PAGE
<PAGE>
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 June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-11902
GIBSON GREETINGS, INC.
Incorporated under the laws IRS Employer
of the State of Delaware Identification No. 52-1242761
2100 Section Road, Cincinnati, Ohio 45237
Telephone Number: Area Code 513-841-6600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 16,140,279 shares of common
stock, par value $.01, outstanding at August 7, 1996.
PAGE
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<TABLE>
Part I. Item 1. Financial Statements
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
June 30, December 31, June 30,
1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 64,291 $ 15,555 $ 8,100
Note receivable - 24,574 -
Trade receivables, net 19,570 46,620 38,321
Inventories 73,377 68,303 190,111
Income tax receivable 7,810 10,698 -
Prepaid expenses 3,196 4,054 5,873
Deferred income taxes 40,042 45,011 42,355
--------- --------- ---------
Total current assets 208,286 214,815 284,760
--------- --------- ---------
Plant and equipment, net 91,441 90,813 116,275
Deferred income taxes 15,168 14,745 9,905
Other assets, net 97,170 105,454 94,730
--------- --------- ---------
$ 412,065 $ 425,827 $ 505,670
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year $ 7,898 $ 28,894 $ 49,252
Accounts payable 8,883 7,995 17,859
Income taxes payable - - 222
Other current liabilities 71,529 71,642 67,707
--------- --------- ---------
Total current liabilities 88,310 108,531 135,040
--------- --------- ---------
Long-term debt 41,139 46,533 52,474
Sales agreement payments due
after one year 17,568 18,564 19,333
Other liabilities 23,131 21,957 20,873
--------- --------- ---------
Total liabilities 170,148 195,585 227,720
--------- --------- ---------
Stockholders' Equity:
Preferred stock, par value $1.00;
5,000,000 shares authorized,
none issued - - -
Preferred stock, Series A, par
value $1.00; 300,000 shares
authorized, none issued - - -
Common stock, par value $.01;
50,000,000 shares authorized,
16,602,528 shares issued at June 30,
1996 and 16,585,130 shares issued at
December 31, 1995 and 16,579,930
shares at June 30, 1995 166 166 166
Paid-in capital 46,218 46,041 46,033
Retained earnings 203,254 191,793 239,194
Foreign currency adjustment (1,770) (1,807) (1,497)
--------- --------- ---------
247,868 236,193 283,896
Less treasury stock, at cost,
494,601 shares at June 30, 1996
and December 31, 1995 and 489,701
shares at June 30, 1996 5,951 5,951 5,946
--------- --------- ---------
Total stockholders' equity 241,917 230,242 277,950
--------- --------- ---------
$ 412,065 $ 425,827 $ 505,670
========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 88,585 $ 97,470 $ 186,364 $ 197,757
--------- --------- --------- ---------
Costs and expenses
Operating expenses:
Cost of products sold 31,106 37,520 65,444 76,688
Selling, distribution
and administrative
expenses 46,082 55,264 98,289 112,038
--------- --------- --------- ---------
Total operating
expenses 77,188 92,784 163,733 188,726
--------- --------- --------- ---------
Operating income 11,397 4,686 22,631 9,031
--------- --------- --------- ---------
Financing expenses:
Interest expense 1,835 3,012 3,982 6,143
Interest income (745) (139) (1,403) (225)
--------- --------- --------- ---------
Total financing
expenses, net 1,090 2,873 2,579 5,918
--------- --------- --------- ---------
Income before
income taxes 10,307 1,813 20,052 3,113
Income taxes 4,438 1,172 8,587 2,201
--------- --------- --------- ---------
Net income $ 5,869 $ 641 $ 11,465 $ 912
========= ========= ========= =========
Net income per share $ 0.36 $ 0.04 $ 0.70 $ 0.06
========= ========= ========= =========
Dividends per share $ - $ - $ - $ -
========= ========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 11,465 $ 912
---------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and write-down of display fixtures 10,867 11,512
Loss on disposal of plant and equipment 174 2,932
Deferred income taxes 4,546 4,595
Amortization of deferred costs and other
intangibles 12,152 10,621
Change in assets and liabilities:
Decrease in trade receivables, net 27,050 159,478
Increase in inventories (5,074) (62,651)
Decrease in income tax receivable 2,888 -
(Increase) decrease in prepaid expenses 858 (154)
Increase in other assets, net of amortization (3,868) (2,480)
Increase (decrease) in accounts payable 888 (3,920)
Decrease in income taxes payable - (4,520)
Decrease in other current liabilities (113) (19,283)
Increase (decrease)in other liabilities 178 (631)
All other, net 30 (345)
---------- ----------
Total adjustments 50,576 95,154
---------- ----------
Net cash provided by operating activities 62,041 96,066
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (11,863) (11,583)
Proceeds from sale of plant and equipment 197 219
Collection of note receivable 24,574 -
---------- ----------
Net cash provided by (used in)
investing activities 12,908 (11,364)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings (19,000) (67,950)
Payments on long-term debt, net (7,390) (10,687)
Issuance of common stock 177 41
Acquisition of common stock for treasury - (6)
---------- ----------
Net cash used in financing activities (26,213) (78,602)
---------- ----------
NET INCREASE IN CASH AND EQUIVALENTS 48,736 6,100
CASH AND EQUIVALENTS BEGINNING OF PERIOD 15,555 2,000
---------- ----------
CASH AND EQUIVALENTS END OF PERIOD $ 64,291 $ 8,100
========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 2,021 $ 4,797
Income taxes 1,154 2,124
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
GIBSON GREETINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 1996 and 1995
(Dollars in thousands except per share amounts)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
the accounts of Gibson Greetings, Inc. and its subsidiaries (the Company).
Intercompany transactions and balances have been eliminated in consolidation.
The unaudited condensed consolidated financial statements have been prepared
in accordance with Article 10-01 of Regulation S-X of the Securities and
Exchange Commission and, as such, do not include all information required by
generally accepted accounting principles. However, in the opinion of the
Company, these financial statements contain all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the financial
position as of June 30, 1996, December 31, 1995 and June 30, 1995, the results
of its operations for the three and six months ended June 30, 1996 and 1995
and its cash flows for the six months ended June 30, 1996 and 1995. The
accompanying financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123 - "Accounting for Stock-Based
Compensation." This statement establishes expanded financial accounting and
disclosure standards for stock-based compensation plans. SFAS No. 123 permits
companies to continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its stock
based compensation awards and will disclose the required pro forma effect of
compensation costs based on the fair value of the equity instrument awarded on
net income and earnings per share.
Note 2 - Seasonal Nature of Business
Because of the seasonal nature of the Company's business, results of
operations for interim periods are not necessarily indicative of results for
the full year.
Note 3 - Trade Receivables
Trade receivables consist of the following:
June 30, December 31, June 30,
1996 1995 1995
--------- --------- ---------
Trade receivables $ 66,190 $ 105,898 $ 81,436
Less reserve for returns,
allowances, cash discounts
and doubtful accounts 46,620 59,278 43,115
--------- --------- ---------
$ 19,570 $ 46,620 $ 38,321
========= ========= =========
PAGE
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Note 4 - Inventories
Inventories consist of the following:
June 30, December 31, June 30,
1996 1995 1995
--------- --------- ---------
Finished goods $ 52,083 $ 47,967 $ 126,295
Work-in-process 13,995 12,409 19,281
Raw materials and supplies 7,299 7,927 44,535
--------- --------- ---------
$ 73,377 $ 68,303 $ 190,111
========= ========= =========
Note 5 - Interest Expense
There was no capitalized interest for the three and six month periods ended
June 30, 1996 and 1995.
Note 6 - Net Income Per Share
The weighted average number of shares of common stock and equivalents
outstanding used in computing net income per share is as follows:
1996 1995
---------- ----------
Three months ended June 30, 16,243 16,200
========== ==========
Six months ended June 30, 16,264 16,149
========== ==========
Note 7 - Condensed Consolidated Statement of Operations - Pro Forma
Three Months Ended Six Months Ended
June 30, 1995 (1) June 30, 1995 (1)
----------------- -----------------
REVENUES $ 87,516 $ 180,187
--------- ---------
COSTS AND EXPENSES:
Operating expenses:
Cost of products sold 29,059 62,002
Selling, distribution and
administrative expenses 47,467 96,773
--------- ---------
Total operating expenses 76,526 158,775
--------- ---------
OPERATING INCOME 10,990 21,412
--------- ---------
Financing expenses:
Interest expense 2,324 4,663
Interest income (139) (225)
--------- ---------
Total financing expenses,
net 2,185 4,438
--------- ---------
INCOME BEFORE INCOME TAXES 8,805 16,974
Income taxes 3,865 7,452
--------- ---------
NET INCOME $ 4,940 $ 9,522
========= =========
NET INCOME PER SHARE $ 0.31 $ 0.59
========= =========
(1) The unaudited Condensed Consolidated Statement of Operations - Pro Forma
is based upon the Statement of Operations of the Company for the three and six
months ended June 30, 1995 and gives effect to the sale in November 1995 of
Cleo, Inc. (Cleo), the Company's wholly-owned gift wrap subsidiary, as if it
had occurred as of January 1, 1995 after giving effect to the pro forma
adjustments. Pro forma adjustments represent management fee allocations
including legal, tax and administrative expenses that are not expected to be
eliminated, reduction in interest expense as a result of prepayment of
short-term debt with sale proceeds and additional commitment fees on the
unused portion of the revolving credit facility and an increase in income tax
resulting from the income tax on reversal of loss on sale of Cleo net of pro
forma expenses. Senior notes were assumed not to be prepaid. The pro forma
financial data set forth above does not purport to represent what the
Company's financial position or results of operations actually would have been
if the sale, in fact, occurred on the date referred to above. This pro forma
financial data should be read in conjunction with the condensed consolidated
financial statements and notes thereto contained herein, as well as the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
Note 8 - Legal Matters
In July 1994, immediately following the Company's announcement of an inventory
misstatement at Cleo, which resulted in an overstatement of the Company's
previously reported 1993 consolidated net income, five purported class actions
were commenced by certain stockholders. These suits were consolidated and a
Consolidated Amended Class Action Complaint against the Company, its then
Chairman, President and Chief Executive Officer, its Chief Financial Officer
and the former President and Chief Executive Officer of Cleo was filed in
October 1994 in the United States District Court for the Southern District of
Ohio (In Re Gibson Securities Litigation). In December 1994 the Court ruled
that neither of the two named plaintiffs qualified as a class representative.
Plaintiffs filed an Amended Complaint naming a proposed substitute class
representative, and a motion to certify a class which the Court also denied.
Plaintiffs have sought reconsideration or, in the alternative, immediate
appeal of that ruling. The most recent complaint alleges violations of the
federal securities laws and seeks unspecified damages for an asserted public
disclosure of false information regarding the Company's earnings. The Company
intends to defend the suit vigorously and has filed an Answer denying any
wrongdoing and a Third Party Complaint against its former auditor for
contribution against any judgment adverse to the Company. The Company also
has filed a motion to dismiss, which is pending. The case currently is
scheduled to be tried in December 1996.
PAGE
<PAGE>
On April 10, 1995, two purported class action lawsuits were commenced against
the Company, its then Chairman, President and Chief Executive Officer and its
Chief Financial Officer in the United States District Court for the Southern
District of Ohio. The Complaints alleged violations of the federal securities
law for an asserted failure to disclose allegedly material information
regarding the Company's financial performance. On August 1, 1995, the two
lawsuits were consolidated and captioned In Re Gibson Greetings Securities
Litigation II. On August 9, 1995, the plaintiffs filed a Consolidated Amended
Class Action Complaint which restated the basic claims which had been
presented in the original complaints. The Court has denied, at this stage,
the Company's motion to dismiss the Consolidated Amended Complaint and also
has conditionally denied the plaintiffs' motion to certify a class for
purposes of class action treatment of the litigation. The Court will
reconsider the class action certification motion at the conclusion of
discovery. The Company intends to defend the action vigorously.
The litigation described in the two preceding paragraphs remain in early
stages of proceedings. Accordingly, the Company presently is unable to
predict the effect of the ultimate resolutions of these matters upon the
Company's results of operations and cash flows; as of this date, however,
Management does not expect that such resolutions would result in a material
adverse effect upon the Company's total net worth, although a substantially
unfavorable outcome could be material to such net worth.
On March 6, 1996, two purported class actions were filed against the Company's
directors (as well as certain former directors) and the Company in the New
Castle County, Delaware Court of Chancery (Crandon Capital Partners v. Cooney,
et al. and Weiss v. Lindberg, et al.). The Complaints allege that the
individual defendants breached their fiduciary duties to the plaintiffs by
refusing to negotiate in response to an acquisition proposal for the Company
by American Greetings Corporation. The Complaints seek to require the
directors to do a number of things, including pursuing merger or acquisition
discussions with American Greetings and others. The Complaints also seek
unspecified damages against those directors. On March 20, 1996, a third
action, Krim, et al. v. Pezzillo, et al., was filed in the same court. While
it generally follows the allegations and demands of the other two Complaints,
it specifically seeks injunctive relief against the exercise of the
shareholder rights plan that has been a part of the Company's corporate
governance for nearly ten years. While the Company is a named defendant in
all three actions, none of the Complaints appears to seek any other specific
relief against the Company. The defendants intend to defend the suits
vigorously.
PAGE
<PAGE>
In 1989, unfair labor practice charges were filed against the Company as an
outgrowth of a strike at its Berea, Kentucky facility. Remedies sought
included back pay from August 8, 1989 and reinstatement of employment for
approximately 200 employees (In the Matter of Gibson Greetings, Inc. and
International Brotherhood of Firemen and Oilers, AFL-CIO Cases 9-CA-26706,
27660, 26875). On May 19, 1995, a unanimous panel of the United States Court
of Appeals for the District of Columbia Circuit found that the strike was not
an unfair labor practice strike and that a significant number of strikers had
been permanently replaced and thus were not entitled to reinstatement or back
pay. The Court remanded the case to the National Labor Relations Board for a
factual determination on the issue of permanency with respect to approximately
52 replacements hired after June 29, 1989. On August 2, 1996 a decision was
rendered dismissing the remaining charges and finding that the strikers were
permanently replaced. If no exceptions to this ruling are filed prior to
August 30, 1996, the decision will become final and the matter will be
concluded. Management does not believe that the outcome of this matter will
result in a material adverse effect on the Company's net worth, total cash
flows or annual operating results.
In addition, the Company is a defendant in certain other routine litigation
which is not expected to result in a material adverse effect on the Company's
net worth, total cash flows or operating results.
PAGE
<PAGE>
Part I., Item 2., Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
In mid-November 1995, the Company sold Cleo, Inc. (Cleo), its wholly-owned
gift wrap subsidiary. In addition to gift wrap and related products, Cleo
manufactured and sold Christmas cards and Valentines. Revenues of Cleo
included in the condensed consolidated financial statements for the three and
six months ended June 30, 1995 were $10.0 million and $17.6 million,
respectively. The results of operations for the three and six months ended
June 30, 1995 included Cleo's results of operations. For comparative
purposes, the discussion below presents results of operations for the three
and six months ended June 30, 1995 on a pro forma basis, excluding Cleo, as
well as on an historical basis. See Note 7 of Notes to Condensed Consolidated
Financial Statements set forth in Item 1 for certain comparative pro forma
data for the three and six months ended June 30, 1995.
Pro Forma Results of Operations - Three Months Ended June 30, 1996 Compared
with Three Months Ended June 30, 1995
Revenues in the second quarter of 1996 increased 1.2% to $88.6 million from
pro forma revenues of $87.5 million in the second quarter of 1995, reflecting
growth at The Paper Factory of Wisconsin, Inc. (The Paper Factory) and higher
international greeting card sales partially offset by a modest decline in
domestic greeting card sales. The decline in domestic greeting card sales
resulted from a volume decrease largely due to the previously announced 1995
loss of a major greeting card customer, however, this was substantially offset
by new rooftops and increased selling prices. Returns and allowances were
18.0% of sales for the three months ended June 30, 1996 compared to pro forma
returns and allowances of 15.1% for the same period in 1995. The increase in
returns and allowances represents higher provisions for seasonal and everyday
returns as well as higher long-term sales contract amortization due to new
sales contracts.
Total operating expenses were $77.2 million in the second quarter of 1996
representing a .9% increase from the total pro forma operating expenses in the
second quarter of 1995. Cost of products sold as a percent of revenues was
35.1% versus pro forma cost of product sold as a percent of revenues of 33.2%
for the second quarter of 1995. The increase was primarily due to a change in
the product mix and higher customer allowances. Selling, distribution and
administrative expenses as a percent of revenues decreased to 52.0% in the
second quarter of 1996 as compared to 54.2% in the second quarter of 1995,
primarily due to a one-time cancellation payment from a former customer of
$2.5 million partially offset by new store operating expenses at The Paper
Factory and non-recurring charges. The Company continues to face strong
competitive pressures with regard to both price and terms of sale.
Interest expense, net reflected no short-term borrowings, reduced long-term
debt and increased interest income on invested balances in the second quarter
of 1996 compared to the pro forma second quarter of 1995.
PAGE
<PAGE>
Second quarter 1996 pretax income of $10.3 million compared with pro forma
pretax income for 1995 of $8.8 million. The effective income tax rate was
43.1% for the second quarter of 1996 compared to a pro forma effective income
tax rate of 43.9% for the second quarter of 1995.
Net income for the second quarter of 1996 was $5.9 million compared with pro
forma 1995 net income of $4.9 million.
Pro Forma Results of Operations - Six Months Ended June 30, 1996 Compared with
Six Months Ended June 30, 1995
Revenues for the six months ended June 30, 1996 increased 3.4% to $186.4
million from pro forma revenues of $180.2 million for the six months ended
June 30, 1995, reflecting growth at The Paper Factory and higher international
greeting card sales partially offset by a modest decline in domestic greeting
card sales. The decline in domestic greeting card sales resulted from a
volume decrease largely due to the previously announced 1995 loss of a major
greeting card customer, however, this was substantially offset by new rooftops
and increased selling prices. Returns and allowances were 19.8% of sales for
the six months ended June 30, 1996 compared to pro forma returns and
allowances of 19.2% for the same period in 1995. The increase in returns and
allowances represents higher provisions for seasonal and everyday returns as
well as higher long-term sales contract amortization due to new sales
contracts.
Total operating expenses were $163.7 million for the six months ended June 30,
1996 representing a 3.1% increase from the total pro forma operating expenses
for the six months ended June 30, 1995. Cost of products sold as a percent of
revenues was 35.1% versus pro forma cost of product sold as a percent of
revenues of 34.4% for the six months ended June 30, 1995. The increase was
primarily due to a change in the product mix and higher customer allowances.
Selling, distribution and administrative expenses as a percent of revenues
decreased to 52.7% for the six months ended June 30, 1996 as compared to 53.7%
for the six months ended June 30, 1995, primarily due to cost control measures
partially offset by new store operating expenses at The Paper Factory. The
Company continues to face strong competitive pressures with regard to both
price and terms of sale.
Interest expense, net reflected lower average short-term borrowings, reduced
long-term debt and increased interest income on invested balances for the six
months ended June 30, 1996 compared to the pro forma for the six months ended
June 30, 1995.
For the six months ended June 30, 1996 pretax income of $20.1 million compared
with pro forma pretax income for 1995 of $17.0 million. The effective income
tax rate was 42.8% for the six months ended June 30, 1996 compared to a pro
forma effective income tax rate of 43.9% for the six months ended June 30,
1995.
Net income for the six months ended June 30, 1996 was $11.5 million compared
with pro forma 1995 net income of $9.5 million.
Results of Operations - Three Months Ended June 30, 1996 Compared with Three
Months Ended June 30, 1995
PAGE
<PAGE>
Revenues in the second quarter of 1996 decreased 9.1% to $88.6 million from
revenues in the second quarter of 1995 reflecting the reduction of revenue as
a result of the sale of Cleo and a modest decline in domestic greeting card
sales, partially offset by growth at The Paper Factory and increased
international greeting card sales. Returns and allowances were 18.0% of sales
for the three months ended June 30, 1996 compared to returns and allowances of
14.0% for the same period in 1995. The increase represents the combination of
an increase in provisions for seasonal and everyday returns and an increase in
long-term sales contract amortization due to new sales contracts.
Total operating expenses were $77.2 million in the second quarter of 1996
representing a 16.8% decrease from the total operating expenses in the second
quarter of 1995. Cost of products sold as a percent of revenues was 35.1%
versus cost of product sold as a percent of revenues of 38.5% for the second
quarter of 1995. The decrease was primarily due to the sale of Cleo which
resulted in a change in the Company's product mix which now consists of higher
margin products. Selling, distribution and administrative expenses as a
percent of revenues were 52.0% versus 56.7% primarily due to the reduction of
expenses as a result of the sale of Cleo, a one-time cancellation payment from
a former customer of $2.5 million partially offset by new store operating
expenses at The Paper Factory and non-recurring charges. The Company
continues to face strong competitive pressures with regard to both price and
terms of sale.
