agent shall promptly
give notice of such Borrowing Base Deficiency to Borrower and Borrower shall,
within seven Business Days following such notice, wholly eliminate the
Borrowing Base Deficiency by doing any one or more of the following: (i)
prepaying the outstanding principal amount of the Loans (and/or, if and to the
extent that the principal of the Loans are paid in full, reducing the Letter of
Credit Outstandings) by a sufficient amount, (ii) pledging, pursuant to
documentation in form and substance satisfactory to Bank but substantially
identical to the Pledge and Security Agreement delivered pursuant to Section
3.1(a), additional shares of FoxMeyer Stock and/or, subject to the prior
written consent of Agent and Required Banks (which consent may or may not be
granted in their sole discretion) and compliance with this Agreement, other
Margin Stock having sufficient fair market value, provided, however, that none
of such additional shares of FoxMeyer Stock or other Margin Stock pledged may
be subject to any restrictions on resale or other transfer restrictions (except
as may be approved by Agent and Majority Banks), and/or (iii) submitting
evidence reasonably satisfactory to Agent which establishes that the fair
market value of
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the Collateral has increased by a sufficient amount.
(c) Application of Prepayments; Payment of Accrued Interest. Each
voluntary prepayment of principal, and each mandatory prepayment of principal
if and to the extent that such prepayment relates to a Eurodollar Loan, shall
be made together with interest accrued on the amount of principal prepaid to
the date prepayment and shall be applied to payment of the Loans being prepaid
in the following manner: (i) first, against the interest accrued on the
principal amount prepaid if such principal relates to voluntarily prepayment or
a Eurodollar Loan; (ii) second, as a prepayment of principal of the outstanding
Base Rate Loans; (iii) third, as a prepayment of principal of the outstanding
Eurodollar Loans; and (iv) fourth, as a prepayment of the remaining
Obligations, and/or for deposit into the Cash Collateral Account, in any manner
Agent shall, in its discretion, determine. Subject to the foregoing provisions
of this Section 2.5(c), prepayments shall be applied to Eurodollar Loans as
Borrower may select; provided, however, that (A) Borrower shall select
Eurodollar Loans to be prepaid in a manner designated to minimize any
Eurodollar Consequential Loss resulting from such prepayments, (B) if Borrower
shall fail to select the Eurodollar Loans to which such prepayments are to be
applied, then Agent shall be entitled to apply the prepayment to the Eurodollar
Loans in any manner Agent shall deem appropriate if Agent uses reasonable
efforts to minimize any Eurodollar Consequential Loss resulting therefrom, (C)
if, as the result of the application of any mandatory prepayment under Section
2.5(b), a Eurodollar Prepayment would occur, then Agent, upon receipt of such
mandatory prepayment and upon the request of Borrower, shall place the portion
thereof that would, if immediately applied, cause a Eurodollar Prepayment in
the Cash Collateral Account and thereafter apply such portion to the Loans on
the earliest date thereafter as is possible and as will avoid the Eurodollar
Prepayment, and (D) if a Default or Event of Default has occurred and is
continuing at the time of such prepayment, then Agent shall be entitled to
apply the prepayment to the Eurodollar Loans in any manner Agent shall deem
appropriate. Any amounts from time to time held in the Cash Collateral Account
referred to in clause (C) preceding shall be subject to the same terms and
provisions that apply to the Cash Collateral Account pursuant to Section 3.2.
2.6 Interest.
(a) Interest Payment Dates/Base Rate Loans. Interest accrued on
the unpaid principal amount of the Base Rate Loans outstanding from time to
time shall be due and payable by Borrower on each Interest Payment Date and on
the Maturity Date.
(b) Interest Payment Dates/Eurodollar Loans. Interest accrued on
the unpaid principal amount of the Eurodollar Loans outstanding from time to
time shall be due and payable by Borrower on each Interest Payment Date and on
the Maturity Date.
(c) Interest Rates Prior to Default. The unpaid principal amount
of all Loans from time to time outstanding, and the unpaid amount of certain
other Obligations that are past due and payable, shall bear interest as
provided in this Section 2.6(c), subject to Section 2.6(d).
(i) Base Rate Loans and Other Past Due
Obligations. The interest rate applicable to Base Rate Loans and,
except for Eurodollar Loans and except as may be expressly provided
otherwise in this Agreement or any other Loan Document with respect to
any such other Obligations, applicable to the unpaid amount of all
other Obligations that are past due and payable shall be the lesser of
(A) the Maximum Lawful Rate or (B) an annual rate equal to the sum of
the Base Rate plus the Base Rate Margin.
(ii) Eurodollar Loans. The interest rate
applicable to the Eurodollar Loans shall be the lesser of (A) the
Maximum Lawful Rate or (B) an annual rate equal to the sum of the
Eurodollar Rateplus the Eurodollar Rate Margin.
(d) Default Rate. Notwithstanding any provision to the contrary
contained in this Section 2.6, upon the occurrence and during the continuation
of an Event of Default, the unpaid principal balance or amount of, and, to the
extent permitted by applicable law, accrued interest on, the Obligations
(including, without limitation,
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the Loans, Reimbursement Obligations, costs, fees, expenses and obligations of
indemnity) shall bear interest, payable on demand, from the date of the
occurrence and during the continuation of such Event of Default until the
Obligations have been paid, at the Default Rate; provided, however, that the
Obligations consisting of other than Loans shall not (unless otherwise
expressly stated herein or in the other Loan Documents to the contrary) begin
to bear interest until the amounts thereof are past due and payable.
(e) Computation of Interest. Subject to Section 10.4, interest on
the Obligations (i) consisting of other than Eurodollar Loans shall be
calculated on the basis of the actual number of days elapsed and computed as if
each year consisted of 365 or 366 days, as the case may be, and (ii) consisting
of Eurodollar Loans shall be calculated on the basis of the actual number of
days elapsed and computed as if each year consisted of 360 days, except when
such computation would cause the Maximum Lawful Rate to be exceeded on all or
any portion of such Obligations, in which event interest shall be computed with
respect to such Obligations (or portion thereof) as if each year consisted of
365 or 366 days, as the case may be. Such computations shall be made by
including the first day but excluding the last day of the period for which such
interest is payable. Notwithstanding any provision to the contrary contained
herein, if at any time or from time to time the rate of interest determined
under Section 2.6(c) or Section 2.6(d), as applicable, exclusive of limitations
with reference to the Maximum Lawful Rate (the "Stated Rate") would (but for
limitations with reference to the Maximum Lawful Rate) exceed the Maximum
Lawful Rate, then any subsequent reduction in the Stated Rate shall not reduce
the rate of interest payable below the Maximum Lawful Rate until the total
amount of interest accrued on the applicable Obligations equals the amount of
interest that would have accrued thereon if the Stated Rate had at all times
been in effect. Each good faith determination by Agent with respect to
interest on the Obligations shall be presumed correct.
2.7 Fees. Borrower shall pay all of the following fees in
connection with this Agreement:
(a) Closing Fee. On the Closing Date, Borrower shall pay to
Paribas for its own account an initial closing fee in the amount set forth in
the Commitment Letter.
(b) Annual Agent's Fee. Borrower shall pay to Agent for its own
account an annual agency fee in the amounts and on the dates set forth in the
Commitment Letter.
(c) Commitment Fee. Borrower shall pay to Agent, for distribution
to Banks as appropriate, on (i) the last day of each calendar quarter
(commencing with the first of such dates to occur after the Closing Date) and
(ii) if the Maturity Date falls on other than the last day of a calendar
quarter, the Maturity Date, a commitment fee in an amount equal to one-half of
one percent (0.50%) per annum (subject to the proviso below) of the remainder
of (A) the average of the Aggregate Commitment in existence during such
calendar quarter (or during such applicable period as explained in the
parenthetical phrase at the end of this Section 2.7(c)), minus (B) the sum of
(1) the average aggregate outstanding principal balance of the Loans plus (2)
the average aggregate undrawn face amount of all Letters of Credit outstanding,
in each case (i.e., with respect to each of (1) and (2)) during such calendar
quarter (or, with respect to the first commitment fee payable pursuant to
clause (i) preceding, during the period from the Closing Date to the last day
of the calendar quarter during which the Closing Date occurred, or, with
respect to the commitment fee payable pursuant to clause (ii) preceding, during
the period from the last day of the immediately preceding calendar quarter to
the Maturity Date).
(d) Letter of Credit Fees. Borrower shall pay to the Issuer with
respect to each Letter of Credit, on the date of issuance of such Letter of
Credit and on each anniversary date of such issuance if such Letter of Credit
then remains outstanding, an amount equal to the greater of (i) one-tenth of
one percent (0.10%) of the face amount of the Letter of Credit being issued or
(ii) $750. In addition, Borrower shall pay to Agent a Letter of Credit fee in
an amount equal to one and one-half of one percent (1.50%) per annum of the
average aggregate undrawn face amount of all Letters of Credit outstanding at
any time. Such fee in such amount shall be payable in advance (i) on the date
of issuance of each Letter of Credit for the period from such date of issuance
to the first to occur of April 1st, July 1st, October 1st or January 1st
thereafter based upon the face amount of such Letter of Credit issued and (ii)
on each April 1st, July 1st, October 1st and January 1st during the term of
this Agreement based upon the aggregate face amount of all Letters of Credit
outstanding on the immediately
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preceding March 31st, June 30th, September 30th and December 31st,
respectively; provided, however, that, on each such April 1st, July 1st,
October 1st and January 1st payment date and on the Maturity Date, the amount
of the payment then made or, with respect to the Maturity Date, the amount of
the payment then most recently made shall be appropriately adjusted to rebate
for any overpayments (if any) made by Borrower based upon the actual average
face amount of all Letters of Credit outstanding during such prior three month
period (or, with respect to the payment due on April 1, 1994, during the period
from the Closing Date to March 31, 1994 or, with respect to the adjustment to
be made on the Maturity Date, during the period from the immediately preceding
April 1st, July 1st, October 1st or January 1st, as the case may be, to the
Maturity Date).
(e) Computation of Fees. The fees referred to in Sections 2.7(c)
and 2.7(d) shall be calculated on the basis of the actual number of days
elapsed and computed as if each year consisted of 360 days, except when the
Maximum Lawful Rate is being charged on all or any portion of the Obligations,
at which time such fees shall be computed as if each year consisted of 365 or
366 days, as the case may be. Each good faith determination by Agent with
respect to fees shall be presumed correct.
(f) Sharing of Certain Fees. All fees payable to Agent pursuant to
Sections 2.7(c) and 2.7(d) shall be distributed to Banks in accordance with
their respective Pro Rata Shares of the Aggregate Commitment. (All other fees
payable by Borrower with respect to the Facility shall not be so distributed
and shall be retained by Agent, Paribas or Issuer, as the case may be.)
(g) Charging Borrower's Account. In the event Borrower fails to
pay any fee to be paid pursuant to this Section 2.7 on the date the same is due
and payable, Banks are hereby authorized (but shall not be required) to advance
or to cause to be advanced the amount of such fee upon any one or more of the
Loans to Borrower.
2.8 Eurodollar Loans: Conversion, Rollover, Maximum Number, Etc.
(a) Conversion from Base Rate Loans. Provided that no Default or
Event of Default shall exist or shall have occurred and be continuing, upon two
Eurodollar Business Days' prior written notice from Borrower to Agent
specifying the commencement date and length of the applicable Interest Period
selected by Borrower, Borrower may convert an amount equal to $500,000, or an
integral multiple of $100,000 in excess thereof, of any outstanding Base Rate
Loan into a Eurodollar Loan. Such notice shall be given by Borrower's
execution and delivery to Agent of a Conversion or Rollover Notice in the form
of Exhibit F hereto, appropriately completed to so state (a "Conversion
Notice"). Each such Conversion Notice shall be effective and irrevocable upon
receipt thereof by Agent.
(b) Conversion from Eurodollar Loans. If Borrower desires to
convert a Eurodollar Loan to a Base Rate Loan, Borrower shall so notify Agent
at least one Business Day prior to the Final Interest Payment Date with respect
to such Eurodollar Loan to be so converted. However, and whether or not
Borrower shall have given any such notice to Agent, unless Agent shall have
actually received notice from Borrower requesting otherwise, delivered in
accordance with Section 2.8(c) below, at least two Eurodollar Business Days
prior to the Final Interest Payment Date with respect to a Eurodollar Loan,
then on such Final Interest Payment Date such Eurodollar Loan shall be
converted to a Base Rate Loan.
(c) Rollover. Provided that no Default or Event of Default shall
exist or shall have occurred and be continuing, at least two Eurodollar
Business Days prior to the Final Interest Payment Date of each Eurodollar Loan,
Borrower may give to Agent written notice that all or any portion of such
Eurodollar Loan shall continue as a Eurodollar Loan upon the expiration of the
then-current Interest Period by executing and delivering to Agent a Conversion
or Rollover Notice in the form of Exhibit E hereto, appropriately completed to
so state (a "Rollover Notice"). Such Rollover Notice shall also specify the
length of the succeeding Interest Period selected by Borrower with respect
thereto. Each Rollover Notice shall be effective and irrevocable upon receipt
thereof by Agent. If the required Rollover Notice shall not have been timely
received by Agent, then Borrower shall be deemed to have elected to have such
Eurodollar Loan be converted to a Base Rate Loan as provided in Section 2.8(b).
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(d) Maximum Number of Eurodollar Loans. Notwithstanding any
provision to the contrary contained herein, there shall not exist or be
outstanding at any time more than an aggregate of six separate Eurodollar
Loans. For purposes of this Section 2.8(d), Eurodollar Loans having different
Interest Periods, regardless of whether such Loans commence on the same date,
shall be considered separate Eurodollar Loans.
(e) Lending Office. Any Bank may cause any Eurodollar Loan to be
made by its principal office or by a foreign or domestic subsidiary, affiliate,
branch or correspondent. Notwithstanding the right of any Bank to fund all or
any portion of a Eurodollar Loan in any manner that it deems appropriate, such
Bank shall, regardless of the actual means of funding, be deemed to have funded
the Eurodollar Loan in accordance with the interest option from time to time
selected by Borrower.
2.9 Protection of Yield.
(a) Increased Costs, etc. Subject to Section 10.4, if at any
time, and from time to time, any Bank determines that the adoption,
modification or implementation of, or compliance with, any applicable law, rule
or regulation regarding (i) taxation (exclusive of any law, rule or regulation
imposing taxes on the income of such Bank or imposing franchise taxes on such
Bank), (ii) required levels of reserves, deposits, insurance or capital
(including any allocation of capital requirements or conditions), or similar
requirements applicable to such Bank, or (iii) HLTs, or any interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation, administration or
compliance of or with any of such requirements, has or would have the effect of
(A) increasing such Bank's costs of making, funding or maintaining the Loans,
the Letters of Credit, its Commitment, the Facility or any part thereof or (B)
reducing the yield or rate of return of such Bank on the Loans, the Letters of
Credit, its Commitment, the Facility or any part thereof, to a level below that
which such Bank would have achieved but for the adoption, modification or
implementation of, or compliance with, any such requirements, Borrower shall,
within 15 days after request therefor by such Bank, pay to such Bank such
additional amounts as will compensate such Bank for such increase in costs or
reduction in yield or rate of return of such Bank. No failure by any Bank to
immediately request payment of any additional amounts payable under this
Section 2.9(a) shall constitute a waiver of such Bank's right to request
payment of such amounts at any subsequent time. Each Bank requesting that
Borrower pay additional amounts pursuant to this Section 2.9(a) shall submit to
Borrower and Agent a certificate, executed by such Bank in good faith, as to
such additional amounts, which certificate shall be presumed correct in the
absence of manifest error. Such certificate shall set forth in reasonable
detail the nature of the occurrence giving rise to such claim for additional
amounts, the additional amounts to be paid to such Bank hereunder, and the
method by which such amounts were determined. In determining such amounts,
such Bank may use any reasonable averaging and attribution methods. Any
portion of the additional amounts required to be paid under this Section 2.9(a)
remaining unpaid 15 days after the due date thereof shall bear interest at the
Default Rate.
(b) Substitute Interest Rate. Notwithstanding anything to the
contrary contained in this Agreement, if, on or before any date on which a
Eurodollar Rate is to be determined hereunder, Agent determines that deposits
of U.S. Dollars in the appropriate amount for the appropriate period are not
being offered in the interbank eurodollar market for U. S. Dollars, or that by
reason of circumstances affecting such market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate, then Agent shall promptly give
notice of such determination to Borrower and such determination shall be
conclusive and binding in the absence of manifest error. During the 15 days
next following the giving of such notice, Borrower and Agent shall negotiate in
good faith in order to arrive at a mutually satisfactory alternative interest
rate (the "Substitute Rate") to replace the rate otherwise applicable to the
pertinent Eurodollar Loans of Borrower during the applicable Interest Period.
If, within such 15 day period, Borrower and Agent agree in writing upon a
substitute rate, such rate shall be effective from the first day of such
Interest Period. If Agent and Borrower fail to agree upon a substitute rate
within such 15 day period, the substitute rate applicable to the pertinent
Eurodollar Loan during such Interest Period shall be the interest rate
applicable to a Base Rate Loan under Section 2.6(c)(i).
(c) Changes in Law Rendering Loan Unlawful or Impractical. In the
event that (i) any change in applicable law, treaty or regulation or the
interpretation thereof (whether or not having the force of law) shall make it
unlawful, impossible or impractical for any Bank to make or continue to
maintain all or any portion of
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a Eurodollar Loan contemplated hereunder, or (ii) any central bank or other
fiscal, monetary or other authority having jurisdiction over any Bank or all or
any portion of a Eurodollar Loan shall request such Bank in writing to comply
with restrictions (whether or not having the force of law) which seek to
prohibit such Bank from making or continuing to maintain such Eurodollar Loan,
then such Bank shall so notify Borrower and Agent, and Borrower shall, upon
request by such Bank, either, at the option of Borrower, prepay such Eurodollar
Loan or convert such Eurodollar Loan to a Base Rate Loan in accordance with
Section 2.8(b) hereof, except that, subject to the provisions of Section 2.9(d)
hereof, such prepayment or conversion need not be effected on a Final Interest
Payment Date, and upon such request or upon notice by such Bank, the obligation
of such Bank to make such Eurodollar Loan hereunder shall terminate (and shall
not be reinstated so long as any such circumstance continues to exist).