Interest expense, net reflected no short-term borrowings, reduced long-term
debt and increased interest income on invested balances in the second quarter
of 1996 compared to the second quarter of 1995.
Second quarter 1996 pretax income of $10.3 million compared with pretax income
for 1995 of $1.8 million. The effective income tax rate was 43.1% for the
second quarter of 1996 compared to an effective income tax rate of 64.6% for
the second quarter of 1995.
Net income for the second quarter of 1996 was $5.9 million compared with 1995
net income of $.6 million.
Results of Operations - Six Months Ended June 30, 1996 Compared with Six
Months Ended June 30, 1995
Revenues for the six months ended June 30, 1996 decreased 5.8% to $186.4
million from revenues of $197.8 million for the six months ended June 30, 1995
reflecting the reduction of revenue as a result of the sale of Cleo and a
modest decline in domestic greeting card sales, partially offset by growth at
The Paper Factory and increased international greeting card sales. Returns
and allowances were 19.8% of sales for the six months ended June 30, 1996
compared to returns and allowances of 18.0% for the same period in 1995. The
increase represents the combination of an increase in provisions for seasonal
and everyday returns and an increase in long-term sales contract amortization
due to new sales contracts.
PAGE
<PAGE>
Total operating expenses were $163.7 million for the six months ended June 30,
1996 representing a 13.2% decrease from the total operating expenses for the
six months ended June 30, 1995. Cost of products sold as a percent of
revenues was 35.1% versus cost of product sold as a percent of revenues of
38.8% for the six months ended June 30, 1995. The decrease was primarily due
to the sale of Cleo which resulted in a change in the Company's product mix
which is now composed of higher margin products. Selling, distribution and
administrative expenses as a percent of revenues were 52.7% versus 56.7%
primarily due to the reduction of expenses as a result of the sale of Cleo and
partially offset by new store operating expenses at The Paper Factory. The
Company continues to face strong competitive pressures with regard to both
price and terms of sale.
Interest expense, net reflected lower average short-term borrowings, reduced
long-term debt and increased interest income on invested balances for the six
months ended June 30, 1996 compared to the six months ended June 30, 1995.
For the six months ended June 30, 1996 pretax income of $20.1 million compared
with pretax income for 1995 of $3.1 million. The effective income tax rate
was 42.8% for the six months ended June 30, 1996 compared to an effective
income tax rate of 70.7% for the six months ended June 30, 1995.
Net income for the six months ended June 30, 1996 was $11.5 million compared
with 1995 net income of $.9 million.
Liquidity and Capital Resources
Cash flow from operating activities for the first six months of 1996 provided
$62.0 million in cash compared to $96.1 million for the same period in 1995.
The decrease from 1995 reflected a substantial reduction in trade receivables
outstanding at the beginning of the year as a result of the disposition of
Cleo. Cleo historically comprised the largest percentage of the Company's
trade receivables at the beginning of the year. The significantly lower
increase in inventory levels from the prior year also reflects the change from
the previously necessary substantial build up of inventory for Cleo's
Christmas season. The decline in other current liabilities reflects payments
to customers under contracts, principally negotiated in 1994 and 1995 and
fewer new contracts in 1996.
Cash provided by investing activities in 1996 was $12.9 million compared to
cash used in investing activities of $11.4 million in 1995. Capital
expenditures for the full 1996 fiscal year are expected to be comparable to
1995.
Cash used in financing activities for the six months ended June 30, 1996 was
$26.2 million compared to $78.6 million in 1995. The decrease reflects the
repayment of lower short-term borrowing levels outstanding at December 31,
1995 compared to December 31, 1994.
On April 26, 1996, the Company entered into a $40.0 million, 364-day revolving
bank credit line that will be utilized for working capital purposes. This
credit line replaces the agreement that expired on April 26, 1996.
PAGE
<PAGE>
Management believes that its cash flow from operations and credit sources will
provide adequate funds, both on a short-term and on a long-term basis, for
currently foreseeable debt payments, lease commitments and payments under
existing customer agreements, as well as for financing existing operations,
currently projected capital expenditures, anticipated long-term sales
agreements consistent with industry trends and other contingencies. (See Note
8 of Notes to Condensed Consolidated Financial Statements)
With the sale of Cleo, the Company anticipates significantly lower short-term
borrowing requirements in 1996 compared with the Company's historical levels.
Capital expenditures for 1996 are expected to be consistent with historical
trends for the remaining operating units. The note receivable outstanding at
December 31, 1995 received in connection with the sale of Cleo was collected
on January 29, 1996 and short-term debt at December 31, 1995 was repaid by
mid-January utilizing cash flow from operations and proceeds from the sale of
Cleo.
Except for the historical information contained herein, the matters discussed
in this report are forward-looking statements which involve risks and
uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices.
PAGE
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information presented in Note 8 of Notes to Condensed Consolidated
Financial Statement (Part I, Item 1) is incorporated by reference in response
to this Item.
Item 2. Changes In Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held May 23, 1996 for
the following purposes:
To elect three directors;
To approve the Gibson Greetings, Inc. 1996 Nonemployee Director Stock Plan.
The results of the matters voted on are as follows:
Against
or Broker
For Withheld Abstentions Non-Votes
---------- -------- ----------- ---------
Election of Directors:
Charles D. Lindberg 13,338,202 2,072,171 - -
Albert R. Pezzillo 13,329,844 2,080,529 - -
C. Anthony Wainwright 13,340,907 2,069,466 - -
The 1996 Nonemployee
Director Stock Plan 13,558,156 1,793,476 58,741 -
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 10(a) Form of Credit Agreement dated
as of April 26, 1996 by and among
Gibson Greetings, Inc.; The Lenders
Party Thereto and The Bank of New
York, as Agent
Exhibit 27 Financial Data Schedule (contained in
EDGAR filing only).
b) Reports on Form 8-K None.
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Gibson
Greetings, Inc. has duly caused this amended report to be signed on its behalf
by the undersigned thereunto duly authorized.
GIBSON GREETINGS, INC.
Date: August 13, 1996 By:/s/ William L. Flaherty
------------------------
William L. Flaherty
Vice President-Finance
Principal Financial
and Accounting Officer
PAGE
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 64291
<SECURITIES> 0
<RECEIVABLES> 66190
<ALLOWANCES> 46620
<INVENTORY> 73377
<CURRENT-ASSETS> 208286
<PP&E> 175157
<DEPRECIATION> 83716
<TOTAL-ASSETS> 412065
<CURRENT-LIABILITIES> 88310
<BONDS> 0
<COMMON> 166
0
0
<OTHER-SE> 241751
<TOTAL-LIABILITY-AND-EQUITY> 412065
<SALES> 186364
<TOTAL-REVENUES> 186364
<CGS> 65444
<TOTAL-COSTS> 163733
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3982
<INCOME-PRETAX> 20052
<INCOME-TAX> 8587
<INCOME-CONTINUING> 11465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11465
<EPS-PRIMARY> .70
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</TABLE>
PAGE
<PAGE>
EXHIBIT 10(a)
CREDIT AGREEMENT
by and among
GIBSON GREETINGS, INC.
THE LENDERS PARTY HERETO,
and
THE BANK OF NEW YORK,
as Agent
__________________________
$40,000,000
__________________________
Dated as of April 26, 1996
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1
1.1 Definitions 1
1.2 Principles of Construction 14
2. AMOUNT AND TERMS OF LOANS 15
2.1 Loans 15
2.2 Notes 15
2.3 Notice of Borrowing 16
2.4 Termination or Reduction of Commitments 16
2.5 Prepayments of the Loans 17
2.6 Use of Proceeds 17
3. PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD PROTECTION
AND FEES 18
3.1 Disbursement of the Proceeds of the Loans 18
3.2 Payments 19
3.3 Conversions; Other Matters 19
3.4 Interest Rates and Payment Dates 21
3.5 Indemnification for Loss 22
3.6 Reimbursement for Costs, Etc. 23
3.7 Illegality of Funding 24
3.8 Option to Fund; Substituted Interest Rate 24
3.9 Certificates of Payment and Reimbursement 25
3.10 Taxes; Net Payments 26
3.11 Commitment Fees 27
3.12 Upfront Fee 28
4. REPRESENTATIONS AND WARRANTIES 28
4.1 Subsidiaries; Capital Stock 28
4.2 Existence and Power 28
4.3 Authority 29
4.4 Binding Agreement 29
4.5 Litigation 29
4.6 No Conflicting Agreements 30
4.7 Taxes 30
4.8 Compliance with Applicable Laws; Filings 31
4.9 Governmental Regulations 31
4.10 Property 31
4.11 Federal Reserve Regulations; Use of Loan Proceeds 32
4.12 No Misrepresentation 32
4.13 Plans 32
4.14 Environmental Matters 33
4.15 Financial Statements 33
4.16 Franchises, Intellectual Property, Etc. 34
4.17 Labor Relations 34
5. CONDITIONS OF MAKING LOANS ON THE FIRST BORROWING DATE 35
5.1 Evidence of Corporate and Other Action 35
5.2 Notes 35
5.3 Subsidiary Guaranty 35
5.4 Existing Bank Indebtedness 35
5.5 Approvals 36
5.6 Litigation 36
5.7 Insurance 36
5.8 Approval of Special Counsel 36
5.9 Opinion of Counsel 36
5.10 Payment of Fees 37
5.11 Senior Notes Agreement 37
5.12 Other Documents 37
6. CONDITIONS OF MAKING LOANS ON EACH BORROWING DATE 37
6.1 Compliance 37
6.2 Closings 37
6.3 Borrowing Request 37
7. AFFIRMATIVE AND FINANCIAL COVENANTS 38
7.1 Legal Existence 38
7.2 Taxes 38
7.3 Insurance 38
7.4 Performance of Obligations 38
7.5 Condition of Property 39
7.6 Observance of Legal Requirements 39
7.7 Financial Statements and Other Information 39
7.8 Inspection 42
7.9 Authorizations 42
7.10 Subsidiaries 42
7.11 Leverage 42
7.12 Consolidated Net Worth 42
7.13 Interest Coverage 42
7.14 Additional Subsidiaries 42
8. NEGATIVE COVENANTS 43
8.1 Indebtedness 43
8.2 Liens 44
8.3 Dispositions 45
8.4 Mergers and Acquisitions 45
8.5 Investments 45
8.6 Restricted Payments 47
8.7 Limitation on Upstream Dividends by Subsidiaries 47
8.8 Line of Business 48
8.9 Amendment of Certain Documents and Agreements 48
8.10 Transactions with Affiliates 48
8.11 Capital Expenditures 48
8.12 Long Term Leases 48
9. DEFAULT 49
9.1 Events of Default 49
9.2 Contract Remedies 51
10. THE AGENT 52
10.1 Appointment 52
10.2 Delegation of Duties 53
10.3 Exculpatory Provisions 53
10.4 Reliance by Agent 54
10.5 Notice of Default 54
10.6 Non-Reliance 55
10.7 Indemnification 55
10.8 Agent in Its Individual Capacity 56
10.9 Successor Agent 56
11. OTHER PROVISIONS 57
11.1 Amendments, Waivers, Etc. 57
11.2 Notices 58
11.3 No Waiver; Cumulative Remedies 60
11.4 Survival of Representations and Warranties 60
11.5 Payment of Expenses and Taxes 60
11.6 Lending Offices 61
11.7 Successors and Assigns 61
11.8 Counterparts 64
11.9 Set-off and Sharing of Payments 64
11.10 Indemnity 65
11.11 Governing Law 66
11.12 Severability 66
11.13 Integration 67
11.14 Acknowledgments 67
11.15 Consent to Jurisdiction 67
11.16 Service of Process 67
11.17 No Limitation on Service or Suit 68
11.18 WAIVER OF TRIAL BY JURY 68
11.19 Effective Date 68
EXHIBITS
Exhibit A List of Commitments; Addresses for Notices
Exhibit B Form of Note
Exhibit C Form of Borrowing Request
Exhibit D Form of Subsidiary Guaranty
Exhibit E Form of Opinion of Special Counsel
Exhibit F Form of Opinion of Counsel to the Borrower and the
Subsidiaries
Exhibit G Form of Compliance Certificate
Exhibit H Form of Assignment and Acceptance Agreement
SCHEDULES
Schedule 4.1 List of Subsidiaries, Material Subsidiaries,
Exceptions to 100% Ownership of Subsidiaries
and Capital Stock
Schedule 4.5 List of Litigation
Schedule 4.14 List of Environmental Matters
Schedule 4.17 List of Collective Bargaining Agreements
Schedule 8.1 List of Indebtedness
Schedule 8.2 List of Existing Liens
Schedule 8.5 List of Existing Investments
<PAGE>
Credit Agreement, dated as of April 26, 1996, by and among Gibson Greetings,
Inc., a Delaware corporation (the "Borrower"), the lenders party hereto from
time to time (each a "Lender" and, collectively, the "Lenders"), and The Bank
of New York, as agent for the Lenders (in such capacity, the "Agent").
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1 Definitions
When used herein, terms defined in the preamble have the respective meanings
indicated therein, and each of the following terms have the meaning ascribed
thereto unless the context hereof otherwise specifically requires:
"ABR Advances": the Loans (or any portions thereof) at such time as they (or
such portions) are made or are being maintained at a rate of interest based
upon the Alternate Base Rate.
"Accountants": Deloitte & Touche LLP, any other "big six" firm of independent
certified public accountants (or any successor thereto), or such other firm of
independent certified public accountants of recognized national standing as
shall be selected by the Borrower and reasonably satisfactory to the Agent.
"Acquisition": with respect to any Person, the purchase or other acquisition
by such Person, by any means whatsoever (including by devise, bequest, gift,
through a dividend or otherwise), of (a) Stock of, or other equity securities
of, any other Person if, immediately thereafter, such other Person would be
either a consolidated subsidiary of such Person or otherwise under the control
of such Person, (b) any business, going concern or division or segment
thereof, or (c) the Property of any other Person (other than in the ordinary
course of business in an arm's length transaction), provided, however, that no
acquisition of all or substantially all of the assets of such other Person
shall be deemed to be in the ordinary course of business.
"Advance": an ABR Advance or a Eurodollar Advance, as the case may be.
"Affected Advance": as defined in Section 3.8(b).
"Affiliate": with respect to any Person at any time and from time to time,
any other Person (other than a consolidated subsidiary of such Person) which
at such time (a) controls such Person, or (b) is under common control with
such Person.
The term "control", as used in this definition with respect to any Person,
means the power, whether direct, or indirect through one or more
intermediaries, to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
other interests, by contract or otherwise.
"Aggregate Commitments": the Commitments of all of the Lenders.
"Aggregate Commitment Amount": at any date, the sum of the Commitment Amounts
of all Lenders on such date.
"Agreement": this Credit Agreement, as the same may be amended, supplemented
or otherwise modified from time to time.
"Alternate Base Rate": for any day, a rate per annum equal to the greater of
(a) the BNY Rate in effect on such day, or (b) 0.50% plus the Federal Funds
Effective Rate.
"Assignment": as defined in Section 11.7(c).
"Assignment and Acceptance Agreement": an assignment and acceptance agreement
executed by an assignor and an assignee pursuant to which, subject to the
terms and conditions hereof, the assignor assigns to the assignee all or any
portion of such assignor's Loans, Notes and Commitment, substantially in the
form of Exhibit H.
"BankWatch": Thomson BankWatch, Inc.
"BNY": The Bank of New York.
"BNY Rate": a rate of interest per annum equal to the rate of interest
publicly announced in New York City by BNY from time to time as its prime
commercial lending rate, such rate to be adjusted automatically (without
notice) on the effective date of any change in such publicly announced rate.
"Borrowing Date": each date upon which a Loan is made.
"Borrowing Request": a request for Loans in the form of Exhibit C.
"Capital Expenditures": shall mean, with respect to any Person for any
period, the aggregate of all expenditures incurred by such Person during such
period which, in accordance with GAAP, are required to be included in
"additions to property, plant or equipment" or similar items reflected on the
balance sheet of such Person, provided, however, that "Capital Expenditures"
shall not include (i) capitalized leases, or (ii) expenditures of proceeds of
insurance settlements in respect of lost, destroyed or damaged assets,
equipment or other property to the extent such expenditures are made to
replace or repair such lost, destroyed or damages assets, equipment or other
property within six months of the receipt of such proceeds.
"CFO": the chief financial officer of the Borrower.
"Change of Control": an event or series of events whereby (a) any Person
(other than the Borrower, any one or more of the Subsidiaries, any employee
benefit plan, or any entity organized, appointed or established by the
Borrower or any Subsidiary which holds shares of the Borrower's common stock
for or pursuant to the terms of any such employee benefit plan), acting alone
or in concert with one or more other Persons, (i) has acquired or shall
acquire beneficial ownership of securities, or options or other rights
therefor, entitling such Person to 20% or more of the voting power with
respect to such class of securities of the Borrower, or (ii) possesses or
shall possess, directly or indirectly, the power to direct or cause the
direction of the management and policies of the Borrower, whether through the
ownership of voting securities, by contract or otherwise, or (b) directors of
the Borrower constituting that percentage necessary to approve corporate
action shall not have been directors on the Effective Date or directors
designated or approved by the directors holding such positions on the
Effective Date.
"Code": the Internal Revenue Code of 1986, as the same may be amended, or any
successor thereto, and the rules and regulations issued thereunder, as from
time to time in effect.
"Commitment": in respect of any Lender, such Lender's undertaking to make
Loans to the Borrower, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount not exceeding the Commitment Amount of
such Lender.
"Commitment Amount": as of any date and with respect to any Lender, the
amount set forth adjacent to its name under the heading "Commitment Amount" in
Exhibit A on such date or, in the event that such Lender is not listed on
Exhibit A, the "Commitment Amount" which such Lender shall have assumed from
another Lender in accordance with Section 11.7 on or prior to such date, as
all of the same may be adjusted from time to time pursuant to Sections 2.4 and
11.7(c).
"Commitment Fee": as defined in Section 3.11.
"Commitment Percentage": as of any date and with respect to any Lender, a
fraction, the numerator of which is such Lender's Commitment Amount on such
date, and the denominator of which is the Aggregate Commitment Amount on such
date.
"Commitment Period": the period commencing on the Effective Date and ending
on the Commitment Termination Date.
"Commitment Termination Date": the earlier to occur of (a) April 24, 1997,
and (b) such other date upon which the Commitments shall have been terminated
in accordance with Section 2.4 or Section 9.2.
"Compensatory Interest Payment": as defined in Section 3.4(c).
"Compliance Certificate": a certificate in the form of Exhibit G.
"Consolidated": the Borrower and the Subsidiaries on a consolidated basis in
accordance with GAAP.
"Consolidated EBITDAR": as of any date, the operating income (before the
deduction of Interest Expense and income tax expense) of the Borrower and the
Subsidiaries on a Consolidated basis for the four fiscal quarter period in
respect of which financial statements have been most recently delivered
pursuant to Section 7.7(a) or Section 7.7(c), as the case may be, plus each of
the following with respect to the Borrower and the Subsidiaries on a
Consolidated basis for such period to the extent utilized in determining such
income, without duplication: (a) depreciation, (b) amortization of deferred
costs and other intangibles, and (c) rent expense.
"Consolidated Net Worth": with respect to the Borrower and the Subsidiaries
on a Consolidated basis at any date, the stockholders' equity of the Borrower
and the Subsidiaries on a Consolidated basis on such date, determined in
accordance with GAAP.
"Consolidated Total Debt": as of any date, the total Indebtedness (other than
indebtedness of the type described in clauses (d) and (g) of the definition of
"Indebtedness" contained herein) of the Borrower and the Subsidiaries on a
Consolidated basis on such date.
"Consolidating": the Borrower and each Subsidiary taken separately.
"Contingent Obligation": as to any Person (the "secondary obligor"), any
obligation of such secondary obligor (a) guaranteeing or in effect
guaranteeing any return on any investment made by another Person, or (b)
guaranteeing or in effect guaranteeing any indebtedness, lease, dividend or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including any
obligation of such secondary obligor, whether or not contingent, (i) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase Property,
securities or services primarily for the purpose of assuring the beneficiary
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, (iv) otherwise to assure or hold harmless
the beneficiary of such primary obligation against loss in respect thereof,
and (v) in respect of the indebtedness of any partnership in which such
secondary obligor is a general partner, except to the extent that such
indebtedness of such partnership is nonrecourse to such secondary obligor and
its separate Property; provided, however, that the term "Contingent
Obligation" shall not include the indorsement of instruments for deposit or
collection in the ordinary course of business.
"Control Person": as defined in Section 3.6(a).
"Default": any of the events specified in Section 9.1, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Default Rate": as defined in Section 3.4(b).
"Disposition": with respect to any Person, any sale, assignment, transfer or
other disposition by such Person, by any means, of (a) the Stock of, or other
equity interests of, any other Person, (b) any business, Operating Entity or
division or segment thereof, or (c) any other Property of such Person other
than in the ordinary course of business, provided, however, that no such sale,
assignment, transfer or other disposition of Property shall be deemed to be in
the ordinary course of business (i) if it is the sale, assignment, transfer or
disposition of (1) all or substantially all of the Property of such Person, or
(2) any Operating Entity, (ii) if the fair market value of the Property is in
excess of $5,000,000, or (iii) to the extent that the aggregate fair market
value of all sales, assignments, transfers and other dispositions of Property
made by such Person within the same fiscal year which are individually equal
to or less than $5,000,000, would exceed $20,000,000, and provided, further,
that notwithstanding anything to the contrary contained in this definition,
(I) all sales of inventory (other than in connection with bulk transfers of
Property in connection with a liquidation or similar disposition of the
Property of such Person) shall be deemed to be in the ordinary course of
business, and (II) any sale, assignment, transfer or other disposition of any
obsolete tangible personal Property shall each be deemed to be in the ordinary
course of business.
"Dollar or "$": lawful currency of the United States of America.
"Domestic Business Day": any day (other than a Saturday, Sunday or legal
holiday in the State of New York) on which banks are open for business in New
York City, New York.
"Domestic Intercompany Debt": (a) Indebtedness of the Borrower to one or more
of the Domestic Subsidiaries which are Guarantors, and (b) demand indebtedness
of one or more of the Domestic Subsidiaries which are Guarantors to the
Borrower or any one or more of the other Domestic Subsidiaries which are
Guarantors.
"Domestic Intercompany Disposition": a Disposition by the Borrower or any
Domestic Subsidiary which is a Guarantor to the Borrower or any other Domestic
Subsidiary which is a Guarantor.
"Domestic Subsidiary": each Subsidiary other than a Foreign Subsidiary.
"Effective Date": as defined in Section 11.19.
"Employee Benefit Plan": an employee benefit plan within the meaning of
Section 3(3) of ERISA maintained, sponsored or contributed to by the Borrower,
any Subsidiary or any ERISA Affiliate.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from
time to time, or any successor thereto, and the rules and regulations issued
thereunder, as from time to time in effect.
"ERISA Affiliate": when used with respect to an Employee Benefit Plan, ERISA,
the PBGC or a provision of the Code pertaining to employee benefit plans, any
Person that is a member of any group of organizations within the meaning of
Sections 414(b) or (c) of the Code or, solely with respect to applicable
provisions of the Code, Sections 414(m) or (o) of the Code, of which the
Borrower or any Subsidiary is a member.
"Eurodollar Advance": a given portion of the Loans selected by the Borrower
to bear interest during an Interest Period selected by the Borrower at a rate
per annum based upon a Eurodollar Rate determined with reference to such
Interest Period, all pursuant to and in accordance with Sections 2.3 and 3.3.
"Eurodollar Business Day": any Domestic Business Day, other than a Domestic
Business Day on which banks are not open for dealings in Dollar deposits in
the London interbank market.
"Eurodollar Rate": with respect to each Eurodollar Advance and as determined
by BNY and reported to the Agent, the rate of interest per annum (rounded, if
necessary, to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%,
then to the next higher 1/16 of 1%) equal to a fraction, the numerator of
which is the rate, as reported by BNY to the Agent, quoted by BNY to leading
banks in the interbank eurodollar market as the rate at which BNY is offering
Dollar deposits in an amount approximately equal to BNY's Commitment
Percentage of such Eurodollar Advance and having a period to maturity
approximately equal to the Interest Period applicable to such Eurodollar
Advance, as quoted two Eurodollar Business Days prior to the first day of such
Interest Period, and the denominator of which is an amount equal to 1.00 minus
the aggregate of the then stated maximum rates during such Interest Period of
all reserve requirements (including marginal, emergency, supplemental and
special reserves), expressed as a decimal, established by the Board of
Governors of the Federal Reserve System and any other banking authority to
which BNY and other major United States money center banks are subject in
respect of eurocurrency liabilities (currently referred to as "Eurocurrency
liabilities" in Regulation D of the Board of Governors of the Federal Reserve
System) without benefit of credits for proration, exceptions or offsets which
may be available from time to time to BNY.
"Event of Default": any of the events specified in Section 9.1, provided that
any requirement for the giving of notice, the lapse of time, or both, or any
other condition has been satisfied.
"Existing Bank Indebtedness": all of the obligations of the Borrower under
the Existing Credit Agreement.
"Existing Credit Agreement": the Credit Agreement, dated as of April 26,
1993, by and among the Borrower, Bankers Trust Company, The Bank of New York,
Mellon Bank, N.A., The Fifth Third Bank, Harris Trust and Savings Bank, NBD
Bank, N.A., Royal Bank of Canada, The Sanwa Bank, Limited, Society National
Bank, Union Bank of Switzerland, Wachovia Bank of Georgia, N.A. and Bankers
Trust Company, as Agent thereunder, as amended.
"Federal Funds Effective Rate": for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average
(rounded, if necessary, to the nearest 1/100 of 1% or, if there is no nearest
1/100 of 1%, then to the next higher 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Domestic Business Day, for the next preceding Domestic Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Domestic Business Day, the average (rounded, if necessary, to
the nearest 1/100 of 1% or, if there is no nearest 1/100 of 1%, then to the
next higher 1/100 of 1%) of the quotations for such day on such transactions
received by the Agent from three Federal funds brokers of recognized standing
selected by it.
"Fees": as defined in Section 3.2(a).
"Financial Statements": as defined in Section 4.15(a).
"Foreign Subsidiary": each Subsidiary that is not organized under the laws of
the United States of America or any State thereof.
"GAAP": generally accepted accounting principles as from time to time in
effect in the United States.
"Governmental Authority": any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof, or any court or arbitrator.
"Guarantor": as defined in the Subsidiary Guaranty.
"Highest Lawful Rate": the maximum rate of interest, if any, which at any
time or from time to time may be contracted for, taken, charged or received on
the Loans or the Notes or which may be owing to any Lender pursuant to this
Agreement under the laws applicable to such Lender and this Agreement.
"Indebtedness": as to any Person, at a particular time, all items of such
Person which constitute, without duplication, (a) indebtedness for borrowed
money or the deferred purchase price of Property (other than trade payables
and accrued expenses incurred in the ordinary course of business), (b)
indebtedness evidenced by notes, bonds, debentures or similar instruments, (c)
obligations with respect to any conditional sale to such Person or other title
retention agreement pursuant to which such Person is obligated, (d)
indebtedness arising under acceptance facilities and the amount available to
be drawn under all letters of credit issued for the account of such Person
and, without duplication, all drafts drawn thereunder to the extent such
Person shall not have reimbursed the issuer in respect of the issuer's payment
of such drafts, (e) all liabilities secured by any Lien on any Property owned
by such Person even though such Person shall not have assumed or otherwise
become liable for the payment thereof (other than carriers', warehousemen's,
mechanics', repairmen's or other like non-consensual Liens arising in the
ordinary course of business), (f) that portion of any obligation of such
Person, as lessee, which in accordance with GAAP is required to be capitalized
on the balance sheet of such Person, and (g) Contingent Obligations.
"Indemnified Liabilities": as defined in Section 11.5.
"Intellectual Property": all trademarks and service marks, all copyrights and
all patents.
"Interest Coverage": as of any fiscal quarter end, the percentage equal to a
fraction, the numerator of which is Consolidated EBITDAR for the four fiscal
quarter period then ended, and the denominator of which is the sum (without
duplication) of (1) Interest Expense and (2) rent expense (excluding, to the
extent included therein, rent expense under leases which have been
capitalized) in each case, of the Borrower and the Subsidiaries on a
Consolidated basis for such period.
"Interest Expense": for any period and in respect of any Person, the interest
expense of such Person in respect of such period, determined in accordance
with GAAP.
"Interest Payment Date": (i) as to any ABR Advance, the last day of each
March, June, September and December commencing on the first of such days to
occur after such ABR Advance shall have been made or any Eurodollar Advance
shall have been converted to such ABR Advance, (ii) as to each Eurodollar
Advance, the last day of the Interest Period in respect thereof, and (iii) as
to any Eurodollar Advance in respect of which the Borrower shall have selected
an Interest Period greater than three months, the last day of each three month
interval during such Interest Period.
"Interest Period": the period commencing on any Eurodollar Business Day
selected by the Borrower in accordance with Section 2.3 or Section 3.3 and
ending one, two or three weeks (if reasonably determined by the Agent to be
available) or one, two, three or six months thereafter (provided that such
period does not end later than the Commitment Termination Date), as selected
by the Borrower in accordance with such Sections, subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Eurodollar Business Day, such Interest Period shall be extended to the
immediately succeeding Eurodollar Business Day unless the result of such
extension would be to carry the end of such Interest Period into another
calendar month, in which event such Interest Period shall end on the
Eurodollar Business Day immediately preceding such day; and
(ii) if any Interest Period of one or more months shall begin 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), such Interest Period shall end on the last Eurodollar
Business Day of such latter calendar month.
"Investments": as defined in Section 8.5.
"Leverage": as of any date, the percentage equal to a fraction, the numerator
of which is Consolidated Total Debt, and the denominator of which is the sum
of Consolidated Total Debt plus Consolidated Net Worth.
"Lien": any mortgage, pledge, assignment, lien, charge, encumbrance or
security interest of any kind, or the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Loan Documents": this Agreement, the Subsidiary Guaranty and, upon the
execution and delivery thereof, the Notes.
"Loan Party": with respect to any Loan Document, any Person (other than the
Agent or any Lender) which, in accordance with the terms of such Loan
Document, is or is to be a party thereto.
"Loan" and "Loans": as defined in Section 2.1.
"Long Term Lease": any lease of Property under which the Borrower or any
Subsidiary shall have become liable, as lessee, or in respect of which the
Borrower or any Subsidiary shall have incurred a Contingent Obligation, and
having an unexpired original term of more than three years, other than (a) any
lease which in accordance with GAAP is required to be capitalized on the
balance sheet of the Borrower or any Subsidiary, (b) any lease of motor
vehicles, rolling stock, computers or office equipment, or (c) any lease of
office space for a sales office, so long as such sales office is not located
at the site of any other facility of the Borrower or any Subsidiary.
"Margin Stock": any "margin stock", as said term is defined in Regulation U
of the Board of Governors of the Federal Reserve System, as the same may be
amended or supplemented from time to time.
"Material Adverse": with respect to any change or effect, a material adverse
change in, or effect on, as the case may be, (i) the financial condition,
operations, business or Property of the Borrower and the Subsidiaries taken as
a whole, (ii) the ability of the Borrower or any Subsidiary to perform its
obligations under the Loan Documents to which it is a party, or (iii) the
ability of the Agent or any Lender to enforce any Loan Document.
"Material Subsidiary": as of any date, each Subsidiary which (a) as of the
fiscal quarter end immediately preceding such date had Consolidating gross
revenues in excess of $35,000,000 for the four fiscal quarters then ended, or
(b) has total assets in excess of $30,000,000.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Pension Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Note" and "Notes": as defined in Section 2.2.
"Operating Entity": (a) any Person, (b) any business or operating unit of a
Person which is, or could be, operated separate and apart from the other
businesses and operations of such Person, or (c) any other line of business or
division or segment.
"Outstandings": with respect to each Lender, as of any date, an amount equal
to the outstanding principal balance on such date of all the Loans of such
Lender.
"Outstanding Percentage": as of any date and with respect to each Lender, a
fraction the numerator of which is the Outstandings of such Lender on such
date, and the denominator of which is the aggregate Outstandings of all
Lenders on such date.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA, or any Governmental Authority succeeding to
the functions thereof.
"Pension Plan": at any time, any Employee Benefit Plan (including a
Multiemployer Plan) subject to Section 302 of ERISA or Section 412 of the
Code, the funding requirements of which are, or at any time within the six
years immediately preceding the time in question, were in whole or in part,
the responsibility of the Borrower, any Subsidiary or an ERISA Affiliate.
"Person": any individual, firm, partnership, limited liability partnership,
joint venture, corporation, limited liability company, association, business
enterprise, joint stock company, unincorporated association, trust,
Governmental Authority or any other entity, whether acting in an individual,
fiduciary, or other capacity, and for the purpose of the definition of "ERISA
Affiliate", a trade or business.
"Property": in respect of any Person, all types of real, personal or mixed
property and all types of tangible or intangible property owned or leased by
such Person.
"Regulatory Change": (a) the adoption of any law, rule or regulation after
the date hereof, (b) the issuance or promulgation after the date hereof of any
directive, guideline or request from any central bank or United States or
foreign Governmental Authority (whether or not having the force of law), or
(c) any change after the date hereof in the interpretation of any existing
law, rule, regulation, directive, guideline or request by any central bank or
United States or foreign Governmental Authority charged with the
administration thereof.
"Rentals": as of any date, all fixed payments which the Borrower or any
Subsidiary, as lessee, shall be required to make by the terms of any lease
having an unexpired term (including any renewal term exercisable at the option
of the lessor) of one year or more, except amounts required to be paid in
respect of maintenance, repairs, property taxes, insurance, assessments or
other similar charges or additional rentals (in excess of fixed minimums)
based upon a percentage of gross receipts.
"Reportable Event": with respect to any Pension Plan, (a) any event set forth
in Sections 4043(c) (other than a Reportable Event as to which the 30 day
notice requirement is waived by the PBGC under applicable regulations),
4062(e) or 4063(a) of ERISA or the regulations thereunder, (b) an event
requiring the Borrower, any Subsidiary or any ERISA Affiliate to provide
security to a Pension Plan under Section 401(a)(29) of the Code, or (c)
failure to make any payment required by Section 412(m) of the Code.
"Required Lenders": (a) at any time prior to the Commitment Termination Date,
Lenders having Commitment Amounts in the aggregate equal to or more than
66-2/3% of the Aggregate Commitment Amount, and (b) at all other times,
Lenders having Outstandings in the aggregate equal to or more than 66-2/3% of
the aggregate Outstandings of all Lenders.
"Restricted Payment": with respect to any Person, any of the following,
whether direct or indirect: (a) the declaration or payment by such Person of
any dividend or distribution on any class of Stock of such Person, other than
a dividend payable solely in shares of that class of Stock to the holders of
such class, (b) the declaration or payment by such Person of any distribution
on any other type or class of equity interest or equity investment in such
Person, other than a distribution to equity holders of the same type and class
of equity interest or equity investment as then held by such equity holders,
and (c) any redemption, retirement, purchase or acquisition of, or sinking
fund or other similar payment in respect of, any class of Stock of, or other
type or class of equity interest or equity investment in, such Person.
"Senior Notes Agreement": the Note Agreement, dated as of May 15, 1991, by
and between the Borrower and the insurance companies party thereto, providing
for the issuance by the Borrower of its 9.33% Senior Notes due 2001, as such
Note Agreement may be amended, supplemented or otherwise modified from time to
time.
"Special Counsel": Emmet, Marvin & Martin, LLP, or such other counsel as the
Agent shall retain as its counsel in connection herewith.
"Stock": any and all shares, interests, warrants, options, rights of
conversion, participations or other equivalents (however designated) of
corporate stock.
"Subsidiary": at any time and from time to time, any corporation,
association, partnership, joint venture or other business entity of which the
Borrower and/or any subsidiary of the Borrower, directly or indirectly at such
time, either (a) in respect of a corporation, owns or controls more than 50%
of the outstanding Stock having ordinary voting power to elect a majority of
the board of directors or similar managing body, irrespective of whether a
class or classes shall or might have voting power by reason of the happening
of any contingency, or (b) in respect of an association, partnership, joint
venture or other business entity, is entitled to share in more than 50% of the
profits and losses, however determined.
"Subsidiary Guaranty": as defined in Section 5.3.
"S&P": Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc.
"Taxes": as defined in Section 3.10(a).
"Unqualified Amount": as defined in Section 3.4(c).
"Upfront Fee": as defined in Section 3.12.
"Upstream Dividends": as defined in Section 8.7.
1.2 Principles of Construction
(a)All capitalized terms defined in this Agreement shall have the meanings
given such capitalized terms herein when used in the other Loan Documents or
any certificate, opinion or other document made or delivered pursuant hereto
or thereto, unless otherwise expressly provided therein.
(b)As used in the Loan Documents and in any certificate, opinion or other
document made or delivered pursuant thereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under GAAP.
Unless otherwise expressly provided herein, the word "fiscal" when used herein
shall refer to the relevant fiscal period of the Borrower.
(c)The words "hereof", "herein", "hereto" and "hereunder" and similar words
when used in each Loan Document shall refer to such Loan Document as a whole
and not to any particular provision of such Loan Document, and Section,
schedule and exhibit references contained therein shall refer to Sections
thereof or schedules or exhibits thereto unless otherwise expressly provided
therein.
(d)All references in each Loan Document to a time of day shall mean the then
applicable time in New York, New York, unless otherwise expressly provided
therein.
(e)Section headings have been inserted herein and in the other Loan Documents
for convenience only and shall not be construed to be a part hereof or
thereof. Unless the context otherwise requires, words in the singular number
include the plural, and words in the plural include the singular.
(f)Whenever in any Loan Document or in any certificate or other document made
or delivered pursuant thereto, the terms thereof require that a Person sign or
execute the same or refer to the same as having been so signed or executed,
such terms shall mean that the same shall be, or was, duly signed or executed
by (i) in respect of any Person that is a corporation, any duly authorized
officer thereof, and (ii) in respect of any other Person (other than an
individual), any analogous counterpart thereof, in either case in respect of
whom the Agent shall have received an incumbency certificate in all respects
satisfactory to the Agent.
(g)The words "include" and "including", when used in each Loan Document, shall
mean that the same shall be included "without limitation", unless otherwise
specifically provided.
(h) All determinations of compliance with Section 7.13 shall be made as if
Cleo, Inc. had been sold prior to the period for which such calculations are
made.
2. AMOUNT AND TERMS OF LOANS
2.1 Loans
Subject to the terms and conditions hereof, each Lender severally (and not
jointly) agrees to make loans (each a "Loan" and, collectively with each other
Loan of such Lender and/or with each Loan of each other Lender, the "Loans")
to the Borrower from time to time during the Commitment Period, during which
period the Borrower may borrow, prepay and reborrow in accordance with the
provisions hereof, provided that immediately after making each Loan and after
giving effect to all Loans repaid concurrently with the making of any Loans,
(a) the aggregate outstanding principal balance of such Lender's Loans would
not exceed such Lender's Commitment Amount, and (b) the aggregate outstanding
principal balance of all Loans would not exceed the Aggregate Commitment
Amount. The principal amount of each Lender's Loan made on a Borrowing Date
shall be an amount equal to its Commitment Percentage of all Loans made on
such date. Subject to the provisions of Sections 2.3 and 3.3, Loans may be
made as (i) one or more ABR Advances, (ii) one or more Eurodollar Advances, or
(iii) any combination thereof.
2.2 Notes
The Loans made by each Lender shall be evidenced by a promissory note of the
Borrower, substantially in the form of Exhibit B (each, as indorsed or
modified from time to time, a "Note" and, collectively with the Note of each
other Lender, the "Notes"), payable to the order of such Lender, dated the
Effective Date, and in the maximum stated principal amount equal to such
Lender's Commitment Amount.
2.3 Notice of Borrowing
The Borrower agrees to notify the Agent, which notification shall be by
facsimile and shall be irrevocable, no later than (a) 12:00 Noon on the same
Domestic Business Day, in the case of an ABR Advance, and (b) 12:00 Noon at
least three Eurodollar Business Days prior to each date, in the case of a
Eurodollar Advance, that it intends to borrow a Loan under this Agreement,
specifying (1) the aggregate amount requested to be borrowed under the
Aggregate Commitments, (2) the proposed Borrowing Date, (3) whether the
borrowing is to be of one or more ABR Advances, one or more Eurodollar
Advances, or a combination thereof and the amount of each thereof, and (4) the
Interest Period for each Eurodollar Advance, which notice shall be promptly
confirmed by delivery to the Agent of a Borrowing Request. The Agent shall
promptly notify each Lender (by telephone or otherwise, such notice to be
confirmed by facsimile or other writing) of such borrowing request. Subject
to its receipt of each such notice from the Agent and subject to the terms and
conditions hereof, each Lender shall make immediately available funds
available to the Agent at the address therefor set forth in Section 11.2 not
later than 2:00 P.M. in the case of an ABR Advance or a Eurodollar Advance, in
each case on each Borrowing Date, in an amount equal to such Lender's
Commitment Percentage of the Loans requested by the Borrower on such Borrowing
Date, provided, however, that (i) each Eurodollar Advance to be made on a
Borrowing Date, when aggregated with all amounts to be converted to a
Eurodollar Advance on such date and having the same Interest Period as such
first Eurodollar Advance, shall equal no less than $1,000,000 or an integral
multiple of $1,000,000 in excess thereof, and (ii) each ABR Advance made on
each Borrowing Date shall equal no less than (x) $1,000,000 or an integral
multiple of $100,000 in excess thereof or (y) the excess of the Aggregate
Commitment Amount over the aggregate outstanding principal balance of all
Loans.