Failure to prepay any such portion of a Eurodollar Loan shall be deemed an
election to convert to a Base Rate Loan. Such request or notice shall be
accompanied by a certificate of such Bank provided in good faith to Borrower
and Agent as to the reasons why it is no longer lawful, possible or practical
for such Bank to make or continue to maintain such Eurodollar Loan hereunder
and such certificate shall be presumed correct in the absence of manifest
error. Each Bank agrees that if it gives notice of any event or circumstance
described in this Section 2.9(c), it shall, in a reasonably prompt fashion,
notify Borrower (and Agent if such Bank is not Paribas) if such event or
circumstance thereafter ceases to exist, in which case the obligations of such
Bank to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar
Loans on the terms and conditions contained herein shall be reinstated.
(d) Eurodollar Consequential Loss. Borrower agrees to indemnify
and hold harmless each Bank from and against any Eurodollar Consequential Loss;
provided, however, that no such obligation of indemnity shall exist with
respect to any Eurodollar Prepayment (if any) resulting from any Bank's failure
to fund an Advance (i) that such Bank was obligated to fund and (ii) which was
initially funded by Agent pursuant to Section 2.3(d). Borrower shall pay,
within 15 days after request therefor by such Bank, the amount of any
Eurodollar Consequential Loss incurred by such Bank. A certificate of such
Bank provided in good faith to Borrower and Agent specifying the amount of any
such Eurodollar Consequential Loss to such Bank and the basis upon which such
loss, cost or expense is computed shall be presumed correct in the absence of
manifest error.
(e) Reasonable Efforts. Borrower and Banks shall use reasonable
efforts to avoid or to minimize amounts payable by Borrower pursuant to this
Section 2.9, and Borrower shall, as promptly as practical, notify Agent, and
each Bank shall, as promptly as practicable, notify Borrower and Agent, of the
existence of any event or circumstance of which it is aware which will require
the payment by Borrower of any such amounts; provided, however, that the
failure to give any such notification shall not result in any liability to such
Bank and shall not affect the rights of Banks or the obligations of Borrower
under this Section 2.9; provided, further, however, that Borrower shall not be
obligated to pay any additional amount to any Bank pursuant to this Section 2.9
unless request is made for payment of such additional amount within one year
after such Bank became aware that such additional amount was owing by Borrower.
2.10 Manner and Application of Payment.
(a) Manner of Payment. All payments by Borrower shall be made,
without setoff, counterclaim or deduction of any kind except as may be
permitted by Section 2.12(a), to Agent (for the account of Agent, Issuer and/or
Banks, as appropriate) not later than 12:00 noon, Houston, Texas time, on the
date due, and shall be payable in lawful currency of the U. S. in immediately
available funds. Agent will promptly (and if such payment is received by Agent
by 11:00 a.m., and otherwise if feasible, on the same Business Day) distribute
to each Bank its Pro Rata Share (based upon the Loans or Letters of Credit to
which such payment relates) of each such payment received by Agent for the
account of Banks. Upon Agent's acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 10.6, from and after the effective date of such Assignment and
Acceptance Agent shall make all payments under this Agreement with respect to
the interest assigned thereby to the Bank assignee thereunder, and the parties
to such Assignment and Acceptance shall, directly between themselves, make all
appropriate adjustments in such payments for periods prior to such effective
date.Whenever any payment with respect to the Base Rate Loans or any other
Obligations, other than the Eurodollar Loans, shall be due on a date which is
not a Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day. Whenever any payment with respect to the Eurodollar
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Loans shall be due on a day which is not a Eurodollar Business Day, the date
for payment thereof shall be extended to the next succeeding Eurodollar
Business Day (subject to the definition of Interest Period). If the date for
any payment of principal or other past due and payable Obligations is extended,
interest shall accrue and be payable by Borrower with respect to such
extension.
(b) Application of Payments. Unless Borrower expressly informs
Agent to the contrary prior to or concurrently with any payment (other than a
prepayment which shall be governed by Section 2.5(c)), or unless the context in
which or the circumstances under which such payment is made make it clear to
Agent (in the good faith exercise of its judgment) that such payment is
intended to be applied to a particular Loan or other Obligation (in which case
such payment shall be applied consistent with such intent), such payment shall
be applied first, to the Loans, and second, to any other Obligations as Agent
shall, in its discretion, determine; provided, however, if an Event of Default
is in existence at the time of such payment or if the payment results from the
exercise of any remedy with respect to any Collateral, then Agent shall apply
such payment to the Loans and other Obligations in any manner Agent shall, in
its discretion, determine. Furthermore, all payments (other than prepayments
which shall be governed by Section 2.5(c)) on the Loans and other Obligations
shall be applied to payment of such Loans and Obligations being paid in the
following manner: (i) first, against the interest accrued and unpaid on the
Loans or other Obligations as of the date of such payments; (ii) second,
against the principal of the Base Rate Loans; (iii) third, against the
principal of the Eurodollar Loans; and (iv) fourth, against the remaining
Obligations in any manner Agent shall, in its discretion, determine. Subject
to the foregoing, Borrower shall select Eurodollar Loans to be repaid in a
manner designed to minimize any Eurodollar Consequential Loss resulting from
such payments; provided, however, that (A) if Borrower shall fail to select the
Eurodollar Loans to which such payments are to be applied, then Agent shall be
entitled to apply the payment to the Eurodollar Loans in any manner Agent shall
deem appropriate if Agent uses reasonable efforts to minimize any Eurodollar
Consequential Loss resulting therefrom, and (B) 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 to such Eurodollar Loans in the manner Agent
shall deem appropriate.
2.11 Reduction and Termination of Commitments.
(a) Termination of Commitments. The Commitments and the Aggregate
Commitment shall automatically terminate on the Maturity Date.
(b) Voluntary Reduction and Termination of Commitments. Upon at
least two Business Days' prior notice to Agent, Borrower may at any time (and
from time to time with respect to a reduction) in part permanently reduce, or
in whole permanently terminate, the Aggregate Commitment; provided, however,
that (i) each partial reduction of the Aggregate Commitment shall be in an
amount equal to $500,000 or an integral multiple of $100,000 in excess thereof
and (ii) the Aggregate Commitment may not be reduced (or terminated) pursuant
to this Section 2.11(b) to an amount that is less than the sum of the aggregate
principal amount of the Loans plus the Letter of Credit Outstandings then
outstanding. Once so reduced or terminated, the Aggregate Commitment may not
thereafter be increased by Borrower.
(c) Allocation of Reduction of Commitments. Each reduction in the
Aggregate Commitment shall be made ratably among Banks in accordance with their
respective Pro Rata Shares of the Aggregate Commitment.
2.12 Taxes; Exemption from U.S. Withholding, Etc.
(a) Withholding Taxes. With respect to payments to be made under
this Agreement and the Notes to any Bank organized under the laws of a
jurisdiction outside of the U.S., Borrower or Agent may withhold from such
payments which are subject to withholding taxes under the Code at the
applicable statutory rate ("Withholding Taxes"); provided, however, that
Borrower and Agent shall not withhold or shall withhold at a rate reduced by an
applicable tax treaty if such Bank timely provides Agent and Borrower with
properly executed Prescribed Forms indicating that such payments either are not
subject to Withholding Taxes or are subject to such taxes at a rate reduced by
an applicable tax treaty.
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(b) Other Taxes. Borrower agrees to and shall pay any and all
present or future stamp or documentary taxes or other excise or property taxes,
charges or similar levies now or hereafter imposed, excluding only taxes
imposed on the income of Agent or a Bank and franchise taxes imposed on Agent
or a Bank, which arise from any payment made under this Agreement or the other
Loan Documents or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the other Loan Documents (hereinafter
referred to as "Other Taxes"). Borrower shall indemnify Agent and each Bank
for the full amount of Other Taxes (including, without limitation, any Other
Taxes imposed by any jurisdiction on amounts payable under this Section
2.12(b)) paid by Agent or such Bank (as the case may be) and all liabilities
(including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto, whether or not such Other Taxes were
correctly or legally asserted. Such indemnification shall be made by Borrower
within 15 days from the date Agent or such Bank (as the case may be) makes
request therefor and provides Borrower with a receipt evidencing payment
thereof.
(c) Additional Amounts Payable by Borrower. If Borrower shall be
required by law to deduct any amount in respect of Other Taxes, excluding
Withholding Taxes, taxes imposed on the income of Agent or a Bank and franchise
taxes imposed on Agent or a Bank, from or in respect of any sum payable under
this Agreement or under any other Loan Document to any Agent or any Bank (i)
the sum payable by Borrower shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.12) Agent or such Bank (as the
case may be) receives an amount equal to the amount it would have received had
no such deductions been made, (ii) Borrower shall make such deductions and
(iii) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(d) Tax Receipts; Refunds. Within 30 days after the date of any
payment of Other Taxes by or at the direction of Borrower, Borrower will
furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof. In the event that (i) Agent or any Bank ever receives any
refund, credit or deduction from any taxing authority to which Agent or such
Bank would not be entitled but for the payment by Borrower of Other Taxes as
required by this Section 2.12 (it being understood that the decision as to
whether or not to claim, and if claimed, as to the amount of any such refund,
credit or deduction shall be made by Agent or such Bank in its sole discretion)
and (ii) Agent or such Bank (as the case may be) determines, in its sole
discretion, that such refund, credit or deduction relates to such payment by
Borrower of Other Taxes, then Agent or such Bank (as the case may be) thereupon
shall repay to Borrower an amount with respect to such refund, credit or
deduction equal to (A) any net reduction in taxes actually obtained by Agent or
such Bank and determined by Agent or such Bank to be attributable to such
refund, credit or deduction (together with any interest actually received
thereon) less (B) all reasonable expenses of Agent or such Bank attributable to
such refund, credit or deduction. Agent and Banks shall not be obligated, in
connection with any term or provision of this Section 2.12, to allow Borrower
to obtain copies of or to review any tax returns or books or records of Agent
or any Bank.
(e) Change of Lending Office. Any Bank claiming any additional
amounts payable pursuant to this Section 2.12 for Other Taxes shall use its
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its lending office, if
the making of such a change would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter accrue and would not, in the
good faith judgment of such Bank, be otherwise disadvantageous to such Bank.
(f) Reasonable Efforts. Agent and each Bank agrees that it will
take reasonable actions by usual means to avoid or to minimize amounts payable
by Borrower under this Section 2.12; provided, however, that Agent and Banks
shall not be obligated by reason of this Section 2.12 to contest the payment of
any Withholding Taxes or Other Taxes, or to disclose any information regarding
its tax affairs or tax computations or reorder its tax or other affairs or tax
or other planning. Notwithstanding anything to the contrary in this Section
2.12, in no event shall Borrower ever be obligated to pay penalties assessed or
interest applicable to past due Other Taxes if and to the extent that such
penalties or interest are due to Agent's or such Bank's (as the case may be)
failure to comply with applicable laws.
2.13 Nature of Letter of Credit Obligations Absolute. The
obligations of Borrower to reimburse
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Issuer for drawings made under any Letter of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with Section 2.3(f) under
all circumstances, including, without limitation: (a) any lack of validity or
enforceability of any Letter of Credit; (b) the existence of any claim, setoff,
defense or other right which Borrower may have at any time against a
beneficiary of any Letter of Credit or against any Bank, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction; (c) any draft, demand, statement, certificate or other document
presented under any Letter of Credit being forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; (d) payment by the Issuer of any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit (except for any payment
resulting from Issuer's gross negligence or willful misconduct); (e) any other
circumstance or happening whatsoever which is similar to any of the foregoing;
or (f) the fact that any Default or Event of Default shall have occurred and be
continuing.
ARTICLE III
SECURITY
3.1 Security Documents. To secure and otherwise ensure full and
complete payment and performance of the Obligations, Borrower shall execute
and/or deliver (as appropriate) to Agent, on behalf of Banks, concurrently with
the execution and delivery of this Agreement, the following Security Documents:
(a) Security Agreement. A Pledge and Security Agreement in form
and substance satisfactory to Agent and Banks, together with financing
statements, stock certificates and stock powers relating thereto properly
executed or endorsed, covering, inter alia, (i) 3,725,000 shares of FoxMeyer
Stock owned by Borrower or such greater number of shares of FoxMeyer Stock
owned by Borrower as may, from time to time, be issued and outstanding and
pledged by Borrower pursuant to such Pledge and Security Agreement, and (ii)
any and all proceeds of, and dividends paid or payable with respect to, such
shares of FoxMeyer Stock and any and all additional shares of FoxMeyer Stock
issued on account of or with respect to such shares of FoxMeyer Stock referred
to in clause (i) preceding (whether as a result of any stock split or stock
dividend or otherwise). In the event that additional shares of FoxMeyer Stock
and/or other Margin Stock are pledged pursuant to and in compliance with
Section 2.5(b), each such pledge shall be undertaken in compliance with
Regulation U and Borrower shall execute and/or deliver to Agent all agreements,
documents, instruments and certificates as Agent may reasonably request in
connection therewith.
(b) Other Items. Such other agreements, documents, instruments
and certificates as Agent or Majority Banks may require to more effectively
evidence the Obligations or to protect Agent's and Banks' interest in the
Collateral and any other security contemplated hereby.
3.2 Cash Collateral Account.
(a) Cash Collateral. Upon the occurrence of an Event of Default
and demand by Agent, or upon the occurrence of any Event of Default under
Section 8.1(f) or 8.1(g) without demand by Agent, Borrower shall, pursuant to
Section 8.3(a)(vi), promptly pay to Agent, in immediately available funds, an
amount equal to 110% of the maximum amount then available to be drawn under the
Letters of Credit then outstanding. Furthermore, in the event that, for
whatever reason, the maturity of any Letter of Credit extends beyond the
Maturity Date, Borrower will promptly pay to Agent, in immediately available
funds on the Maturity Date, an amount equal to 110% of the maximum amount then
available to be drawn under the Letters of Credit then outstanding. Any
amounts so received by Agent pursuant to this Section 3.2(a), and any amounts
received by Agent pursuant to clause (C) of Section 2.5(c), shall be deposited
by Agent in a deposit account maintained by Agent, or by any Bank selected by
Agent in its discretion, for the benefit of Banks (the "Cash Collateral
Account").
(b) Security Interest. As security for the payment of all
Reimbursement Obligations and for all other Obligations, Borrower hereby
grants, conveys, assigns, pledges, sets over and transfers to Agent (for the
benefit of Issuer and Banks), and creates in Agent's favor (for the benefit of
Issuer and Banks) a security interest in, all
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money, instruments and securities at any time held in or acquired in connection
with the Cash Collateral Account, together with all proceeds thereof. The Cash
Collateral Account shall be under the sole dominion and control of Agent, and
Borrower shall not have any right to withdraw or cause Agent to withdraw any
funds deposited in the Cash Collateral Account. At any time and from time to
time, upon Agent's request, Borrower promptly shall execute and deliver any and
all such further agreements, documents, instruments and certificates, including
financing statements, as may be necessary, appropriate or desirable in Agent's
judgment to obtain the full benefits (including perfection and priority) of the
security interest created or intended to be created by this Section 3.2(b) and
of the rights and powers herein granted. Borrower shall not create or suffer
to exist any Lien on any amounts or investments held in the Cash Collateral
Account other than the Lien granted under this Section 3.2(b).
(c) Application of Funds. Agent may, and shall upon request by
Borrower (i) apply any funds in the Cash Collateral Account deposited in
accordance with Section 2.5(c) as required by Section 2.5(c), (ii) shall apply
any other funds in the Cash Collateral Account toward payment of Reimbursements
Obligations when the same become due and payable if and to the extent that
Borrower shall fail directly to pay such Reimbursement Obligations and (iii)
after the date on which the Commitments of Banks shall have terminated, all
Letters of Credit shall have expired and all Reimbursement Obligations shall
have been paid in full, apply any proceeds remaining in the Cash Collateral
Account first to pay any unpaid Obligations then outstanding hereunder and then
to refund any remaining amount to Borrower.
(d) Investment of Funds. Agent may invest the funds held in the
Cash Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (i) direct obligations of the
U.S. or any agency thereof, or obligations guaranteed by the U.S. or any agency
thereof and (ii) one or more types of other Permitted Cash Investments
permitted by Agent from time to time, in each case with such maturities as
Agent may specify, pending application of such funds toward payment of
Reimbursement Obligations or of other Obligations as provided herein. All such
investments shall be made in Agent's name for the account and benefit of Agent
(provided, however, that Borrower shall be obligated to pay all taxes with
respect to such investments) and shall be subject to Section 3.2(c). Borrower
recognizes that any losses or taxes with respect to such investments shall be
borne solely by Borrower, and Borrower agrees to indemnify and hold Agent and
Banks harmless from and against any such losses or taxes. Agent may liquidate
any investment held in the Cash Collateral Account in order to apply the
proceeds of such investment toward payment of the Reimbursement Obligations or
other Obligations then due and payable, as the case may be, without regard to
whether such investment has matured and without liability for any penalty or
other fee incurred (with respect to which Borrower hereby agrees to reimburse
Agent) as a result of such application.
(e) Fees. Borrower shall pay to Agent or the Bank with whom the
Cash Collateral Account has been established, for the account of Agent or such
Bank (as applicable), the fees customarily charged by Agent or such Bank with
respect to the maintenance of accounts similar to the Cash Collateral Account.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Initial Advance. The obligation of Banks to make the initial
Advance and to issue the initial Letter of Credit under the Facility shall be
subject to the prior satisfaction of each of the following conditions
precedent:
(a) Notes. The Notes (i.e., one Note payable to the order of each
Bank) shall have been duly executed by Borrower and delivered to Agent.
(b) Security Documents. The Security Documents referred to in
Section 3.1 (including, without limitation, the Pledge and Security Agreement,
financing statements, stock certificates and stock powers) shall have been duly
executed by Borrower and such other Persons, if any, referred to in Section 3.1
and/or delivered (as appropriate) to Agent and, if and to the extent
appropriate, filed and recorded.
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(c) Federal Reserve Form U-1. A Federal Reserve Form U-1,
appropriately completed in a manner satisfactory to Bank, shall have been fully
executed by Borrower and delivered to Agent.