2.4 Termination or Reduction of Commitments
At the Borrower's option, (i) the Borrower may terminate the Commitments at
any time, or (ii) the Borrower may permanently reduce the Aggregate Commitment
Amount in part at any time and from time to time, provided in each case,
however, that (A) the Borrower shall have given at least three Domestic
Business Days' prior irrevocable written notice to the Agent, (B) the Borrower
shall have prepaid the accrued Commitment Fee on the amount of such reduction
through the date thereof, (C) immediately after giving effect thereto, the
aggregate principal balance of all Loans shall not exceed the Aggregate
Commitment Amount, and (D) with regard to partial reductions, each such
partial reduction shall be in an amount equal to at least $3,000,000, or an
integral multiple of $1,000,000 in excess thereof. Each reduction of the
Aggregate Commitment Amount shall be made by reducing each Lender's Commitment
Amount by a sum equal to each such Lender's Commitment Percentage of the
amount of such reduction.
2.5 Prepayments of the Loans
(a)Voluntary Prepayments of Loans. The Borrower may, at its option, prepay
Loans, in whole or in part, at any time and from time to time, (i) by
notifying the Agent in writing no later than 11:00 A.M. at least three
Eurodollar Business Days prior to the designated Eurodollar Business Day for
such prepayment, in the case of a prepayment of a Eurodollar Advance, provided
that such prepayment shall be made by no later than 2:00 P.M. on the
designated Eurodollar Business Day for such prepayment, or (ii) by notifying
the Agent no later than 11:00 A.M. at least one Domestic Business Day prior to
the designated Domestic Business Day for such prepayment, in the case of a
prepayment of an ABR Advance, provided that such prepayment shall be made by
no later than 2:00 P.M. on the designated Domestic Business Day for such
prepayment, in either case specifying (x) the amount to be prepaid, and (y)
the date of such prepayment. Upon receipt of each such notice, the Agent
shall promptly notify each Lender thereof. Each such notice given by the
Borrower pursuant to this Section 2.5(a) shall be irrevocable. Each partial
prepayment under this Section 2.5(a) shall be in a minimum amount of
$1,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b)Mandatory Repayments and Prepayments of Loans; Clean-down.
(i) Upon any expiration or termination of the Commitments, the Borrower shall
repay the outstanding principal balance of the Loans.
(ii) The Borrower shall cause the aggregate outstanding principal balance of
the Loans to be equal to zero ($0.00) for any period (which period shall not
be shorter than 30 consecutive days) selected by the Borrower during the
Commitment Period.
(c)In General. Simultaneously with each prepayment of a Loan, the Borrower
shall prepay all accrued interest on the amount prepaid through the date of
prepayment, together with any amounts due under Section 3.5.
2.6 Use of Proceeds
The Borrower covenants and agrees that on and after the first Borrowing Date,
the Borrower shall use the proceeds of the Loans to support its working
capital needs, in a manner not inconsistent with the provisions of the Loan
Documents. Notwithstanding anything to the contrary contained in any Loan
Document, the Borrower further covenants and agrees that no part of the
proceeds of any Loan will be used, directly or indirectly, for a purpose which
violates any law, rule or regulation of any Governmental Authority, including
the provisions of Regulations G, U or X of the Board of Governors of the
Federal Reserve System, as amended.
3. PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD PROTECTION AND FEES
3.1 Disbursement of the Proceeds of the Loans
The Agent shall disburse the proceeds of the Loans at its office designated in
Section 11.2 by crediting to the general deposit account (maintained with the
Agent) of the Borrower (or such other account of the Borrower as to which the
Agent may be hereafter notified by the Borrower in writing) the funds received
from each Lender. Unless the Agent shall have received prior notice from a
Lender (by telephone or otherwise, but not "voice mail" or any similar
service, such notice to be confirmed by facsimile or other writing) that such
Lender will not make available to the Agent such Lender's Commitment
Percentage of the Loans requested by the Borrower on a Borrowing Date, the
Agent may assume that such Lender has made such amount available to the Agent
on such Borrowing Date in accordance with this Section 3.1, provided that such
Lender received notice of the proposed borrowing from the Agent, and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
Borrowing Date a corresponding amount. If and to the extent such Lender shall
not have so made such amount available to the Agent, and the Agent shall have
made such amount available to the Borrower, such Lender and the Borrower
severally agree to pay to the Agent, forthwith on demand, such corresponding
amount (to the extent not previously paid by the other), together with
interest thereon for each day from the date such amount is made available to
the Borrower until the date such amount is paid to the Agent, at a rate per
annum equal to, in the case of the Borrower, the applicable interest rate set
forth in Section 3.4(a) and, in the case of such Lender, the Federal Funds
Effective Rate for the first three Domestic Business Days after such funding
was so made available by the Agent, and 1% plus the Federal Funds Effective
Rate thereafter. Any such payment by the Borrower shall be without prejudice
to its rights against such Lender. If such Lender shall pay to the Agent such
corresponding amount, such amount so paid shall constitute such Lender's Loan
as part of such Loans for purposes of this Agreement, which Loan shall be
deemed to have been made by such Lender on the Borrowing Date applicable to
such Loans.
3.2 Payments
(a)Each payment, including each prepayment, of principal and interest on the
Loans, of the Commitment Fee, of the Upfront Fee (together with all other fees
to be paid to the Agent and the Lenders in connection with this Agreement, the
"Fees"), and all other amounts payable by the Borrower under the Loan
Documents shall be made by the Borrower to the Agent at its office set forth
in Section 11.2 in funds immediately available in New York by 2:00 P.M. on the
due date for such payment. The failure of the Borrower to make any such
payment by such time shall not constitute a default hereunder if such payment
is made on such due date, but any such payment made after 2:00 P.M. on such
due date shall be deemed to have been made on the next Domestic Business Day
or Eurodollar Business Day, as the case may be, for the purpose of calculating
interest on amounts outstanding on the applicable Loans. Promptly upon
receipt thereof by the Agent, each payment of principal and interest on the
Loans shall be remitted by the Agent in like funds as received to each Lender
pro rata according to its pro rata share of the Loans being paid. Promptly
upon receipt thereof by the Agent, each payment of the Commitment Fee shall be
remitted by the Agent in like funds as received to each Lender pro rata
according to such Lender's Commitment Amount.
(b)If any payment hereunder or under the Loans shall be due and payable on a
day which is not a Domestic Business Day or Eurodollar Business Day, as the
case may be, the due date thereof (except as otherwise provided in the
definition of Interest Period) shall be extended to the next Domestic Business
Day or Eurodollar Business Day, as the case may be, and interest shall be
payable at the applicable rate specified herein during such extension.
3.3 Conversions; Other Matters
(a)The Borrower may elect at any time and from time to time to convert one or
more Eurodollar Advances to an ABR Advance by giving the Agent irrevocable
notice of such election prior to 11:00 A.M. the same Domestic Business Day as
that designated for conversion, specifying the amount to be so converted,
provided, that any such conversion shall only be made on the last day of the
Interest Period applicable to each such Eurodollar Advance. In addition, the
Borrower may elect from time to time to convert an ABR Advance to any one or
more new Eurodollar Advances or to convert any one or more existing Eurodollar
Advances to any one or more new Eurodollar Advances by giving the Agent
irrevocable notice of such election by no later than 11:00 A.M. three
Eurodollar Business Days prior thereto, specifying the amount to be so
converted and the initial Interest Period relating thereto, provided that (i)
any such conversion of an ABR Advance to a Eurodollar Advance shall only be
made on a Eurodollar Business Day, and (ii) any such conversion of an existing
Eurodollar Advance shall only be made on the last day of the Interest Period
applicable thereto. The Agent shall promptly provide the Lenders with notice
of each such election. Advances may be converted pursuant to this Section 3.3
in whole or in part, provided that the amount to be converted to each
Eurodollar Advance, when aggregated with any Eurodollar Advance to be made on
such date and having the same Interest Period as such first Eurodollar
Advance, shall equal no less than $1,000,000 or an integral multiple of
$1,000,000 in excess thereof.
(b)Notwithstanding anything in this Agreement to the contrary, upon the
occurrence and during the continuance of a Default or an Event of Default, the
Borrower shall have no right to elect to convert any existing ABR Advance to a
new Eurodollar Advance or to convert any existing Eurodollar Advance to a new
Eurodollar Advance. In such event, any such ABR Advance shall be
automatically continued as an ABR Advance and any such Eurodollar Advance
shall be automatically converted to an ABR Advance on the last day of the
Interest Period applicable to such Eurodollar Advance.
(c)Each such conversion shall be effected by each Lender by applying the
proceeds of the new ABR Advance or Eurodollar Advance, as the case may be, to
the existing Advance (or portion thereof) being converted (it being understood
that such conversion shall not constitute a borrowing for purposes of Section
4, 5 or 6).
(d)Notwithstanding any other provision of any other Loan Document:
(i) If the Borrower shall have failed to elect a Eurodollar Advance under
Section 2.3 or 3.3, as the case may be, in connection with any borrowing of
new Loans or expiration of an Interest Period with respect to any existing
Eurodollar Advance, the amount of the Loans subject to such borrowing or such
existing Eurodollar Advance shall thereafter be an ABR Advance until such
time, if any, as the Borrower shall elect a new Eurodollar Advance pursuant to
this Section 3.3, and
(ii) The Borrower shall not be permitted to have more than 5 Eurodollar
Advances outstanding at any one time.
3.4 Interest Rates and Payment Dates
(a)Prior to Maturity. Except as otherwise provided in Section 3.4(b) and
Section 3.4(c), the Advances shall bear interest on the unpaid principal
balance thereof at the applicable interest rate or rates per annum set forth
below:
ADVANCES RATE
Each ABR Advance Alternate Base Rate.
Each Eurodollar Advance Eurodollar Rate applicable thereto plus 1.00%.
(b)Default Rate. Upon the occurrence and during the continuance of any Event
of Default, the unpaid principal balance of each Loan shall bear interest at a
rate per annum equal to 2% plus the rate which would otherwise be applicable
pursuant to Section 3.4(a) (the "Default Rate"). Interest accrued at the
Default Rate shall be payable on demand.
(c)Highest Lawful Rate. Notwithstanding anything to the contrary contained in
this Agreement, at no time shall the interest rate payable on the Loans,
together with the Fees and other amounts payable hereunder to the extent the
same constitute or are deemed to constitute interest, exceed the Highest
Lawful Rate. If in respect of any period during the term of this Agreement,
any amount paid hereunder, to the extent the same shall (but for the
provisions of this Section 3.4) constitute or be deemed to constitute
interest, would exceed the maximum amount of interest permitted by the Highest
Lawful Rate during such period (such amount being hereinafter referred to as
an "Unqualified Amount"), then (i) such Unqualified Amount shall be applied or
shall be deemed to have been applied as a prepayment of the Loans, and (ii) if
in any subsequent period during the term of this Agreement, all amounts
payable hereunder in respect of such period which constitute or shall be
deemed to constitute interest shall be less than the maximum amount of
interest permitted by the Highest Lawful Rate during such period, then the
Borrower shall pay to the Lender in respect of such period an amount (each a
"Compensatory Interest Payment") equal to the lesser of (x) a sum which, when
added to all such amounts, would equal the maximum amount of interest
permitted by the Highest Lawful Rate during such period, and (y) an amount
equal to the aggregate sum of all Unqualified Amounts less all other
Compensatory Interest Payments.
(d)Late Payment Rate. Each payment of interest on any Loan, and each payment
of any Fee or other payment (other than principal) payable under any Loan
Document, not paid within three Domestic Business Days of the date when due
and payable, shall bear interest, to the extent permitted by law, at the
Default Rate from the due date thereof until the date such payment is made,
payable on demand by the Agent.
(e)In General. Interest shall be payable in arrears on each Interest Payment
Date and upon each payment (including each prepayment) of the Loans. Any
change in the interest rate on the Loans resulting from a change in the
Alternate Base Rate, any reserve requirement, or any deposit insurance
assessment shall become effective as of the opening of business on the day on
which such change shall become effective. The Agent shall, as soon as
practicable, notify the Borrower and the Lenders of the effective date and the
amount of any change in the BNY Rate, but any failure to so notify shall not
in any manner affect the obligation of the Borrower to pay interest on the
Loans in the amounts and on the dates set forth herein. Each determination by
the Agent of the Alternate Base Rate and the Eurodollar Rate pursuant to this
Agreement shall be conclusive and binding on the Borrower absent manifest
error. The Borrower acknowledges that to the extent interest payable on the
Loans is based on the Alternate Base Rate, such rate is only one of the bases
for computing interest on loans made by the Lenders, and by basing interest
payable on the ABR Advances on the Alternate Base Rate, the Lenders have not
committed to charge, and the Borrower has not in any way bargained for,
interest based on a lower or the lowest rate at which the Lenders may now or
in the future make extensions of credit to other Persons. Interest on
Eurodollar Advances and ABR Advances determined with reference to the Federal
Funds Effective Rate shall be calculated on the basis of a 360 day year for
the actual number of days elapsed. Interest on ABR Advances determined with
reference to the BNY Rate shall be calculated on the basis of a 365/6 day year
for the actual number of days elapsed.
3.5 Indemnification for Loss
Notwithstanding anything contained herein to the contrary, if the Borrower
shall fail to borrow or convert an Advance after it shall have given notice to
do so in which it shall have requested a Eurodollar Advance pursuant to
Section 2.3 or 3.3, as the case may be, or if a Eurodollar Advance shall be
terminated for any reason prior to the last day of the Interest Period
applicable thereto, or if any repayment or prepayment of the principal amount
of a Eurodollar Advance is made for any reason on a date which is prior to the
last day of the Interest Period applicable thereto, the Borrower agrees to
indemnify each Lender against, and to pay on demand directly to such Lender
the amount (calculated by such Lender using any method chosen by such Lender
which is reasonable and customarily used by such Lender for such purpose)
equal to any loss or reasonable expense suffered by such Lender to the extent
resulting from such failure to borrow or convert, or such termination,
repayment or prepayment, including any loss, cost or expense suffered by such
Lender in liquidating or employing deposits acquired to fund or maintain the
funding of such Eurodollar Advance, or redeploying funds prepaid or repaid, in
amounts which correspond to such Eurodollar Advance.
3.6 Reimbursement for Costs, Etc.
(a)If at any time or from time to time there shall occur a Regulatory Change
and any Lender shall have determined that such Regulatory Change (i) shall
have had the effect of reducing (A) the rate of return on such Lender's
capital or the capital of any Person directly or indirectly owning or
controlling such Lender (each a "Control Person"), or (B) the asset value (for
capital purposes) to such Lender or such Control Person, as applicable, of the
Loans or any participation therein, in any case to a level below that which
such Lender or such Control Person would have achieved but for such Regulatory
Change (after taking into account such Lender's or such Control Person's
policies regarding capital), (ii) imposes, modifies or deems applicable any
reserve, asset, special deposit or special assessment requirements on deposits
obtained in the interbank eurodollar market in connection with this Agreement
and the Notes (excluding, with respect to any Eurodollar Advance, any such
requirement which is included in the determination of the rate applicable
thereto), (iii) subjects such Lender, as applicable, to any tax (documentary,
stamp or otherwise, but excluding any tax on such Lender's net income or
revenues imposed by the United States or any other jurisdiction) with respect
to this Agreement or any Note, or (iv) changes the basis of taxation of
payments to such Lender of principal, interest or fees payable under this
Agreement or any Note (except for any tax, or changes in the rate of tax, on
such Lender's net income or revenues imposed by the United States or any other
jurisdiction) then, in each such case, within ten days after receipt by the
Borrower of a certificate with respect thereto given in accordance with
Section 3.9 by such Lender, the Borrower shall pay to such Lender or such
Control Person, as the case may be, such additional amount or amounts as shall
be sufficient to compensate such Lender or such Control Person, as the case
may be, for (1) any such reduction referred to in clause (a)(i) of this
Section 3.6, and (2) any taxes, losses, costs or expenses (excluding general
administrative and overhead costs) attributable to such Lender's or such
Control Person's compliance during the term hereof with such Regulatory
Change.
(b)Each Lender agrees to provide the Borrower with notice of each Regulatory
Change which would require the Borrower to make a payment to such Lender under
this Section 3.6 promptly upon such Lender obtaining actual knowledge thereof
and determining that it intends to require the Borrower to make such payment.
(c)Each Lender will, at the request of the Borrower, designate a different
lending office if such designation (i) will avoid the need for, or minimize
the amount of, any compensation to which such Lender is entitled pursuant to
this Section 3.6, and (ii) will not, in the sole judgment of such Lender, be
otherwise disadvantageous to it. This Section 3.6 is subject to the
limitations set forth in Section 11.6.
3.7 Illegality of Funding
Notwithstanding any other provision hereof, if after the date hereof any
Lender shall reasonably determine that any law, regulation, treaty or
directive, or any change therein or in the interpretation or application
thereof, shall make it unlawful for such Lender to make or maintain any
Eurodollar Advance as contemplated by this Agreement, (a) the commitment of
such Lender to make Eurodollar Advances or convert ABR Advances to Eurodollar
Advances shall forthwith be suspended, and (b) such Lender's Loans then
outstanding as Eurodollar Advances, if any, shall be converted automatically
to an ABR Advance on the last day of the then current Interest Period
applicable thereto or at such earlier time as may be required. If the
commitment of any Lender with respect to any Eurodollar Advances is suspended
pursuant to this Section 3.7 and such Lender shall notify the Agent and the
Borrower that it is once again legal for such Lender to make or maintain
Eurodollar Advances, such Lender's commitment to make or maintain Eurodollar
Advances shall be reinstated.
3.8 Option to Fund; Substituted Interest Rate
(a)Each Lender has indicated that, if the Borrower requests a Eurodollar
Advance, such Lender may wish to purchase one or more deposits in order to
fund or maintain its funding of its Commitment Percentage of such Eurodollar
Advance during the Interest Period with respect thereto; it being understood
that the provisions of this Agreement relating to such funding are included
only for the purpose of determining the rate of interest to be paid in respect
of such Eurodollar Advance and any amounts owing under Sections 3.5 and 3.6.
Each Lender shall be entitled to fund and maintain its funding of all or any
part of each Eurodollar Advance in any manner it sees fit, but all such
determinations hereunder shall be made as if each Lender had actually funded
and maintained its Commitment Percentage of each Eurodollar Advance during the
applicable Interest Period through the purchase of deposits in an amount equal
to its Commitment Percentage of such Eurodollar Advance having a maturity
corresponding to such Interest Period. Any Lender may fund its Commitment
Percentage of each Eurodollar Advance from or for the account of any branch or
office of such Lender as such Lender may choose from time to time.
(b)In the event that (i) the Agent shall have determined (which determination
shall be conclusive and binding upon the Borrower) that by reason of
circumstances affecting the interbank eurodollar market either adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate applicable
pursuant to Section 2.3 or Section 3.3, or (ii) Required Lenders shall have
notified the Agent of their determination (which determination shall be
conclusive and binding on the Borrower) that the applicable Eurodollar Rate
will not adequately and fairly reflect the cost to the Lenders of maintaining
or funding loans bearing interest based on such Eurodollar Rate with respect
to any portion of the Loans that the Borrower has requested be made as a
Eurodollar Advance or any Eurodollar Advance that will result from the
requested conversion of any portion of the Loans into a Eurodollar Advance
(each, an "Affected Advance"), the Agent shall promptly notify the Borrower
and the Lenders (by telephone or otherwise, to be promptly confirmed in
writing) of such determination on or, to the extent practicable, prior to the
requested Borrowing Date or conversion date for such Affected Advance. If the
Agent shall give such notice, (A) any Affected Advances shall be made as ABR
Advances, (B) the Loans (or any portion thereof) that were to have been
converted to Affected Advances shall be converted to or continued as ABR
Advances, and (C) any outstanding Affected Advances shall be converted, on the
last day of the then current Interest Period with respect thereto, to ABR
Advances. The Agent shall withdraw any notice under clause (i) or (ii), as
the case may be, of this Section 3.8(b) by notice to the Borrower promptly
upon (x) in the case of clause (i), the Agent having determined that such
circumstances affecting the relevant market no longer exist and that adequate
and reasonable means do exist for determining the Eurodollar Rate pursuant to
Section 2.3 or Section 3.3, or (y) the Agent having been notified by Required
Lenders that circumstances no longer render the Loans (or any portion thereof)
Affected Advances, and until such withdrawal of a notice under clause (i) or
(ii), as the case may be, of this Section 3.8(b), no further Eurodollar
Advances of the affected type shall be required to be made by the Lenders nor
shall the Borrower have the right to convert all or any portion of the Loans
to such type of Eurodollar Advances.
3.9 Certificates of Payment and Reimbursement
Each Lender agrees, in connection with any request by it to the Borrower for
payment or reimbursement pursuant to Section 3.5 or 3.6, to provide the
Borrower with a certificate, signed by an officer of such Lender, setting
forth a description in reasonable detail of the amount and nature of any such
payment or reimbursement. Each Lender's determination of such payment or
reimbursement shall be conclusive absent manifest error.
3.10 Taxes; Net Payments
(a)All payments made by the Borrower to the Agent and each Lender under the
Loan Documents shall be made free and clear of, and without reduction for or
on account of, any taxes required by law to be withheld from any amounts
payable under the Loan Documents excluding, in the case of the Agent and each
Lender, net income and franchise taxes imposed (including, without limitation,
branch taxes imposed by the United States or similar taxes imposed by a
political subdivision or taxing authority thereof) on the Agent or such
Lender, as the case may be, by the jurisdiction under the laws of which such
Person is organized or any political subdivision or taxing authority thereof
or therein, or by any jurisdiction in which such Person's lending office is
located or any political subdivision or taxing authority thereof or therein
(all such non-excluded taxes being hereinafter called "Taxes"). In the event
that the Borrower is prohibited by law from making payments hereunder free of
deductions or withholdings in respect of Taxes, then the Borrower shall pay
such additional amounts to the Agent, for the benefit of the Lenders, as may
be necessary in order that the actual amounts received by each Lender in
respect of interest and any other amounts payable hereunder or under its Note
after deduction or withholding (and after payment of any additional taxes or
other charges due as a consequence of the payment of such additional amounts)
shall equal the amount that would have been received if such deduction or
withholding were not required. In the event that any such deduction or
withholding with respect to Taxes can be reduced or nullified as a result of
the application of any relevant double taxation convention, the Agent or the
relevant Lender, as the case may be, will (unless it would be otherwise
disadvantageous to it) cooperate with the Borrower (at the sole expense of the
Borrower) in making application to the relevant taxing authorities seeking to
obtain such reduction or nullification, provided, however, that the Agent and
the Lenders shall have no obligation to engage in litigation with respect
thereto. If the Borrower shall make any payments under this Section 3.10 or
shall make any deductions or withholdings from amounts paid hereunder in
accordance with this Section 3.10, the Borrower shall, as promptly as
practicable thereafter, forward to the Agent original or certified copies of
official receipts or other evidence acceptable to the Agent establishing such
payment and the Agent in turn shall distribute copies of such receipts to each
Lender. If payments to any Lender hereunder are or become subject to any
withholding, such Lender shall (unless otherwise required by a Governmental
Authority or as a result of any law, rule, regulation, order or similar
directive applicable to such Lender) designate a different office or branch to
which payments are to be made under the Loan Documents from that initially
selected by such Lender, if such designation would avoid or mitigate such
withholding and would not be otherwise disadvantageous to such Lender in any
respect. In the event that any Lender shall have determined that it received
a refund or credit for Taxes paid by the Borrower under this Section 3.10,
such Lender shall promptly notify the Agent and the Borrower of such fact and
shall remit to the Borrower the amount of such refund or credit applicable to
the payments made by the Borrower in respect of such Lender under this Section
3.10.
(b)Each Lender not incorporated under the laws of the United States or any
State thereof shall deliver to the Borrower such certificates, documents, or
other evidence as the Borrower may reasonably require from time to time as are
necessary to establish that such Lender is not subject to withholding under
Section 1441, 1442 or 3406 of the Code or as may be necessary to establish,
under any law imposing upon the Borrower, hereafter, an obligation to withhold
any portion of the payments made by the Borrower under the Loan Documents,
that payments to the Agent on behalf of such Lender are not subject to
withholding. Notwithstanding any provision herein to the contrary, the
Borrower shall have no obligation to pay to any Lender any amount which the
Borrower is liable to withhold due to the failure of such Lender to file any
statement of exemption required by the Code.
(c)This Section 3.10 shall be subject to the limitations set forth in Section
11.6.
3.11 Commitment Fees
The Borrower agrees to pay to the Agent for the pro rata account of the
Lenders a fee (the "Commitment Fee"), payable quarterly in arrears on the last
day of each March, June, September and December of each year, commencing on
the last day of the fiscal quarter in which the Effective Date shall have
occurred, and on the Commitment Termination Date, at a rate per annum equal to
0.375%, on the average daily excess of (a) the Aggregate Commitment Amount,
over (b) the aggregate outstanding principal balance of the Loans. In
addition, upon each reduction of the Aggregate Commitment Amount, the Borrower
shall pay the Commitment Fee accrued on the amount of such reduction through
the date of such reduction. The Commitment Fee shall be computed on the basis
of a 360 day year for the actual number of days elapsed.
3.12 Upfront Fee
The Borrower agrees to pay to the Agent for the pro rata account of the
Lenders a fee (the "Upfront Fee"), payable on the Effective Date, in an amount
equal to 0.125% of the Aggregate Commitment Amount.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent to enter into this Agreement and to induce the
Lenders to enter into this Agreement and to make the Loans, the Borrower
hereby makes the following representations and warranties to the Agent and the
Lenders:
4.1 Subsidiaries; Capital Stock
As of the date of this Agreement, the Borrower has only the Subsidiaries set
forth on, and the authorized, issued and outstanding capital stock of the
Borrower and each such Subsidiary (or partnership or other interests, as the
case may be) is as set forth on, Schedule 4.1. As of the date of this
Agreement, the only Material Subsidiary of the Borrower is The Paper Factory
of Wisconsin, Inc. As of the date of this Agreement, the shares of, or
partnership or other interests in, each Subsidiary owned beneficially and of
record by the Borrower or another Subsidiary are free and clear of all Liens
except as permitted by Section 8.2, and are duly authorized, validly issued,
fully paid and nonassessable. As of the date of this Agreement, except as set
forth on Schedule 4.1, (a) no Subsidiary has issued any securities convertible
into, or options or warrants for, any common or preferred equity securities
thereof and (b) there are no agreements, voting trusts or understandings
binding upon any Subsidiary with respect to the voting securities of any
Subsidiary or affecting in any manner the sale, pledge, assignment or other
disposition thereof, including any right of first refusal, option, redemption,
call or other right with respect thereto, whether similar or dissimilar to any
of the foregoing.
4.2 Existence and Power
Each of the Borrower and each Subsidiary is (a) duly organized, validly
existing and, other than with respect to the jurisdictions of England and
Wales, in good standing under the laws of the jurisdiction of its formation,
except where the failure to be so organized, existing or in good standing
could not reasonably be expected to have a Material Adverse effect, (b) has
all requisite power and authority to own its Property and to carry on its
business as now conducted, except where the failure to have such power or
authority could not reasonably be expected to have a Material Adverse effect,
and (c) is in good standing (other than in the case of England or Wales) and
authorized to do business in each jurisdiction in which the failure so to
qualify could reasonably be expected to have a Material Adverse effect.
4.3 Authority
Each of the Borrower and each Material Subsidiary has full power and authority
to own its Property, conduct its business, and enter into, execute, deliver
and perform the terms of the Loan Documents to which it is a party, all of
which have been duly authorized by all proper and necessary corporate,
partnership or other action, as the case may be, and are in full compliance
with its certificate of incorporation and by-laws or partnership agreement
and/or other organic documents, as the case may be. No consent or approval
of, notice to, filing with, or other action by, shareholders of the Borrower,
any Governmental Authority or any other Person, which has not already been
obtained, is required to authorize in respect of the Borrower or any of the
Material Subsidiaries, or is required in connection with the execution,
delivery and performance by the Borrower and each Material Subsidiary of, the
Loan Documents to which it is a party, or is required as a condition to the
enforceability against the Borrower or such Material Subsidiary of the Loan
Documents to which it is a party.
4.4 Binding Agreement
The Loan Documents constitute the valid and legally binding obligations of the
Borrower and each Subsidiary to the extent the Borrower or such Subsidiary, as
the case may be, is a party thereto, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by equitable principles
relating to the availability of specific performance as a remedy.
4.5 Litigation
Except as set forth on Schedule 4.5, there are no actions, suits, arbitration
proceedings or claims (whether purportedly on behalf of the Borrower, any
Subsidiary or otherwise) pending or, to the knowledge of the Borrower,
threatened against the Borrower or any Subsidiary or maintained by the
Borrower or any Subsidiary, or to which the Property of the Borrower or such
Subsidiary may be subject, at law or in equity, before any Governmental
Authority, which could reasonably be expected to have a Material Adverse
effect. There are no proceedings pending or, to the knowledge of the
Borrower, threatened against the Borrower or any Subsidiary (a) which call
into question the validity or enforceability of, or otherwise seek to
invalidate any Loan Document, or (b) which might, individually or in the
aggregate, materially and adversely affect any of the transactions
contemplated by any Loan Document.
4.6 No Conflicting Agreements
(a)Neither the Borrower nor any Subsidiary is in default under any agreement
to which it is a party or by which it or any of its Property is bound, unless
the effect of such default could not reasonably be expected to have a Material
Adverse effect.
(b)No provision of any statute, rule, regulation, judgment, directive, decree
or order, or any existing material mortgage, indenture, contract or agreement,
in each case binding on the Borrower or any Subsidiary or affecting the
Property of the Borrower or any Subsidiary conflicts with, or requires any
consent which has not already been obtained under, or would in any way
prohibit the execution, delivery or performance by the Borrower or any
Subsidiary of the terms of, any Loan Document. The execution, delivery or
performance by the Borrower and each Subsidiary of the terms of each Loan
Document to which it is a party will not constitute a default under, or result
in the creation or imposition of, or obligation to create, any Lien upon the
Property of the Borrower or any Subsidiary pursuant to the terms of any such
mortgage, indenture, contract or agreement, which defaults or Liens,
individually or in the aggregate, would have or result in a Material Adverse
effect.
4.7 Taxes
The Borrower and each Subsidiary has filed or caused to be filed all tax
returns, and has paid, or has made adequate provision for the payment of, all
taxes shown to be due and payable on said returns or in any assessments made
against them, the failure of which to file or pay could reasonably be expected
to have a Material Adverse effect, and no tax Liens have been filed against
the Borrower or any Subsidiary and no claims are being asserted with respect
to such taxes which are required by GAAP (as in effect on the Effective Date)
to be reflected in the Financial Statements and are not so reflected therein.
The charges, accruals and reserves on the books of the Borrower and each
Subsidiary with respect to all federal, state, local and other taxes are
considered by the management of the Borrower to be adequate, and the Borrower
knows of no unpaid assessment which is or might be due and payable against it
or any Subsidiary or any Property of the Borrower or any Subsidiary, except
such thereof as could not reasonably be expected to have a Material Adverse
effect.
4.8 Compliance with Applicable Laws; Filings
Neither the Borrower nor any Subsidiary is in default with respect to any
judgment, order, writ, injunction, decree or decision of any Governmental
Authority which default could reasonably be expected to have a Material
Adverse effect. The Borrower and each Subsidiary is complying with all
applicable statutes, rules and regulations of all Governmental Authorities, a
violation of which could reasonably be expected to have a Material Adverse
effect. The Borrower and each Subsidiary has filed or caused to be filed with
all Governmental Authorities all reports, applications, documents, instruments
and information required to be filed pursuant to all applicable laws, rules,
regulations and requests which, if not so filed, could reasonably be expected
to have a Material Adverse effect.
4.9 Governmental Regulations
Neither the Borrower nor any Subsidiary nor any corporation controlled by,
controlling, or under common control with, the Borrower or any Subsidiary, is
subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, or the Investment Company Act of 1940, in each case as
amended, or is subject to any statute or regulation which regulates the
incurrence of Indebtedness, including statutes or regulations relative to
common or contract carriers or to the sale of electricity, gas, steam, water,
telephone, telegraph or other public utility services.
4.10 Property
Each of the Borrower and each Subsidiary has good and marketable title to, or
a valid leasehold interest in, all of its real property, and is the owner of,
or has a valid lease of, all personal property, except where the failure to
have good and marketable title to, or a valid leasehold interest in, such real
property, or the failure to be the owner of, or have a valid lease of, such
personal property, as the case may be, could not reasonably be expected to
have a Material Adverse effect (except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted),
subject to no Liens, except such Liens permitted by Section 8.2. All leases
of Property to each of the Borrower and each Subsidiary are in full force and
effect, the Borrower or such Subsidiary enjoys quiet and undisturbed
possession under all leases of real property and neither the Borrower nor any
Subsidiary is in default beyond any applicable grace period of any provision
thereof, except where the failure of such leases to be in full force and
effect or the failure to enjoy quiet and undisturbed possession under such
leases of real property, or where such default, as the case may be, could not
reasonably be expected to have a Material Adverse effect. The foregoing
representation is not intended to benefit any title insurer or other third
party in respect of Property owned by the Borrower or any Subsidiary by way of
subrogation or otherwise.
4.11 Federal Reserve Regulations; Use of Loan Proceeds
Neither the Borrower nor any Subsidiary is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock. After giving effect to the making
of each Loan, Margin Stock will constitute less than 25% of the assets (as
determined by any reasonable method) of the Borrower and the Subsidiaries.
Anything in this Agreement to the contrary notwithstanding, no Lender shall be
obligated to extend credit to the Borrower in violation of any limitation or
prohibition provided by any applicable law, regulation or statute, including
Regulation U of the Board of Governors of the Federal Reserve System.
4.12 No Misrepresentation
No representation or warranty contained in any Loan Document and no
certificate, Financial Statement, annual audited or quarterly unaudited
Consolidated financial statement furnished pursuant to Section 7.7(a) or
7.7(c), or written notice furnished or to be furnished by the Borrower or any
Subsidiary pursuant to Section 7.7, contained or will contain, as of its date,
a misstatement of material fact, or omitted or will omit to state, as of its
date, a material fact required to be stated in order to make the statements
therein contained not misleading in the light of the circumstances under which
made.
4.13 Plans
(a)Each Employee Benefit Plan and to the knowledge of Borrower, each
Multiemployer Plan has been and will be maintained and funded, in all material
respects, in accordance with its terms and with all provisions of ERISA
applicable thereto and no condition exists that would require the Borrower to
give notice under Section 7.7(g); (b) no Reportable Event, other than a
Reportable Event for which the reporting requirements have been waived by
regulations issued by the PBGC, has occurred and is continuing with respect to
any Employee Benefit Plan, (c) no liability to the PBGC has been incurred by
the Borrower or any Subsidiary or any ERISA Affiliate with respect to any
Employee Benefit Plan, other than for premiums due and payable, and (d) no
contribution failure sufficient to give rise to a lien under Section 412(n) of
the Code, or Section 302(f) of ERISA, has occurred and is continuing with
respect to any Employee Benefit Plan.
4.14 Environmental Matters
Except as set forth on Schedule 4.14, neither the Borrower nor any Subsidiary
(a) has received written notice or otherwise learned of any claim, demand,
action, event, condition, report or investigation indicating or concerning any
potential or actual liability which individually or in the aggregate could
reasonably be expected to have a Material Adverse effect, arising in
connection with (i) any non-compliance with or violation of the requirements
of any applicable federal, state or local environmental health or safety
statute or regulation, or (ii) the release or threatened release of any toxic
or hazardous waste, substance or constituent, or other substance into the
environment, (b) to the best knowledge of the Borrower, has any threatened or
actual liability in connection with the release or threatened release of any
toxic or hazardous waste, substance or constituent, or other substance into
the environment which individually or in the aggregate could reasonably be
expected to have a Material Adverse effect, (c) has received notice of any
federal or state investigation evaluating whether any remedial action is
needed to respond to a release or threatened release of any toxic or hazardous
waste, substance or constituent or other substance into the environment for
which the Borrower or any Subsidiary is or would be liable, which liability
would reasonably be expected to have a Material Adverse effect, or (d) has
received notice that the Borrower or any Subsidiary is or may be liable to any
Person under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601 et seq., or any analogous
state law, which liability would reasonably be expected to have a Material
Adverse effect. Except as set forth on Schedule 4.14, the Borrower and each
Subsidiary is in compliance with the financial responsibility requirements of
federal and state environmental laws to the extent applicable, including those
contained in 40 C.F.R., part 264, subpart H, and part 265, subpart H, and any
analogous state law, except in those cases in which the failure so to comply
would not reasonably be expected to have a Material Adverse effect.
4.15 Financial Statements
The Borrower has heretofore delivered to the Lenders and the Agent copies of
its audited Consolidated Balance Sheet as of December 31, 1995, and the
related Consolidated Statement of Income and Retained Earnings, and
Consolidated Statement of Cash Flows, for the fiscal year then ended (together
with the related notes and schedules, the "Financial Statements"). The
Financial Statements fairly present the Consolidated financial condition and
results of the operations of the Borrower and the Subsidiaries as of the dates
and for the periods indicated therein and have been prepared in conformity
with GAAP as then in effect subject, in the case of interim Financial
Statements, to normal year-end adjustments and to a lack of footnotes.
Neither the Borrower nor any Subsidiary has any obligation or liability of any
kind (whether fixed, accrued, contingent, unmatured or otherwise) which, in
accordance with GAAP as then in effect, should have been disclosed in the
Financial Statements and was not. Since December 31, 1995, there has been no
Material Adverse change and the Borrower and the Subsidiaries have conducted
their businesses only in the ordinary course.
4.16 Franchises, Intellectual Property, Etc.
The Borrower and each Subsidiary possesses or has the right to use all
franchises, Intellectual Property and licenses that are material and necessary
for the conduct of its business, and to the knowledge of the Borrower and the
Subsidiaries, such franchises, Intellectual Property or licenses do not
infringe upon the valid rights of others in a manner that could reasonably be
expected to have a Material Adverse effect. No event has occurred that
permits or, to the best knowledge of the Borrower, after notice or the lapse
of time or both, or any other condition, could reasonably be expected to
permit, the revocation or termination of any rights to such franchises,
Intellectual Property or licenses, which revocation or termination could
reasonably be expected to have a Material Adverse effect.
4.17 Labor Relations
As of the Effective Date, to the best knowledge of the Borrower, no petition
(that remains pending) has been filed or proceedings (that remain pending)
instituted by any employee or group of employees with any labor relations
board seeking recognition of any bargaining representative with respect to the
Borrower or such Subsidiary. Except as set forth on Schedule 4.17, there are
no material controversies pending between the Borrower or any Subsidiary and
any of their respective employees, which could reasonably be expected to have
a Material Adverse effect.
5. CONDITIONS OF MAKING LOANS ON THE FIRST BORROWING DATE
In addition to the requirements set forth in Section 6, the obligation of each
Lender to make one or more Loans on the first Borrowing Date is subject to the
fulfillment of the following conditions when indicated or, if not so
indicated, on or prior to the first Borrowing Date:
5.1 Evidence of Corporate and Other Action
On or prior to the Effective Date, the Agent shall have received a
certificate, dated the Effective Date, of the Secretary or Assistant Secretary
or other analogous counterpart of each Loan Party (i) attaching a true and
complete copy of the resolutions of its Board of Directors or other analogous
managing body and of all documents evidencing all necessary corporate,
partnership or similar action (in form and substance reasonably satisfactory
to the Agent) taken by it to authorize the Loan Documents to which it is a
party and the transactions contemplated thereby, (ii) attaching a true and
complete copy of its certificate of incorporation and by-laws or other
organizational documents, (iii) setting forth the incumbency of the corporate
officer(s) or other analogous counterparts thereof who may sign such Loan
Documents, including therein a signature specimen of such corporate officer or
counterpart, as the case may be, and (iv) attaching a certificate of good
standing of the Secretary of State of the State of its formation and, without
duplication, each of the following jurisdictions: California, Delaware,
Kentucky, New York and Ohio.
5.2 Notes
On or prior to the Effective Date, the Borrower shall have delivered to the
Agent (for delivery to each Lender) each of the Notes, as executed by the
Borrower.
5.3 Subsidiary Guaranty
On or prior to the Effective Date, the Borrower shall have delivered or caused
to be delivered to the Agent a guaranty, dated the Effective Date, executed by
each Domestic Subsidiary indicated as a Material Subsidiary on Schedule 4.1,
and in the form of Exhibit D (as the same may be amended, supplemented or
otherwise modified from time to time, the "Subsidiary Guaranty").