(d) Corporate Certificate. A Corporate Certificate in the form of
Exhibit G hereto, appropriately completed, shall have been duly executed by
each of Borrower and certain of its officers, as indicated therein, and
delivered to Agent, and the resolutions of the Board of Directors of Borrower,
the Certificate of Incorporation of Borrower and the Bylaws of Borrower
attached thereto shall be in form and substance reasonably satisfactory to
Agent.
(e) Good Standing and Authority. Certificates of the appropriate
governmental offices of the jurisdiction in which Borrower is incorporated and
of each other jurisdiction in which Borrower transacts business and is required
to qualify as a foreign corporation and where the failure to so qualify could
cause a Material Adverse Effect, each dated a Current Date, to the effect that
Borrower is in existence, in good standing with respect to the payment of
franchise and similar taxes and duly qualified to transact business in such
jurisdictions, shall have been delivered to Agent.
(f) Opinion of Counsel. A legal opinion of Weil, Gotshal &
Manges, as counsel for Borrower, in form and substance satisfactory to Agent,
shall have been duly executed by such counsel and delivered to Agent (which
opinion shall address, without limitation, matters regarding Banks' compliance
with Regulation U).
(g) UCC and Lien Searches. Search certificates from the
Secretaries of State (or such other governmental authorities as may be a
repository for UCC financing statements or similar documents) of Borrower's
State of incorporation, the State where Borrower's chief executive office is
located and all other States in which Borrower transacts business and is
required to qualify as a foreign corporation and where the failure to so
qualify could cause a Material Adverse Effect, setting forth all UCC filings,
financing statements and other Lien filings against Borrower, shall have been
delivered to Agent, which certificates shall confirm that the shares of
FoxMeyer Stock pledged as Collateral are free and clear of all Liens and that
the other Assets of Borrower are free and clear of all Liens other than
Permitted Liens, if any.
(h) Balance Sheet. (i) A consolidating (as to Borrower and
FoxMeyer and Borrower's investment in NSC only) balance sheet of Borrower dated
as of November 30, 1993, and (ii) a consolidated balance sheet of Borrower and
its Consolidated Subsidiaries dated as of November 30, 1993, shall have been
delivered to Agent, which balance sheets shall be certified by a Financial
Officer of Borrower and shall reflect, to the satisfaction of Agent, that there
has not occurred any material adverse change in the financial condition of
Borrower or Borrower and its Consolidated Subsidiaries since September 30,
1993.
(i) Fees. All fees required to have been paid by Borrower
pursuant to Section 2.7 shall have been paid (to the extent then due).
(j) No Litigation, etc. There are no investigations, actions,
suits or proceedings pending or threatened in or before any Tribunal that could
cause a Material Adverse Effect.
(k) Environmental Report. Agent shall have received a letter from
Borrower, in form and substance reasonably satisfactory to Agent, which
attaches copies of the disclosures made by Borrower as to environmental matters
contained in its most recent annual public report and estimates the probable
costs of complying with Environmental Laws (including remedying the
environmental problems identified in such report) during 1994, and the status
of such environmental matters, as a whole, shall be reasonably satisfactory to
Agent.
(l) Tax Sharing Agreement. Bank shall have received a certified
copy of the Tax Sharing Agreement and all amendments thereto, which agreement
and amendments shall be in form and substance reasonably satisfactory to Agent,
and the Tax Sharing Agreement shall be in full force and effect.
(m) Closing Certificate. A Closing Certificate in the form of
Exhibit H hereto, appropriately completed and dated the date of the initial
Advance, shall have been executed by Borrower and certain of its
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officers, as indicated therein, and delivered to Agent, which certificate shall
certify as to satisfaction of the conditions precedent set forth in Sections
4.1 and 4.2.
(n) Minimum Collateral Value. Agent shall have received evidence
satisfactory to it that the fair market value of the Collateral, calculated as
of the date of the making of the initial Advance or the issuance of the initial
Letter of Credit (as the case may be), equals or exceeds $45,000,000, and the
Borrowing Base Certificate delivered pursuant to Section 4.2(e) in connection
therewith shall confirm such fact.
4.2 All Advances. The obligation of Banks to make any Advance
(including, without limitation, the initial Advance) and/or to issue any Letter
of Credit under the Facility shall be subject to the condition that each
condition specified in Section 4.1 shall continue to be satisfied and subject
to the prior satisfaction of each of the following additional conditions
precedent:
(a) No Default. As of the date of the making of such Advance or
issuance, amendment, renewal or extension of such Letter of Credit and after
giving effect thereto, no Default or Event of Default then exists or would
exist.
(b) Representations and Warranties. The representations and
warranties contained in the Loan Documents (including, without limitation,
those contained in Article V hereof and those relating to the information
disclosed on Schedule 2 hereto) shall be true and correct in all respects on
the date of the making of such Advance or issuance, amendment, renewal or
extension of such Letter of Credit with the same force and effect as though
made on and as of such date, except to the extent that such representations or
warranties are expressly by their terms made only as of the Closing Date or
another specific date.
(c) Covenants and Agreements. All covenants and agreements to
have been complied with and performed by Borrower on or prior to the making of
such Advance or issuance, amendment, renewal or extension of such Letter of
Credit shall have been fully complied with and performed.
(d) Loan Request Certificate; L/C Request Certificate; L/C
Application. With respect to any Advance, the Loan Request Certificate
relating thereto, appropriately completed and executed by Borrower and in form
and substance satisfactory to Agent, shall have been delivered to Agent. With
respect to the issuance, amendment, renewal or extension of any Letter of
Credit, the L/C Request Certificate relating thereto, appropriately completed
and executed by Borrower and in form and substance satisfactory to Agent and
Issuer, shall have been delivered to Agent and Issuer, and the L/C Application
relating thereto, appropriately completed and executed by Borrower and in form
and substance satisfactory to Issuer, shall have been delivered to Issuer, and
the Letter of Credit requested to be issued or the amendment, renewal or
extension requested to be made, as the case may be, pursuant thereto shall be
in compliance with this Agreement and in form and substance satisfactory to
Issuer.
(e) Borrowing Base Certificate and Borrowing Base. Agent shall
have received, in connection with each Loan Request Certificate and L/C Request
Certificate to be delivered to Agent pursuant to Section 4.2(d), a Borrowing
Base Certificate, appropriately completed, dated as of the date of the making
of the requested Advance or the issuance of the requested Letter of Credit (as
the case may be) and containing information concerning the fair market value of
the FoxMeyer Stock and the other (if any) Margin Stock then constituting
Collateral based upon the closing sale price of such stock on the Business Day
immediately preceding such requested advance or issuance date, in reasonable
detail and certified as to accuracy by a Financial Officer by Borrower. After
giving full effect to the requested Advance by Bank and/or to the requested
issuance, amendment, renewal or extension of a Letter of Credit, as the case
may be, the sum of (i) the aggregate outstanding principal amount of all Loans
plus (ii) the aggregate Letter of Credit Outstandings, would not exceed the
Borrowing Base then in effect.
(f) Security Interests. The security interests of Agent and Banks
in the Collateral and the proceeds thereof are valid, perfected and first
priority security interests.
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(g) No Material Adverse Effect. There shall not have occurred any
event or events and there shall not exist any circumstance or circumstances
which, individually or collectively, could cause a Material Adverse Effect.
(h) Additional Items. Such additional agreements, documents,
instruments and certificates (including, without limitation, legal opinions) as
Agent or Required Banks may reasonably request in connection with this
Agreement and the other Loan Documents and the transactions contemplated
therein shall have been delivered to Agent.
4.3 Representation and Warranty. Each request for an Advance and
each request for issuance, amendment, renewal or extension of a Letter of
Credit shall constitute a representation and warranty by Borrower to Agent and
Banks that all conditions precedent in this Article IV applicable thereto have
been satisfied in full (subject to any applicable discretion or satisfaction of
Agent or Banks). Each delivery of a Conversion Notice or Rollover Notice to
Agent pursuant to Section 2.8(a) or 2.8(c), respectively, shall constitute a
representation and warranty by Borrower to Agent and Banks that no Default or
Event of Default then exists.
4.4 Determinations Regarding Conditions Precedent. Except as may
be expressly stated in this Article IV to the contrary, all determinations of
compliance with applicable conditions precedent shall be made by Agent in good
faith. If and to the extent that any Bank shall, in accordance with this
Article IV, have the right to make or be involved in any such determination,
such Bank shall be deemed to have consented to, approved or accepted or to be
satisfied with each agreement, document, instrument or certificate or other
matter to be consented to, approved or accepted or satisfactory to such Bank
unless (a) an officer of Agent responsible for the administration of this
Agreement and holding the position of Vice President or higher shall have
received notice from such Bank, prior to the relevant time and date, specifying
its objection thereto and (b) such objection shall not have been withdrawn by
verbal or written notice to Agent. To the extent that any condition precedent
contained in Article IV involves a matter that is to be determined expressly
based upon the satisfaction of or acceptability to Agent, Majority Banks,
Required Banks or Banks, such condition precedent shall, to such extent (and
only to such extent), be deemed satisfied if Agent and such Banks make the
requested Advance to which such condition precedent relates (as the case may
be) unless, prior to or concurrently with such Advance, Agent notifies Borrower
to the contrary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Agent and Banks as follows:
5.1 Organization, Standing, Qualification. Each of Borrower and
its Consolidated Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing under the laws of its State of incorporation, (b)
has all requisite power, corporate or otherwise, to conduct its business and to
execute and deliver, and perform its obligations, if any, under, the Loan
Documents to which it is a party, and (c) is duly qualified to transact
business as a foreign corporation in each jurisdiction when the nature of its
Assets or the conduct of its business requires such qualification and where the
failure to so qualify could cause a Material Adverse Effect.
5.2 Authorization, Enforceability, Etc.
(a) The execution, delivery and performance by Borrower of the
Loan Documents have been duly authorized by all necessary corporate action and
do not and will not (i) violate any provision of any material agreement, law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect to which Borrower or any Major Subsidiary is a party
or by which it or any of its material Assets are bound or affected, (ii) result
in, or require the creation or imposition of, any Lien (other than a Permitted
Lien in favor of Agent and Banks) upon or with respect to any Asset owned by
Borrower or any Major Subsidiary, or (iii) result in a breach of, or constitute
a default by Borrower or any Major Subsidiary under, any indenture, loan or
credit agreement or any other material contract, agreement, document or
instrument to which it is a party or
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by which it or any of its Assets are bound or affected.
(b) No approval, authorization, order, license, permit, franchise
or consent of or registration, declaration, qualification or filing, and no
lapse of a waiting period or lack of objection, with or from any Tribunal or
other Person is required in connection with the execution, delivery and
performance by Borrower of any Loan Documents to which it is a party or by
which it or any of its Assets are bound or affected, except for those (if any)
which have been appropriately obtained or made. No approval, authorization or
consent of any Tribunal is or was required in connection with the execution,
delivery and performance by Borrower and FoxMeyer of the Tax Sharing Agreement.
(c) This Agreement has been duly executed and delivered by
Borrower, and constitutes the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, subject to
applicable Debtor Relief Laws and equitable principles imposed by law. The
other Loan Documents to which Borrower is a party, when duly executed and
delivered by Borrower, will constitute legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, subject to applicable Debtor Relief Laws and equitable principles
imposed by law. Without limiting the generality of the foregoing, (i) the
Pledge and Security Agreement referred to in Section 3.1(a), when duly executed
and delivered by Borrower, will create in favor of Agent and Banks valid
security interests in the shares of FoxMeyer Stock and other Assets (if any)
constituting Collateral and the proceeds thereof intended to be covered
thereby, (ii) the financing statements referred to in Section 3.1(a), when duly
executed and delivered by Borrower and filed with the Secretary of State of the
State of Texas, will result in such security interests of Agent and Banks in
all right, title and interest of Borrower in and to any dividends, general
intangibles and proceeds of the shares of FoxMeyer Stock constituting
Collateral being fully perfected and of first priority, and (iii) Agent's
possession of the stock certificates evidencing the FoxMeyer Stock constituting
Collateral owned by Borrower will result in such security interests of Agent
and Banks in the shares of FoxMeyer Stock constituting Collateral and the
proceeds thereof being fully perfected and of first priority.
5.3 Financial Statements and Business Condition.
(a) Borrower's Financial Statements (including the Base Financial
Statements) were prepared in accordance with GAAP and fairly present in all
material respects the consolidated and consolidating financial conditions and
results of operations of Borrower and its Consolidated Subsidiaries as of, and
for the fiscal year (or portion thereof, as the case may be) ending on, the
date(s) thereof, subject to year-end adjustments (if applicable). There were
no material liabilities, direct or indirect, fixed or contingent, of Borrower
or any Consolidated Subsidiary as of the dates of Borrower's Financial
Statements (including the Base Financial Statements) which are not reflected
therein or in the notes thereto or which otherwise have not been disclosed to
Agent and Banks in Schedule 2. Except for occurrences heretofore disclosed in
writing to Agent and Banks and described in such disclosure as being adverse
(if any), there has not occurred any material adverse change in the financial
condition of Borrower or any Consolidated Subsidiary from the financial
condition shown in the Base Financial Statements, and neither Borrower nor any
Consolidated Subsidiary has incurred any material liability, direct or
indirect, fixed or contingent except in the ordinary course of its business as
currently conducted since the date of the Base Financial Statements. No event
or events have occurred, and no circumstance or circumstances exist, which,
individually or collectively, has or could have a Material Adverse Effect.
(b) The Financial Statements of FoxMeyer (including the Base
Financial Statements) were prepared in accordance with GAAP and fairly present
in all material respects the consolidated and consolidating financial
conditions and results of operations of FoxMeyer and its consolidated
subsidiaries as of, and for the fiscal year (or portion thereof, as the case
may be) ending on, the date(s) thereof, subject to year-end adjustments (if
applicable). There were no material liabilities, direct or indirect, fixed or
contingent, of FoxMeyer or any of its consolidated subsidiaries as of the dates
of such Financial Statements (including the Base Financial Statements) which
are not reflected therein or in the notes thereto or which otherwise have not
been disclosed to Agent and Banks in Schedule 2. Except for occurrences
heretofore disclosed in writing to Agent and Banks and described in such
disclosure as being adverse (if any), there has not occurred any material
adverse change in the financial condition of FoxMeyer or any of its
consolidated subsidiaries from the financial condition shown in the Base
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Financial Statements, and neither (i) FoxMeyer nor (ii) any of its consolidated
subsidiaries has incurred any material liability, direct or indirect, fixed or
contingent except in the ordinary course of its business as currently conducted
since the date of the Base Financial Statements. No event or events have
occurred, and no circumstance or circumstances exist, which, individually or
collectively, has or could have a Material Adverse Effect.
(c) The balance sheets referred to in Section 4.1(h) fairly
present in all material respects the financial conditions of Borrower and/or
Consolidated Subsidiaries, as the case may be, as of the dates thereof.
5.4 Filing of Tax Returns; Tax Sharing Agreement. Each of
Borrower and its Consolidated Subsidiaries has filed all material tax returns
required to have been filed and has paid all taxes shown to be due and payable
on such returns, including interest and penalties, and all other material taxes
which are payable by it, to the extent the same have become due and payable.
As of the Closing Date, Borrower is not aware of any proposed tax assessment
against Borrower or any of its Consolidated Subsidiaries, and all tax
liabilities of each of Borrower and its Consolidated Subsidiaries are
adequately provided for. No tax liability of Borrower or any of its
Consolidated Subsidiaries has been asserted by the Internal Revenue Service or
any other Tribunal for taxes in excess of those already paid, except as is
being (or may be) contested by such taxpayer in good faith consistent with the
requirements therefor set forth in Section 6.1(e). The Tax Sharing Agreement
is in full force and effect, and all payments required to be made by or to
Borrower pursuant to the Tax Sharing Agreement as of the Closing Date have been
paid in full.
5.5 Title to Properties; Collateral. Each of Borrower and its
Consolidated Subsidiaries has good and indefeasible title to all material
Assets purported to be owned by it (except for minor defects in title and minor
encumbrances not in any case materially detracting from the value of the Assets
affected thereby) and to all Collateral purported to be owned by it. No Person
has any right, title or interest in or to, or Lien against, the Collateral,
except for Permitted Liens in favor of Agent and Banks.
5.6 Leases. All material real property leases, if any, under
which Borrower is lessee or tenant are in full force and effect, and there does
not exist any default or default thereunder by Borrower by which any such lease
could be terminated. Each such lease existing as of the Closing Date is
identified on Schedule 2 attached hereto.
5.7 Subsidiaries. Except as identified on Schedule 2, as of the
Closing Date, Borrower has no Subsidiaries. Schedule 2 identifies the only
Consolidated Subsidiaries of Borrower as of the Closing Date. As of the
Closing Date, Borrower's ownership (record and beneficial) of the Consolidated
Subsidiaries and NSC is accurately set forth on Schedule 2 attached hereto. As
of the Closing Date, FoxMeyer has issued and outstanding 28,200,000 shares of
capital stock, all of which are shares of common stock and 22,690,000 of which
(i.e., approximately 80.5% of the total number of such shares issued and
outstanding) are owned by Borrower.
5.8 Business; Compliance. Each of Borrower and its Major
Subsidiaries has performed and complied with all material obligations required
to be performed or complied with by it, and is not in default (to the extent it
could be materially and adversely affected) under any license, permit, order,
authorization, grant, contract, agreement or regulation material to its
business to which it is a party or by which it or any of its Assets are bound
or affected. The businesses and operations of each of Borrower and its Major
Subsidiaries have been and are being conducted, in all material respects, in
accordance with all applicable laws, rules and regulations of all Tribunals.
5.9 Licenses, Permits, etc. Borrower possesses such valid
Proprietary Rights and consents, authorizations, exemptions and orders of
Tribunals or otherwise as are necessary or appropriate to carry on its business
as now being or currently proposed to be conducted. Schedule 2 contains a
description of all Proprietary Rights of Borrower existing as of the Closing
Date that are material to Borrower's business and disclosure of the Person that
owns the rights thereto.
5.10 Litigation, Proceedings, etc. Except as set forth on Schedule
2, there are no investigations,
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actions, suits, proceedings, orders or injunctions pending or, to Borrower's
knowledge, threatened against or affecting Borrower or any Consolidated
Subsidiary or its Assets, at law or in equity, or before or by any Tribunal
which (a) either has had or could reasonably be expected to have a Material
Adverse Effect or (b) either has related or could reasonably be expected to
relate to the Loans, any Commitment, the Facility or the other transactions
contemplated by the Loan Documents, and no accidents, acts or actions have
occurred which involve any pending claim that could have a Material Adverse
Effect and which is not fully covered by insurance or provided for by adequate
reserves established by and reflected in the Base Financial Statements
furnished to Agent. Neither Borrower nor any Consolidated Subsidiary is in
default with respect to any order, writ, injunction or decree of any Tribunal,
which default could cause a Material Adverse Effect.
5.11 Plans. Each Plan with respect to which Borrower or any Group
Member, as of the Closing Date, has incurred actual or contingent liability
exceeding $5,000,000, and each Plan as to which Borrower's or any Group
Member's current required annual amount of contributions exceeds $5,000,000, is
listed on Schedule 2. Each Plan has been maintained at all times in
compliance, in all material respects, with its provisions and applicable law,
including, without limitation, compliance with the applicable provisions of
ERISA and the Code, and all applicable funding requirements imposed by the Plan
or applicable law. Either each of Borrower and each of its Group Members has
elected to adopt the Statements of Financial Accounting Standards No. 106 and
report the full current value of retiree projected medical benefits or the
unreported portion of such value is set forth on Schedule 2. Except as set
forth on Schedule 2, no Pension Plan has incurred any "accumulated funding
deficiency," as defined in Section 302(a)(2) of ERISA and Section 412(a) of the
Code, whether or not waived. Except as set forth on Schedule 2, each Plan
which is intended to be a qualified Plan under Section 401(a) has received a
favorable determination letter with respect to all years preceding the current
remedial amendment period for filing the request for such letter with respect
to such Plan. Except as set forth on Schedule 2, at the most recent date on
which such amount has been determined, the "withdrawal liability", as defined
in Section 4201 of ERISA, of all Group Members with respect to all Pension
Plans which are Multiemployer Plans does not exceed $5,000,000, and Borrower
knows of no facts or circumstances which have occurred or may reasonably be
expected to occur which would cause the net unfunded liabilities of any Plan to
increase at a materially greater rate than has been used to calculate the net
unfunded liabilities of such Plan as shown on Borrower's consolidated Financial
Statements or as set forth on Schedule 2. With respect to each Plan whose net
unfunded liabilities are in excess of $5,000,000 and which liabilities are not
shown on Borrower's consolidated Financial Statements, such net unfunded
liability has been set forth on Schedule 2. Borrower has furnished to Agent
true, current and complete copies of all material documents relating to the
Plans which have been requested in writing by Agent.
5.12 Chief Executive Offices and Principal Place of Business; Trade
Names. The chief executive office and principal place of business of Borrower
is located in Dallas County, Texas. As of the Closing Date, the present and
foreseeable locations of the offices or facilities of Borrower and the books
and records of Borrower, and all assumed or trade names of Borrower or any
division of Borrower, are set forth on Schedule 2.
5.13 Federal Reserve Regulations. Neither Borrower nor any of its
Consolidated Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying Margin Stock; provided, however, that the FoxMeyer/NII Loan
Facility is a loan made under Regulation G and FoxMeyer is a registered lender
under Regulation G.
5.14 Fiscal Year. As of the Closing Date, the fiscal year of
Borrower and each of its Consolidated Subsidiaries ends on March 31st.
5.15 Environmental Matters.
(a) Each of Borrower and the Consolidated Subsidiaries is in
compliance with all Environmental Laws (including, but not limited to, all such
laws and regulations governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of Hazardous
Materials), the violation of which could cause a Material Adverse Effect during
the term of this Agreement.
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(b) (i) To Borrower's knowledge, there are no presently
outstanding complaints that Borrower or any Consolidated Subsidiary is now or
at any time prior hereto was in violation of any Environmental Law, the
violation of which could cause a Material Adverse Effect during the term of
this Agreement, (ii) there are no administrative or judicial proceedings
presently pending or, to Borrower's knowledge, threatened by a Tribunal against
Borrower or any Consolidated Subsidiary pursuant to any Environmental Law that
could, if adversely determined, cause a Material Adverse Effect during the term
of this Agreement, and (iii) there is no claim presently outstanding against
Borrower or any Consolidated Subsidiary which was asserted pursuant to any
Environmental Law, which claim could cause a Material Adverse Effect during the
term of this Agreement.
(c) There are no facts or circumstances known to Borrower that
could reasonably form the basis of any claim against Borrower or any
Consolidated Subsidiary under any Environmental Laws (including, but not
limited to, any claim arising from past or present environmental practices
asserted under CERCLA, RCRA, the Clean Air Act, the Clean Water Act or any
other Federal, State or local Environmental Laws), which claim could cause a
Material Adverse Effect during the term of this Agreement.
5.16 Labor Disputes. Except as may be set forth on Schedule 2, as
of the Closing Date (a) there is no collective bargaining agreement or other
labor contract covering employees of Borrower, (b) no such collective
bargaining agreement or other labor contract is scheduled to expire during the
term of this Agreement, and (c) to Borrower's knowledge, no union or other
labor organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of Borrower. There is no pending or, to
Borrower's knowledge, threatened strike, work stoppage, unfair labor practice
claim or other labor dispute against or affecting Borrower or its employees
which has or could have a Material Adverse Effect.
5.17 Investment Company Act; Public Utility Holding Company Act.
Neither Borrower nor any Subsidiary is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940, as
amended, or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935, as amended.
5.18 Burdensome Contracts; Certain Contracts with Account Debtors.
Neither Borrower nor any Consolidated Subsidiary is a party to, or bound by,
any agreement, contract or Plan which is materially burdensome (taking into
consideration any benefits provided thereby) and which has or could have a
Material Adverse Effect.
5.19 FoxMeyer Dividend Restrictions. As of the Closing Date,
except as may be disclosed on Schedule 2 or as may be limited or restricted by
the provisions of the corporate laws of the jurisdiction in which FoxMeyer is
incorporated, FoxMeyer is not bound by any agreement to limit or restrict, in
any way (e.g., as to time or amount), the declaration or payment of dividends
to its shareholder(s).
5.20 Workers' Compensation. Except as may be disclosed on Schedule
2, as of the Closing Date, Borrower has not become a non- subscriber to any
applicable State workers' compensation statute.
5.21 Tax Sharing Agreement. The Tax Sharing Agreement has been
approved by all necessary corporate action of Borrower and FoxMeyer in a manner
consistent with the requirements of Section 144 of the Delaware General
Corporation Law relating to "interested director" transactions.
5.22 Weirton Liabilities. Borrower has no actual or contingent
liability for the Weirton Liabilities or with respect to the Weirton Retirement
Program except contractually pursuant to and as provided in the Weirton
Liabilities Agreement, none of which contractual liabilities may be increased
by an event or circumstance occurring after the Closing Date.
5.23 Full Disclosure. No information, exhibit or written report
furnished by or on behalf of Borrower or any Subsidiary to Agent or any Bank in
connection with this Agreement, any other Loan Document or any transaction
contemplated hereby or thereby contains any material misstatement of fact or
omits the statement of a material fact necessary to make the statements
contained herein or therein not misleading.
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ARTICLE VI
COVENANTS
6.1 Affirmative Covenants. So long as any portion of the
Obligations remains unpaid or any Bank is committed to make any Loan or issue,
amend, renew or extend any Letter of Credit hereunder:
(a) Payment and Performance of Obligations. Borrower shall pay
all principal, interest, fees and other charges with respect to the Obligations
when and as the same become due and payable in accordance with the Loan
Documents and Borrower shall strictly observe and perform, or cause to be
observed and performed, all covenants, agreements, terms, conditions and
limitations contained in the Loan Documents applicable to it and shall do all
things necessary to prevent the occurrence of any default thereunder.
(b) Maintenance of Existence, Qualification and Assets. Borrower
shall maintain, and shall cause each Major Subsidiary to maintain, at all
times, (i) its legal existence, (ii) its qualification to transact business and
good standing in all jurisdictions where the nature of its Assets or the
conduct of its business requires such qualification and where the failure to so
qualify could cause a Material Adverse Effect, and (iii) its material Assets
(and exclusive of obsolete Assets) in proper repair, working order and
condition, ordinary wear and tear excepted; provided, however, that any Major
Subsidiary may merge with and into any other Major Subsidiary. Borrower shall
conduct, and shall cause each Major Subsidiary to conduct, its business in an
orderly and efficient manner consistent with good business practices. Borrower
shall, and shall cause each Major Subsidiary to, act prudently and in
accordance with customary industry standards in managing and operating its
Assets, businesses and investments.
(c) Maintenance of Insurance. Borrower shall maintain, at all
times, insurance covering such risks and in such amounts as is customarily
maintained by businesses similarly situated, including, without limitation,
insurance covering the following: (i) workmen's compensation insurance; (ii)
employer's liability insurance; (iii) comprehensive general public liability
and property damage insurance in respect of all activities in which such Person
might incur personal liability for the death or injury of an employee or third
person, or damage to or destruction of another's property; (iv) insurance
against loss or damage by fire, lightning, hail, tornado, explosion and other
similar risk; and (v) comprehensive automobile liability insurance.
(d) Maintenance of Security. Borrower shall execute and deliver,
or cause to be executed and delivered by the appropriate Person, to Agent all
security agreements, pledge agreements, financing statements, assignments and
such other agreements, documents, instruments and certificates, and supplements
and amendments thereto, and take such other actions, as Agent deems necessary
or appropriate in order to maintain as valid, enforceable and perfected first
priority Liens, all Liens required, pursuant to this Agreement, to be granted
to Agent or any Bank to secure all or any part of the Obligations.
(e) Payment of Taxes and Claims. Borrower shall pay, and shall
cause each Consolidated Subsidiary to pay, all federal taxes and all material
taxes of any nature imposed upon it or any of its Assets or with respect to any
of its franchises, businesses, income or profits before any penalty or interest
accrues thereon and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due and
payable and which by law have or might become a vendor's Lien or landlords',
mechanics', laborers', materialmen's, operator's, statutory or other similar
Lien affecting any of its Assets; provided, however, that neither Borrower nor
any Consolidated Subsidiary shall be required to pay any such taxes or claims
(other than those which, if not paid, would result in a Lien upon any of the
Collateral) if and to the extent that (i) the amount, applicability or validity
thereof is currently (at the time in question) being contested in good faith by
appropriate action promptly initiated and diligently conducted, and (ii) such
Person shall have set aside on its books cash reserves (segregated to the
extent required by GAAP) that are adequate for the payment of such taxes or
claims; and provided, further, however, that all such taxes, penalties,
interest and claims shall in any event be paid forthwith upon the commencement
of any proceedings to foreclose any Lien which may have attached as security
therefor. Borrower shall promptly notify Agent of any taxes or claims
contested by Borrower or any Consolidated Subsidiary and the circumstances
relating thereto, in detail reasonably satisfactory to Agent to the extent that
such
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taxes and claims exceed $5,000,000. Borrower shall ensure that all payments
required to be made to Borrower pursuant to the Tax Sharing Agreement are paid
in a reasonably prompt fashion after such payments become due and owing to
Borrower.
(f) Compliance with Laws and Documents. Borrower shall comply,
and shall cause each Consolidated Subsidiary to comply, in all material
respects, with the provisions of any and all laws, rules, regulations, orders,
Governmental Requirements and agreements material to its businesses and
operations, including, without limitation, Environmental Laws, and shall
maintain or cause to be maintained its ability to fully perform its obligations
thereunder. With respect to any Pension Plan, Borrower shall cause each Group
Member to at all times make prompt payments of contributions required to be
made to meet applicable minimum funding standards. Borrower shall pay,
promptly when due, any and all amounts payable by it under the NSC Agreement.
(g) Inspections. Borrower shall, at any reasonable time and from
time to time during business hours after Agent shall have given Borrower one
Business Day's prior notice, permit, and, shall cause each Consolidated
Subsidiary to permit, any agents or representatives of Agent or any Bank to
inspect any of Borrower's and each Consolidated Subsidiary's Assets and to
examine and make copies of and abstracts from its records and books of account
and to discuss its affairs, finances and accounts with any of its officers,
employees or independent public accountants (and by this provision Borrower
authorizes said accountants to discuss with Agent and Banks and their agents
and representatives, the affairs, finances and accounts of Borrower and its
Consolidated Subsidiaries).
(h) Records. Borrower shall keep, and shall cause each
Consolidated Subsidiary to keep, adequate books and records reflecting all
financial transactions of such Person, in which complete entries shall be made
in accordance with GAAP.
(i) Expenses. Borrower shall promptly pay, from time to time upon
request made by Agent, any and all costs, fees and expenses paid or incurred by
Agent or Paribas incident to (i) this Agreement or any other Loan Document or
any amendment thereto or waiver or interpretation thereof or the filing or
recordation, if appropriate, thereof (including, without limitation, the fees
and expenses of Agent and Paribas and counsel to Agent and Paribas incurred in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and any amendment thereto or waiver or interpretation
thereof and the filing or recordation, if appropriate, of any Loan Documents),
(ii) the advertising of the Facility (including, without limitation, the cost
of "tombstones", closing mementos, etc.) , and (iii) any syndication of the
Loans, Letters of Credit or Commitments by Agent or Paribas; provided, however,
that the syndication costs, fees and expenses to be paid by Borrower shall be
limited to out-of-pocket costs, fees and expenses and shall not exceed $10,000
in aggregate amount. In addition, Borrower shall promptly pay, from time to
time upon request made by Agent after the occurrence and during the
continuation of a Default, any and all costs, fees and expenses incurred by
Agent or any Bank incident to (A) the collection and enforcement of the Loans,
the Letters of Credit, the Obligations and the Loan Documents, (B) the exercise
of, or preparation for the possible exercise of, any right or remedy under or
with respect to the Loans, the Letters of Credit, the Obligations and the Loan
Documents and (C) the defense or prosecution of any action, suit or proceeding
under or with respect to the Loans, the Letters of Credit, the Obligations and
the Loan Documents. Without limiting the obligations of Borrower under the
preceding sentence, each Bank shall use reasonable efforts to mitigate the
costs, fees and expenses for which Borrower is liable under the preceding
sentence by engaging the services of one common counsel on behalf of all Banks
in each applicable jurisdiction, but only if and to the extent that, and for
such period of time as, such Bank determines, in its sole discretion, that the
use of such common counsel is consistent with its best interests under the
applicable circumstances.
(j) Maintenance of Assets, Etc. Borrower shall maintain all
Proprietary Rights and other Assets material to the conduct of its business as
heretofore or to be conducted by it. Borrower shall ensure that the Tax
Sharing Agreement remains in full force and effect.
(k) Workers' Compensation. If and to the extent that Borrower or
any Major Subsidiary is or becomes a non-subscriber under any applicable State
workers' compensation statute, Borrower shall consistently
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take all reasonable precautions as may be necessary or appropriate to minimize
the risk of loss to Borrower and such Major Subsidiary associated with, or
arising from, claims that would otherwise be covered by such State workers'
compensation statute if Borrower or such Major Subsidiary had continued to
subscribe under such statute.
(l) Ownership and Consolidation of Major Subsidiaries, Etc.
Borrower shall own, beneficially and of record, at least 80% of the total
number of shares of FoxMeyer Stock issued and outstanding from time to time.
Notwithstanding anything to the contrary contained in the definition of
"Borrowing Base" or elsewhere in this Agreement, Borrower (unless Agent and
Majority Banks otherwise agree in writing) shall ensure, and shall cause
FoxMeyer to ensure, that the FoxMeyer Stock shall at all times be publicly
traded on a U.S. national securities exchange. Borrower shall ensure, and
shall cause FoxMeyer to ensure, that FoxMeyer shall own, beneficially and of
record, 100% of the shares of capital stock of FoxMeyer Drug Company issued and
outstanding from time to time and that (unless Harris is merged with and into
FoxMeyer Drug Company) FoxMeyer Drug Company shall own, beneficially and of
record, 100% of the shares of capital stock of Harris issued and outstanding
from time to time. Borrower shall, from time to time, take all actions as may
be necessary or appropriate to ensure that FoxMeyer is consolidated with
Borrower for income tax and financial reporting purposes. In the event that
any shareholder or director of Borrower votes or evidences its, his or her
intention to vote to allow, authorize or permit any amendment, modification or
change of the type described in the second sentence of Section 6.2(m), Borrower
shall, as a shareholder of FoxMeyer by the voting of its shares of FoxMeyer and
otherwise, use its best efforts to prevent, reverse or otherwise eliminate the
effects (as the case may be) of any such amendment, modification or change.
(m) Rank of Obligations. Borrower shall do all acts necessary to
ensure that its Obligations under this Agreement and the other Loan Documents
rank, at all times, (i) at least pari passu in right of payment with all other
(if any) senior, unsubordinated Indebtedness of Borrower, and (ii) with respect
to the Collateral, senior to all other Indebtedness of Borrower.
(n) Further Assurances. Borrower shall execute and deliver, or
shall cause to be executed and delivered by the appropriate Person, any and all
other and further agreements, documents, instruments and certificates as, in
the judgment of Agent, may be necessary or appropriate to more effectively
evidence or secure the Obligations and the performance of the terms and
provisions of the Loan Documents.
6.2 Negative Covenants. So long as any portion of the Obligations
remains unpaid or any Bank is committed to make any Loan or issue, amend, renew
or extend any Letter of Credit hereunder:
(a) Limitation on Indebtedness. Any Indebtedness for borrowed
money incurred by Borrower, other than Indebtedness arising under this
Agreement, shall either be (i) unsecured or (ii) secured only by Permitted
Liens referred to in clauses (a), (g), (h), (i), (j) or (k) of the definition
of such term. The aggregate of all Funded Debt, exclusive of (A) the
Indebtedness evidenced by the Notes, (B) the Indebtedness of Borrower, not to
exceed $30,000,000, pursuant to the FoxMeyer/NII Loan Facility, (C) the
Indebtedness of Borrower pursuant to the Riverside Loan, (D) the Weirton
Liabilities and (E) the Indebtedness of Borrower incurred in connection with
investments by any Real Estate Partnership to the extent that such Indebtedness
is wholly nonrecourse to Borrower, shall not exceed $20,000,000 at any time
outstanding.