5.4 Existing Bank Indebtedness
The Existing Bank Indebtedness shall have been completely discharged, all
Liens, if any, securing the same shall have been terminated, all of the
obligations of the financial institutions party to the Existing Credit
Agreement to extend credit thereunder shall have been terminated, and the
Agent shall have received satisfactory evidence of all of the foregoing.
5.5 Approvals
All approvals and consents of all Governmental Authorities, and all approvals
and all consents of all other Persons, in each case which are required to be
obtained in connection with the consummation of the transactions contemplated
by the Loan Documents have been obtained, all required notices have been
given, and all required waiting periods have expired, and the Agent shall have
received a certificate, dated the Effective Date, in all respects satisfactory
to the Agent, to the foregoing effect.
5.6 Litigation
There is no injunction, writ, preliminary restraining order or other order of
any nature issued by any Governmental Authority in any respect affecting any
Loan Document or any transaction contemplated by the Loan Documents, and no
action or proceeding by or before any Governmental Authority shall have been
commenced and be pending seeking to prevent or delay any of the foregoing or
challenging any term or provision thereof or seeking any damages in connection
therewith, and the Agent shall have received a certificate, dated the
Effective Date, in all respects reasonably satisfactory to the Agent, of an
executive officer of the Borrower to the foregoing effect.
5.7 Insurance
On or prior to the Effective Date, the Agent shall have received a certificate
of the CFO, in all respects satisfactory to the Agent, certifying that the
Borrower is in compliance with Section 7.3.
5.8 Approval of Special Counsel
All legal matters incident to the making of each Loan on the first Borrowing
Date shall be reasonably satisfactory to Special Counsel and the Agent shall
have received from Special Counsel an opinion, dated the first Borrowing Date,
and in the form of Exhibit E.
5.9 Opinion of Counsel
On or prior to the Effective Date, the Agent shall have received an opinion of
Taft, Stettinius & Hollister, counsel to the Borrower and the Subsidiaries,
dated the Effective Date and in the form of Exhibit F.
5.10 Payment of Fees
On or prior to the Effective Date, the Borrower shall have paid to the Agent
and the Lenders all Fees and all expenses (including the fees and
disbursements of Special Counsel) which it shall have agreed to pay, to the
extent such Fees and expenses shall have become payable on or prior to the
Effective Date.
5.11 Senior Notes Agreement
The Agent shall have received a copy of the Senior Notes Agreement, certified
by the Borrower as being a true, complete and correct copy thereof.
5.12 Other Documents
The Agent shall have received such other documents (including financial
statements), each in form and substance satisfactory to the Agent, as the
Agent shall reasonably require in connection with the making of the first
Loans.
6. CONDITIONS OF MAKING LOANS ON EACH BORROWING DATE
The obligation of each Lender to make each Loan is subject to the fulfillment
of the following conditions precedent:
6.1 Compliance
On each Borrowing Date, and after giving effect to the Loans to be made on
such Borrowing Date, (a) there shall exist no Default or Event of Default, and
(b) the representations and warranties contained in this Agreement shall be
true and correct with the same effect as though such representations and
warranties had been made on such Borrowing Date.
6.2 Closings
All documents required by the provisions of this Agreement to have been
executed or delivered by each Loan Party to the Agent or any Lender on or
before the applicable Borrowing Date shall have been so executed or delivered
on or before such Borrowing Date.
6.3 Borrowing Request
The receipt by the Agent of a Borrowing Request executed by the Borrower.
7. AFFIRMATIVE AND FINANCIAL COVENANTS
The Borrower covenants and agrees that on and after the Effective Date and
until the later to occur of (a) the Commitment Termination Date, and (b) the
payment in full of the Notes and the performance by the Borrower of all of its
other obligations under the Loan Documents, the Borrower will:
7.1 Legal Existence
Maintain, and cause each Material Subsidiary to maintain, its corporate,
partnership or other legal existence, as the case may be, in good standing in
the jurisdiction of its incorporation or formation and in each other
jurisdiction in which the failure so to do could reasonably be expected to
have a Material Adverse effect.
7.2 Taxes
Pay and discharge when due, and cause each Subsidiary so to do, all taxes,
assessments, governmental charges, license fees and levies upon or with
respect to the Borrower and such Subsidiary, and upon the income, profits and
Property thereof unless, and only to the extent, that such taxes, assessments,
governmental charges, license fees and levies could not reasonably be expected
to have a Material Adverse effect.
7.3 Insurance
Maintain, and cause each Material Subsidiary to maintain, insurance with
financially sound insurance carriers against at least such risks, and in at
least such amounts, as are usually insured against by similar businesses,
including, as appropriate, business interruption, public liability (bodily
injury and property damage), fidelity, workers' compensation and property
insurance.
7.4 Performance of Obligations
Pay and discharge promptly when due, and cause each Subsidiary so to do, all
lawful Indebtedness, obligations and claims for labor, materials and supplies
or otherwise which, if unpaid, could reasonably be expected to (a) have a
Material Adverse effect, or (b) become a Lien on the Property of the Borrower
or any Subsidiary, except those Liens permitted under Section 8.2, provided
that neither the Borrower nor such Subsidiary shall be required to pay or
discharge or cause to be paid or discharged any such Indebtedness, obligation
or claim so long as (i) the validity thereof shall be contested in good faith
and by appropriate proceedings diligently conducted by the Borrower or such
Subsidiary, and (ii) such reserve or other appropriate provision as shall be
required by GAAP shall have been made therefor.
7.5 Condition of Property
Except for ordinary wear and tear, at all times maintain, protect and keep in
good repair, working order and condition, all Property used in the operation
of its business, and cause each Subsidiary so to do, except to the extent that
the failure so to do would not, individually or in the aggregate, have a
Material Adverse effect.
7.6 Observance of Legal Requirements
Observe and comply in all material respects, and cause each Subsidiary so to
do, with all laws, ordinances, orders, judgments, rules, regulations,
certifications, franchises, permits, licenses, directions and requirements of
all Governmental Authorities, including, without limitation, ERISA and
environmental laws, which now or at any time hereafter may be applicable to it
or to such Subsidiary, a violation of which could reasonably be expected to
have a Material Adverse effect.
7.7 Financial Statements and Other Information
Maintain, and cause each Subsidiary to maintain, a standard system of
accounting in accordance with GAAP, and furnish to each Lender:
(a)As soon as available and, in any event, within 90 days after the close of
each fiscal year, a copy of (i) the Borrower's Consolidated Balance Sheets as
of the end of such fiscal year, and (ii) the related Consolidated Statements
of Income and Retained Earnings, and Consolidated Statement of Cash Flows, as
of and through the end of such fiscal year, setting forth in each case in
comparative form the corresponding figures in respect of the previous fiscal
year, all in reasonable detail and, in the case of such Consolidated financial
statements, accompanied by an unqualified report of the Accountants, which
report shall state that (A) the Accountants audited such Consolidated
financial statements, (B) such audit was made in accordance with generally
accepted auditing standards in effect at the time and provides a reasonable
basis for their opinion, and (C) said Consolidated financial statements have
been prepared in accordance with GAAP;
(b)Simultaneously with the delivery of the annual audited statements required
by Section 7.7(a), copies of a certificate of such Accountants stating that
after making their examination necessary to provide the report therefor, they
have no knowledge of any Default or Event of Default, except as specified in
such certificate;
(c)As soon as available, and in any event within 45 days after the end of each
of the first three fiscal quarters of each fiscal year, a copy of (i) the
Balance Sheet, as of the end of such quarter, of the Borrower and the
Subsidiaries on a Consolidated basis, and (ii) the related Statements of
Income and Retained Earnings, and Statements of Cash Flows, of the Borrower
and the Subsidiaries on a Consolidated basis for (x) such quarter, and (y) the
period from the beginning of the then current fiscal year to the end of such
quarter, in each case in comparative form with the prior fiscal year, all in
reasonable detail, together with a Compliance Certificate of the CFO, which
certificate shall state that (1) all such financial statements are true,
complete and correct in all material respects and, have been prepared in
accordance with GAAP (without footnotes and subject to year-end adjustments),
and (2) there exists no violation of any of the terms or provisions of the
Loan Documents and that no condition or event has occurred which would
constitute a Default or an Event of Default, or if so, specifying in such
certificate all such violations, conditions and events and the nature and
status thereof;
(d)Prompt written notice upon the Borrower's or any Subsidiary's obtaining
knowledge that: (i) any Indebtedness (other than Indebtedness under the Loan
Documents) of the Borrower or any Subsidiary in an aggregate amount in excess
of $2,000,000 shall have been declared or become due and payable prior to its
stated maturity, or called and not paid when due, or (ii) the holders of any
notes (other than the Notes), or other evidence of Indebtedness, certificates
or securities evidencing any such Indebtedness, or any obligees with respect
to any other Indebtedness of the Borrower or any Subsidiary, have the right to
declare Indebtedness in an aggregate amount in excess of $2,000,000 due and
payable prior to its stated maturity;
(e)Prompt written notice of: (i) any citation, summons, subpoena, order to
show cause or other order naming the Borrower or any Subsidiary a party to any
proceeding before any Governmental Authority which could reasonably be
expected to have a Material Adverse effect, and include with such notice a
copy of such citation, summons, subpoena, order to show cause or other order,
(ii) any lapse or other termination of any license, permit, franchise or other
authorization issued to the Borrower or any Subsidiary by any Governmental
Authority, (iii) any refusal by any Governmental Authority to renew or extend
any license, permit, franchise or other authorization, and (iv) any dispute
between the Borrower or any Subsidiary and any Governmental Authority, which
lapse, termination, refusal or dispute, referred to in clause (ii), (iii) or
(iv) of this Section 7.7(g), could reasonably be expected to have a Material
Adverse effect;
(f)Promptly upon becoming available, copies of all regular, periodic or
special reports, schedules, proxy statements, registration statements, 10-Ks,
10-Qs and 8-Ks which the Borrower or any Subsidiary may now or hereafter be
required to file with or deliver to any securities exchange or the Securities
and Exchange Commission, or any other Governmental Authority succeeding to the
functions thereof, and copies of all material news releases sent to financial
analysts;
(g)Promptly upon becoming aware of the occurrence of any (i) Reportable Event
with respect to an Employee Benefit Plan, other than a Reportable Event for
which the reporting requirements have been waived by regulations issued by the
PBGC, (ii) contribution failure sufficient to give rise to a lien under
Section 412(n) of the Code, or Section 302(f) of ERISA, with respect to any
Employee Benefit Plan, (iii) "prohibited transaction" (as such term is defined
in Section 4975 of the Code with respect to an Employee Benefit Plan, (iv)
notice of intent to terminate any Employee Benefit Plan under Section 4041(c)
of ERISA, (v) with respect to an Employee Benefit Plan, the institution by the
PBGC of proceedings under Section 4042 of ERISA, or (vi) the complete or
partial withdrawal from a Multiemployer Plan by the Borrower, any Subsidiary
or any ERISA Affiliate that results in liability under Section 4201 or 4204 of
ERISA (including any obligation to satisfy secondary liability as a result of
a purchaser default) or the receipt by the Borrower, any Subsidiary or any
ERISA Affiliate of notice from a Multiemployer Plan that it is in insolvency
or reorganization or that it intends to terminate or has terminated in
connection with any Employee Benefit Plan (or in the case of (vi), any
Multiemployer Plan) or any trust created thereunder, a written notice
specifying the nature thereof, what action the Borrower is taking or proposes
to take with respect thereto, and when known, any action taken by the Internal
Revenue Service, the PBGC or the Department of Labor with respect thereto;
(h)Upon becoming aware thereof, prompt written notice of the occurrence of (i)
each Default, (ii) each Event of Default, and (iii) each Material Adverse
change; and
(i)Promptly upon request therefor, such other information and reports
regarding the business, condition (financial or otherwise) or Property of the
Borrower and the Subsidiaries, as the Agent or any Lender at any time or from
time to time may reasonably request.
7.8 Inspection
At all reasonable times, upon reasonable prior notice, permit representatives
of the Agent or any Lender to visit the offices of the Borrower or any
Subsidiary, to examine the books and records thereof and Accountants' reports
relating thereto, and to make copies or extracts therefrom, to discuss the
affairs of the Borrower or any Subsidiary with the respective officers
thereof, and to examine and inspect the Property of the Borrower or any
Subsidiary and to meet and discuss the affairs of the Borrower and each
Subsidiary with the Accountants.
7.9 Authorizations
Maintain and cause each Subsidiary to maintain, in full force and effect, all
copyrights, patents, trademarks, trade names, service marks, franchises,
licenses, permits, applications, reports, and other authorizations and rights,
as are necessary for the conduct from time to time of their businesses, except
to the extent the failure so to maintain such items, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse effect.
7.10 Subsidiaries
Except as set forth on Schedule 4.1, at all times maintain (directly or
indirectly), beneficially and of record, 100% of the voting control of, and
100% of the equity in, each of its Material Subsidiaries.
7.11 Leverage
Maintain Leverage of not greater than 35%.
7.12 Consolidated Net Worth
Maintain Consolidated Net Worth of not less than the sum of (a) $210,000,000
plus (b) 50% of the positive Consolidated net income of the Borrower and the
Subsidiaries for each completed fiscal quarter ending on or after March 31,
1996.
7.13 Interest Coverage
At each fiscal quarter end, have Interest Coverage of not less than 300%.
7.14 Additional Subsidiaries
(a) Within 45 days after the end of each fiscal quarter, cause each Person
(other than an existing Guarantor) which shall be both a Domestic Subsidiary
and a Material Subsidiary as of such fiscal quarter end, to become a party to
the Subsidiary Guaranty in accordance with the terms thereof.
(b)Cause each Subsidiary which shall have become a party to the Subsidiary
Guaranty at any time after the Effective Date to deliver to the Agent,
simultaneously with the execution and delivery of the same, (i) a certificate,
dated the date such Subsidiary shall have become a party to the Subsidiary
Guaranty, executed by such Subsidiary and substantially in the form of, and
with substantially the same attachments as, the certificate which would have
been required under Section 5.1 if such Subsidiary had become a party to the
Subsidiary Guaranty on the Effective Date, and (ii) if requested by the Agent,
an opinion of counsel to such Subsidiary covering the same matters with
respect to such Subsidiary covered by the opinions delivered pursuant to
Section 5.9, and otherwise in form and substance reasonably satisfactory to
the Agent.
8. NEGATIVE COVENANTS
The Borrower covenants and agrees that on and after the Effective Date and
until the later to occur of (a) the Commitment Termination Date, and (b) the
payment in full of the Notes and the performance by the Borrower of all of its
other obligations under the Loan Documents, the Borrower shall not:
8.1 Indebtedness
Create, incur, assume or suffer to exist any Indebtedness, or permit any
Subsidiary so to do, except any one or more of the following types of
Indebtedness: (a) Indebtedness under the Loan Documents, (b) the Existing
Bank Indebtedness, provided that such Indebtedness shall be repaid in full
prior to or simultaneously with the making of the Loans on the first Borrowing
Date, (c) Indebtedness set forth on Schedule 8.1, (d) Domestic Intercompany
Debt, (e) Indebtedness of the Borrower and its Subsidiaries not in excess of
$15,000,000 in the aggregate at any one time outstanding under reimbursement
agreements in respect of letters of credit, (f) Contingent Obligations of the
Borrower and its Subsidiaries not in excess of $5,000,000 in the aggregate at
any one time outstanding (exclusive of Contingent Obligations permitted under
Section 8.1(c) constituting indemnification obligations related to the sale of
Cleo, Inc.), and (g) other Indebtedness of the Borrower not in excess of
$2,000,000 in the aggregate at any one time outstanding.
8.2 Liens
Create, incur, assume or suffer to exist any Lien against or on any Property
now owned or hereafter acquired by the Borrower or any Subsidiary, or permit
any Subsidiary so to do, except any one or more of the following types of
Liens: (a) Liens in connection with workers' compensation, unemployment
insurance or other social security obligations (which phrase shall not be
construed to refer to ERISA or the minimum funding obligations under Section
412 of the Code), (b) Liens to secure the performance of bids, tenders,
letters of credit, contracts (other than contracts for the payment of
Indebtedness), leases, statutory obligations, surety, customs, appeal,
performance and payment bonds and other obligations of like nature, in each
such case arising in the ordinary course of business, (c) mechanics',
workmen's, carriers', warehousemen's, materialmen's, landlords', or other like
Liens arising in the ordinary course of business with respect to obligations
which are not due or which are being contested in good faith and by
appropriate proceedings diligently conducted, (d) Liens for taxes,
assessments, fees or governmental charges or levies which are not delinquent
or are being contested in good faith and by appropriate proceedings diligently
conducted, and in respect of which adequate reserves shall have been
established in accordance with GAAP on the books of the Borrower or such
Subsidiary, (e) Liens of attachments, judgments or awards against the Borrower
or any Subsidiary with respect to which an appeal or proceeding for review
shall be pending or a stay of execution shall have been obtained, or which are
otherwise being contested in good faith and by appropriate proceedings
diligently conducted, and in respect of which adequate reserves shall have
been established in accordance with GAAP on the books of the Borrower or such
Subsidiary, (f) easements, rights of way, restrictions, leases of Property to
others, easements for installations of public utilities, title imperfections
and restrictions, zoning ordinances and other similar encumbrances affecting
Property which in the aggregate do not have, or would not be reasonably
expected to result in, a Material Adverse effect, (g) Liens on Property of the
Borrower or any Subsidiary existing on the Effective Date and set forth on
Schedule 8.2, (h) statutory Liens in favor of lessors arising in connection
with Property leased to the Borrower or any Subsidiary, (i) Liens on Margin
Stock to the extent that a prohibition on such Liens pursuant to this Section
8.2 would violate Regulation U of the Board of Governors of the Federal
Reserve System, as amended, and (j) Liens created under or in connection with
the Existing Bank Indebtedness, provided that such Liens shall be released
simultaneously with the making of the Loans on the first Borrowing Date.
8.3 Dispositions
Make any Disposition or permit any Subsidiary to do so, except any one or more
of the following: (a) Dispositions of any Investments permitted under
Sections 8.5(a) through and including 8.5(j) and Section 8.5(q), (b)
Dispositions of Margin Stock to the extent that a prohibition on such
Dispositions pursuant to this Section 8.3 would violate Regulation U of the
Board of Governors of the Federal Reserve System, as amended, (c) Domestic
Intercompany Dispositions, and (d) Dispositions by the Borrower of the capital
stock of any Subsidiary which is not a Material Subsidiary.
8.4 Mergers and Acquisitions
Consolidate or merge into or with any Person, or make any Acquisition, or
enter into any binding agreement to do any of the foregoing which is not
contingent on obtaining the consent of the Required Lenders, or permit any
Subsidiary so to do, except any one or more of the following: (a) any
wholly-owned Subsidiary may merge into or be acquired by the Borrower or any
other wholly-owned Subsidiary, provided that in the case of the Borrower being
a party to such merger or Acquisition, the Borrower is the survivor thereof,
and provided further that in each case referred to in this clause (a),
immediately before and after giving effect thereto, no Default or Event of
Default shall or would exist, (b) Acquisitions by the Borrower or any
Subsidiary of Investments permitted by Section 8.5, and (c) Capital
Expenditures permitted by Section 8.11.
8.5 Investments
Any time hold, purchase, invest in or otherwise acquire any derivative product
or any interest therein or any debt security or Stock of, or any other equity
interest in, any Person, or make any loan or advance (other than cash advances
to retail customers in the ordinary course of business) to, or enter into any
arrangement for the purpose of providing funds or credit to, or make any other
investment, whether by way of capital contribution or otherwise, in any Person
(all of which are sometimes referred to herein as "Investments"), or permit
any Subsidiary so to do, except any one or more of the following Investments:
(a) Investments by the Borrower or any Subsidiary in short-term direct
obligations of the United States of America (and not the agencies or
instrumentalities thereof), (b) Investments by the Borrower or any Subsidiary
in short-term debt securities of any issuer, provided that the principal
thereof and interest thereon is unconditionally guaranteed by the United
States of America (and not the agencies or instrumentalities thereof), (c)
Investments by the Borrower or any Subsidiary in short-term certificates of
deposit, in Dollars, of any Lender or any other depository institution
chartered under the laws of the United States of America or any State thereof
the deposits of which are insured by the Federal Deposit Insurance Corporation
and which has capital and undivided surplus of not less than $500,000,000, (d)
Investments by the Borrower or any Subsidiary in commercial paper having the
highest commercial paper rating by S&P or Moody's, (e) Investments in
overcollateralized repurchase agreements with primary dealers reporting daily
to the Federal Reserve Bank of New York with a net worth of not less than
$100,000,000, (f) Investments in United States money market obligations and
foreign bank money market obligations, provided that if the applicable
institution is a foreign bank, such institution, together with any Affiliates
of such institution, has a net worth of at least $200,000,000, and if the
applicable institution is a United States bank, such institution is a
depository institution chartered under the laws of the United States of
America or any State thereof, has a net worth, together with any Affiliates of
such institution, of at least $200,000,000, has a BankWatch rating of at least
B/C and has commercial paper, if issued, rated at least A-2 by S&P or P-2 by
Moody's, (g) bank and corporate bonds with maturities of not more than 5
years, provided that the issuers thereof have a rating of at least A by S&P or
A-2 by Moody's, (h) Investments in short-term municipal securities rated at
least MIG-1 by Moody's or backed by a letter of credit issued by any Lender or
any other depository institution chartered under the laws of the United States
of America or any State thereof the deposits of which are insured by the
Federal Deposit Insurance Corporation and which has capital and undivided
surplus of not less than $500,000,000, (i) Investments in intermediate to
long-term municipal securities rated at least A by S&P or A-2 by Moody's,
provided in any case that the maturities of such municipal securities are less
than 5 years, (j) Investments existing on the date hereof and set forth on
Schedule 8.5, (k) Investments by the Borrower or any Domestic Subsidiary in
Domestic Intercompany Debt permitted under Section 8.1, (l) Acquisitions
permitted by Section 8.4, (m) Investments existing on and as of the Effective
Date in Subsidiaries, (n) Investments in non-speculative foreign exchange and
interest rate protection arrangements in the ordinary course of business, (o)
Investments in Foreign Subsidiaries in amounts equal to dividends and other
distributions received by the Borrower from Foreign Subsidiaries, provided
that any such Investment shall be made in the same Foreign Subsidiary from
which the Borrower received such dividend or other distribution, and such
Investment shall be made within 10 Domestic Business Days of the Borrower's
receipt of such dividend or other distribution, (p) additional Investments in
one or more Domestic Subsidiaries which are Guarantors, and (q) Investments by
Foreign Subsidiaries or foreign branches of Domestic Subsidiaries in (1)
short-term direct obligations of the nation under the laws of which such
Foreign Subsidiary is organized, (2) short-term debt securities issued or
guaranteed as to payments of principal and interest by the nation under the
laws of which such Foreign Subsidiary is organized, and (3) short-term money
market instruments or short-term time deposits, in either case denominated in
foreign currencies of the nation under the laws of which such Foreign
Subsidiary is organized, provided, however, that (X) the aggregate fair market
value of all such Investments made pursuant to this Section 8.5(q) shall not
exceed $3,000,000 at any one time, (Y) the aggregate fair market value of all
such Investments made pursuant to this Section 8.5(q) in British Pounds shall
not exceed $3,000,000 at any one time, and (Z) the aggregate fair market value
of all such Investments made pursuant to this Section 8.5(q) in all other OEDC
currencies, in the aggregate, shall not exceed $250,000 at any one time.
8.6 Restricted Payments
Make any Restricted Payment or permit any Subsidiary so to do, except any one
or more of the following Restricted Payments: (a) any wholly-owned Subsidiary
may pay dividends and make other distributions, and (b) provided that
immediately before and after giving effect thereto no Default or Event of
Default shall or would exist, the Borrower may pay dividends and make
distributions on and redemptions of any class of Stock or other type or class
of equity interest or equity investment not in excess of $10,000,000 in the
aggregate during any fiscal year.
8.7 Limitation on Upstream Dividends by Subsidiaries
Permit, cause or suffer to exist, any Subsidiary to enter into or agree, or
otherwise be or become subject, to any agreement, contract or other
arrangement (other than this Agreement or any applicable statute, rule or
regulation) with any Person pursuant to the terms of which (a) such Subsidiary
is or would be prohibited from declaring or paying any cash dividends on any
class of its stock owned directly or indirectly by the Borrower or any other
Subsidiary or from making any other distribution on account of any class of
any such stock (herein referred to as "Upstream Dividends"), or (b) the
declaration or payment of Upstream Dividends by a Subsidiary or another
Subsidiary, on an annual or cumulative basis, is or would be otherwise limited
or restricted.
8.8 Line of Business
Engage in any business, or permit any Subsidiary thereof so to do, that is
materially different from the business conducted by the Borrower and the
Subsidiaries on the Effective Date.
8.9 Amendment of Certain Documents and Agreements
Amend, supplement or otherwise modify (a) its certificate of incorporation or
by-laws, or cause, permit or otherwise allow any Subsidiary to amend,
supplement or otherwise modify its certificate of incorporation or by-laws or,
if such Subsidiary is not a corporation, any analogous counterpart thereof, or
(b) the Senior Notes Agreement, unless, in any such case, such amendment,
supplement or modification would not materially and adversely affect the
interests of the Agent or any Lender under the Loan Documents.
8.10 Transactions with Affiliates
Become, or permit any Subsidiary to become, a party to any transaction with
any Affiliate of the Borrower on a basis less favorable to the Borrower and
the Subsidiaries than if such transaction were not with an Affiliate.
8.11 Capital Expenditures
Make any Capital Expenditure, or permit any Subsidiary so to do, except (a)
Acquisitions permitted under Section 8.4 or 8.5, and (b) any Capital
Expenditure which, when added to all of the other Capital Expenditures of the
Borrower and the Subsidiaries on a Consolidated basis during the Commitment
Period, does not exceed $45,000,000.
8.12 Long Term Leases
Become liable, renew or extend as lessee under, or incur any Contingent
Obligation in respect of, any Long Term Lease, or permit any Subsidiary so to
do, if immediately after giving effect thereto and to any concurrent
transactions, the aggregate annual Rentals payable during any current or
future period of twelve consecutive months under all Long Term Leases would
exceed 15% of Consolidated Net Worth.
9. DEFAULT
9.1 Events of Default
The following shall each constitute an "Event of Default" hereunder:
(a)The failure of the Borrower to make any payment of principal on any Note
when due and payable; or
(b)The failure of the Borrower to make any payment of interest on any Loan or
any Fee on any date when due and payable and such default shall continue
unremedied for a period of three Domestic Business Days after the same shall
have become due; or
(c)The failure of the Borrower to observe or perform any covenant or agreement
contained in Section 2.6, 7.1, 7.10, 7.11, 7.12, 7.13, or 7.14, or in Section
8; or
(d)The failure of the Borrower to observe or perform any other covenant or
agreement contained in this Agreement, and such failure shall have continued
unremedied for a period of 30 days after the Borrower shall have become aware
of such failure; or
(e)(i)Any representation or warranty of any Loan Party (or of any of its
officers on its behalf) made in any Loan Document shall in any such case prove
to have been incorrect or misleading (whether because of misstatement or
omission) in any respect when made, or (ii) any representation or warranty of
any Loan Party (or of any of its officers on its behalf) made in any
certificate, report, opinion (other than an opinion of counsel) or other
document delivered on or after the date hereof pursuant to any Loan Document,
shall in any such case prove to have been incorrect or misleading (whether
because of misstatement or omission) in any material respect when made; or
(f)(i) Liabilities and/or other obligations in an aggregate amount in excess
of $2,000,000 of the Borrower or any Material Subsidiary (other than the
obligations hereunder and under the Notes), whether as principal, guarantor,
surety or other obligor, for the payment of any Indebtedness, (A) shall become
or shall be declared to be due and payable prior to the expressed maturity
thereof, or (B) shall not be paid when due or within any grace period for the
payment thereof, or (ii) any holder of any such liabilities and/or obligations
in excess of $2,000,000 shall have the right to declare the Indebtedness
evidenced thereby due and payable prior to its stated maturity; or
(g)The Borrower or any Material Subsidiary shall (i) suspend or discontinue
its business (except as may otherwise be expressly permitted herein), or (ii)
make an assignment for the benefit of creditors, or (iii) generally not be
paying its debts as such debts become due, or (iv) admit in writing its
inability to pay its debts as they become due, or (v) file a voluntary
petition in bankruptcy, or (vi) become insolvent (however such insolvency
shall be evidenced), or (vii) file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment of debt,
liquidation or dissolution or similar relief under any present or future
statute, law or regulation of any jurisdiction, or (viii) petition or apply to
any tribunal for any receiver, custodian or any trustee for any substantial
part of its Property, or (ix) be the subject of any such proceeding filed
against it which remains undismissed for a period of 60 days, or (x) file any
answer admitting or not contesting the material allegations of any such
petition filed against it, or of any order, judgment or decree approving such
petition in any such proceeding, or (xi) seek, approve, consent to, or
acquiesce in any such proceeding, or in the appointment of any trustee,
receiver, custodian, liquidator, or fiscal agent for it, or any substantial
part of its Property, or an order is entered appointing any such trustee,
receiver, custodian, liquidator or fiscal agent and such order remains
unstayed and in effect for 60 days, or (xii) take any formal action for the
purpose of effecting any of the foregoing or looking to the liquidation or
dissolution of the Borrower or any such Material Subsidiary (except as may
otherwise be expressly permitted herein); or
(h)An order for relief is entered under the United States bankruptcy laws or
any other decree or order is entered by a court having jurisdiction and
continues unstayed and in effect for a period of 60 days (i) adjudging the
Borrower or any Material Subsidiary as bankrupt or insolvent, or (ii)
approving as properly filed a petition seeking reorganization, liquidation,
arrangement, adjustment or composition of, or in respect of the Borrower or
any Material Subsidiary under the United States bankruptcy laws or any other
applicable Federal or state law, or (iii) appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of the
Borrower or any Material Subsidiary or of any substantial part of the Property
of any thereof, or (iv) ordering the winding up or liquidation of the affairs
of the Borrower or any Material] Subsidiary and any such decree or order
continues unstayed and in effect for a period of 60 days; or
(i)Judgments or decrees in an aggregate amount in excess of $1,000,000 (net of
insurance coverage therefor which is not being contested by the insurer)
against the Borrower or any Material Subsidiary shall remain unpaid, unstayed
on appeal, undischarged, unbonded or undismissed for a period of 60 days; or
(j)A Change in Control shall have occurred or been agreed upon; or
(k)An event or condition occurs or exists with respect to any Employee Benefit
Plan or Multiemployer Plan, and the Borrower or any Subsidiary or any ERISA
Affiliate has incurred or in the reasonable opinion of the Required Lenders is
reasonably likely to incur a liability or liabilities to such Employee Benefit
Plan or Multiemployer Pension Plan, the PBGC, or a trustee under Section 4042
of ERISA (or any combination of the foregoing) which is material in relation
to the financial condition of the Borrower and its Subsidiaries taken as a
whole; provided, however, that no such amount shall be deemed to be material
so long as the aggregate of all such amounts do not exceed the greater of (i)
$30,000,000 or (ii) 15% of Consolidated Net Worth; or
(l) The Subsidiary Guaranty shall cease to be in full force and effect, or an
"Event of Default" shall have occurred under, and as such term is defined in,
the Subsidiary Guaranty; or
(m)The Borrower shall have made a Disposition of all or any portion of the
capital stock of any Subsidiary other than Gibson de Mexico, S.A. de C.V., a
Mexican corporation.
9.2 Contract Remedies
(a)Upon the occurrence or at any time during the continuance of an Event of
Default, the Agent, at the written request of the Required Lenders, shall
notify the Borrower that all of the Aggregate Commitments have been terminated
and/or that all of the Notes have been declared immediately due and payable,
provided that upon the occurrence of an Event of Default under Section 9.1(g)
or (h), all of the Aggregate Commitments shall automatically terminate and all
of the Notes shall become immediately due and payable without declaration or
notice to the Borrower. To the fullest extent not prohibited by law, except
for the notice provided for in the preceding sentence and any other notice
expressly provided for herein, the Borrower hereby expressly waives any
presentment, demand, protest, notice of protest or other notice of any kind in
connection with the Loan Documents and its obligations thereunder. To the
fullest extent not prohibited by law, the Borrower hereby further expressly
waives and covenants not to assert any appraisement, valuation, stay,
extension, redemption or similar law, now or at any time hereafter in force
which might delay, prevent or otherwise impede the performance or enforcement
of this Agreement and the other Loan Documents.
(b)In the event that the Aggregate Commitments shall have been terminated or
all of the Notes shall have been declared due and payable pursuant to the
provisions of this Section 9.2, the Lenders agree, among themselves, that any
funds received from or on behalf of the Borrower or, except as otherwise
required by law or the Subsidiary Guaranty, any other Loan Party under any
Loan Document by any of the Lenders (except funds received by any Lender as a
result of a purchase from such Lender pursuant to the provisions of Section
11.9) shall be remitted to the Agent, and shall be applied by the Agent in
payment of the Loans and the obligations of the Borrower under the Loan
Documents in the following manner and order: (i) first, to reimburse the
Agent and thereafter the Lenders for any expenses due from the Borrower
pursuant to the provisions of Section 11.5, (ii) second, to the payment of the
Fees, (iii) third, to the payment of any other fees, expenses or amounts
(other than the principal of and interest on the Notes) payable by the
Borrower to the Agent or any of the Lenders under the Loan Documents, (iv)
fourth, to the payment, pro rata according to the Outstanding Percentage of
each Lender, of interest due on the Notes, (v) fifth, to the payment, pro rata
according to the aggregate outstanding principal balance of the Notes of such
principal, and (vi) sixth, any remaining funds shall be paid to whomsoever
shall be entitled thereto or as a court of competent jurisdiction shall
direct.
(c)In the event that the Notes shall have been declared due and payable
pursuant to the provisions of this Section 9.2, the Agent may, and upon the
written request of the Required Lenders shall, proceed to enforce the rights
of the holders of the Notes by suit in equity, action at law and/or other
appropriate proceedings, whether for payment or the specific performance of
any covenant or agreement contained in the Loan Documents.
10. THE AGENT
10.1 Appointment
Each Lender hereby irrevocably designates and appoints BNY as the "Agent" of
such Lender under the Loan Documents and each Lender hereby irrevocably
authorizes BNY, as Agent, to take such action on its behalf under the
provisions of the Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities except those expressly set forth herein or therein,
or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into the Loan Documents or otherwise exist against the Agent.
10.2 Delegation of Duties
The Agent may execute any of its duties under the Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to rely upon the advice of
counsel concerning all matters pertaining to such duties.
10.3 Exculpatory Provisions
Neither the Agent nor any of its respective officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except the Agent for its own gross
negligence or willful misconduct), or (ii) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by any
party contained in the Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent
under or in connection with, the Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the Loan
Documents or for any failure of the Borrower, any Subsidiary, or any other
Person to perform its obligations hereunder or thereunder. The Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, the Loan Documents, or to inspect the properties, books or records of the
Borrower or any Subsidiary. The Agent shall not be under any liability or
responsibility to the Borrower or any other Person as a consequence of any
failure or delay in performance, or any breach, by any Lender of any of its
obligations under any of the Loan Documents. The Lenders acknowledge that the
Agent shall not be under any duty to take any discretionary action permitted
hereunder unless the Agent shall be requested in writing to do so by the
Required Lenders.
10.4 Reliance by Agent
The Agent shall be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, consent, certificate, affidavit,
opinion, letter, cablegram, telegram, facsimile, telex or teletype message,
statement, order or other document or conversation reasonably believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected
by the Agent. The Agent may treat each Lender, or the Person designated in
the last notice filed with the Agent under Section 11.7, as the holder of all
of the interests of such Lender in its Loans and in its Note until written
notice of transfer, signed by such Lender (or the Person designated in the
last notice filed with the Agent) and by the Person designated in such written
notice of transfer, in form and substance satisfactory to the Agent, shall
have been filed with the Agent. The Agent shall not be under any duty to
examine or pass upon the validity, effectiveness or genuineness of the Loan
Documents or any instrument, document or communication furnished pursuant
thereto or in connection therewith, and the Agent shall be entitled to assume
that the same are valid, effective and genuine, have been signed or sent by
the proper parties and are what they purport to be. The Agent shall be fully
justified in failing or refusing to take any action under the Loan Documents
unless it shall first receive such advice or concurrence of the Required
Lenders as it deems appropriate. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
10.5 Notice of Default
The Agent shall be deemed not to have knowledge or notice of the occurrence of
any Default or Event of Default unless the Agent shall have received written
notice thereof from a Lender or the Borrower. In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders,
provided that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action or give such
directions, or refrain from taking such action or giving such directions, with
respect to such Default or Event of Default as it shall deem to be in the best
interests of the Lenders.
10.6 Non-Reliance
Each Lender expressly acknowledges that neither the Agent nor any of its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Agent hereinafter, including any review of the affairs of the Borrower or
the Subsidiaries, shall be deemed to constitute any representation or warranty
by the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own evaluation of and investigation into the business, operations, Property,
financial and other condition and creditworthiness of the Borrower and the
Subsidiaries and made its own decision to enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon
the Agent or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
analysis, evaluations and decisions in taking or not taking action under the
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, Property, financial and other condition
and creditworthiness of the Borrower and the Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, Property, financial and other condition
or creditworthiness of the Borrower or the Subsidiaries which may come into
the possession of the Agent or any of its respective officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.7 Indemnification
Each Lender agrees to indemnify the Agent in its capacity as such (to the
extent not promptly reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to its Commitment
Percentage or, in the event any Loans shall be outstanding, its Outstanding
Percentage, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever, including any amounts paid to the
Lenders by or for the account of the Borrower pursuant to the terms hereof,
that are subsequently rescinded or avoided (or must otherwise be restored or
returned) which may at any time (including at any time following the payment
of the Notes) be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of this Agreement, any other Loan Document or
any other document contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be taken by the Agent
under or in connection with any of the foregoing; provided, however, that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent resulting solely from the gross
negligence or willful misconduct of the Agent. The agreements in this Section
10.7 shall survive the termination of the Aggregate Commitments, the payment
of the Notes and all other amounts payable under the Loan Documents, and the
performance and observance by the Borrower of all of its other obligations
under the Loan Documents.
10.8 Agent in Its Individual Capacity
BNY and each affiliate thereof may make loans to, accept deposits from, issue
letters of credit for the account of and generally engage in any kind of
business with, the Borrower and the Subsidiaries as though BNY was not the
Agent hereunder. With respect to the Commitment made or renewed by BNY and
each Note issued to BNY, BNY shall have the same rights and powers under this
Agreement as any Lender and may exercise the same as though it was not the
Agent and the term "Lender" shall include BNY.
10.9 Successor Agent
If at any time the Agent deems it advisable, in its sole discretion, it may
submit to each of the Lenders a written notification of its resignation as
Agent under this Agreement, such resignation to be effective on the earlier to
occur of (a) the thirtieth day after the date of such notice, and (b) the date
upon which any successor agent, in accordance with the provisions of this
Section 10.9, shall have accepted in writing its appointment as such successor
agent. Upon any such resignation, the Required Lenders shall have the right
to appoint from among the Lenders a successor agent reasonably acceptable to
the Borrower. If no successor agent shall have been so appointed by the
Required Lenders and accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor agent, which successor agent
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of
at least $500,000,000. Upon the written acceptance of any appointment as
Agent hereunder by a successor agent, such successor agent shall automatically
become a party to this Agreement and shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent's rights, powers, privileges and duties as Agent
under this Agreement shall be terminated. The Borrower and the Lenders shall
execute such documents as shall be necessary to effect such appointment.
After any retiring Agent's resignation as Agent, the provisions of this
Section 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement. If at any time there
shall not be a duly appointed and acting Agent, upon notice duly given, the
Borrower agrees to make each payment when due hereunder and under the Notes
and the other Loan Documents directly to the Lenders entitled thereto during
such time.