(b) Minimum Net Worth. Borrower shall not permit Net Worth, as of
the Closing Date and as of the last day of each fiscal quarter thereafter, to
be less than $250,000,000; provided, however, that, for purposes of this
Section 6.2(b), any reduction in Net Worth attributable to any Weirton
Adjustment or any Ben Franklin Adjustment shall be excluded.
(c) Restricted Payments. Borrower shall not make any Restricted
Payments; provided, however, that Borrower may, subject to the proviso set
forth below, (i) pay, in the ordinary course of its business, dividends on its
1,011,970 presently issued and outstanding shares of $5 Cumulative Convertible
Preferred Stock in accordance with its presently existing preferred stock
dividend obligations, (ii) redeem its 1,011,970 presently issued and
outstanding shares of $5 Cumulative Convertible Preferred Stock consistent with
the present
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redemption schedule therefor as set forth on Schedule 2, (iii) purchase its
presently issued and outstanding shares of common stock for cash if and to the
extent that (but only if and to the extent that), at the time of any such
purchase and after giving effect thereto, (A) the remainder of Borrower's cash
minus the aggregate principal amount of all Loans and Letter of Credit
Outstandings equals or exceeds $2,000,000, or (B) the aggregate amount of such
purchases during the term of this Agreement does not exceed $18,000,000, (iv)
purchase its presently issued and outstanding shares of common stock in
exchange for PIK Securities issued by Borrower, (v) redeem its 3,416,753
presently issued and outstanding shares of $4.20 Cumulative Exchangeable Series
A Preferred Stock, and the 1,221,250 additional shares of such preferred stock
that are issuable as dividends thereon through the Maturity Date, in exchange
for PIK Securities to be issued by Borrower, and (vi) make payments required to
be paid by Borrower pursuant to the Tax Sharing Agreement as it presently
exists or as it may hereafter be amended with the prior written consent of
Majority Banks (which consent shall not be unreasonably withheld, conditioned
or delayed); provided, further, however, that no such Restricted Payments may
be declared, paid or made or may occur at any time when a Default or an Event
of Default exists or would exist after giving effect thereto.
(d) Acquisitions. Neither Borrower, any Subsidiary of Borrower
(other than FoxMeyer and Ben Franklin) nor any group of which Borrower or such
Subsidiary is a member shall become the beneficial owner of Securities
representing five percent or more of the combined voting power of the
then-outstanding voting Securities of an issuing entity, other than currently
existing Subsidiaries of Borrower, that has a class of Securities registered
with the SEC pursuant to Section 12 of the Exchange Act. For purposes of this
Section 6.2(d), the term "group" shall mean as defined in Rule 13d-5
promulgated under the Exchange Act and the term "beneficial owner" shall mean
as defined in Rule 13d-3 promulgated under the Exchange Act.
(e) Loans, Advances and Investments. Borrower shall not, directly
or indirectly, make any loan, advance, extension of credit or capital
contribution to, make any investment in, or purchase or commit to purchase any
Securities or evidences of financial obligations of, or interests in, (i)
Centaur Partners IV or any Controlling Person of Borrower, (ii) any officer,
director or partner of Borrower, Centaur Partners IV or any such Controlling
Person or (iii) any Affiliate of Borrower, Centaur Partners IV or any such
Controlling Person other than Subsidiaries of Borrower; provided, however, that
Borrower may make investments in any Real Estate Partnership and may make
advances to its employees in reasonable amounts for salaries, travel expenses
and moving expenses in the ordinary course of business or not inconsistent with
prudent business practices.
(f) Mergers and Dissolutions. Neither Borrower nor FoxMeyer shall
(i) merge or consolidate with any Person or (ii) be dissolved or liquidated,
except that Consolidated Subsidiaries other than FoxMeyer may be merged with
and into Borrower so long as Borrower shall be the entity surviving such
merger.
(g) No Sales of Certain Assets; Negative Pledge; No Negative
Pledge in Favor of Other Lenders. Borrower shall not, directly or indirectly,
(i) sell, transfer, assign, encumber or otherwise dispose of, or create, or
allow to be created or to otherwise exist, any Lien on, (A) any of the
Collateral except for Permitted Liens described in clause (a) of the definition
thereof or (B) any capital stock of FoxMeyer (other than FoxMeyer Stock
constituting Collateral) except for Permitted Liens described in clauses (a),
(h) or (i) of the definition of such term, or (ii) sell, transfer, assign,
encumber or otherwise dispose of, or create, or allow to be created or to
otherwise exist, any Lien upon, any of its other Assets (i.e., Assets other
than Collateral or capital stock of FoxMeyer) except for Permitted Liens, sales
of such other Assets for full and fair consideration made in the ordinary
course of business or otherwise consistent with prudent business practices and
sales of capital stock of Consolidated Subsidiaries other than FoxMeyer for
full and fair consideration. Except as set forth in this Section 6.2(g) or the
other Loan Documents in favor of Agent and Banks or in the FoxMeyer Loan
Agreement, Borrower shall not (A) covenant or agree, with any other lender(s)
or other Person(s), not to create, or not to allow to be created or otherwise
exist, any Lien upon any Asset, or (B) covenant or agree, with any other
lender(s) or other Person(s), to any other arrangement that is functionally
equivalent or similar to a negative pledge (provided, however, that such a
negative pledge or the functional equivalent thereof may be created or
otherwise exist in favor of other lender(s) or other Person(s) with respect to
Assets other than Collateral to the same extent that Permitted Liens, other
than Permitted Liens in favor of Agent and Banks, are permitted to be created
or otherwise exist (pursuant to this Agreement) in favor of such other
lender(s) or other Person(s) with respect to the same Assets).
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(h) Fiscal Year. Borrower shall not change its fiscal year from
that in effect on the Closing Date.
(i) Plans and Compensation. Borrower shall not, and Borrower
shall not permit any Consolidated Subsidiary to (i) take any action, or fail to
take any action, that will cause or be reasonably expected to cause any
representation or warranty contained in Section 5.11, if made on and again as
of any date on or after the date of this Agreement, to not be true, or (ii)
amend a Plan, or (except in the ordinary course of business in connection with
an acquisition of a business unrelated to Borrower or any Consolidated
Subsidiary) adopt or begin contributions to one or more additional Plan(s) not
shown on Schedule 2, where such amendment or adoption would have the effect of
increasing, in the aggregate with respect to all such amendments and adoptions
occurring since the Closing Date, as compared to the amount thereof existing as
of the Closing Date, either (A) the actual or contingent liability of Borrower
and its Consolidated Subsidiaries with respect to all Plans by an amount in
excess of $5,000,000, or (B) the current required amount of annual
contributions to all such Plans by an amount in excess of $5,000,000.
(j) Transactions with and Payments to Affiliates. Borrower shall
not, and Borrower shall not permit any Consolidated Subsidiary to, enter into
any transactions with any Affiliate except in the ordinary course and pursuant
to the reasonable requirements of such Person's business and upon fair and
reasonable terms no less favorable to such Person than would result in a
comparable arms' length transaction with a Person who is not an Affiliate;
provided, however, that Borrower may amend the Tax Sharing Agreement in
accordance with Section 6.2(n), the FoxMeyer/NII Loan Facility and the NII
Management Agreement, may invest in any RTC Partnership and may make loans,
advances, extensions of credit or capital contributions to and investments in,
and may purchase assets from, its existing Subsidiaries, whether or not such
amendments, investments or transactions are in the ordinary course of business
or are no less favorable to such Person then would result in a comparable arms'
length transaction with a Person who is not an Affiliate.
(k) Change of Chief Executive Offices, Etc. Borrower shall not
change the location of its chief executive office or principal place of
business or change the location where it keeps its books and records with
respect to any Collateral owned by it unless (i) Borrower has given Agent 60
days' prior written notice of any such change and (ii) Borrower has executed
and delivered to Agent, and Agent has filed and recorded, to the extent it
deems necessary or appropriate, any and all such financing statements and other
agreements, documents, instruments and certificates as, in the judgment of
Agent, may be necessary or appropriate to ensure that the Liens of Agent and
Banks in and to Collateral are fully perfected and of first priority.
(l) FoxMeyer Dividend Restrictions. Except to the extent that the
payment of dividends by FoxMeyer (i) may presently be limited or restricted by
the express provisions of the existing credit agreements identified on Schedule
2 hereto to which FoxMeyer is a party or may be limited or restricted by the
express provisions of future credit agreements that are no more restrictive as
to the payment of dividends than the provisions of such presently existing
credit agreements or (ii) may be limited or restricted by the provisions of the
corporate laws of the jurisdiction in which FoxMeyer is incorporated, Borrower
shall not permit FoxMeyer to agree to limit or restrict, in any way (e.g., as
to amount or time), the declaration or payment of dividends to Borrower.
(m) Certificate or Articles of Incorporation and Bylaws of Major
Subsidiaries. Borrower shall not permit the Certificate or Articles of
Incorporation or Bylaws of any Major Subsidiary to be amended or modified in
any manner that could materially adversely affect the rights of the
shareholder(s) of such Major Subsidiary or the rights or remedies of a pledgee
of the stock of such Major Subsidiary (provided, however, that mergers
permitted pursuant to Section 6.1(b) are not prohibited by this sentence).
Without limiting the generality of and in addition to the foregoing, Borrower
shall not, as a shareholder of FoxMeyer, vote any shares of FoxMeyer to allow,
authorize or permit any amendment to, modification of or other change in any
term or provision of the Certificate of Incorporation or Bylaws of FoxMeyer if
and to the extent that an effect of such amendment, modification or change,
whether direct or indirect, would be to (i) in any way limit or restrict the
ability of shareholders owning a majority of the FoxMeyer Stock to remove a
director of FoxMeyer with or without cause and to appoint his or her successor,
or (ii) in any way limit or restrict the ability of shareholders owning a
majority of the FoxMeyer Stock to amend the Certificate of Incorporation or
Bylaws of FoxMeyer.
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(n) Tax Sharing Agreement. Borrower shall not, without the prior
written consent of Majority Banks (which consent shall not be unreasonably
withheld, conditioned or delayed) or except as may be (and to the extent)
necessary to comply with any changes of applicable tax laws, cause or allow the
Tax Sharing Agreement to be terminated, amended, restated, replaced,
substituted, supplemented or otherwise modified.
(o) Exceptions to Covenants. Borrower shall not, and Borrower
shall not permit any other Person to, take any action or fail to take any
action which is permitted by any of the covenants contained in this Agreement
if such action or omission would result in the breach of any other covenant
contained in this Agreement or another Loan Document.
(p) Issuances of PIK Securities. Borrower shall not issue any PIK
Securities without the prior written consent of Majority Banks, which consent
shall not be unreasonably withheld. All such PIK Securities shall have terms
and provisions, and shall not exceed an aggregate amount, reasonably
satisfactory to Majority Banks.
6.3 Reporting Requirements. So long as any portion of the
Obligations remains unpaid or any Bank is committed to make any Loan or issue,
amend, renew or extend any Letter of Credit hereunder, Borrower shall furnish
to Agent and each Bank the following:
(a) Borrowing Base Certificates. On the last Business Day of each
week, a Borrowing Base Certificate, appropriately completed and in each case
calculated on the basis of the closing sale price per share (as appearing on
any regularly published reporting or quotation service) of the FoxMeyer Stock
and any other Margin Stock (if any) pledged as Collateral for the Business Day
immediately preceding the date of submission of the Borrowing Base Certificate,
all in reasonable detail and certified as to accuracy by a Financial Officer of
Borrower. Borrower shall also furnish to Agent the Borrowing Base Certificates
required pursuant to Section 4.2(e).
(b) Cash Flow Projections. As soon as available and in any event
within 50 days after the end of each fiscal quarter commencing with the fiscal
quarter ended December 31, 1993, cash flow projections for the lesser of the
immediately following four fiscal quarters or the period through the first
fiscal quarter following the Maturity Date showing projected cash sources and
cash uses of Borrower, which projections shall be in form reasonably
satisfactory to Agent.
(c) Quarterly Financial Reports of Borrower. As soon as available
and in any event within 50 days after the end of each fiscal quarter commencing
with the fiscal quarter ended December 31, 1993, a consolidated statement of
operations, balance sheet and statement of cash flows of Borrower and its
Consolidated Subsidiaries, in each case for the period from the beginning of
the current fiscal year to the end of such fiscal quarter, and a consolidated
balance sheet of Borrower and its Consolidated Subsidiaries, in each case as at
the end of such fiscal quarter, setting forth in each case in comparative form
the figures for the corresponding fiscal period in accordance with SEC
reporting requirements or guidelines, all in reasonable detail and certified as
to fairness of presentation, GAAP and consistency by a Financial Officer of
Borrower, subject to changes resulting from year-end adjustments.
(d) Semiannual Letter of Credit Report. As soon as available and
in any event within 15 days after the end of each March 31st and September 30th
commencing with September 30, 1994, a written report summarizing the face
amounts and issuance, amendment, renewal, extension and expiration dates of all
Letters of Credit issued, amended, renewed or extended during such fiscal
quarter and drawings during such fiscal quarter under all Letters of Credit.
(e) Quarterly Financial Reports of FoxMeyer and Ben Franklin. As
soon as available and in any event within 55 days after the end of each fiscal
quarter commencing with the fiscal quarter ended December 31, 1993, a
consolidated statement of operations, statement of stockholder's equity and
statement of cash flows of each of FoxMeyer and its consolidated subsidiaries
and Ben Franklin and its consolidated subsidiaries, in each case for the period
from the beginning of the current fiscal year to the end of such fiscal
quarter, and a
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consolidated balance sheet of FoxMeyer and its consolidated subsidiaries and
Ben Franklin and its consolidated subsidiaries, in each case as at the end of
such fiscal quarter, setting forth in each case in comparative form the figures
for the corresponding fiscal period in accordance with SEC reporting
requirements or guidelines, all in reasonable detail and, as to the financial
statements of FoxMeyer, certified as to fairness of presentation, GAAP and
consistency by a Financial Officer of FoxMeyer, subject to changes resulting
from year-end adjustments.
(f) Payments under the Tax Sharing Agreement. As soon as
available and in any event within 50 days after the end of each fiscal quarter
commencing with the fiscal quarter ended June 30, 1993, a written report
specifying the amount and type of each payment made during such fiscal quarter
by Borrower or any of its Consolidated Subsidiaries pursuant to the Tax Sharing
Agreement, and, as soon as available and in any event within 90 days after the
end of each fiscal year, a certificate executed by a Financial Officer of
Borrower certifying that all payments made by Borrower or any of its
Consolidated Subsidiaries during such fiscal year pursuant to the Tax Sharing
Agreement were made in compliance with such agreement.
(g) Annual Financial Reports. As soon as available and in
any event within 95 days after the end of each fiscal year, a consolidating (as
to Borrower, FoxMeyer and Ben Franklin and, if applicable, Borrower's
investment in NSC only) and consolidated statement of operations, statement of
stockholder's equity (as to the consolidated statements only) and statement of
cash flows (as to the consolidated statements only) of Borrower and its
Consolidated Subsidiaries, in each case for the annual period ended as of the
end of such fiscal year, and a consolidating (as to Borrower, FoxMeyer and Ben
Franklin and, if applicable, Borrower's investment in NSC only) and
consolidated balance sheet of Borrower and its Consolidated Subsidiaries, in
each case as at the end of such fiscal year, setting forth (with respect to the
consolidated Financial Statements only) in each case in comparative form the
figures for Borrower's preceding annual audit, all in reasonable detail and
reasonably satisfactory in scope to Agent and certified by independent
certified public accountants of recognized national standing selected by
Borrower, whose certificate shall be in scope and substance satisfactory to
Agent, and, as to the financial statements of Borrower, also certified by a
Financial Officer of Borrower; provided, however, that the consolidating
financial information required pursuant to this Section 6.3(g) shall not be
required to be certified by such independent certified public accountants. In
conjunction with each delivery of financial statements required by this Section
6.3(g), Borrower shall deliver to Agent a certificate of said independent
public accountants stating that, in making the audit necessary to the
certification of such financial statements, they have obtained no knowledge of
any failure to comply with any covenants set forth in Section 6.2(b), (c) or
(e) or, if any such knowledge exists, specifying the nature and period of
existence thereof.
(h) Compliance Certificates. Concurrently with the financial
reports required pursuant to Sections 6.3(c) and (g), a Compliance Certificate
substantially in the form of Exhibit I hereto, appropriately completed.
(i) Notice of Default under this Agreement. Promptly upon
becoming aware of the occurrence thereof, notification of any Default or Event
of Default, specifying in connection with such notification all actions taken
or proposed to be taken in order to remedy such circumstance.
(j) Notice of Defaults under other Documents. Within three
Business Days after Borrower becomes aware of the occurrence thereof,
notification of Borrower's or any Consolidated Subsidiary's default or default
under any material agreement, document, instrument or certificate to which such
Person is a party or by which such Person or its Assets is bound or affected.
(k) Proxies and Reports. Promptly and as soon as available, one
copy of each (i) financial statement, report, notice or proxy statement sent by
Borrower or FoxMeyer to its stockholders generally, (ii) regular, periodic or
special report, registration statement or prospectus filed by Borrower or
FoxMeyer with any securities exchange or the SEC or any successor agency, (iii)
press release or other statement made available generally by Borrower or
FoxMeyer to the public generally concerning material developments in Borrower's
or FoxMeyer's businesses, (iv) order issued by any Tribunal materially
affecting Borrower or FoxMeyer or its material Assets and (v) material report,
notice or financial statement required to be prepared by or on behalf of
Borrower, any Consolidated Subsidiary or any Plan.
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(l) Change in Location of Collateral or Office. Promptly upon the
occurrence thereof, notification of (i) any change in Borrower's or any Major
Subsidiary's chief executive office or other office location or corporate,
trade or other name, and (ii) any additional trade or other name(s) under which
Borrower or any Major Subsidiary transacts business.
(m) Notice of Legal Proceedings. Promptly upon becoming aware of
the existence thereof, notification of the institution of any investigation,
action, suit, proceeding, order, injunction or dispute with any Person or
Tribunal and involving Borrower or any Consolidated Subsidiary or any of its
Assets (including, without limitation, any of the Collateral) which could have
a Material Adverse Effect.
(n) Plans. Promptly after becoming aware of the occurrence of any
event or condition which has the result that any representation or warranty
contained in Section 5.11, if made on and again as of any date on or after the
date of this Agreement, ceases to be true, a notification specifying the nature
and resulting consequences and expected consequences of such event or
condition, the action Borrower or its Consolidated Subsidiary (as applicable)
is taking or proposes to take with respect thereto and, if known, any action
taken by the Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto.
(o) Burdensome Contracts. Within thirty days after any agreement
or contract of any type described in Section 5.18 comes into existence (except
to the extent that such agreement or contract is described on Schedule 2),
notification of the existence of such agreement or contract and such other
information relating thereto as Agent may reasonably request.
(p) Reports and Information. Such information (not otherwise
required to be furnished under the Loan Documents) respecting Borrower's or any
Consolidated Subsidiary's businesses, affairs, books, Collateral, material
Assets, or liabilities, and such opinions, agreements, documents, instruments,
certificates and outside audits, in addition to those mentioned in this
Agreement, as Agent (or Majority Banks through Agent) may reasonably request
from time to time, including, without limitation, information regarding the
subject matter of the information disclosed on Schedule 2 hereto.
ARTICLE VII
CERTAIN RIGHTS OF BANK
7.1 Protection of Collateral. Agent, and/or any Bank with the
consent of Agent, may at any time take such steps as they deem necessary or
appropriate to protect their interest in and to preserve the Collateral, all at
the expense of Borrower (unless such actions become necessary or appropriate
primarily or exclusively due to the gross negligence or wilful misconduct of
Agent or any Bank). Borrower agrees to cooperate fully with any and all of
Agent's and Banks' efforts to preserve the Collateral and Agent's and Banks'
interests therein and will take such actions to preserve the Collateral and
Agent's and Banks' interests therein as Agent may reasonably direct. All of
Agent's and Banks' expenses of preserving the Collateral and their interests
therein, including any expenses relating to the compensation and bonding of a
custodian, shall be charged to Borrower and added to the Obligations.
7.2 Appointment of Agent. Following the occurrence and during the
continuation of a Default, Agent shall have the right to receive, endorse,
assign and/or deliver in the name of Agent, any Bank or Borrower any check,
draft or other instrument for the payment of money to Borrower relating to any
Collateral, and Borrower hereby waive(s) notice of presentment, protest and
non-payment of any instrument so endorsed. Following the occurrence and during
the continuation of a Default, Borrower hereby irrevocably appoint(s) Agent
and/or Agent's designee as Borrower's attorney-in-fact (which appointment shall
be irrevocable and deemed coupled with an interest) with full power and
authority, in the place and stead of Borrower, from time to time, to endorse
Borrower's name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment of Collateral that may come into Agent's or any
Bank's possession; to sign Borrower's name on any agreements, documents,
instruments or certificates relating to any Collateral; to sign Borrower's name
on all financing statements, endorsements, or any other agreements, documents,
instruments or certificates deemed
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necessary or appropriate by Agent to preserve, protect or perfect Agent's and
Banks' interests in the Collateral and to file the same; to obtain and adjust
insurance relating to any Collateral; to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any Collateral; to receive, endorse and
collect drafts or other instruments, documents and chattel paper relating to
any Collateral; to file any claims and to take any action or to initiate any
proceeding which Agent may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Agent with respect
to any Collateral; and to do all other acts and things necessary to carry out
this Agreement. All acts of Agent or its designee are hereby authorized and
neither shall be liable for any act of omission or commission, or for any error
of judgment or mistake of fact or law (including its own negligence or
inadvertence), unless done maliciously or resulting from Agent's gross
negligence or willful misconduct; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid.
7.3 No Liability. Agent and Banks shall not, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in connection with the maintenance or
disposition of any Collateral (specifically including that resulting from its
negligence or inadvertence), except for damage resulting from its gross
negligence or willful misconduct. Following the occurrence and during the
continuation of an Event of Default, Agent may, without notice to or consent
from Borrower, sue upon or otherwise collect, extend the time of payment of, or
compromise upon any terms, any of the Collateral or any security, instrument or
insurance applicable thereto and/or release the obligor thereon.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Nature of Events. An "Event of Default" shall exist if any
one or more of the following shall occur:
(a) Payments. Borrower shall fail to make any payment or
mandatory prepayment of principal, interest, fees, costs, expenses or other
amounts with respect to the Obligations on or before the date such payment or
prepayment is due and, except with respect to principal or interest for which
there shall be no notice requirement or cure period, such failure shall
continue for a period of ten days following Borrower's receipt of notice
thereof from Agent.
(b) Covenant Defaults. Borrower shall fail to observe or perform,
or cause to be observed or performed, any covenant or agreement contained in
Sections 6.1(b), 6.1(d), 6.1(g), 6.1(j), 6.1(l) or 6.1(m), Section 6.2 or
Section 6.3(i) of this Agreement; Borrower shall fail to observe or perform any
covenant or agreement contained in Section 6.3(a) and such failure shall
continue for a period of five Business Days; or Borrower shall fail to observe
or perform, or cause to be observed or performed, any other covenant or
agreement contained in the Loan Documents (other than covenants and agreements
pertaining to payment obligations of Borrower which shall be governed by
Section 8.1(a)) and such failure shall continue for a period of 30 days
following the earlier to occur of Borrower's knowledge thereof or Borrower's
receipt of notice thereof from Agent.
(c) Representations or Warranties. Any representation, warranty
or other statement made or deemed made by or on behalf of Borrower and
contained in the Loan Documents or in any agreement, document, instrument or
certificate furnished in compliance or connection with the Loan Documents is
false, misleading or incorrect in any material respect as of the date made or
deemed made.
(d) Enforceability of Liens. Any Lien (other than a Lien
expressly and voluntarily released by Agent and Banks) granted or purported to
be granted by Borrower to Agent or any Bank under the Security Documents or any
other Loan Document is or becomes invalid or unenforceable or is not, or ceases
to be, a perfected first priority Lien in favor of Agent and Banks encumbering
the Asset intended to be encumbered.
(e) Other Debt. Any event or condition occurs with respect to
Indebtedness of Borrower aggregating in excess of $5,000,000 (at any time
outstanding), the effect of which is (i) to cause or to permit any holder of
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such Indebtedness to cause the same, or a material portion thereof, to become
due prior to its stated maturity or prior to its regularly scheduled date(s) of
payment and such right of acceleration is not waived by the holder (whether or
not such acceleration occurs), (ii) that all or any portion of any such
Indebtedness is declared to be due and payable, or required to be prepaid
(other than by regularly scheduled payment) prior to the scheduled maturity
thereof, or (iii) that all or any portion of any such Indebtedness is not paid,
renewed or rearranged when due.
(f) Involuntary Proceedings. A case is commenced or petition or
complaint is filed against Borrower or any Consolidated Subsidiary (other than
Ben Franklin or a Consolidated Subsidiary having total assets of less than
$5,000,000) under any Debtor Relief Law and such case, petition or complaint
remains in effect for more than 30 days; a receiver, liquidator or trustee of
Borrower or any Consolidated Subsidiary (other than Ben Franklin or a
Consolidated Subsidiary having total assets of less than $5,000,000), or of any
material Asset of Borrower or any Consolidated Subsidiary (other than a Ben
Franklin or Consolidated Subsidiary having total assets of less than
$5,000,000), is appointed by court order and such order remains in effect for
more than 45 days; or any material Asset of Borrower or any Consolidated
Subsidiary (other than Ben Franklin or a Consolidated Subsidiary having total
assets of less than $5,000,000) is sequestered by court order and such order
remains in effect for more than 45 days.
(g) Voluntary Proceedings. Borrower or any Consolidated
Subsidiary (other than Ben Franklin or a Consolidated Subsidiary having total
assets of less than $5,000,000) voluntarily seeks, consents to, or acquiesces
in the benefit of any provision of any Debtor Relief Law; consents to the
filing of any petition against it under any such law; makes an assignment for
the benefit of its creditors; admits in writing its inability to pay its debts
generally as they become due; or consents to the appointment of a receiver,
trustee, liquidator or conservator for it or any part of its Assets.
(h) Undischarged Judgments. Any judgment(s), decree(s) and/or
order(s) for the payment of money aggregating in excess of $6,000,000 (at any
time outstanding) shall be rendered against Borrower and/or any Consolidated
Subsidiary (other than Ben Franklin or a Consolidated Subsidiary having total
assets of less than $6,000,000) and such judgment(s), decree(s) or order(s)
shall not be satisfied and shall be in effect for any period of 30 consecutive
days without being vacated, discharged, satisfied or stayed or bonded pending
appeal.
(i) Attachment. The failure to have discharged, within a period
of 30 days after the commencement thereof, any attachment, sequestration or
similar proceeding against any Collateral or any material portion of the Assets
of Borrower or any Major Subsidiary.
(j) Termination Event. The occurrence of any Termination Event if
the actual or reasonably anticipated increase in liability and/or annual
acceleration of payments or funding incurred or required to be paid by Borrower
and/or any Consolidated Subsidiary as a result of such Termination Event and as
a result of all other Termination Events occurring after the Closing Date
exceeds $5,000,000 in aggregate amount.
(k) Material Adverse Effect. The occurrence of a Material Adverse
Effect.
(l) FoxMeyer Default. The occurrence of a FoxMeyer Default.
(m) Change of Control. The occurrence of a Change of Control.
8.2 Concurrent Acceleration. In the event of the occurrence of an
Event of Default specified in Sections 8.1(f) or 8.1(g), the aggregate unpaid
amount of the Obligations shall immediately, and concurrently with the
occurrence of such Event of Default, become due and payable in full without any
action or notification of any kind required by Agent or any Bank, including,
without limitation, presentment, demand, protest or notice of protest,
dishonor, notice of intention to acceleration and notice of acceleration, all
of which are expressly hereby waived by Borrower.
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8.3 Certain Rights of Bank.
(a) Remedies Upon Default. Should an Event of Default occur,
Agent may, at its discretion, and, at the request of Required Banks, Agent
shall take any one or more of the following actions:
(i) Acceleration. Without demand or notice of
any nature whatsoever, declare the unpaid balance of the Obligations,
or any part thereof, immediately due and payable, whereupon the same
shall be due and payable (unless accelerated automatically pursuant to
Section 8.2);
(ii) Termination. Terminate the Aggregate
Commitment in its entirety or as to any portion thereof, to the extent
Agent or Required Banks shall deem appropriate;
(iii) Judgment. Reduce any claim to judgment;
(iv) Setoff. Exercise the rights of setoff and/or
banker's Lien against the interests of Borrower in and to every
account and other Assets of Borrower which are in the possession of
Agent or any Bank to the extent of the full amount of the Obligations;
(v) Foreclosure. Foreclose any or all Liens in
favor of Agent or any Bank and otherwise realize upon any and all of
the rights Agent or any Bank may have in and to the Collateral, or any
part thereof;
(vi) Letters of Credit. If any Letter of Credit
shall then be outstanding, (A) make demand upon Borrower to, and
promptly upon such demand Borrower shall, or (B) with respect to any
Event of Default underSection 8.1(f) or 8.1(g), Borrower shall
promptly without demand by Agent, pay to Agent in immediately
available funds at the office of Agent, for deposit in the Cash
Collateral Account, an amount equal to 110% of the maximum amount
available to be drawn under the outstanding Letters of Credit; and
(vii) Exercise of Rights. Exercise any and all
other rights or remedies afforded by any applicable laws as Agent or
Required Banks shall deem appropriate, or by the Loan Documents, at
law, in equity, or otherwise, including, but not limited to, the right
to bring suit or other proceeding before any Tribunal, either for
specific performance of any covenant or condition contained in the
Loan Documents or in aid of the exercise of any right or remedy
granted to Agent or any Bank in the Loan Documents.
(b) Performance by Agent. Should any covenant, duty or agreement
of Borrower fail to be performed in accordance with the terms of the Loan
Documents, Agent may, at its discretion, perform or attempt to perform, such
covenant, duty or agreement on behalf of Borrower. In such event, Borrower
shall, at the request of Agent, promptly pay to Agent any amount expended by
Agent in such performance or attempted performance, together with interest
accrued thereon at the Default Rate until Agent is reimbursed therefor.
Notwithstanding the foregoing, it is expressly understood that Agent does not
assume and shall never have, except by its express written consent, any
liability or responsibility for the performance of any covenant, duty or
agreement of Borrower under the Loan Documents.
(c) Duties and Rights. Agent and Banks may execute any of their
duties and/or exercise any of their rights or remedies by or in the name of
Agent or any Bank and by or through any of their officers, directors,
employees, attorneys, agents or other representatives.
(d) Bank Not in Control. Borrower acknowledges that none of the
covenants or other provisions contained in this Agreement shall give Agent or
any Bank the right or power to exercise control over the affairs and/or
management of Borrower or any Subsidiary.
(e) Waivers. The acceptance by Agent or any Bank at any time and
from time to time of partial
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payment of the Obligations shall not be deemed to be a waiver of any Event of
Default or Default then existing. No waiver by Agent or any Bank of any Event
of Default or Default shall be deemed to be a waiver of any other or subsequent
Event of Default or Default. No delay or omission by Agent or any Bank in
exercising any right or remedy shall impair such right or remedy or be
construed as a waiver thereof or an acquiescence therein, and no single or
partial exercise of any such right or remedy shall preclude other or further
exercise thereof, or the exercise of any other right or remedy under the Loan
Documents or otherwise. Except as otherwise provided in this Agreement or by
applicable law, Borrower and each surety, endorser, guarantor and other party
liable for the payment or performance of all or any portion of the Obligations
severally waive presentment and demand for payment, protest, and notice of
protest, notice of intention to accelerate, acceleration and nonpayment, and
agree that their liability shall not be affected by any renewal or extension in
the time of payment of any Obligation, or by any release or change in any
security for the payment or performance of the Obligations, regardless of the
number of such renewals, extensions, releases or changes.
(f) Cumulative Rights. All rights and remedies available to Agent
and/or any Bank under the Loan Documents shall be cumulative of and in addition
to all other rights and remedies granted to Agent and/or any Bank at law or in
equity, whether or not the Obligations are due and payable and whether or not
Agent and/or any Bank shall have instituted any suit for collection or other
action in connection with the Loan Documents.
(g) Expenditures by Banks. Any sums expended by or on behalf of
Agent or any Bank pursuant to the exercise of any right or remedy shall, to the
extent the same are required to be paid or reimbursed by Borrower pursuant to
Section 6.1(i), become part of the Obligations of Borrower and shall bear
interest at the Default Rate, from the date of such expenditure until the date
repaid.
(h) Diminution in Value of Collateral. Neither Agent nor any Bank
shall have any liability or responsibility whatsoever for any diminution or
loss in value of any Collateral (specifically including that which may arise
from Agent or any Bank's negligence or inadvertence, whether such negligence or
inadvertence is the sole or concurring cause of any damage), except that
arising in connection with Agent's or any Bank's gross negligence or willful
misconduct.
(i) Indemnification of Agent and Banks. Borrower hereby
indemnifies Agent, each Bank and Agent's and each Bank's directors, officers,
employees, attorneys and agents (Agent, each Bank and each such other Person is
hereinafter called an "Indemnitee") and holds them and each of them harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
(collectively "Claims") of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against any Indemnitee, in any way relating to or
arising out of the Loan Documents or any of the transactions contemplated
therein (including, without limitation, any Claims relating to or arising out
of the execution or delivery of this Agreement or any other Loan Document, the
performance of the terms and provisions hereof and thereof and the obligations
thereunder, and the use of the proceeds of the Loans and the use of the Letters
of Credit) or the Environmental Laws, no matter how such Claims arise or
result, and including, without limitation, those Claims that may arise or
result from or any Indemnitee's negligence or inadvertence; provided, however,
that no Indemnitee shall have the right to be indemnified hereunder (i) to the
extent that such Claims directly relate to or arise out of any breach by such
Indemnitee of its obligations under the Loan Documents, (ii) to the extent that
such Claims directly relate to or arise out of the relationship between (A) an
assignor Bank and an assignee Bank under this Agreement or (B) a Bank and a
participant of such Bank under this Agreement, or (iii) to the extent that the
Claims as to which such Indemnitee is seeking indemnification are determined by
a court of competent jurisdiction by final and nonappealable order or judgment
to have resulted from the gross negligence or willful misconduct of such
Indemnitee. Such indemnification shall not give Borrower any right to
participate in the selection of counsel for any Indemnitee or the conduct or
settlement of any dispute or proceeding for which indemnification may be
claimed.
(j) Right of Setoff. If an Event of Default shall have occurred
and be continuing, and either (i) such Event of Default shall consist of a
failure of Borrower to make any payment of any Obligation, (ii) Agent shall
have declared the Obligations or any portion thereof immediately due and
payable or (iii) Required Banks shall have requested Agent to declare the Loans
immediately due and payable, then each Bank is hereby authorized
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at any time and from time to time, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness
at any time owing by such Bank to or for the credit or account of Borrower
against any or all of the Obligations now or hereafter existing and held by
such Bank, irrespective of whether or not such Bank shall have made any demand
under this Agreement or any other Loan Document and whether or not such
Obligations shall be matured or unmatured.
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization; Administration; Duties.