11. OTHER PROVISIONS
11.1 Amendments, Waivers, Etc.
(a)Except as otherwise provided in Section 11.1(b), with the written consent
of the Required Lenders, the Agent and the appropriate Loan Parties may, from
time to time, enter into written amendments, supplements or modifications to
any Loan Document and, with the consent of the Required Lenders, the Agent
may, on behalf of the Lenders, execute and deliver to any such parties a
written instrument waiving or consenting to the departure from, on such terms
and conditions as the Agent may specify in such instrument, any of the
requirements of the Loan Documents or any Default or Event of Default and its
consequences, provided, however, that no such amendment, supplement,
modification, waiver or consent shall, without the consent of all of the
Lenders (i) increase the Commitment Amount of any Lender (provided that
neither (A) a waiver of a Default or an Event of Default, nor (B) an
Assignment to a Lender shall be deemed to constitute such an increase), (ii)
extend the Commitment Period, (iii) reduce the amount, or extend the time of
payment, of the Commitment Fee, (iv) reduce the rate (other than the Default
Rate), or extend the time of payment of, interest on any Loan or any Note, (v)
reduce the amount, or extend the time of payment of any installment or other
payment of principal on any Loan or any Note, (vi) decrease or forgive the
principal amount of any Loan or any Note, (vii) consent to any assignment or
delegation by the Borrower or any Subsidiary, or any other Loan Party, of any
of its rights or obligations under any Loan Document, (viii) release all or
substantially all of the obligations of any Loan Party under the Subsidiary
Guaranty (other than in connection with a Disposition of such Loan Party
permitted by Section 8.3), (ix) change the provisions of Sections 3.5, 3.6,
3.7, 3.8, 3.10, 9.1(a), this Section 11.1, Section 11.5, or Section 11.10, (x)
change the definition of Required Lenders, (xi) change sharing provisions
among the Lenders, or (xii) change the several nature of the obligations of
the Lenders, and provided further that no such amendment, supplement,
modification, waiver or consent shall amend, modify or waive any provision of
Section 10 or otherwise change any of the rights or obligations of the Agent
under any Loan Document without the written consent of the Agent. Any such
amendment, supplement, modification, waiver or consent shall apply equally to
each of the Lenders and shall be binding upon the parties to the applicable
agreement, the Lenders, the Agent and all future holders of the Notes. In the
case of any waiver, the parties to the applicable agreement, the Lenders, and
the Agent shall be restored to their former position and rights hereunder and
under the other Loan Documents, and any Default or Event of Default waived
shall not extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
(b)Notwithstanding anything to the contrary contained in Section 11.1(a), the
Agent may, at any time and from time to time without the consent of any one or
more of the Lenders, release all or any of the obligations of a Loan Party
under the Subsidiary Guaranty in connection with a Disposition of such Loan
Party permitted by Section 8.3.
11.2 Notices
Except as otherwise expressly provided herein, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing and, if in writing, shall be deemed to have been duly given or made
(a) when delivered by hand, (b) one Domestic Business Day after having been
sent by overnight courier service, (c) five Domestic Business Days after
having been deposited in the mail, first-class postage prepaid, or (d) in the
case of facsimile notice, when sent, addressed as follows in the case of the
Borrower and the Agent, and as set forth in Exhibit A in the case of each of
the Lenders, or to such other addresses as to which the Agent may be hereafter
notified by the respective parties hereto or any future holders of the Notes:
The Borrower:
Gibson Greetings, Inc.
2100 Section Road
Cincinnati, Ohio 45237
Attention: William L. Flaherty,
Senior Vice President,
Finance & Chief Financial Officer
Facsimile: (513) 841-6038
Telephone: (513) 841-6675,
with a copy to:
Gibson Greetings, Inc.
2100 Section Road
Cincinnati, Ohio 45237
Attention: Jay Rutherford,
Director of Treasury and Risk Management
Facsimile: (513) 841-6038
Telephone: (513) 841-6948,
with a copy in the case of a notice of a Default:
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Charles D. Lindberg, Esq.
Facsimile: (513) 381-2838
Telephone: (513) 357-9300
The Agent:
The Bank of New York
One Wall Street
22nd Floor
New York, New York 10286
Attention: Gail Kurz,
Assistant Treasurer
Facsimile: (212) 635-6434
Telephone: (212) 635-7842
with a copy to, in the case of all Borrowing Requests, prepayment notices
under Section 2.5(a) and notices under Section 3.3, and to the attention of,
in the case of all fundings by the Lenders:
The Bank of New York
One Wall Street
18th Floor
New York, New York 10286
Attention: Kalyani Bose,
Assistant Treasurer
Facsimile: (212) 635-6365 or x.6366 or x.6367
Telephone: (212) 635-4693
except that any notice, request or demand by the Borrower to or upon the Agent
or the Lenders pursuant to Section 2.3 or 3.3 shall not be effective until
received. Any party to a Loan Document may rely on signatures of the parties
thereto which are transmitted by telecopier or other electronic means as fully
as if originally signed.
11.3 No Waiver; Cumulative Remedies
No failure to exercise and no delay in exercising, on the part of the Agent or
any Lender, any right, remedy, power or privilege under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges under the
Loan Documents are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
11.4 Survival of Representations and Warranties
All representations and warranties made in the Loan Documents and in any
document, certificate or statement delivered pursuant thereto or in connection
therewith shall survive the execution and delivery of this Agreement, the
Notes and the other Loan Documents.
11.5 Payment of Expenses and Taxes
The Borrower agrees, promptly upon presentation of a statement or invoice
therefor, and whether any Loan is made, (a) to pay or reimburse the Agent for
all its out-of-pocket costs and expenses incurred in connection with the
development, syndication, preparation and execution of, and any amendment,
waiver, consent, supplement or modification to, the Loan Documents, any
documents prepared in connection therewith and the consummation of the
transactions contemplated thereby whether such Loan Documents or any such
amendment, waiver, consent, supplement or modification to the Loan Documents
or any documents prepared in connection therewith are executed and whether the
transactions contemplated thereby are consummated, including the reasonable
fees and disbursements of counsel, (b) to pay or reimburse the Agent and the
Lenders for all of their respective out-of-pocket costs and expenses incurred
in connection with the enforcement or preservation of any rights under the
Loan Documents, including reasonable fees and disbursements of counsel
(including the allocated costs of in-house counsel), (c) to pay, indemnify,
and hold each Lender and the Agent harmless from any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of,
or consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect
of, the Loan Documents and any such other documents, and (d) to pay, indemnify
and hold each Lender, the Agent and each of their respective affiliates,
officers, directors and employees harmless from and against any and all other
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including reasonable counsel fees and disbursements (including the
allocated costs of in-house counsel)) with respect to the enforcement and
performance of the Loan Documents (all the foregoing, collectively, the
"Indemnified Liabilities") and, if and to the extent that the foregoing
indemnity may be unenforceable for any reason, the Borrower agrees to make the
maximum payment permitted under applicable law; provided, however, that the
Borrower shall have no obligation hereunder to pay Indemnified Liabilities to
the Agent or any Lender arising from the gross negligence or willful
misconduct of the Agent or such Lender. The agreements in this Section 11.5
shall survive the termination of the Aggregate Commitments, the payment of the
Notes and all other amounts payable under the Loan Documents, and the
performance and observance of all of the other obligations of the Loan Parties
under the Loan Documents.
11.6 Lending Offices
Each Lender shall have the right at any time and from time to time to transfer
any Loan to a different office of such Lender. In the event that any Lender
shall so change its office (other than as may be required by any law, statute,
rule, regulation or directive of any applicable Governmental Authority, as
required by any Section of this Agreement, or as requested by the Borrower or
any applicable Governmental Authority) and, as a result thereof, the Borrower
shall be required to pay any sums under Sections 3.6 or 3.10 in excess of sums
which the Borrower would have been required to pay had such change not
occurred, then notwithstanding anything to the contrary contained in Sections
3.6 or 3.10, the Borrower shall not be required to pay such excess.
11.7 Successors and Assigns
(a)This Agreement, the Notes and the other Loan Documents to which the
Borrower is a party shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns.
(b)Subject to Section 11.7(e), each Lender may at any time assign all or any
portion of its rights under one or more of the Loan Documents to any Federal
Reserve Bank.
(c)In addition to its rights under Section 11.7(b), each Lender shall have the
right to sell, assign, transfer or negotiate (each an "Assignment") one
hundred percent, or any lesser percentage, of its Loans, its Commitment and
its Notes to any subsidiary or Affiliate of such Lender, to any other Lender,
or to any other bank, insurance company, financial institution, pension fund,
mutual fund or other similar fund, provided that (i) each such Assignment
shall be of a constant, and not a varying, percentage of the assignor Lender's
rights and obligations under the Loan Documents, (ii) the Commitment Amount of
the Commitment assigned shall be not less than $3,000,000 or the full
Commitment Amount of such assignor Lender's Commitment, (iii) unless the
assignee is another Lender or a subsidiary or Affiliate of any Lender, the
Agent and the Borrower shall have consented thereto in writing (either such
consent not to be unreasonably withheld), provided that the consent of the
Borrower shall not be required if at the time of such Assignment, an Event of
Default shall have occurred and be continuing, and (iv) the assignor Lender
and such assignee shall deliver to the Agent three copies of an Assignment and
Acceptance Agreement executed by each of them, along with an assignment fee in
the sum of $3,000 for the account of the Agent. Upon receipt of such number
of executed copies of each such Assignment and Acceptance Agreement together
with the assignment fee therefor and the Borrower's consent to such
Assignment, if required, the Agent shall record the same and execute not less
than two copies of such Assignment and Acceptance Agreement in the appropriate
place, deliver one such copy to the assignor and one such copy to the
assignee, and deliver one photocopy thereof, as executed, to the Borrower.
From and after the Assignment Effective Date specified in, and as defined in,
such Assignment and Acceptance Agreement, the assignee thereunder shall be a
party hereto and shall for all purposes of this Agreement and the other Loan
Documents be deemed a "Lender" and, to the extent provided in such Assignment
and Acceptance Agreement, the assignor Lender thereunder shall be released
from its obligations under this Agreement and the other Loan Documents. The
Borrower agrees that, in connection with each such Assignment, it shall at its
own cost and expense execute and deliver (1) to the Agent or such assignee a
Note in a maximum principal amount equal to the Commitment Amount of the
Commitment assumed by such assignee, payable to the order of such assignee and
dated the Effective Date, and (2) to the Agent or such assignor Lender, in the
event that such assignor Lender shall not have assigned all of its Commitment,
a Note in a maximum principal amount equal to the Commitment Amount of the
Commitment retained by such assignor, either in escrow pending the delivery
of, or against receipt of, such assignor Lender's existing Note. The Agent
shall be entitled to rely upon the representations and warranties made by the
assignee under each Assignment and Acceptance Agreement.
(d)In addition to the participations provided for in Section 11.9(b), each
Lender may grant participations in all or any part of its Loans, its Note and
its Commitment to one or more banks, insurance companies, pension funds,
mutual funds or other financial institutions, provided that (i) such Lender's
obligations under this Agreement and the other Loan Documents shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties to this Agreement and the other Loan Documents for the performance of
such obligations, (iii) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents and such Lender shall retain the sole right to enforce the
obligations of the Borrower relating to the Advances and to approve any
modification, amendment, or waiver of any provision of this Agreement, subject
to the provisions of Section 11.7(d)(vi), (iv) no sub-participations shall be
permitted, (v) the granting of such participation does not require that any
immediate out-of-pocket cost or expense be borne by the Borrower, and (vi) the
voting rights of any holder of any participation shall be limited to the right
to consent to any action taken or omitted to be taken by such Lender under the
Loan Documents which would (A) increase the Commitment Amount of any Lender
(provided that no waiver of a Default or Event of Default or of any mandatory
reduction of any of the foregoing shall be deemed to constitute such a
change), (B) extend the Commitment Period, (C) reduce the amount or extend the
time of payment of the Commitment Fee, (D) reduce the rate (other than the
Default Rate) or extend the time of payment of interest on any Loan or any
Note, (E) reduce the amount or extend the time of payment of any installment
or other payment of principal on any Loan or any Note, (F) decrease or forgive
the principal amount of any Loan or any Note, (G) consent to any assignment or
delegation by the Borrower or any of Subsidiary, or any other Loan Party, of
all of its rights or obligations under all of the Loan Documents, or (H)
release all of the obligations of or by any Loan Party under the Subsidiary
Guaranty (other than in connection with a Disposition of such Loan Party
permitted by Section 8.3).
(e)No Lender shall, as between and among the Borrower, the Agent, and such
Lender, be relieved of any of its obligations under the Loan Documents as a
result of any assignment of or granting of participations in, all or any part
of its Loans, its Commitment and its Note, except that a Lender shall be
relieved of its obligations to the extent of any such Assignment of all or any
part of its Loans, its Commitment or its Note pursuant to Section 11.7(c).
11.8 Counterparts
Each of the Loan Documents (other than the Notes) may be executed on any
number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same agreement. It shall not be
necessary in making proof of any Loan Document to produce or account for more
than one counterpart signed by the party to be charged. A set of the copies
of this Agreement and each of the other Loan Documents signed by all of the
parties thereto shall be lodged with each of the Borrower and the Agent. Any
party to a Loan Document may rely upon the signatures of any other party
thereto which are transmitted by facsimile or other electronic means to the
same extent as if originally signed.
11.9 Set-off and Sharing of Payments
(a)In addition to any rights and remedies of the Lenders provided by law, upon
the occurrence of an Event of Default and acceleration of the Notes, or at any
time upon the occurrence and during the continuance of an Event of Default
under Sections 9.1(a) or 9.1(b), each Lender shall have the right, without
prior notice to the Borrower or any other Loan Party, any such notice being
expressly waived by the Borrower and each such other Loan Party to the extent
permitted by applicable law, to set-off and apply against any indebtedness or
other liability, whether matured or unmatured, of the Borrower or any other
Loan Party to such Lender arising under the Loan Documents, any amount owing
from such Lender to the Borrower or such other Loan Party. To the extent
permitted by applicable law, the aforesaid right of set-off may be exercised
by such Lender against the Borrower or any other Loan Party or against any
trustee in bankruptcy, custodian, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor
of the Borrower or any other Loan Party, or against anyone else claiming
through or against the Borrower or any other Loan Party or such trustee in
bankruptcy, custodian, debtor in possession, assignee for the benefit of
creditors, receivers, or execution, judgment or attachment creditors,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the making, filing or issuance of, service
upon such Lender of, or notice to such Lender of, any petition, assignment for
the benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Borrower and the Agent after each such set-off
and application made by such Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
(b)If any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of its
Loans or its Note in excess of its Outstanding Percentage of payments then due
and payable on account of the Loans and Notes received by all the Lenders,
such Lender shall forthwith purchase, without recourse, for cash, from the
other Lenders such participations in their Loans and Notes as shall be
necessary to cause such purchasing Lender to share such excess payment with
each of them according to their Outstanding Percentages, provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from such other Lenders shall be
rescinded and such other Lenders shall repay to the purchasing Lender the
purchase price to the extent of such recovery, together with an amount equal
to such Lender's pro rata share (according to the proportion of (i) the amount
of such Lender's required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from such other Lenders
pursuant to this Section 11.9(b) may exercise such rights to payment
(including the right of set-off) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation.
11.10 Indemnity
The Borrower agrees to indemnify and hold harmless the Agent and each Lender
from and against (x) any and all liabilities, obligations, claims, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever which may at any time (including at any
time following the payment of the Notes) be imposed on, reasonably incurred by
or asserted against the Agent or any Lender relating to or arising out of this
Agreement, any other Loan Document or any other document contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted to be taken by the Agent or such Lender under or in connection with
any of the foregoing, and/or (y) any loss, cost, liability, damage or expense,
including the reasonable fees and disbursements of counsel (including the
allocated costs and expenses of in-house counsel to the extent that outside
counsel is not utilized) to the Agent and each Lender incurred by the Agent or
such Lender in investigating, preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of, any
commenced or threatened litigation, administrative proceeding or investigation
under any federal securities law or any other statute of any jurisdiction, or
any regulation, or at common law or otherwise, which is alleged to arise out
of or is based upon (1) any untrue statement or alleged untrue statement of
any material fact, in any document or schedule executed or filed with any
Governmental Authority by or on behalf of the Borrower or any Subsidiary which
relates to the transactions contemplated by the Loan Documents, (2) any
omission or alleged omission to state any material fact required to be stated
in such document or schedule, or necessary to make the statements made
therein, in light of the circumstances under which made, not misleading, (3)
any acts, practices or omissions or alleged acts, practices or omissions of
the Borrower or its agents relating to the use of the proceeds of any Loan
which is alleged to be in violation of Section 2.6, or in violation of any
federal securities law or of any other statute, regulation or other law of any
jurisdiction applicable thereto, or (4) this Agreement, any other Loan
Document or any other document contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to be taken by
the Agent or such Lender under or in connection with any of the foregoing.
The indemnity set forth herein shall be in addition to any other obligations
or liabilities of the Borrower to the Agent and the Lenders hereunder or at
common law or otherwise, shall include the fees and expenses of counsel
(including the allocated costs and expenses of in-house counsel to the extent
that outside counsel is not utilized) incurred in connection with establishing
liability under this Section 11.10 or collecting amounts payable under this
Section 11.10 and shall survive any termination of this Agreement, the
expiration of the Aggregate Commitments and the payment of all indebtedness of
the Borrower hereunder and under the other Loan Documents, provided that the
Borrower shall have no obligation under this Section 11.10 to the Agent or any
Lender with respect to any of the foregoing to the extent the same is
determined in a final judgment, after available appeals, to have arisen from
the gross negligence or willful misconduct of the Agent or such Lender.
11.11 Governing Law
The Loan Documents and the rights and obligations of the parties thereto shall
be governed by, and construed and interpreted in accordance with, the laws of
the State of New York, without regard to principles of conflict of laws.
11.12 Severability
Every provision of this Agreement and the other Loan Documents is intended to
be severable, and if any term or provision hereof or thereof shall be invalid,
illegal or unenforceable for any reason, the validity, legality and
enforceability of the remaining provisions hereof or thereof shall not be
affected or impaired thereby, and any invalidity, illegality or
unenforceability in any jurisdiction shall not affect the validity, legality
or enforceability of any such term or provision in any other jurisdiction.
11.13 Integration
All exhibits to this Agreement and any other Loan Document shall be deemed to
be a part of this Agreement or such other Loan Document, as the case may be.
Each Loan Document embodies the entire agreement and understanding between or
among the parties thereto with respect to the subject matter thereof and
supersedes all prior agreements and understandings between or among the
parties thereto with respect to the subject matter thereof.
11.14 Acknowledgments
Each Loan Party acknowledges that (a) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents, (b) by virtue of
the Loan Documents, neither the Agent nor any Lender has any fiduciary
relationship to such Loan Party, and the relationship between the Agent and
the Lenders, on the one hand, and such Loan Party, on the other hand, is
solely that of debtor and creditor, and (c) by virtue of the Loan Documents,
no joint venture exists among the Agent and the Lenders or among such Loan
Party and the Agent and/or the Lenders.
11.15 Consent to Jurisdiction
Each Loan Party irrevocably submits to the jurisdiction of any New York State
or Federal Court sitting in the City of New York over any suit, action or
proceeding arising out of or relating to the Loan Documents. Each Loan Party
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in such a court and any claim that any such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. Each Loan Party agrees that a final judgment in any such
suit, action or proceeding brought in such a court, after all appropriate
appeals, shall be conclusive and binding upon it.
11.16 Service of Process
Each Loan Party agrees that process may be served against it in any suit,
action or proceeding referred to in Section 11.15 by sending the same by first
class mail, return receipt requested or by overnight courier service, to the
address of such Loan Party set forth in Section 11.2 or in the applicable Loan
Document executed by such Loan Party. Each Loan Party agrees that any such
service (i) shall be deemed in every respect effective service of process upon
it in any such suit, action, or proceeding, and (ii) shall to the fullest
extent enforceable by law, be taken and held to be valid personal service upon
and personal delivery to it.
11.17 No Limitation on Service or Suit
Nothing in the Loan Documents or any modification, waiver, or amendment
thereto shall affect the right of the Agent or any Lender to serve process in
any manner permitted by law or limit the right of the Agent or any Lender to
bring proceedings against any Loan Party in the courts of any jurisdiction or
jurisdictions.
11.18 WAIVER OF TRIAL BY JURY
THE AGENT, THE LENDERS AND EACH LOAN PARTY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY. FURTHER, EACH LOAN PARTY HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE AGENT, OR THE LENDERS, OR
COUNSEL TO THE AGENT OR THE LENDERS, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE AGENT OR THE LENDERS WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH LOAN PARTY
ACKNOWLEDGES THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION 11.18.
11.19 Effective Date
This Agreement shall be effective at such time (the "Effective Date") as
executed counterparts hereof shall have been delivered to the Agent by the
Borrower and each Lender.
<PAGE>
AS EVIDENCE of the agreement by the parties hereto to the terms and conditions
herein contained, each such party has caused this Agreement to be executed on
its behalf.
GIBSON GREETINGS, INC.
By: /s/ W L Flaherty
--------------------------------
Name: W L Flaherty
Title: Senior Vice President &
Chief Financial Officer
THE BANK OF NEW YORK, in its
capacity as a Lender and in
its capacity as the Agent
By: /s/ Douglas Ober
--------------------------------
Name: Douglas Ober
Title: Vice President
FIFTH THIRD BANK
By: /s/ Andrew K. Hauck
--------------------------------
Name: Andrew K. Hauck
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /s/ Jeffrey C. Nichloson
--------------------------------
Name: Jeffrey C. Nicholson
Title: Vice President
NBD BANK, N.A.
By: /s/ Edward C. Hathaway
--------------------------------
Name: Edward C. Hathaway
Title: First Vice President
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ James P. Byrnes
--------------------------------
Name: James P. Byrnes
Title: Vice President
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Hiroyuki Iwami
--------------------------------
Name: Hiroyuki Iwami
Title: Joint General Manager
<PAGE>