(a) General. The general administration of the Loan Documents and
any other documents contemplated by this Agreement shall be by Agent or its
designees as provided in Sections 9.1(c) and 9.6(a). Agent shall not be
required to exercise any right or remedy with respect to any Event of Default
except as may be expressly directed by Required Banks. In the event Required
Banks direct Agent to exercise any right or remedy available hereunder, Agent
agrees to commence taking action with respect to such right or remedy within a
reasonable period of time and to diligently pursue such action or to submit its
resignation pursuant to Section 9.10. Except as otherwise provided herein or
otherwise agreed to by Agent and Banks in writing, each Bank hereby irrevocably
authorizes Agent, at Agent's discretion, to take or refrain from taking such
actions as Agent on such Bank's behalf and to exercise or refrain from
exercising such powers, rights and remedies under the Loan Documents and any
other documents contemplated by this Agreement as are delegated by the terms
hereof or thereof, as appropriate, together with all powers, rights and
remedies reasonably incidental thereto. Notwithstanding the foregoing or any
term or provision of this Agreement, Agent shall have no duties or
responsibilities to Borrower or any Bank except as expressly set forth in this
Agreement or the other Loan Documents. Unless otherwise expressly stated in
this Agreement or in the other Loan Documents to the contrary, all references
in this Agreement and the other Loan Documents to Agent shall be deemed to be
references to Agent in its capacity as agent for and on behalf of Banks
pursuant to this Agreement and the other Loan Documents.
(b) Collateral. Each Bank irrevocably appoints and authorizes
Agent to hold the Collateral and enforce the Liens granted to Banks as security
for the Obligations and to take such action as Agent on its behalf and to
exercise such powers, rights and remedies under this Agreement and the other
Loan Documents or otherwise as are delegated to Agent by the terms hereof or
thereof, together with all such powers, rights and remedies as are reasonably
incidental thereto, provided, however, that, subject to Section 10.7, as
between and among Banks, Agent will not prosecute, settle or compromise any
claim against Borrower or release or institute enforcement or foreclosure
proceedings against any Collateral securing the Obligations, except with the
consent of Required Banks. Without limiting the generality of the foregoing,
each Bank authorizes Agent to (i) enter into any Loan Documents securing
payment of the Obligations in the capacity of agent for and on behalf of Banks
and (ii) to administer all of the Collateral and to enforce the interests of
Banks therein in accordance with the Loan Documents. Any action for enforcement
of the interests of Banks under the Loan Documents shall be taken either as
Agent for Banks or directly in the respective names of Banks, as counsel to
Agent may at the time advise. Subject to Section 10.7, Banks consent and agree
that any action taken by Agent with the consent or at the direction of Required
Banks as provided herein shall be taken for and on behalf of all Banks,
including those who may not have so consented or directed, in order to protect
or enforce the Liens securing the Obligations; provided that any Bank may
direct Agent not to act for or on its behalf in any such proceeding if such
Bank executes in favor of Agent a release of its rights to share in the
benefits of any such action and a release of its legal and beneficial interest
in the Lien created by the Loan Documents on the Collateral which is the
subject of such action. Banks and Borrower agree that Agent is not a fiduciary
for Banks or Borrower or any other Person but simply is acting in the capacity
described herein to alleviate administrative burdens for all parties hereto and
that Agent has no duties or responsibilities to Banks, Borrower or any other
Person except those (if any) expressly set forth in the Loan Documents.
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(c) Sub-Agents. Each Bank hereby authorizes Agent (in its sole
discretion) (i) to appoint sub-agents (including any Banks) to be the holders
of record of any Lien to be granted to Agent (for its benefit and the benefit
of Banks) or Banks or to hold on behalf of Agent any Collateral or instruments
relating thereto, and (ii) so long as an Event of Default shall not have
occurred and be continuing, to release a Lien granted to it (for its benefit
and the benefit of Banks) on any Asset sold or otherwise disposed of and
permitted to be sold or otherwise disposed of in accordance with the terms
hereof.
9.2 Advances and Payments. On the date of each Advance, Agent
shall be authorized, but not obligated, to advance, for the account of each
Bank making such Advance, the amount of the Advance to be made by it in
accordance with its Commitment hereunder if and to the extent that such Bank
does not make such amount timely available to Agent for advance to Borrower,
Paribas or Issuer, as the case may be, pursuant to this Agreement. Each Bank
agrees to immediately reimburse Agent in immediately available funds for any
amount so advanced on its behalf by Agent. If any such reimbursement is not
made in immediately available funds on the same day on which Agent shall have
made any such amount available on behalf of any Bank, such Bank shall pay
interest to Agent at the Federal Funds Rate until such reimbursement is made.
All amounts to be paid to Banks by Agent shall be credited to Banks, forthwith
after collection by Agent, in immediately available funds, in such manner as
Banks and Agent shall from time to time agree.
9.3 Sharing of Payments. Each Bank agrees that if it shall obtain
any payment (whether voluntarily, involuntarily through the exercise of a right
of banker's lien, setoff or counterclaim, including, without limitation, a
secured claim under the Bankruptcy Code or other security interest arising with
respect to or in lieu of such secured claim and received by such Bank under any
Debtor Relief Law, or otherwise) in respect of any obligation owing to such
Bank as a result of which the unpaid portion of its Loans is proportionately
less than the unpaid portion of such Loans of other Banks (based upon the
respective Pro Rata Shares of the Commitment to which such Loans relate), (a)
it shall promptly purchase at par (and shall be deemed to have thereupon
purchased) from such other Banks a participation in such Loans of such other
Banks, so that the aggregate unpaid principal amount of such Loans of each Bank
shall be in the same proportion to the aggregate unpaid principal amount of all
such Loans then outstanding as the principal of such Loans of such Bank prior
to the obtaining of such payment was to the principal amount of all such Loans
outstanding prior to the obtaining of such payment, (b) it shall pay interest
calculated at the Federal Funds Rate to such other Banks on the amount
purchased from the date it received such payment until the date of the purchase
of such participation, and (c) such other adjustments shall be made from time
to time as shall be equitable to ensure that Banks share such payment pro rata
based upon their respective Pro Rata Shares of the Commitment to which such
Loans relate. Notwithstanding anything to the contrary contained herein, if a
Bank shall obtain payment under any circumstances contemplated herein while any
Obligations shall remain outstanding, such Bank shall promptly turn over such
payment to Agent for distribution, as appropriate, to Banks on account of the
Obligations as provided herein. Borrower expressly consents to the foregoing
arrangements and agrees that any Bank or Banks holding (or deemed to be
holding) a participation in any of the Loans, Letters of Credit or other
Obligations may exercise any and all rights of payment (including, without
limitation, rights of banker's lien, setoff or counterclaim) with respect to
such participation as fully as if such Bank were the direct creditor of
Borrower in the amount of such participation.
9.4 Distribution of Information. Agent will forward to all Banks
copies of all financial statements and reports of a material nature furnished
to it hereunder by Borrower other than those which are by the terms hereof to
be distributed by Borrower directly to Banks; provided, however, that any
failure by Agent to do so shall not result in any liability to Agent.
9.5 Notice to Banks. Except as otherwise provided in this
Agreement or except with respect to communications or notices to be provided
directly to Banks by Borrower or any Major Subsidiary or Consolidated
Subsidiary pursuant to this Agreement or the other Loan Documents, upon receipt
by Agent from Borrower of any communication calling for an action on the part
of Banks, or upon notice to Agent of any Event of Default, Agent will, in a
reasonably prompt fashion, give to Banks notice of the nature of such
communication or Event of Default, as the case may be; provided, however, that
any failure by Agent to give any such notice shall not result in any liability
to Agent except if such failure constitutes gross negligence or willful
misconduct.
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9.6 Liability of Agent.
(a) Other Agents. Agent, when acting on behalf of Banks, may
execute any of its responsibilities or duties under this Agreement by or
through its, or any Bank's, officers, directors, employees, attorneys or
agents. All such officers, directors, employees, attorneys and agents, when
exercising the rights or performing the duties of Agent, shall be deemed to be
included in the term "Agent." Neither Agent nor its officers, directors,
employees, attorneys or agents shall be liable to Banks or any of them for any
action taken or omitted to be taken in good faith, or be responsible to Banks
or to any of them for the consequences of any oversight or error of judgment,
or for any loss, unless the same shall happen through its gross negligence or
wilful misconduct. Agent and its officers, directors, employees, attorneys and
agents shall in no event be liable to Banks or to any of them for any action
taken or omitted to be taken by it pursuant to instructions received by it from
any of Banks or in reliance upon the advice of counsel selected by it. Without
limiting the foregoing, neither Agent nor any of its officers, directors,
employees, attorneys or agents shall be responsible to any of Banks for the due
execution, validity, genuineness, effectiveness, sufficiency or enforceability
of, or for any statement, warranty or representation in, or for the perfection
of any Lien contemplated by, this Agreement or any other Loan Document, or
shall be required to ascertain or to make any inquiry concerning the
performance or observance by Borrower or any other Person of any of the terms,
conditions, covenants or agreements of this Agreement or any other Loan
Document.
(b) No Responsibility for Failure of Performance. Neither Agent
nor any of its officers, directors, employees, attorneys or agents (when acting
in its or their capacities as or on behalf of Agent hereunder) shall have any
responsibility to Borrower or any other Person on account of the failure or
delay in performance or breach by any of Borrower, Banks (other than Agent) or
any other Person of any of their respective obligations under this Agreement or
any other Loan Document.
(c) Communications. Agent, as agent hereunder, shall be entitled
to rely on any communication, instrument or document reasonably believed by it
to be genuine or correct and to have been signed or sent by a Person or Persons
believed by it to the proper Person or Persons, and it shall be entitled to
rely on advice of legal counsel, independent public accountants and other
professional advisers and experts selected by it.
9.7 Reimbursement and Indemnification. Each Bank agrees (a) if
and to the extent not promptly reimbursed by Borrower, to reimburse Agent, in
accordance with such Bank's Pro Rata Share of the Aggregate Commitment, Loans
or Letters of Credit to which the same relate (except as provided below in this
Section 9.7), on demand, for fees, costs and expenses incurred for the benefit
of Banks under the Loan Documents, including, without limitation, counsel fees
and compensation of agents and employees paid for services rendered on behalf
of Banks, and any other expense incurred in connection with the preparation,
execution, administration, monitoring or enforcement thereof, (b) if and to the
extent not promptly indemnified by Borrower, to indemnify and hold harmless
Agent and any of its officers, directors, employees, attorneys or agents, in
accordance with such Bank's Pro Rata Share of the Aggregate Commitment, Loans
and Letters of Credit to which the same relate (except as provided below in
this Section 9.7), on demand, 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 it or any of them in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken
or omitted by it or any of them under this Agreement or any other Loan Document
(except such as shall result from their gross negligence or wilful misconduct),
and (c) that Agent may offset distributions of principal, interest and fees due
to a Bank by the amount of unreimbursed amounts due and owing in accordance
with the provisions of this Section 9.7 if such Bank has not reimbursed or
indemnified Agent upon a written request by Agent for reimbursement or
indemnification.
9.8 Rights of Agent. It is understood and agreed that Paribas
shall have the same powers, rights, remedies and obligations hereunder
(including the right to give such instructions) as the other Banks and may
exercise such powers, rights and remedies, as well as its powers, rights and
remedies under other agreements, documents, instruments and certificates to
which it is or may be party, and engage in other transactions with Borrower,
any Major Subsidiary, any Consolidated Subsidiary, any Affiliate of Borrower or
any other Person,
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as though it were not the Agent under this Agreement.
9.9 Independent Investigation and Credit Decision by Banks. Each
Bank acknowledges and agrees that it has decided to enter into this Agreement
and to make Loans and issue, or participate in the issuance of, Letters of
Credit hereunder based on its own analysis of (a) the transactions contemplated
hereby, (b) the creditworthiness of Borrower and Consolidated Subsidiaries, (c)
this Agreement and the other Loan Documents and (d) the business, legal and
other issues relating thereto, and further acknowledges and agrees that neither
Paribas nor Agent shall bear any responsibility therefor. Each Bank
acknowledges and agrees that it will, independently and without reliance upon
Agent or any other Bank, continue to make its own credit decisions and other
decisions regarding the taking or not taking of any action under this Agreement
or the other Loan Documents.
9.10 Successor Agent. Agent may resign at any time by giving at
least 15 days' prior notice thereof to Banks and Borrower. Upon any such
resignation, within ten days after the retiring Agent's giving of notice of
resignation, Majority Banks shall have the right to appoint a successor Agent
from among Banks and, if such right is exercised, such Bank appointed by
Majority Banks as such shall thereupon become successor Agent (unless such Bank
shall decline to accept such appointment). If no successor Agent shall have
been so appointed by Majority Banks and shall have accepted such appointment,
within 15 days after the retiring Agent's giving of notice of resignation, the
retiring Agent may, on behalf of Banks, appoint a successor Agent which shall
either be a Bank or a commercial bank reasonably acceptable to Borrower
constituting an Eligible Assignee and having capital and surplus of at least
$750,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the powers, rights, remedies, privileges, responsibilities and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its responsibilities, duties and obligations under this Agreement. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
IX shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Unless otherwise expressly provided in this
Agreement, all notices or other communications required or permitted to be
given under this Agreement shall be in writing and may be personally served,
telecopied, telefaxed, telexed or sent by courier or first class prepaid mail
(airmail if to an address in a foreign country from the party writing) and
shall be deemed to have been given and received when delivered in person or by
courier service, upon transmission of a telecopy, telefax or telex or four days
after deposit in the mail (certified or registered, return receipt requested,
with postage prepaid and properly addressed). Notices or other communications
by Borrower to Agent or any Bank shall not be effective until given and
actually received. For purposes of this Agreement, the addresses of the
parties to this Agreement (until 15 days' prior notice of a change thereof is
delivered as provided in this Section 10.1) shall be as set forth below each
party's name on the signature pages hereof.
10.2 Survival. All representations, warranties, covenants and
agreements made by Borrower herein or in the other Loan Documents shall be
considered to have been relied upon by Agent and Banks and shall survive the
delivery of the Loan Documents, the making of Loans and issuance, amendment,
renewal and extension of Letters of Credit and the creation and extension of
the Obligations, regardless of any investigation made by or on behalf of Agent
or any Bank. All covenants and agreements made by Borrower herein or in the
other Loan Documents regarding the payment of principal, interest, fees, taxes,
costs or expenses, and all covenants and agreements made (a) by Borrower or (b)
by Banks herein, (i) to or in favor of any one or more of Agent and Banks or
(ii) to or in favor of Agent, respectively, regarding any indemnification or
reimbursement or disclaimer of liability (including, without limitation, the
provisions of Sections 2.9, 2.12, 3.2(d), 7.2, 7.3, 8.3(h) and 8.3(i) hereof),
shall survive the termination of this Agreement and the other Loan Documents.
10.3 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
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(INCLUDING, WITHOUT LIMITATION, THE VALIDITY, ENFORCEABILITY, INTERPRETATION
AND CONSTRUCTION THEREOF) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS AND APPLICABLE U.S. FEDERAL LAWS.
10.4 Limitation on Interest. Notwithstanding anything to the
contrary contained in this Agreement or the other Loan Documents, none of the
terms and provisions of this Agreement or the other Loan Documents shall ever
be construed to create a contract or obligation to pay interest at a rate in
excess of the Maximum Lawful Rate; and neither Agent nor any Bank shall ever
charge, receive, take, collect, reserve or apply, as interest on the
Obligations, any amount in excess of the Maximum Lawful Rate. In furtherance
of the foregoing, the parties hereto agree that any interest, charge, fee,
expense or other obligation provided for in this Agreement or in the other
Loan Documents which constitutes interest under applicable law shall be, ipso
facto and under any and all circumstances, limited or reduced to an amount
equal to the lesser of (a) the amount of such interest, charge, fee, expense or
other obligation that would be payable in the absence of this Section 10.4, or
(b) an amount, which when added to all other interest payable under this
Agreement or the other Loan Documents, equals the Maximum Lawful Rate. If,
notwithstanding the foregoing, Agent or any Bank ever contracts for, charges,
receives, takes, collects, reserves or applies as interest any amount in excess
of the Maximum Lawful Rate, such amount which would be deemed excessive
interest shall be deemed a partial payment or prepayment of principal of the
Obligations and treated hereunder as such; and if the Obligations, or
applicable portions thereof, are paid in full, any remaining excess shall
promptly be paid to Borrower (or to such other Person who may be entitled
thereto by law). In determining whether the interest paid or payable, under
any specific contingency, exceeds the Maximum Lawful Rate, Borrower, Agent and
Banks shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate and spread, as appropriate to reflect
variations in the Maximum Lawful Rate, the total amount of interest throughout
the entire contemplated term of the Obligations, or applicable portions
thereof, so that the interest rate does not exceed the Maximum Lawful Rate at
any time during the term of the Obligations; provided that, if the unpaid
principal balance is paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds the Maximum Lawful Rate, Agent and/or Banks, as
appropriate, shall refund to Borrower (or to such other Person who may be
entitled thereto by law) the amount of such excess and, in such event, Agent
and Banks shall not be subject to any penalties provided by any laws for
contracting for, charging, receiving, taking, collecting, reserving or applying
interest in excess of the Maximum Lawful Rate. Borrower hereby agrees that the
actual effective rate of interest from time to time existing with respect to
Loans made by any Bank to Borrower, including all amounts agreed to by Borrower
or that are charged or received by such Bank incident to Loans which may be
deemed to be interest under applicable law, shall be deemed to be a rate which
is agreed to and stipulated by Borrower and Bank in accordance with applicable
law.
10.5 Invalid Provisions. If any provision of this Agreement or any
of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws effective during the term thereof, such provision
shall be fully severable, this Agreement and the Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its
severance therefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of this
Agreement or the other Loan Documents (as the case may be) a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
10.6 Successors and Assigns. (a) Interested Parties; Prohibition
Regarding Assignment by Borrower. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower, Banks and Agent and
their respective successors and assigns; provided, however, that Borrower may
not assign, transfer or delegate any of its rights, duties or obligations under
this Agreement or the other Loan Documents without the prior written consent of
Agent and Banks. Banks may assign, sell and transfer their interests, rights
and obligations under this Agreement and the other Loan Documents only in
accordance with this Section 10.6.
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(b) Assignment by Banks. Any Bank may assign to one or more
Eligible Assignees all or any portion of its interests, rights and obligations
under this Agreement and the other Loan Documents; provided, however, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
all of the assigning Bank's interests, rights and obligations under this
Agreement, (ii) the amount of each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment) shall not be
less than the lesser of (A) the entire amount of such Bank's Loans and Letters
of Credit or (B) the principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (iii) the parties to each such assignment
shall execute and/or deliver to Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with the Notes subject to such
assignment, and a processing and recordation fee of $2,500 payable to Agent.
Upon such execution, delivery, acceptance and recording, from and after the
"Effective Date" specified in the Assignment and Acceptance, which "Effective
Date" shall be not earlier than five Business Days after the date of acceptance
and recording by Agent unless Agent agrees otherwise (provided, however, that,
as between the assigning Bank and the assignee thereunder only, the effective
date shall be the effective date of execution and delivery as between such
Persons as specified in the Assignment and Acceptance), (1) the assignee
thereunder shall be a Bank under this Agreement and, to the extent provided in
such Assignment and Acceptance, have the interests, rights and obligations of a
Bank hereunder and (2) the assigning Bank thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of the assigning Bank's interests, rights and
obligations under this Agreement, such assigning Bank shall cease to be a Bank
under this Agreement). Each Bank shall, in a reasonably prompt fashion after it
has engaged in any material discussions with an Eligible Assignee that
apparently will lead to an assignment referred to in this Section 10.6(b),
notify Borrower of the identity of such Eligible Assignee; provided, however,
that the failure to give any such notification shall not result in any
liability to such Bank and shall not affect the rights of Banks or the
obligations of Borrower hereunder.
(c) Effect of Assignment and Acceptance. By executing and
delivering an Assignment and Acceptance, the assigning Bank thereunder and the
Eligible Assignee thereunder shall be deemed to confirm to and agree with each
other and the other parties hereto as follows: (i) such assignee is an Eligible
Assignee; (ii) other than as provided in the Assignment and Acceptance, such
assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any representations, warranties or other
statements made in or in connection with this Agreement or any other Loan
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document or any
Collateral; (iii) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower
or any Subsidiary or the performance or observance by Borrower or any
Subsidiary of any of its obligations under this Agreement or any other Loan
Document; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent Financial Statements and
other financial information delivered pursuant to Sections 6.3(b), 6.3(c),
6.3(e) and 6.3(g) (or if none of such Financial Statements shall have been
delivered, then copies of the Base Financial Statements) and such other
agreements, documents, instruments, certificates and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon Agent, such assigning Bank or any other Bank and based on
such agreements, documents, instruments, certificates and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement and the other Loan
Documents; (vi) such assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; (vii) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement and the other Loan Documents
are required to be performed by it as a Bank; and (viii) such assignee makes
loans in the ordinary course of its business.
(d) Register. Agent shall maintain at its offices in Houston,
Texas a copy of each Assignment and Acceptance delivered to it and a register
for the recordation of the names and addresses of the Banks, and the
Commitments of, and principal amount of the Loans owing to and Letters of
Credit outstanding from, each Bank pursuant to the terms hereof from time to
time (the "Register"). The entries in the Register shall be conclusive in the
absence of manifest error and Borrower, Agent and Banks may treat each Person
whose name is recorded
53
<PAGE> 55
in the Register pursuant to the terms hereof as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
Borrower and Banks at any reasonable time and from time to time upon reasonable
prior notice.
(e) Acceptance and Recording. Upon its receipt of an Assignment
and Acceptance executed by an assigning Bank and an Eligible Assignee and the
required processing and recordation fee, Agent shall, if such Assignment and
Acceptance is duly completed and is in the required form, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to Banks and Borrower.
(f) Replacement Notes. Within five Business Days after Borrower's
receipt of any such notice from Agent, Borrower, at its own expense, shall
execute and deliver to Agent, in exchange for the surrendered Note or Notes, a
new Note or Notes payable to the order of such assignee in the appropriate
principal amount(s) evidencing such assignee's assigned Loans and Commitment,
and, if the assignor Bank has retained a portion of its Loans and Commitment, a
new Note or Notes payable to the order of such assignor in the appropriate
principal amount(s) evidencing such assignor's Loans and Commitment retained by
it. Such new Note(s) shall be dated the appropriate date(s) and shall
otherwise be in substantially the form of the surrendered Notes, as
appropriate.
(g) Participations. Each Bank may, without the consent of
Borrower or Agent, sell participations to one or more banks or other Persons in
all or a portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Loans or Commitment) and the other Loan
Documents held by it; provided, however, that (i) such Bank shall remain a Bank
for all purposes of this Agreement and the transferee of such participation
shall not constitute a Bank under this Agreement, (ii) such Bank's obligations
under this Agreement shall remain unchanged, (iii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iv) the participating banks or other entities shall be entitled
to the benefit of the provisions contained in Sections 2.9 and 2.12 to the same
extent as if they were Banks hereunder, except that no such participant shall
be entitled to receive any greater benefit pursuant to Section 2.9 than its
assignor Bank would have been entitled to receive with respect to the rights
participated, and (v) Borrower, Agent and the other Banks shall continue to
deal solely and directly with such Bank in connection with such Bank's
interests, rights and obligations under this Agreement and the other Loan
Documents, and such Bank shall retain the sole right to enforce the obligations
of Borrower relating to the Loans and Letters of Credit and to approve any
amendment, modification or waiver of any provision of this Agreement, provided
that such participation agreement may provide that such Bank shall not agree to
any amendment, modification or waiver of this Agreement or the other Loan
Documents, without the consent of such participant, that would (A) reduce the
principal or the rate of interest payable by Borrower on any Loan or Letter of
Credit or reduce any fees payable by Borrower, (B) postpone any date fixed for
the payment of principal of or interest on the Loans or Letters of Credit or
any fees payable by Borrower, (C) increase any Commitment or subject such Bank
to any obligation to make Loans or issue Letters of Credit, (D) release any
Collateral securing any of the Obligations, or (E) amend Section 10.7 or any
other provision of this Agreement requiring the consent or other action of all
Banks.
(h) Disclosure. Any Bank may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 10.6, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower or any Subsidiary, the
Collateral or the Loan Documents furnished to such Bank by or on behalf of the
Borrower or any Subsidiary; provided, however, that, prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality
of any non-public information received from such Bank on the same terms and
conditions as contained in Section 10.13.
(i) Substitution of Banks. If (i) any Bank has demanded
compensation under Section 2.9(a) in an aggregate amount exceeding $15,000
during any calendar year, (ii) it becomes unlawful, impossible or impractical
for any Bank to make or continue to maintain Eurodollar Loans pursuant to
Section 2.9(c) and such circumstance is not applicable to Paribas and Majority
Banks, (iii) with respect to any waiver, amendment or modification which
requires the prior written consent of all Banks pursuant to Section 10.7 and
which waiver, amendment or
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<PAGE> 56
modification has received the prior written consent of Required Banks, any Bank
refuses to provide its written consent to such waiver, amendment or
modification in a reasonably prompt fashion, (iv) any Bank materially defaults
in its obligations to make Loans under this Agreement, or (v) any Bank is or
becomes insolvent or a receiver, conservator or similar authority is appointed
for any Bank, then Agent and/or Borrower shall have the right, but not the
obligation, upon notice to such Bank and Borrower or Agent, as applicable, to
designate, with the consent of such assignee, an assignee for any such Bank,
which assignee shall be an Eligible Assignee mutually satisfactory to Agent and
Borrower, to purchase such Bank's Loans, Letters of Credit and Commitment and
assume such Bank's obligations; provided, however, that Borrower shall not have
the right to designate any assignee for Paribas or to designate any assignee
for any Bank referred to in clause (iii) preceding. Within ten Business Days
after any such notice to such Bank and Borrower or Agent, as applicable, such
Bank shall be obligated to sell its Loans, Letters of Credit and Commitment,
and such assignee shall be obligated to purchase such Loans and assume such
Bank's Letter of Credit Obligations and Commitment, pursuant to an Assignment
and Acceptance. The purchase price therefor shall be an amount equal to the sum
of (A) the outstanding principal amount of the Loans payable to such Bank, plus
(B) all accrued and unpaid interest on such Loans, plus (C) all accrued and
unpaid fees and other amounts due to such Bank pursuant to this Agreement.
(j) Assignment to Federal Reserve Banks. Notwithstanding anything
to the contrary contained in this Section 10.6, any Bank may at any time or
from time to time assign as collateral all or any portion of its rights under
this Agreement with respect to its Loans, Letters of Credit, Commitment and
Note to a Federal Reserve Bank. No such assignment shall release the assigning
Bank from its obligations under this Agreement.
10.7 Entirety and Amendments. Except as provided in Section 2.7
regarding fees, this Agreement and the other Loan Documents embody the entire
agreement between or among the parties hereto relating to the subject matter
hereof and supersede all prior commitment letters, term sheets, discussions,
agreements and understandings, if any, relating to the subject matter hereof;
provided, however, that the terms and provisions of the Commitment Letter
regarding Borrower's payment of costs, fees and expenses of Agent and Banks and
their counsel shall remain in full force and effect. Neither this Agreement
nor any provision hereof or of any of the Loan Documents may be waived, amended
or modified except by an agreement in writing executed jointly by Borrower and
Required Banks, and the same may be supplemented only by documents delivered or
to be delivered in accordance with the express terms hereof, provided however,
that, without the prior written consent of all Banks, no such agreement shall
(a) change or amend the principal amount of, or extend the maturity of or any
date for the payment of any principal of or interest on, any Loan or Letter of
Credit, or waive or excuse any such payment or any part thereof, or reduce the
rate of interest on any Loan or Letter of Credit (other than any such change in
the rate of interest resulting from a change in the Base Rate in accordance
with the definition of such term), (b) change or amend the Commitment or
obligations of any Bank, the provisions of this Section 10.7 or the definitions
of "Majority Banks" or "Required Banks", (c) release any Collateral securing
any of the Obligations, (d) change any fee payable to Agent or any Bank, or (e)
increase the amount of the Aggregate Commitment; provided, further, that no
such agreement shall change or amend or otherwise affect the powers, rights,
remedies or duties of Agent hereunder without the prior written consent of
Agent. Each Bank and each holder of a Note shall be bound by any waiver,
amendment or modification authorized by this Section 10.7 regardless of whether
its Note shall have been marked to make reference thereto, and any consent by
any Bank or holder of a Note pursuant to this Section 10.7 shall bind any
Person subsequently acquiring a Note from it, whether or not such Note shall
have been so marked.
10.8 Counterparts; Effectiveness. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.9 No Duty. All attorneys, accountants, appraisers, consultants
and other professional Persons retained by Agent or any Bank shall have the
right to act exclusively in the interests of Agent or such Bank, respectively,
and shall have no duty of disclosure, duty of loyalty, duty of care or other
duty or obligation of any type or nature whatsoever to Borrower or any
Subsidiary or its officers, directors or stockholders or any other Person.
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<PAGE> 57
10.10 Banks Not Fiduciaries. The relationship between Borrower and
Agent and each Bank is solely that of debtor and creditor, and neither Agent
nor any Bank has or shall have any fiduciary or other special relationship with
Borrower or any Subsidiary, and no term or provision of any of the Loan
Documents shall be construed so as to deem such relationship to be other than
that of debtor and creditor or to involve any fiduciary or other special
relationship.
10.11 Article 15.10(b). The parties hereto agree that, except for
Section 15.10(b) thereof, the provisions of Article 5069 - 15.01 et seq. of the
Revised Civil Statutes of Texas, 1925, as amended (regulating certain revolving
credit loans and revolving triparty accounts) shall not apply to the Loans or
the Loan Documents.
10.12 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN AND
AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN (A) BORROWER AND (B) AGENT OR ANY BANK.
10.13 Confidentiality. Agent and each Bank agree (on behalf of
itself and each of its Affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with customary procedures for handling confidential information of
the nature involved and in accordance with safe and sound banking practices,
any non-public information supplied to it by Borrower pursuant to this
Agreement, provided that Agent and each Bank may disclose (and shall not be
required to keep confidential) such non- public information (a) to the extent
authorized by Borrower, (b) to the extent required by law, rule, regulation or
judicial process of any Tribunal, (c) to its counsel or agents, (d) to bank
examiners, regulators, auditors or accountants, (e) to Agent or any other Bank
in connection with any action, suit or proceeding to which it or any one or
more of Banks is a party, (f) to any assignee or participant (or prospective
assignee or participant) or Affiliate of a Bank so long as such assignee or
participant (or prospective assignee or participant) or Affiliate agrees to
preserve the confidentiality of any non-public information to the extent
required of Banks pursuant to this Section 10.13, (g) which has become public
knowledge through no violation of this Agreement, (h) to the extent such
information becomes available through a Person other than Borrower without
knowledge by Agent or such Bank (as the case may be) of any requirements of
confidentiality, (i) to the extent such information was already known by, or in
the possession of, Agent or such Bank, as the case may be, without restriction
on disclosure thereof at the time such information was supplied by Borrower, or
(j) to the extent such information is also furnished to Agent or any Bank by a
third party not having any similar duty of confidentiality to Borrower. Except
to the extent that such information may be disclosed as provided in the
immediately preceding sentence, all such non-public information supplied to
Agent or any Bank shall not be copied or distributed to any Person other than
Agent and Banks without the prior written consent of Borrower. The obligations
of confidentiality under this Section 10.13 shall supersede and replace the
obligations of Agent and each Bank under any confidentiality letter or other
confidentiality agreement in respect of this financing initially signed and
delivered to Borrower prior to the date hereof.
10.14 Construction of Indemnity and Reimbursement Obligations. It
is the express intention of the parties hereto that all covenants and
agreements made by (a) Borrower or (b) Banks herein (i) to or in favor of Agent
and Banks or (ii) to or in favor of Agent, respectively, regarding any
indemnification or reimbursement or disclaimer of liability, to the extent that
such covenants and agreements provide (expressly or by clear implication) that
the beneficiary of such provisions shall be responsible only for its own gross
negligence or willful misconduct or the like, are intended to and shall
indemnify, reimburse and protect such beneficiary pursuant to the terms thereof
notwithstanding such beneficiary's own negligence (as opposed to gross
negligence or willful misconduct), whether or not that negligence is the sole
or concurring cause of any amount to be indemnified, reimbursed or protected
against.
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10.15 Jurisdiction, Etc.
(a) Jurisdiction. Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
Texas State court or Federal court sitting in Houston, Texas, or Dallas, Texas,
and any appellate court thereof, in any suit, action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any order or judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect
of any such suit, action or proceeding may be heard and determined in such
court located in Texas, or to the extent permitted by law, in such Federal
court in Harris County, Texas or Dallas County, Texas. Each of the parties
hereto agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that Agent or any Bank may otherwise have to bring any
suit, action or proceeding relating to this Agreement or the other Loan
Documents against Borrower or its property in the courts of any jurisdiction.
(b) Venue. Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or the
other Loan Documents in any Texas State court or Federal court sitting in
Houston, Texas, or Dallas, Texas. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such suit, action or proceeding in any such court.
(c) Service of Process. Each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in Section
10.1. Nothing in this Agreement shall affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
10.16 Changes in Accounting Principles. If any changes in generally
accepted accounting principles from those in effect on the date hereof are
hereafter adopted which result in a change in the method of calculation of any
of the financial covenants, standards or terms in this Agreement, the parties
hereto agree to enter into negotiations in order to amend such provisions so as
to equitably reflect such changes with the desired result that the criteria for
evaluating the financial condition of Borrower and its Consolidated
Subsidiaries shall be the same after such changes as if such changes had not
been made.
10.17 References to Schedule 2. Any reference in this Agreement to
Schedule 2 shall be deemed to be a reference only to that portion of Schedule 2
which specifically relates to the Section of this Agreement in which such
reference is made.
10.18 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OF AGENT OR ANY BANK IN THE NEGOTIATION, ADMINISTRATION
OR ENFORCEMENT HEREOF OR THEREOF.
10.19 Termination of Prior Loan Agreement. Concurrently with the
initial Advance under this Agreement on the Closing Date, the Prior Loan
Agreement shall terminate.
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IN WITNESS WHEREOF, Borrower, Agent and Banks have caused this
Agreement to be executed and delivered by their duly authorized officers
effective as of the date first above written.
BORROWER:
NATIONAL INTERGROUP, INC.
By:_________________________________________
Name: John G. Murray
Title: Assistant Treasurer
Address and Telecopy No. for Notice Purposes:
1220 Senlac Drive
Carrollton, Texas 75006
Telecopy No.: (214) 446-4898
AGENT AND A BANK:
BANQUE PARIBAS,
as Agent for Banks and as a Bank
By:_________________________________________
Name: Pierre-Jean de Filippis
Title: General Manager
By:_________________________________________
Name: Bruce A. Cauley
Title: Deputy General Manager
Address and Telecopy No. for Notice Purposes:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No.: (713) 659-4811
with a copy to:
2121 San Jacinto, Suite 930
Dallas, Texas 75201
Telecopy No.: (214) 969-0260
58
<PAGE> 1
EXHIBIT 11
NATIONAL INTERGROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
-------------------- ---------------------
1993 1992 1993 1992
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Primary
-------
Earnings
Income from operations $ 7,579 $ (6,349) $ 12,982 $ 4,948
Deduct dividends on preferred shares 3,210 1,338 5,740 4,088
-------- -------- -------- ---------
Net income (loss) applicable to common
stockholders $ 4,369 $ (7,687) $ 7,242 $ 860
======== ======== ======== =========
Shares
Weighted average number of shares of common
stock outstanding 15,394 19,697 18,264 20,057
======== ======== ======== =========
Net income (loss) $ 0.28 $ (0.39) $ 0.40 $ 0.04
======== ======== ======== =========
Assuming Full Dilution
----------------------
Earnings
Income from operations $ 7,579 $ (6,349) $ 12,982 $ 4,948
Dividends on preferred shares (conversion of
preferred shares would be anti-dilutive) 3,210 1,338 5,740 4,088
-------- -------- -------- ---------
Net income (loss) applicable to common stockholders $ 4,369 $ (7,687) $ 7,242 $ 860
======== ======== ======== =========
Shares
Weighted average number of common shares
outstanding 15,394 19,697 18,264 20,057
Conversion of preferred stock (anti-dilutive) - - - -
Assuming conversion of 4 5/8% convertible debentures 67 68 67 68
-------- -------- -------- ---------
Weighted average number of shares of common
stock outstanding as adjusted 15,461 19,765 18,331 20,125
======== ======== ======== =========
Net income (loss)** $ 0.28 $ (0.39) $ 0.40 $ 0.04
======== ======== ======== =========
</TABLE>
** This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
